Wednesday, January 1, 2014

Revisiting our institutions

“Education schools . . . don't see their job as training teachers. They see their job as creating professional identity . . . While most programs could say they had classroom management as part of their curriculum, classroom management strategies rarely received “the connected and concentrated focus they deserve.” What's more, “instruction is generally divorced from practice (and vice versa) in most programs, with little evidence that what gets taught gets practiced.” [Joe Nocera, What is good teaching, The New York Times, 16th Dec 2013]

Not surprisingly, the private sector has raised the Western educational system as an issue. The American work force has some of weakest mathematical and problem-solving skills in the developed world. In a recent survey by the Organization for Economic Cooperation and Development, a global policy organization, adults in the United States scored far below average and better than only two of 12 other developed comparison countries, Italy and Spain. Worse still, the United States is losing ground in worker training to countries in Europe and Asia whose schools are not just superior to ours but getting steadily better . . . The lessons from those high-performing countries can no longer be ignored by the United States if it hopes to remain competitive.” [Why Other Countries Teach Better, The New York Times Editorial, 17th Dec 2013]

If Americans can stand up to the reality that its “work force has some of weakest mathematical and problem-solving skills,” could we Pinoys do the same? My Eastern European friends, despite my sense of them generally having stronger mathematical skills than what I saw in the US, accepted the reality that they also needed better problem-solving skills. And even their math-related skills were put to a test as they applied to sales forecasting and long-term planning, for example – which, of course, demand other competencies. And so they have embraced education and training as a constant. 

Economic development which is central to nation-building is like any development efforts, it demands maturity, hard work – and then some. And while at the macro level it is the collective success of private enterprise that will nurture and sustain the broader economy, the predicate is clear: industry must invest in education and training at the enterprise level, precisely what progressive global companies have done over the last few decades.

And invariably their experiences would confirm the shortcomings of the Western educational system. For example, young interns and new hires would immediately recognize the gap between what they learned in school and what the private sector demands, for instance, in marketing. In industry, it is taken as general management which translates to horizontal leadership and financial accountability. It simply means that the old command-and-control structure doesn't apply. Because in today’s fast-changing world, what is demanded is a constant rearranging of groups into self-organizing teams that are cross-functional and multi-level such that the old formal division of labor and hierarchical structure are incongruous. For example, global companies could be developing and test marketing a new product idea in three different countries and thus would render the formal structure moot.

What about economic development? In PHL, we are input-driven, which is fine until we get to the endpoint. For example, in economics there is the input of policy as in fiscal and monetary policies; and employing a set of such policies has yielded 6% to 7% GDP growth for PHL over the recent past. But as we now know, those numbers have had no major impact on the output – that of our average income of $4,500. At this level, we clearly are an underdeveloped economy and so PHL poverty remains at such alarming levels. On the other hand, if we are to be output-driven, the desired outcome is to be a developed economy and that means an average income in the $30,000 to $50,000 range; and it would take at least a generation for us to get there even at a 7% compounded annual GDP growth rate.

Ergo: an impressive growth rate of 7% is moot – make that 8% and the prognosis doesn't change – given how deep we are in the hole! And so the questions we must ask then are: Where are we? Where do we want to be? How will we get there? We are at $4,500 in average income. We want to be at $30,000 at a minimum. [At the half-way mark poverty would have eased but methodically building the foundation is imperative to get to nirvana.] And we can't run away from reality. PHL poverty is as hard and fast as our underdevelopment.

But with over $20 billion in OFW remittances that we generate with zero efforts other than the blood, sweat and tears of OFW families, the Western financial services sector is blowing our horn for us – because we are the solitary economy with such a healthy foreign exchange reserves that prop the economy, thus a haven for hot money but which can come and go anytime. Yet we don’t get the FDIs for long-term investment as explained in this blog. 

And how will we get to be a developed economy – or how are others doing it? The first step is to open the economy to foreign investment and technology. And if these investments are to come, we must accelerate infrastructure development. And then, so that we are not dissipating time, effort and resources, while free enterprise says every entrepreneur could do his or her own thing, the government can play quarterback and focus industry to a handful of businesses where we could attain global competitiveness – like the seven industry winners the JFC teed up, for example.

To achieve a quantum leap in PHL economic output, we need investment, beyond OFW remittances and even the property boom! And despite the slew of investment-rating upgrades, we’re still the least able to attract investment. Consider: PHL gross investments at 19.4% versus Thailand at 28.5% and Vietnam at 28.2%. Consider still the stock of foreign direct investment in PHL at $30.38 billion against Thailand’s $185.7 and Vietnam’s $73.71. Ergo: we are no different from a two-stroke motorbike racing against 4- and 6-cylinder turbo-charged cars! We can brush that aside at our peril?

And what about the formal structures that are high up in our value system? To be globally competitive, we can’t have the formal structures (see above re self-organizing teams) getting in the way – like the way Messrs. Roxas and Romualdez demonstrated it at the height of Yolanda. In the private sector, those guys would have been hanged! And to drive home the point even more, government should have pulled out all the stops to support the likes of the JFC’s seven industry winners. But as Mr. Roxas and Mr. Romualdez demonstrated, our instincts and our mindsets may be anachronistic that they have no place in the 21st century? 

And which is why our culture is a consistent theme of this blog. For example, are our institutions undermined by our way of life? Do we need to revisit and reset our assumptions – from family to school to church to the public and private sectors? Could the Binays learn from the mayor of QC who reportedly accepted a traffic violation ticket and then promoted the apprehending traffic aide? We instinctively take things personally and pull rank? What about our “kaklase,” are they “licensed to kill” too, like family? And while we're proud of our schools, even in the West, the educational system has failed to meet the needs of a fast changing world? Meanwhile Pope Francis has challenged our understanding of our faith? And as one columnist put it, “nationalism doesn't create jobs”? And when we throw in political patronage (as in Ps 300 – Ps 500 million in election contributions?) and oligopoly into our cultural mix, what do we have – a failed economy, if not yet a failed nation?

It appears that the Editorial of Manila Standard Today (27th Dec 2013) offers a prescription: “Making PH attractive . . . “Economic Planning Secretary Arsenio Balisacan is pushing to amend a Palace directive to liberalize foreign investment and prepare the Philippines for the Asean economic integration in 2015. The government, he said, must shorten the negative list under Executive Order 98. The revisions largely cover the practice of foreign professionals in the Philippines and overseas interest in some businesses.”

“Foreign investment creates more jobs and results in the transfer of technology that makes industries more efficient. The Philippines, thus, must open up the economy more and adapt to change, if it wants to keep pace with its more affluent neighbors.”

But where is the editorial coming from? “The Philippines, despite having the second-fastest economic growth in Asia, is one of the least attractive investment sites in the region. An outdated Constitution and the parochial mentality of some political leaders have made the Philippines least desired by foreign investments in this part of the world.”

“Pseudo nationalists, who are just out to protect the economic interests of the landed few and the present oligarchs, try their best to maintain the status quo. The resistance of the political leadership, which includes President Benigno Aquino III, to change the Constitution and liberalize the economy further has allowed other Asian neighbors to progress ahead of the Philippines.”

“Indonesia, in contrast, is making moves to allow higher foreign investment in several sectors of the economy to boost growth and woo back foreigners who left during recent market turmoil. The Southeast Asian nation is opening up foreign investment in power plants, ports and airports and the pharmaceuticals industry . . . Indonesia is revising its “negative investment list,” which restricts foreign investment in areas considered sensitive. Jakarta hopes to expand the economy by increasing foreign ownership in airports, sea ports and toll roads.”

Ergo: it is not about destiny; we hold the future in our hands . . . And another neighbor is showing us how? 

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