Saturday, May 31, 2014

History is to learn from, not an excuse

There was a recent column that pointed out that the Chinoys make up present-day Philippine oligarchy, no longer the brand-name families of old. [The realities of Philippine oligarchy, Ej Lopez, The Manila Times, 15th May 2014] Put another way, these Filipinos are not like many of us that have invoked history as a crutch instead of playing the cards we were dealt with?

Consider how history could conveniently be an excuse: “The history of Ottoman Bulgaria spans nearly 500 years, from the conquest by the Ottoman Empire . . . The Ottoman rule was a period marked by oppression and misgovernment and represents a deviation of Bulgaria's development as a Christian European state.” [Wikipedia]

“After World War II, Bulgaria became a Communist state, dominated by Todor Zhivkov for a period of 35 years. Bulgaria's economic advancement during the era came to an end in the 1980s, and the collapse of the Communist system in Eastern Europe marked a turning point for the country's development. A series of crises in the 1990s left much of Bulgaria's industry and agriculture in shambles . . .”  

That would confirm personal notes I took over ten years ago when I came to do development work in Bulgaria. Recalling the times I joined demonstrations as a student against ‘American imperialism’ (and would proudly hold a copy of Mao’s Red Book, but not actually reading it; I was a lazy student and didn’t truly read my textbooks) the opportunity was pretty intriguing. Ironically I was tapped because of my MNC background. The West, beyond monetary assistance, wanted to provide help in kind, as in showing the Bulgarians and the Romanians the ropes as their nations prepared for accession into the EU – and to compete with Western behemoths.

In PHL though, is it true that even our large enterprises would prefer government assistance – thus reinforcing and perpetuating our tradition of political patronage? Bulgaria today has former commissars (turned oligarchs) that took advantage of the transition to free market, yet the private sector while rallying and protesting against this reality acknowledges that they have been left with elbow room to develop private enterprise. And the Chinoys would say “ditto”?
In other words, we have to overcome “victimhood” – i.e., winners don’t feel, think, believe and behave like victims? And, as importantly, we have to learn to be forward-looking? With due respect to our economic managers, are we wondering why, for example, we seem to be among the least prepared for ASEAN integration?

As my wife would say it, “mahilig tayo sa libre” – we love freebees if we don’t seek it all the time? To overcome victimhood, governments must be committed to good governance and ours has been but – acknowledging though that President Aquino has made the world believe his leadership? Nonetheless, free enterprise presupposes personal initiative and it mustn’t be foreign to us given our faith, i.e., we were made into the image and likeness of The Creator – and driving Adam and Eve out of Eden has demonstrated man’s superiority over the rest of the animal kingdom? (Alms-giving to the less fortunate is another thing – for example, in the US they generate over $300 billion in charity funds; and while foreign aid has declined as a percentage of GDP, it is still substantial as we witnessed in Yolanda.)

This blog often talks about my development work in Eastern Europe and from the get-go they had to understand that the assistance from our group was in kind. For instance, if they would not respond to the new thinking brought to them, the efforts would fail.

In PHL, we’ve had similar efforts from the West yet after decades we Pinoys continue to be prone to dependency? Consider, with my Bulgarian friends, from a cottage industry eleven years ago, today they have seven modern manufacturing facilities. And the confidence to build even more comes from a commitment to develop globally competitive products. And Western private financial institutions realized how compelling their business model was and thus have pledged to support them. For example, they just set up their US subsidiary, and as a newcomer they’re experiencing firsthand the reality, the high costs of living and of doing business in this market. Yet, inherent in their value system is developing people, products and markets, and so they are absorbing these higher costs with no subsidy from their government or wherever – like the magnitude they have to spend behind [Madison Avenue’s] advertising agencies . . . on top of the sales force and retail-level promotional expenses they are incurring.

Why aren’t we in PHL competitive? Is it because among the first questions we want to ask is: where are the BOI incentives? When it should be: where is our commitment to globally competitive products – and which can only come from a commitment to investment, technology, innovation as well as people and market development? And, not surprisingly, we feel, think, believe and behave like victims?

But aren’t we proud of our capacity – especially technical – and intellect? “Technical knowledge is the sort of information that can be put in a recipe book in a cookbook. Practical knowledge is what the master chef actually knows: the skills, habits, intuitions and traditions of the craft. Practical knowledge exists only in use; it can be imparted but not taught. Technocrats and ideologues possess abstract technical knowledge and think that is all there is.” [David Brooks, Really good books; Rationalism in politics by Michael Oakeshott, The New York Times, 22nd May 2014]

Translation: we can analyze why we're not globally competitive and thus unable to attract foreign investment until we're blue in the face, but until we truly commit to good governance and rapidly pursue infrastructure development and dismantle oligopoly, we don't have a prayer or a ghost of a chance?

“We see vested interest masquerading as national interest. We should learn to distinguish between the two.” Ouch! That's from ADB's Stephen Groff at the World Economic Forum on East Asia summit. [Bettina Faye V. Roc, Better approaches said needed to address infrastructure gap, Business World, 23rd May 2014]

Wednesday, May 28, 2014

The Vietnamese and the Pinoy worldviews

“Le Duy Anh, 24, a lecturer at Hanoi’s FPT School of Business (FSB), remarked to me when I visited his campus that whenever China does something to Vietnam these days people go to the American Embassy in Hanoi and demonstrate. For so many years, Vietnamese fought a war with Americans ‘trying to get you out,’ he said, ‘and now we are demonstrating to get you to intervene. We don’t want bloodshed, so we need someone to tell someone else to calm down.’” [More Chopsticks, Please, Thomas L. Friedman, The New York Times, 10th May 2014]

“So Americans may think we’ve lost influence in the world, but, the truth is, many people out here want our ‘presence’ more than ever. This is especially true of those living on the borders of Russia and China, who are each sort of half in and half out of today’s globalization system — beneficiaries of its trading and investment regimes but revisionists when it comes to playing by all the rules in their own neighborhoods. We may not be so interested in the world, but a lot of the world is still interested in us — and saying: ‘Yankee come hither’ more than ‘Yankee go home.’”

What about us? It’s been 68 years since our independence from the Americans, we don’t want to be like juveniles confused if we’re an adult or not? A country that we had to help because of the Vietnam War is rapidly catching up with us economically and is poised to overtake us if they haven’t yet? They have already beaten us in the ability to attract foreign investment; their stock of foreign direct investment is at $85.61 billion against our $33.28 billion; poverty is less of a problem for them, with their poverty rate at 11.3% while ours is 26.5%.

Their national saving rate is higher, at 38.4% versus our 22.9%, which means they have a greater pool to tap for investment purposes. And again, not surprisingly, the contributions of industry and agriculture to their GDP are better than ours, 38.5% and 19.3%, respectively, while ours are at 31% and 11.2%. And by extension, the contributions of these sectors to employment are better: 21% and 48%, respectively, compared to ours, 15% and 32%. On unemployment, theirs is much lower at 1.3% while ours is 7.4%.

We can’t dictate our terms on the rest of the world (there is PHL citizenship and there is “global citizenship”?) and Vietnam is only one example which, sadly, has yet to wake us up from our parochial stupor? With due respect to National Treasurer Rosalia de Leon, yes we're a democracy but we can't sweep our 'culture of impunity' under the carpet? Not to be outdone, Senate President Drilon said the Senate is not in crisis? And again, with due respect, are we waiting for the [PHL] house to burn before we call a spade a spade?

But what a coincidence; after reading those two news items, I came across: “Ex-SAC Capital trader Steinberg sentenced to 3-1/2 years.” [The New York Times, Matthew Goldstein, 16th May 2014] Translation: crime must not pay, but not in PHL? And in the [competition] arena, to be seeing only one's credit side is considered being oblivious to sub-optimization – or why better performing enterprises can run rings around the laggards! Or is it simply, as in our case, mistaking fatalism for faith? And thus our problem-solving is suspect, and reflected in our inability to resolve our nagging problems? “De Leon said the credit rating upgrades achieved by the Philippines show that the global community considers the country as stable.” [Corruption scandals won't affect WEF, Iris Gonzales, The Philippine Star, 16th May 2014] Remember the spiel re the BRIC countries – which the world now knows is so yesterday? And in the case of PHL, the upgrades come with lots of caveats that we can only ignore at our peril? 

Not surprisingly, “VICE President Jejomar C. Binay said the economic growth must be sustained by diversifying into job-generating sectors such as manufacturing, agriculture and tourism. Binay added that various critical areas need to be addressed to attract investments in these sectors. At the same time, he pushed for a review of the Constitution to allow the entry of foreign direct investments to the country.”[Economic growth ‘meaningless’ sans poverty eradication–Binay, Recto Mercene, Business Mirror, 19th May 2014]

“The goal is to liberalize the entry of foreign investments in economic priming sectors like infrastructure, energy and telecommunications,” he said. He also urged increasing infrastructure spending, as well as fast-tracking the implementation of public-private partnership (PPP) programs, particularly in the transport sector.”

Meanwhile, “Property investors said not too keen on Philippines,” Daphne J. Magturo, Business World, 15th May 2014: ‘WHILE foreign investors are said to be highly interested in pouring money into real estate, they are not very interested in the Philippines . . . This is mainly due to the country’s restrictions on foreigners’ land ownership, Jones Lang LaSalle Leechiu Country Head David Leechiu told reporters at a . . . pre-summit briefing, prior to the 2014 World Economic Forum on East Asia . . .’”

“He also said that many foreign investors complain about high tax rates in the country, as the government rakes in 35% of corporate taxable income while other Asia Pacific countries, such as Hong Kong, only taxes 15% and 16% of the respective incomes of incorporated and unincorporated entities . . . In the World Bank’s 2014 Ease of Doing Business Index, the Philippines ranked 108th out of 189 economies, a 25-point upgrade from its 133rd place last year. ‘We have improved a lot in a short span of time, but we still have a long way to go,’ Mr. Leechiu said.”

“With only 285 listed companies on its stock exchange, the Philippines is also said to rank low in terms of transparency and openness, compared with other economies. World Federation of Exchanges data showed that India has 5,336 listed companies, while the United States has 5,052, and Japan, 3,418.”

“Mr. Leechiu further noted that the country must have a ‘sensible’ land use planning through strict enforcement of laws. ‘We have to open up the country to convince them (foreign property investors) that they should put more money in the Philippines,’ he added.”

Sadly, these are like broken records that we’ve heard before – incessantly, for decades. Until Juan de la Cruz indeed wakes up, we shall be leaving to the ensuing generations a nation that is far worse than what our generation inherited? And clearly the Vietnamese have demonstrated that that is not acceptable?

Wednesday, May 21, 2014

Learning to walk and then run

“[R]ural banks should review the viability of their current business model and find ways to make their operations more suited to the needs and demands of the times . . . It is about time rural banks realized technology is a serious game-changer . . . Given the rapid advancements and challenges in the business landscape, it becomes imperative for rural banks to be attuned with the times” [The need to transform, The Manila Times, 14th May 2014]

“Recently, the Bangko Sentral ng Pilipinas (BSP) announced it was considering liberalizing foreign ownership regulations to open up the country further to foreign investors ahead of the forthcoming integration of the Southeast Asian nations . . . Among the amendments proposed were an increase in the allowed foreign ownership to 100 percent from the current 60 percent, and the lifting of the limit on the number of foreign banks that could enter the country . . . [S]ome economists and analysts say the financial system remains unprepared for the integration and the stiffer competition it is bound to bring. Debt watcher Standard & Poor’s, for one, had pointed out that local banks are still lacking in terms of scale.”

Note that the call to reform in the above news report refers to rural banks. Rural banks are not universal banks and by their very name are not major Philippine enterprises. But then, on the same day, this appears: “Magsaysay unit seeks perks,” Daryll Edisonn D. Saclag, Business World, 14th May 2014. “A UNIT of the Magsaysay Group of Companies is seeking government incentives for its newly acquired shipping vessel, a Board of Investments (BoI) notice published in a newspaper showed . . .”

What is this group of companies? In their website, the first thing one would notice is the following: “Our history in shipping,” and the next line reads: “1948-1958.” It is safe to assume that they are far larger than the typical rural bank? “NMCCLI is a unit of Magsaysay Transport & Logistics Group, which, in turn, is part of the Magsaysay Group of Companies. NMCCLI is engaged in full-container liner shipping, servicing six of the country’s major economic ports: Manila, Batangas, Cebu, Cagayan de Oro, Davao, and General Santos.” [ibid.]

They are 66 years old. And if small rural banks are expected to pursue reform, what about bigger enterprises? In fairness, our shipping infrastructure is like our economy, it lags those of our neighbors. Does that justify perks for shipping companies or should fixing our infrastructure be the priority? But then again, PHL has long been priority-challenged or simply, we can’t seem to prioritize, reflective of our ‘crab mentality’?

But the following would suggest that government indeed wants to promote inclusive growth? “THE DEPARTMENT of Trade and Industry (DTI) has turned nearly P1.3 million worth of weaving equipment to a community in Bohol to boost the industry’s competitiveness, the agency yesterday said in a statement.” [Bohol co-op gets weaving equipment, Daryll Edisonn D. Saclag, Business World, 14th May 2014] “The DTI said that, under its shared service facility (SSF) program, the Tubigon Loomweavers Multi-Purpose Cooperative (TLMPC) was granted 15 handlooms, laboratory equipment, and drying facility worth P1.259 million to help in the recovery of Bohol’s weaving industry. The handlooms will develop bigger and wider woven fabrics while the laboratory equipment and drying facility are intended to improve the quality of bleached and dyed raffia fibers, the agency noted. With the facility now in place, raffia rolls can now be sold at an average of P200 per meter (m) per P75/m, “redounding to increased income and better standard of living for the weavers.”

Sounds good . . . but is dependence something we take for granted?

“If the inauguration of the Commonwealth of the Philippines in November 1935 marked the high point of Philippine-United States relations, the actual achievement of independence was in many ways a disillusioning anticlimax. Economic relations remained the most salient issue. The Philippine economy remained highly dependent on United States markets--more dependent, according to United States high commissioner Paul McNutt, than any single state was dependent on the rest of the country. Thus a severance of special relations at independence was unthinkable, and large landowners, particularly those with hectarage in sugar, campaigned for an extension to free trade. The Philippine Trade Act, passed by the United States Congress in 1946 and commonly known as the Bell Act, stipulated that free trade be continued until 1954; thereafter, tariffs would be increased 5 percent annually until full amounts were reached in 1974. Quotas were established for Philippine products both for free trade and tariff periods. At the same time, there would be no restrictions on the entry of United States products to the Philippines, nor would there be Philippine import duties. The Philippine peso was tied at a fixed rate to the United States dollar . . . The most controversial provision of the Bell Act was the "parity" clause that granted United States citizens equal economic rights with Filipinos, for example, in the exploitation of natural resources.” [Ronald E. Dolan, ed. Philippines: A Country Study. Washington: GPO for the Library of Congress, 1991]

Can we learn to walk and then run after all these years? Or shall we always find an excuse why we can’t stand on our own two feet?“Perhaps, what’s most unfortunate is that the Philippines needs either the US or China to secure its future.” [Balancing security with economics, The Business Mirror Editorial1st May 2014]

Friday, May 16, 2014

Our assumptions reveal our values

Not all values are virtuous? And in the case of PHL, a lot of them are subsumed under our parochial and hierarchical culture which is intertwined with our faith and thus the certitude in our beliefs? For example, did we ever imagine that periodically granting minimum wage increases would be counterproductive – or simply shooting ourselves in the foot? But isn’t a “living wage” what our faith demands?“Minimum wage earners in the Philippines are among the least productive unskilled workers in the world . . . This stems from a long history of underinvestment in people, firms, and public investment . . .” [Filipino unskilled workers among world’s least productive—World Bank,Paolo G. MontecilloPhilippine Daily Inquirer, 8th May 2014]

Translation: If our economy is to be robust and sustainable and foster the common good, it must be productive, among others; and a big piece of the others is investment. Beyond our lack of predisposition to invest (as my wife would remind me given her own family’s history) is our parochial and hierarchical culture. Ergo: we don’t like foreign investment and expect our cacique masters to be our savior? In the meantime, given our meager economic output, let’s take care of the unskilled and give them a living wage? Though renowned ethicist-theologian-economist Bernard Lonergan, SJ argued that an economic activity presupposes a surplus – with the caveat that they are reinvested into the activity – if it is to be a virtuous circle.

Have we ever tried deconstructing our value system? For example, take inclusive growth, how does that square with parochialism and hierarchy . . . when inclusive growth presupposes an egalitarian character? And everything goes downhill from there, and even a priest said that we can’t get God to solve our problems given they are of our own doing?

Are we then surprised why PHL is dysfunctional? Here are news reports that would make us wonder if we’d ever be the good shepherds to our God-given talents and resources:

1.      ‘Koko’ slams unresolved power crisis, Macon Ramos-Araneta, Manila Standard Today, 10th May 2014: SENATOR Aquilino Pimentel III on Friday slammed the government for what he called its failure to provide a solution to the power crisis in Mindanao. “Our people are angry. This burden has gone on for too long,” he said.

2.      Escudero blames govt for sluggish rehab pace, Macon Ramos-Araneta Manila Standard Today, 10th May 2014:LESS than 10 percent or only P3 billion of this year’s P40-billion post-disaster budget has been used to rehabilitate the communities destroyed by super typhoon “Yolanda,” Senator Francis Escudero said on Friday. He blamed the problem on the “sluggish pace” at which the government has been doing its job, saying it had been four months since the budget was approved and yet there was still no blueprint for rehabilitation.

3.      Recognizing shortfalls is 1st step to excellence, The Manila Times, 10th May 2014: We say this because there is one dominant characteristic of the President that everyone has seen these three and a half years-plus that he and the Liberal Party and its allies have ruled this country.  This dominant characteristic is his loathing for admitting mistakes and apologizing for them.

4.      What’s up with new Mactan airport deal? SHOOTING STRAIGHT, Bobit S. Avila, The Philippine Star, 10th May 2014: At this point, we are waiting for the SC to rule on this petition filed by Sen. Serge Osmeña. If the SC rules in his favor… then it is the end of future foreign investments to the Philippines. After the botched PIATCO deal at the NAIA 3, no one would dare come to our shores… thanks to this suicidal political intervention . . . Lest you’ve already forgotten, our airports are the welcome mats of our country and therefore we must make an extra effort to present to our tourists a wonderful experience when they arrive in our country.

5.      The solution to management problems is not more managers, Ben D. Kritz, The Manila Times, 9th May 2014: With all due respect to Secretary Pangilinan, these are issues that demand a better approach than “I’ll see what I can do.” The Department of Agriculture is a mess, and it’s a mess that’s gotten worse over the past four years. But a serious management problem is never fixed by applying more managers (as if the utter lack of accomplishment of the last “czar” appointed by Aquino wasn’t enough evidence of that), it is fixed by applying actual plans and processes.
What’s behind the string of unpleasant news? Sense of urgency, or the lack of it, for one – but we're so cool and resilient that it goes against the grain? And leadership is the bigger challenge because in our cacique system and structure it is not leadership but condescension that is manifest? And it comes with compassion and so we see it as virtuous – as in the inability of the administration to get rid of non-performing public servants, yet would move mountains to expel opposition members? And so there’s lots of politics woven into our dysfunctional system? And out of frustration, Juan de la Cruz whenever he doesn’t share in the spoils succumbs to ‘crab mentality’?

And if we want to trace how we got to where we are, chances are we would be pointed to our assumptions that have been our instinctive guide as a people? For example, the region has left us behind infrastructure-wise and industry-wise – and by extension we are the economic laggards – and yet we believe we can leapfrog development? It doesn't compute! (It will take us at least a generation if we follow the right path or at 7% GDP growth! A handful of billionaires and 10 million OFWs and the BPO industry, for example, haven't done it.) It is what fatalism is about which we have mistaken for our faith? 

Haven’t we witnessed the perfect storm given our value system in the power crisis, where we simply have it upside down? And so while the whole nation suffered, the big boys prospered in the playing field that for all intents and purposes is designed for vested interests ahead of Juan de la Cruz? If we wanted road maps for over 30 industries, where is our power-industry road map? And we don't want foreigners involved conveniently forgetting that Meralco is in Singapore and Nigeria? But which is not surprising given our parochialism? And we expect to solve major problems when we like to limit our options and box ourselves in a corner? Problem-solving is not an intellectual exercise, it's real-world stuff that brings poverty?

Another barrier we have to contend with, given that our industry is underdeveloped and uncompetitive, is that our view of the world by definition is limited? And so we continue to look inward despite ASEAN, for example? It’s understandable especially after we saw how our biggest exports, electronics, receded and then recovered. And that is precisely why we need to learn how value-addition (e.g., via technology and innovation) is inherent in product development, or why progressive MNCs are simply that – progressive – irrespective of the state of the world economy. And it comes from their mantra: to commit to investment and technology and innovation as well as people, product and market development. And it doesn’t take half a century to learn that . . . to the pleasant surprise of my Eastern European friends. But that perspective can’t get much traction in PHL given our underdeveloped industry and economy? Underdevelopment, like poverty, has a price?

Indeed, our assumptions reveal our values? Sadly, that makes us less able to “unfreeze” strongly held beliefs to make room for new thinking? The evidence: take the above news reports; and it is no secret given we are a well-traveled people, where are we versus the rest of the world? But we’re in good company – i.e., the Vatican Curia is much like us?

Thursday, May 15, 2014

Talk is cheap?

Did we say that Marcos was a master of the mind game such that not only he but also Juan de la Cruz had believed the “new society”? It’s understandable that as a nation we have to stay positive, but it doesn’t mean embracing the unreal? Yes, we should tap ourselves on the back given our elevated foreign exchange reserves and the strength of the peso; the investment-grade ratings that we’ve received and the heightened interest of foreign investors – though they have yet to translate into more substantial FDIs to approximate those of our neighbors. But we can’t brush aside that we’re standing on the backs of 10 million OFWs and the more recent BPO industry – i.e., they are the source of our income stream, not exports, where we need an incremental $100-B plus as the DTI rightfully set as a goal to be in the same league as our neighbors. Meanwhile our infrastructure system is dismal; our investment rates have been meager and thus our inability to produce truly regionally or globally competitive products; and, sadly, our culture of impunity is turning from bad to worse?

Still we mustn’t be discouraged. Yet we can’t keep fooling ourselves, to quote the former Senator Eddie Ilarde. Of course, the back patting has been confined to the elite class because Juan de la Cruz continues to suffer – as in more Filipinos feel they are poor?

“Something is wrong about all this . . . A long list of complaints against Agriculture Secretary Proceso J. Alcala has been enumerated, from corruption and cronyism to basically being ineffective in his job. If these are true—and we’re not saying they are—then why is he still in his post? The fact that Pangilinan has been put directly in charge of four agencies under the DA indicates that the structure is faulty . . . We have seen a Land Transportation Office that has not been able to perform its basic function of supplying license plates. The Ninoy Aquino International Airport, which is under the Department of Transportation and Communications, operates under a procurement system that takes months to do a job the private sector could accomplish in weeks. The Department of Energy seems helpless to ensure a reliable electricity supply.” [Government: Is the structure or the people in it the problem? The Business Mirror Editorial, 8th May 2014]

If those weren’t enough, an international institution had more unpleasant news for Juan de la Cruz: “Filipino unskilled workers among world’s least productive—World Bank.” [Paolo G. MontecilloPhilippine Daily Inquirer, 8th May 2014] “This stems from a long history of underinvestment in people, firms, and public investment,” said Rogier Van den Brink, World Bank Philippines lead economist for poverty reduction . . . As a result, rising wages in the country, due to yearly hikes in minimum wage mandated by law, have outpaced the increase in the average productivity of workers.”

We can’t gloss over very basic fundamentals? And fundamental to generating the economic output that we need for our wellbeing as a people and nation is investment. But to Juan de la Cruz investment comes from our cacique masters – or from government which, unfortunately, hasn’t done a good job? Yet there is still the need for us to develop a community sense (the opposite of crab mentality) if we are to learn to prioritize and successfully pursue the common god – e.g., recall NAIA 3 and as though not content, we now have Mactan airport? And so to hear captains of industry talk about innovation and competitiveness given where we are is adding insult to injury? And especially when our system matter-of-factly lines the pockets of supposed public servants and their cohort – and serves the needs of vested interests over that of Juan de la Cruz?

What about SMEs? First, what about infrastructure like power? [Cagayan de Oro, Davao hit by 7.5-hour daily brownouts, Alexander D. Lopez and Camcer O. Imam, Manila Bulletin, 8th May 2014.] And we talk about extending them credit facility but even beyond that: what is the way forward for our SMEs given ASEAN integration? Our large enterprises are encouraging SMEs to establish themselves as a reliable pool of support industries, but then again, beyond that: what compelling competitive attributes are our large enterprises bringing to the region? If only a handful of these large enterprises are geared to be truly regionally competitive, what is the future of SMEs? On a different though similar subject, didn’t we have the agriculture scam on the heels of the supposed good intentions of promoting agribusiness?

“The ACEF (Agricultural Competitiveness Enhancement Fund) scam resurfaced anew after one of its biggest recipients was embroiled in the pork barrel scandal. At least P775 million in ACEF funds went for the food processing and cold chain project of National Agribusiness Corp (Nabcor) in 2007 and 2008 . . . [It was] a multibillion-peso farm subsidy fund supposedly meant to prepare the agriculture sector for the country’s trade integration into the Southeast Asian market next year, but official documents showed [two lawmakers] gained from farm subsidies [and] their bailiwicks became the biggest beneficiaries of their pet legislation.” [2 lawmakers gained from farm subsidies, Gil C. Cabacungan, Philippine Daily Inquirer, 5th May 2014] 

But have we learned our lesson – or are we simply dependent on Big Brother and starting on the wrong foot? “Exporters of homestyle products have sought for a P1-billion export support fund (ESF) to help the sector arrest the decline in export revenues, the Philippine Exporters Confederation Inc. said Friday . . . Luis Sicat, a private sector trustee of the Export Development Council (EDC), was quoted in the statement as saying that the fund will be needed for export promotions, product design and development and improvement for technology, among others.” [Exporters plead for P1-B aid deal, Amy R. RemoPhilippine Daily Inquirer, 5th May 2014]

How are the intentions behind the new ESF different from that of the ACEF? This blog often talks about my Eastern European friends and their efforts to compete in the EU; they had access to funds (from the EU) similar to the above but they were not the key to their moving forward. Their real financial needs had to be sourced from private financial institutions – to whom they had to present a compelling case as is the norm when tapping a credit facility. And they had access to MNC managers to show them the ropes of global competition – which formed part of the assistance from the West; other assistance came to address their nation's statutory gaps and deficiencies as in constitution-writing (including check-and-balance mechanisms like the ombudsman) among others, or what my friends called “mentality-related” efforts – because they realized they had to toss their socialist inclinations. And, clearly, the massive infrastructure development assistance program from the EU was vital.

If our SMEs are to strike on their own, it is important for them to think like MNCs by committing to investment and technology and innovation as well as people, product and market development – which would facilitate developing a compelling case for private financial institutions to support their enterprise. While government – if PHL is to have a chance to transform itself from underdeveloped to developed economy – must provide the requisite infrastructure where, sadly, our track record is not encouraging?

Still, the overarching principle remains: Start with the end in view. We have to start viewing major undertakings from the backend, not the frontend or via the inputs. And which is why establishing a handful of industries where we can be competitive is a must. And that is where we can build the requisite networks and partnerships of large enterprises and SMEs. Arguably our largest industries benefited from our oligarchic economy – and why they’ve lobbied against competition especially foreign – and thus their muscles weren’t toned from roughing it up in the regional or global competitive arena but local domination and political patronage? There are exceptions, of course, but the beef is we have yet to develop an innovation and technology culture. And that starts from the mindset of honest-to-goodness freedom and democracy, that is, fair and square – and not accepting oligopoly as a given!

That is our reality and the more we talk about innovation and competitiveness, the more we will reinforce that talk is cheap – unless we put the requisite building blocks in place? On that sad note . . . Happy Mother's Day to all the mothers!

Saturday, May 10, 2014


It connotes being “two-faced.” To illustrate: On the one hand our thought process has a bias for comprehensive, as in CARP or the Comprehensive Agrarian Reform Program – but where we’ve yet to deliver on the promise. While landownership in CARP is laudable, the outcome we must seek must go beyond – i.e., a true comprehensive program must be defined as a virtuous circle. And the key to attaining such a goal is to first view the program from the backend, not the frontend. For example, the output must generate a surplus so that the process goes round and round as in a virtuous circle. Put another way, in a market economy, industries – including agribusiness – must meet the demands of the market. It is the essence of free enterprise, and where competition is fair and square. And so we can’t just assume that whatever we produce will find a market. We must design our products to deliver a compelling value proposition to the consumer. Why are we an oligopoly, for instance, and talk about a level playing field like a promise to be broken? Is it because we have yet to internalize “fair and square” – i.e., the simplest definition of freedom and democracy?

And on the other hand, “The Philippines has yet to promulgate a comprehensive antitrust statute to fully cover the anti-competitive acts [in the numerous but] fragmented legal provisions . . .” of what we consider a competition law. Not surprisingly, PHL is not fully compliant with the ASEAN guidelines. “Congress’ lack of success in passing antitrust legislation [stems from] historical and social circumstances . . . which have largely concentrated economic power in the hands of a few who lobbied against competition . . .” [Competition needed, Opinion, Philippine Daily Inquirer, 28th Apr 2014]

Yet do we sincerely believe that we are the next Asian tiger? It all starts in the mind. And we can’t be a tiger if we have a bias for sub-optimization. To maximize efforts in pursuit of a major undertaking may not be realistic thus enterprises and nations commit to optimization instead. But to sub-optimize is idiocy – it is a race to the bottom especially in this day and age when countries have formed economic blocs that by definition will have winners and losers. [And we’ve lived through it with my Eastern European friends, starting from how we prepared as their nation geared up to accession into the EU to how to compete with Western-industry behemoths to extending our wings to Asia and then to North America, where pleasingly even New Yorkers have shown us a lot of respect – aka “ease of doing business”.]

But in our hearts and minds, can we shake off our cacique culture given all the privileges that come with rank? In an egalitarian society privileges are an insult to a people’s intelligence, character and maturity – or why monarchies, like in Spain most recently, have earned the people's wrath? To truly take freedom and democracy to heart, a community cannot assume that people aren’t equal? And we Pinoys can’t keep to our assumptions and practices and beliefs and ideologies if indeed we mean what we say, that we want “inclusive growth”? Inclusive growth is not paternalism. It is not alms giving. It is not CSR . . . They in fact reinforce our cacique culture – and that is borne by science, i.e., charity-giving triggers the part of the brain associated with pleasure. Inclusive growth is about building strong democratic institutions. It is leveling the playing field. It is egalitarian. Is our inability to embrace a true competition law reflective of a fundamental flaw?

We were just reviewing an acquisition opportunity with my Eastern European friends in Europe. And what caught our attention right away was why the opportunity even came about. Lo and behold, the European Union’s commission for competitiveness mandated the company that owned the brand to divest it after it had successfully won a bid to acquire another brand with a dominant market share in the same business. In other words, in these markets where the costs of doing business are higher than in PHL, the reality is “ease of doing business” is their mantra, i.e., competition is fair and square, mitigating their higher costs structure. And it’s not something out of the ordinary; it is part of doing day-to-day business, like we came across the opportunity because it came through our email system. Of course, there is no perfection in this world – not even in Europe – but the fact that we in PHL remain the least able to attract FDIs should wake us up?

And what do we get in our personal email inboxes? And it’s not uncommon: this or that oligarch celebrates another success – but at whose expense? But then we just have to ask ourselves, are we ‘balimbing’ – or just behind the times?

Tuesday, May 6, 2014

It’s unfortunate but we need others to secure our future?

The full quote reads: “Perhaps, what’s most unfortunate is that the Philippines needs either the US or China to secure its future.” [Balancing security with economics, The Business Mirror Editorial1st May 2014]

“DESPITE the country’s robust economic growth, unemployment is expected to worsen even beyond the term of President Benigno Aquino 3rd due to “global spillovers,” the International Labor Organization (ILO) said. In a recently released executive summary, ILO said the 7.3 percent unemployment rate in the Philippines for 2013 was the highest among Association of Southeast Asian Nations (Asean) member-countries and other nations in the Pacific region.” [PH unemployment to worsen, warns ILO, The Manila Times, Joel M. Sy Egco and Jing Villamente, 1st May 2014] 

But is Juan de la Cruz forward-looking to respond to his many challenges and even more, to take responsibility for his misdeeds? “The deep sense of shame can be found in other societies.” [Shame, Sketches, Ana Marie Pamintuan, The Philippine Star, 2nd May 2014.] “All natural disasters here are dismissed as acts of God, with no one taking responsibility for failing to mitigate the impact, such as by preventing illegal logging . . . In any disaster, the immediate response is to pass the buck, to deny responsibility. Remember what happened in the Rizal Park hostage mess . . . Crooks in government, even when presented with incontrovertible evidence of wrongdoing, will never admit it all the way to their grave, and will be sorry only that they got caught . . . Shame? Not in this society. Some of the individuals accused of plunder (plus an ex-convict) and other high crimes even hobnobbed with US President Barack Obama at a pricey Malacañang dinner paid for by Pinoy taxpayers. In our society, thieves and those responsible for public misery never say sorry or quit. They aspire for high office, and they often win.”

What a pity? “Our country was once known as ‘a small container with great things.’” [Eddie IlardePhilippine Daily Inquirer, 2nd May 2014] “History tells us that long before the arrival of the ‘white colonizers,’ the inhabitants, though unaware of the worldly knowledge of peoples of the West, have had their own culture and possessed simple and admirable traits. They enjoyed the respect and trust of the neighboring states spanning the Majapahit and Sri Vijaya empires.”

“Today the past lingers only in misty memory, the nimbus darkened by ill wind. Along the way we have metamorphosed into notoriety and disrepute; with the exemplary and admirable character of our forebears—endowed with physical and spiritual strength—all but dissipated into oblivion. We can look for scapegoats and self-serving reasons for the adversities that have befallen us: bad foreign influences, our Christianization by Spain and democratization by America centuries before, inappropriate education, modern trends, even the Internet, etc. But let us ponder the validity of these excuses while believing our own lies. The hard-to-admit truth is, many of our people today—pick any of [these] reasons—are ill-mannered, materialistic, uncouth, selfish, greedy, and have become weaklings; they have permitted themselves to be exploited by wretched government leaders who have taken over a rotten political system. And yet with false pride we love to proclaim ‘our virtues’ and our make-believe commendations. Through the years we have grown accustomed to fooling ourselves!”

Are we not fooling ourselves again – and can pull it off this time? “The private sector and the government should work together to strengthen the country’s competitiveness in preparation for the ASEAN Economic Community (AEC) next year . . .” [Gov’t, business urged to work as one for ASEAN 2015, Manila Bulletin, 2nd May 2014] “[B]oth public and private sectors should work together in taking full advantage of the foreseen integration and to capitalize on it in pursuit of inclusive growth. The ball is in our court, so to speak. And we need to level up our game, intensify our strategic initiatives, and adopt a unified approach.”

Of course, there is always positive news: I can’t help but reminisce about my brief stint in DOF. It was in 2000 when the international reserves of $14.9 billion were way below the international debt of $52.0 billion, with credit rating not in our wildest dreams. Today, it’s a big difference and the Philippines rating is in an investment grade status with the BSP’s “Say” Tetangco and DOF’s Cesar Purisima - the WORLD’S BEST CENTRAL BANKER AND FINANCE MINISTER, respectively. The Philippines is now one of the fastest growing economies in the world. The current exchange rate is at Ps 44 level, international reserves of $80 billion is more than the international debt of $58 billion level and tax collection effort is at 13.5%.” [The DOF, then and now, Flor G. Tarriela, Manila Bulletin, 1st May 2014]

Meanwhile, “Leody de Guzman, BMP national president, chided the President for asking organized labor during a dialogue in Malacañang to give the government more time in looking at workers’ concerns . . . ‘Sorry, Mister President. The workers and the poor have no more time for your lame excuses. Time is a luxury that we do not have. Four years of indifference to our immediate and urgent demands are enough.’” [PH unemployment to worsen, warns ILO, The Manila Times, Joel M. Sy Egco and Jing Villamente, 1st May 2014]

Why the two dimensions of PHL’s reality? Is the simple answer because we have the elite class and there is everybody else? But who cares when a few have more than secured their future while PHL needs the US – or is it China? 

Saturday, May 3, 2014


Would we Pinoys want to relate more to the Italians than the Anglo-Saxons? “Don't expect logic from us, we're Italians!” Two recent articles though (from a Philippine daily) would infer that we are more pragmatic than that. “The PCCI study groups the local industries into three industries: Competitive, uncompetitive, and middle business. At the onset, there are those that cannot compete and we should forget, some we can let go because they are already competitive, but the bulk is in the middle and that is what we should really help . . . [T]hese industries, however, must have different interventions for them to become competitive [in ASEAN]. One intervention is through joint ventures with foreign firms . . .” [PCCI encourages foreign JVs with promising local companies, Bernie MagkilatManila Bulletin, 24th Apr 2014]

And from Fr. Bel R. San Luis, SVD“On the national level, we as a nation should help save our country from the morass of poverty. Public officials, for instance, should shun corrupt practices like plundering the government coffers so that the funds can be used for much-needed social services . . . The Greek philosopher Plato once said: ‘Poverty consists not in the decrease of man’s possessions, but in the increase of one’s greed.’ Yes, Christ saved us. He is still helping us but He doesn’t work miracles to solve our own problems. We should save ourselves now.” [Christ saved us; let’s save ourselves, Manila Bulletin, 22nd Apr 2014]

Given the focus of this blog – to challenge Juan de la Cruz to revisit our assumptions and overcome PHL underdevelopment – I am reminded of three things that we Pinoys may be taking for granted: parochial, hierarchical and “kawawa.” And this came as I spent my first week at the new midtown Manhattan office of my Eastern European friends. Singapore (where they had their first office outside Europe) and New York – to be closer to the markets around them – are at the top tier in costs of doing business. But in the global competitiveness index, the specific metric is about “ease of doing business” – and costs are just one component. [Should we Pinoys then be surprised that we can’t attract FDIs as much as our neighbors do when infrastructure and good governance impact ease of doing business and mitigate costs, and are reflected in the efficiency and productivity that characterize preferred locations?]

How did they get this far in just eleven years, coming literally from the middle of nowhere, a mere cottage industry and housed in a dilapidated ex-communist facility? [And it was like yesterday when they said: “we are poor Bulgarians; we can only sell products at 50 euro cents!”] The simple answer is they had to think like an MNC – and which for decades we Pinoys just assumed was evil thus robbing ourselves of the option and the vision to become a nation of MNCs? Was ideology behind why we were “thinking small” instead of “thinking big”?

For example, did our businesses see virtue in making and selling low-priced products? “We are poor Pinoys and can’t afford high-priced goods!” And is it an expression of our being parochial? Even our biggest enterprises doing business overseas target Pinoys or OFWs. And beyond our parochial bias is respect for hierarchy? We are a poor, small country; we are not in the same league as big Western companies? We see everything through a prism – of parochialism and hierarchy – and, not surprisingly, we feel “kawawa”?

It is refreshing that the private sector is sounding more pragmatic in its efforts to respond to the challenges posed by the ASEAN economic community: “At the onset, there are those that cannot compete and we should forget, some we can let go because they are already competitive, but the bulk is in the middle and that is what we should really help.” But then again, how do we think like MNCs? First we have to stop assuming that we can only market to Pinoys – its smacks of parochialism? Then we have to stop believing that we are inferior like we are in the local hierarchy when we are not the masters? And if we are able to think big, we don’t have to feel “kawawa”?

How do we think like an MNC? [It is not about government although in fairness government must make amends by demonstrating an honest-to-goodness commitment to infrastructure and good governance. But am I not being pragmatic and resorting to wishful thinking – or should we demand our public servants to resign en masse? As my daughter’s friend commented, their contemporaries who are now in government are as corrupt as their elders! What now and where to, Philippines?] As this blog has discussed numerous times, to think like an MNC is to commit to: investment and technology and innovation as well as people, product and market development. But as my wife would always remind me, “We Pinoys aren’t predisposed to investing in the first place. We are ‘sigurista’ [loosely translates to “no guts”] and that is reinforced by our success models from our cacique masters and reflected in PHL being an oligopoly.” Does it explain why we don’t have inclusive growth? And are we not party to the folly?

Of course, we could always resort to prayers? “Yes, Christ saved us. He is still helping us but He doesn’t work miracles to solve our own problems. We should save ourselves now.”

Can Juan de la Cruz be pragmatic as the PCCI and Fr. San Luis implied?