Wednesday, January 28, 2015

What dots to connect . . .?

Where to begin? Education as the Greeks formulated it was founded on linear thinking – or step-by-step progression – which would characterize a course syllabus, for example. But then major breakthroughs (which is what problem-solving or innovation is about) that transformed the world would come from elsewhere; and Edison, the father of modern R&D, comes to mind. And so do Jobs and Gates. And we can get a glimpse of their mental processes by looking at how product development comes about: It is critical-thinking and forward-thinking at the same time. That means looking and starting with the end in mind – and thinking out of the box, beyond conventional wisdoms and comfort zones. 

And more than going from point A to point B, it is defining the base line and establishing a hypothesis against which the outcome is measured; and paves the way to go beyond incremental gains, leapfrog convention if not undo the status quo via creative destruction.

Recently, we heard from the UK ambassador: “UK envoy offers advice on thrusts of PPP projects,” Kris Bayos, Manila Bulletin, 24th Jan 2015. “The mindset change that the UK had to make was looking it from the project developers’ point of view to the users’ point of view . . . The challenge for the Philippines is to learn from our mistake. Start on the end-users first. In terms of transport, what journey do the end users want to make and why they want to make it . . .”

And true to form, a US official would choose to be pragmatic: “This past October, a roadshow was conducted by the PPP office in the US to present to potential investors 50 PPP projects worth $20.82 billion. That is a substantial amount of investment the Philippines could use for its infrastructure improvement . . . But in the words of (Principal Deputy Assistant Secretary Kurt Tong of the US Department of State) . . . the projects need to be ‘practical,’ a word that we do not understand the meaning of in this context. However he also said the rules and plans need to be clearer . . . ‘PPP deals’ need to be viable on the revenue side of the private investor . . .” [PPP and the USA, Business Mirror Editorial, 23rd Jan 2015]

There’s no free lunch. In the final analysis, a project must be viable. It must not be based on rent-seeking proffered through government subsidy [though there are exceptions when justified by cost-benefit, e.g., the rail system in Europe, critical in conducting people and economic activity in the world’s largest economic bloc] and/or an overpriced project that the proponent is able to abandon at a profit even when the project wasn’t sustainable in the first place.

Connecting the dots: As shared by the UK ambassador, a project or an undertaking must respond to a human need. And it brings to mind the principle-based – i.e., human empathy – or design-thinking model that the Stanford School of Design has championed. And which progressive global enterprises have adopted to guide innovation efforts.

Yet, human need has a broader context and, that is, of the community and the common good. For example, to support a farmer is appealing yet in today's highly globalized and competitive world, there is a higher hurdle to satisfy. How do we introduce the concept of community and the common good to a poor farmer? More to the point is how to introduce the imperative of critical mass – that can translate to efficiency, productivity, innovation and competitiveness, thus a virtuous circle, like they have done in Vietnam, for instance?

In short, how does the community manifest mercy and compassion but not embrace “pusong mamon” and perpetuate “crab mentality”? Because doing so is mirroring the mantra of “me and myself” that we see in political patronage and crony capitalism that nurtures an oligarchic economy . . . that is then manifested in PHL's persistent poverty? In sum, “community sense and the common good” must be paramount. 

And so it is not surprising that the debate continues: What do we mean by “inclusive”? Is it robbing Peter to pay Paul? Or is there a principle-based context that is universally acceptable – or an overarching goal or vision? For example, poor nations want to move from an underdeveloped to a developed economy? And in the absence of such an overarching goal, we don't generate a sense of purpose and would debate the wisdom of federalism, for example, if only to neutralize “Imperial Manila” for the benefit of rural Philippines. But then, why would a person trained as a communist like Deng Xiaoping accept such a fundamental given as scarcity of resources – and thus would prioritize industries and regions as he kept an eye on the ball, that is, China’s modernization and economic development goals?

The key is not for our favorite regions or industries to be first but for the economy as a whole to grow at a faster clip so that it will spawn more economic activity. Surprise, surprise! China is today the second largest economy and in some measures has surpassed the U.S. Sadly, such an image is foreign to PHL because we've been an underdeveloped economy for the longest time. And our impatience has reinforced linear thinking and, not surprisingly, we've paid dearly for decades of “crab mentality.” 

We seem to have found cover in “trickle-down economics” reading about the US economy? Is the Aquino administration resorting to “trickle-down economics,” driving growth insensitively? If we have a challenge it is in fact to accelerate growth even more! The US is a well-developed economy with a GDP per capita (PPP) of over $52,000. Indeed they can talk about “trickle-down economics” because there’s loads to trickle down, but they don’t. In the case of PHL, our per capita income is a mere sliver (at $4,700; still meager compared to Thailand’s $9,900) and, ergo, there is nothing to trickle down. Of course, plunderers are indiscriminate, making us believe we are rich? Our challenge is underdevelopment . . . not to be confused with those faced by developed economies.

A developed nation is not necessarily devoid of poverty but it is the exception than the rule. And we don’t have to look far and wide but to our neighbors. Let’s stick to benchmarking against our neighbors so we don’t compare apples and oranges. Deng Xiaoping, Lee Kuan Yew, Mohamad Mahathir, for example, have demonstrated that an overarching goal is a must for a nation, and that the way forward isn't about me and myself but about the common good.

And our elite class must recognize that bragging about our successes in managing the economy carries a risk and responsibility – given our national income is yet to lift us above an underdeveloped economy? We can't raise the expectations of Juan de la Cruz when no one has demonstrated visionary leadership; people need to appreciate the course we are traversing? But are we taking Juan de la Cruz for granted, that he is not of the same level and rank?

Moreover, an underdeveloped economy does not have an efficient ecosystem such that the output we generate for every unit of input is much less compared to those of developed economies – because underdevelopment is characterized by dysfunctional policies, systems and processes. And why connecting the dots is the acid test of creativity. Question: why are we riveted to the quarterly GDP growth target when blips are to be expected from an underdeveloped economy compared to those of developed and more efficient ecosystems?

What is called for is not to mirror Wall Street’s orientation of monitoring the short-term (and weren't we critical of such short-term bias in the first place?) but to set for ourselves an overarching goal or vision. Many years ago the US, for example, did the exercise and they came up with “the pursuit of life, liberty and happiness” . . . and . . . “a government by the people, of the people and for the people.” Of course, there is such a thing as arrogance of success and, not surprisingly, they tossed their basic egalitarian ethos.

We need to craft our way forward by critically defining (warts and all) what point A is and establishing the hypothesis (an overarching goal or vision) that is point B against which we are able to truly measure progress as we traverse into the future.

For example, between the power crisis and PPP, there are numerous dots that we're unable to connect because we're still going through the learning curve on something as fundamental as vital infrastructure. And no wonder when we superimposed the (imperative) set of strategic industries like those proposed by the JFC, we seemed lost? Because we barely have an infrastructure platform to speak of that can bear the load? How critical these building blocks are can’t be overemphasized yet more than being negligent, we allowed our culture of impunity to get in the way? 

Indeed, we need a North Star – a sense of purpose – like an overarching goal or vision . . . and visionary leadership so that we don't flounder?

Sunday, January 25, 2015

Flavor of the month

Manufacturing is resurgent. But what happened to the seven industry winners from Arangkada Philippines proposed by the JFC? Sugar was once upon a time flavor of the month, so was garments and semiconductors?

Now it’s manufacturing? It is growing because investors are finding China’s costs are rising. And while semiconductors still account for 42% of exports or 8% of GDP, total manufacturing is 22% out of the 31% contributed by industry – and manufacturing is comprised of a number of industries. And regionally if not globally manufacturing is less about finished products but a function of the supply chain involving several countries with the efforts orchestrated by major manufacturers like those of auto. For example, auto electronic parts is one of PHL’s major manufactured products that go into a broader supply chain process. 

That’s my takeaway from the Philippine economic briefing I attended c/o Eagle Watch where two-thirds of the presentations would be what in Wall Street is called “technical analysis.” For example, every economic forecast from the different institutions in Q3-2014 was overstated, meaning we missed to deliver the forecast. Also, the economy is still skewed to specific regions: Luzon, from Hacienda Luisita down to Metro Manila and Calabarzon account for 2/3 of the economy; but with Cebu and Davao plus Cagayan de Oro, altogether they would represent the bulk of PHL’s $272 billion economy.

And one-third of the briefing, to distinguish it from the technical analysis piece, would be the “fundamental analysis” – or what’s behind the numbers like price stability, jobs and personal income as well as leadership as in what must be the profile of the next president; and finally what critical legislations must be enacted if PHL is to continue to grow at a-7% clip – e.g., the competition law; the FOI; Customs systems simplification; foreign ownership restrictions in public utility, etc.

Beyond the non-mention of Arangkada Philippines is the non-mention of how we must prioritize manufacturing. Didn’t we say Juan de la Cruz has been defined by “crab mentality” or “pusong mamon” – because we can’t say no and want to be everything to everybody? And are we then misinterpreting what “inclusive” means? Granted that many of the manufactured products are for domestic consumption, are they truly unique that despite AEC other countries wouldn't want to compete right in our own backyard? If indeed they see a big enough market in the Philippines, what will stop them from coming over?

In the meantime, if the Luzon region and beyond referenced above would confirm Pareto’s econometric model or 80-20 rule, i.e., a major chunk (20) in a given universe will account for the majority (80) of the outcome, shouldn’t we figure out within manufacturing, which industries must be the priority? Given the Aquino administration has a poor batting average with PPP, and since it is now in what everyone calls its last two minutes, the question must be asked: when will the many industry roadmaps that are under development become actionable? When the administration was new, I applauded the efforts of the Dept. of Agriculture as it plunged into developing a roadmap. And as everyone knows, agriculture remains a major challenge.

More to the point, could we truly support 40 or 50 industries – even when they all have roadmaps? Germany is the world-standard in manufacturing and they have fewer or 13 industries that they consider world-beaters. As importantly, if we speak of a regional supply chain, what must be the benchmark in our efforts to exploit manufacturing? For example, take Thailand, where the contribution of industry to GDP is almost equal to that of services at the 40%-range.

Thailand is known as the Detroit of Southeast Asia. We produce electronic parts, they make cars. And in PHL, services account for 57% of GDP with industry lower at 31%. In other words, we have to drill down and test the hypothesis that manufacturing is essentially supply chain, not finished consumer products. That is to say, we better benchmark our vision of the future for manufacturing versus what Thailand has achieved. They have a better track record; while we are still at the level of the analysis. Put another way, where are we, where do we want to be, how will we get there? Look with the end in view so that we don't miss the forest for the trees.

We cannot assess manufacturing’s potentials by simply assuming FDIs will move from China to PHL. For example, Japanese manufacturers that left China chose Indonesia over PHL. We need to focus where the biggest bang is and understand what the competitive drivers are. Beyond ease of doing business, competition is a hard nut to crack, i.e., either a product is preferred by the consumer or not. We must confront the challenge of competitiveness where it truly matters? For example, Procter & Gamble sold 100 of their brands and will henceforth focus on the balance of 80 from their portfolio. In other words, even the once industry model of competitiveness can’t bite more than they could chew. Or have we in PHL developed an alternative econometric model to that of Pareto?

Indeed manufacturing has to be viewed in the broader context of competitiveness. That is to say, it is beyond our success model of a third-party provider like we’ve been in garments, semiconductors, OFWs and BPOs. And competitiveness can be as fundamental as delivering basic rational benefits to the consumer – or be higher in the value chain, with higher value-added as in more functional or emotional or experiential benefits, e.g., lifestyle. Even higher in the value chain is “creative destruction,” which is way beyond conventional wisdom, a very hard lesson that Nokia and BlackBerry had to learn. Or take IBM, the owner of the most number of patents in the world; they must have done both the technical and fundamental analyses of their business many times over before Apple came. Yet Apple upended the dominance of IBM. How did a college dropout do it? For one, as he told Walter Isaacson, who wrote his biography, “When behind, leapfrog.” And he would add, focus . . . simplify . . . connect the dots (from end to end.)

The conventional wisdom of growing PHL’s GDP by 7% on a compounded basis will take us a generation to be a developed economy as confirmed by international agencies. Sadly, our rhetoric re inclusive growth will remain as such if we don’t develop a new paradigm in managing our economy. In the meantime, we must benchmark the elements of our economic output against those of our neighbors; and if, for example, we want to make a major dent on poverty, we need to raise GDP by 50% or double GDP per capita.

If we want the next president to understand economics in order to be effective, let us remember that the most recent two were a professor and student-graduate from the economics community. And if economists don’t have the answers to all the questions, we better give credit to the JFC for developing Arangkada Philippines because that is a good example of what this blog has called egalitarian – i.e., it was an open, transparent and diverse process having tapped a cross-section of PHL’s society. And successful problem-solving and similar creative pursuits can be attributed to an egalitarian atmosphere, even in Deng’s China. When Deng signaled the opening of China and fleshed out China's modernization vision, he had different groups organized into teams and they came up with the game plan. And PHL has yet to find a visionary leader like Deng Xiaoping.

While in the economic briefing the income drivers of the economy or GDP were discussed, we still need to compare and contrast what portfolio we have today versus what we must have to truly accelerate economic growth – beyond doing quarterly growth forecast. For example, the bulk of GDP is still accounted for by OFW remittances, BPOs and semiconductors. What must our portfolio be? And why?

Great leaders transformed the world because they were visionary leaders. They demonstrated community sense and were committed to the common good. And in the process, they could not be “pusong mamon” nor tolerate “crab mentality” because they understood the fundamental given of scarcity of resources. And finally, before Pareto was Christ, who admonished the Jews to toss their 300 tenets and focus on the two Great Commandments. That thought came the first time I stood in front of ex-socialists that wanted to learn the ropes of the free market – that problem-solving must be principle-based to generate a sense of purpose.

[This posting captures the points I made during the briefing; copy furnished and acknowledged by a presenter.]

Thursday, January 22, 2015

Modernization by design

“The Iwakura Mission was a Japanese diplomatic journey around the world, initiated in 1871 by the oligarchs of the Meiji period. Although it was not the only such ‘mission,’ it is the most well-known and possibly most important for the modernization of Japan after a long period of isolation from the West. It was first proposed by the influential Dutch missionary and engineer Guido Verbeck and was probably based on the model of the Grand Embassy of Peter I.” [Wikipedia]

“[T]he historical turning point that set the nation on the road to modernization was the Iwakura Mission. From December 1871 to September 1873, fifty-one Meiji government leaders traveled by ship and rail to fifteen different countries . . . When the group left home, Japan was essentially a closed country; the Japanese knew little about the outside world. But as the members of the mission visited other countries’ factories, mines, museums, parks, stock exchanges, railways, farms, and shipyards, their eyes were opened to ways Japan could remake itself, not only with new technologies, but also with new organizational strategies and ways of thinking . . .

“The trip created a shared awareness among the mission members of just how far behind Japan was from the advanced countries and a common perspective about how to introduce change. Rather than becoming discouraged by what they saw, the officials returned home energized, excited by future prospects for Japan and eager to send additional teams abroad to study in more detail.”[Deng Xiaoping and the transformation of China, Ezra F. Vogel; The Belknap Press of Harvard University Press, 2011, p. 217]

“Gu Mu . . . served as the Vice-Premier of the People's Republic of China between 1975 and 1982 . . . Between 1978 and 1988 Gu was a major part of the new reformist government under Deng Xiaoping, specializing in external relations and economic development. Gu, as Vice-Premier, led the PRC's first formal delegation to Western Europe following the Cultural Revolution. On the trip Gu visited France, Belgium, Denmark, Switzerland, and West Germany . . . As one of Deng Xiaoping's chief aides in charge of economic management, he played a major role in implementing Deng's economic reform policies and China's opening to the world. He was a key figure in the creation of Shenzhen, China's first Special Economic Zone.” [Wikipedia]

“Gu Mu recalled that on the eve of the trip, when Deng met with him to give his instructions, he said, ‘Have broad contacts, make detailed investigations, and carry on deep research into the issues . . . Look at how they manage their economic activities. We ought to study the successful experiences of capitalist countries and bring them back to China . . . China’s new willingness to work with capitalist countries . . . required not only rethinking specific industrial plans, but also revising rules and bureaucratic procedures to allow foreign firms to operate in China . . . In the more leisurely days of Meiji Japan, the Iwakura Mission had taken more than a decade to produce its twelve-volume ‘Opinions on Industry’ to guide industrial development. By contrast, after the Gu Mu trip, it took just several weeks for the delegation to complete its reports and for the Chinese economic leaders to organize appropriate units to discuss the implications of what they had learned . . .

“The forum was conducted in a series of twenty-three morning sessions spread over two months . . . In the afternoons the officials returned to their regular work units to report on the morning discussions and to prepare their units’ written responses to the issues raised. The forum allowed some sixty representatives of the key economic ministries and commissions to present the overall activities and plans of their units. This way, each unit could get a sense of what all the other units were thinking without becoming involved in arguments about precise allocations and production targets; such details would be discussed at later planning meetings . . . China could no longer remain a closed economy, that it must import foreign technologies, equipment, capital, and management experience in order to accelerate its development.” [Vogel, Op. Cit. pp, 221, 224, 225]

This blog has raised that in the case of PHL, we embraced the most convenient route to drive our economy, OFW remittances, and more recently, BPOs. If we’d look into the details of the Iwakura mission and the efforts of Gu Mu, we will realize that the economic miracles that happened in these countries were a product of a deliberate game plan. Which they crafted after an “aha moment” – when they recognized that they had to push their thinking and worldview into the modern age. They weren’t simply destined or fated. On the other hand, we risk misunderstanding the mantra of mercy and compassion when we have yet to make the unanimous choice to move the nation forward and exert the requisite efforts? “[T]he Church in the Philippines is called to acknowledge and combat the causes of the deeply rooted inequality and injustice which mar the face of Filipino society, plainly contradicting the teaching of Christ.” [Homily of Pope Francis in Manila Cathedral,, 16th Jan 2015]

In short, we have to overcome: (a) parochialism and truly learn from others; (b) our hierarchical system and structure that says only the elite has the right to learn about modernization; and (c) the assessment of the friars that we’re incapable of self-government – that our culture of impunity seems to bear out? And precisely why Rizal risked his life by preaching and echoing the Age of Enlightenment.

There is a parallel history in the US where the pioneers saw the natives as incapable of self-rule. In our case, the colonizers saw Juan de la Cruz as a thief. In the US, the pioneers pursued the efforts to modernize and consequently the natives became the minority. In the case of PHL, the Chinoys showed us how to drive the economy and, not surprisingly, they are today the Philippine economy.

Why did that not happen in Japan and China? They opened the country to foreign investment, modern technology and innovation and thus learned the imperatives of talent, product and market development – the critical elements that drive economic output. Yet we're finding a 21st century ally in socialism – that it is the answer to our backwardness?

For example, let’s look at Thomas Piketty’s (“the French economist that put inequality back on the map and is being hailed as the Karl Marx of the 21st century”) key concerns: ‘[I]f every country just tries to snap away investments from its neighbors through tax competition and optimization, then everybody loses. It’s a stupid game; it’s a negative-sum game that fosters financial opacity . . .  If a rising percentage of the public thinks that a disproportionate share of the benefits of globalization goes to the financial sector or large multinational companies, then there is a great danger that people like Marine Le Pen will be able to successfully drive the anti-globalization agenda and revitalize nationalism.” [Piketty: 'The Myth Of National Sovereignty Helps Big Corporations Screw Us Over', Max Tholl and Florian Guckelsberger, The European, 5th Jan 2015]

Piketty summarized his perspective as follows: “I firmly believe that globalization is a positive-sum game that serves all our interests. But we must find ways and develop institutions to ensure that everybody benefits from it . . . A truly global government is of course a utopian idea. But I tried to make it clear in the book that I believe in step-by-step progress. I don’t believe in all-or-nothing proposals.”

He wants to strengthen global institutions so that: (a) banks don’t play games with their own investments and financial products that are designed to benefit themselves – and would bring the world down to its knees, i.e., the Great Recession of 2008; and (b) governments don’t turn their countries into tax havens that will entice MNCs to seek tax “inversion” (perhaps a step beyond historical “avoidance” and closer to “evasion”) as a competitive advantage. That’s fair enough; but are we romanticizing something about which we need more insights?

For example, my Ukrainian friends demonstrated, despite the misfires in their pursuit of the free market, they would go to war against the Russians because they don't like the specter of the dark ages – under communist-socialist rule. But do we see socialism as the easy way out? Granted that Japan and China are old civilizations, still our neighbors who can’t make the same historical claims (with the exception of Taiwan) did not shirk the challenge of modernization. Surprise, surprise! They became Asian Tigers!

Is the pain from our backwardness then self-inflicted? And if so, the mantra of mercy and compassion must attack the root “cause” more than the “effect” that we see in the face of poverty. That's what problem-solving is about! Otherwise we run the risk of the rest of the region leaving us in the dust – frail, wobbly and feeble? 

Saturday, January 17, 2015

Problem-solving the problem that is PHL

That may sound presumptuous but it is not if we distinguish problem-solving from prescribing a solution. Remember the adage “If it ain’t broke don’t fix it”? Most everyone knows the Nokia story, the once dominant mobile phone brand, or even BlackBerry. If it ain’t broke better fix it! And as my Eastern European friends (and in fact China under Deng when they visited capitalist Europe) would learn, problem-solving is team sport. More to the point, successful problem-solving and creativity is a product of an egalitarian environment – of openness, transparency and diversity. And the model is borrowed from the GPS: where are we, where do we want to be, how will we get there.

Problem-solving must be principle-based so that it is universal and lends itself to a sense of purpose for a group or people to commit to. Which then turns the challenge into an opportunity, meaning it brings about a sense of control, not helplessness. And the first principle is to establish an overarching goal if not vision.

Instinctively we Pinoys are wedded to the past if not old paradigms even when our daunting challenges demand that we pause and revisit our worldview . . . Take a specific example: while most nations first became an agriculture economy, agri-business or agro-industry – given its greater multiplier effect and impact on economic output – would upend traditional agriculture because the latter was sub-optimal. [“Investing in agriculture, Barbarians at the farm gate, Hardy investors are seeking a way to grow their money,” The Economist, 3rd Jan 2015.]

It is not rocket science but economies of scale that facilitate efficiency, productivity, technology and innovation – but demands 50 small farmers coming together as one competitive enterprise, for example. And that means developing a community sense in pursuit of the common good – the yardstick that is inherent in nation-building . . . If we’d care to reflect on where we are and why we are where we are today!

Consider: We had mistaken that we were showered with manna from heaven – OFW remittances and (more recently) the BPO industry – even when we netted out lagging the region in economic output. The subordination of nation-building to what was convenient, despite the prize of a handful of billionaires that PHL is proud of, has its price! Where is the principle that is driving our embrace of OFW remittances? Where is the overarching goal or vision? Where is the sense of purpose or commitment or sense of control? Where are the building blocks of nation-building? Connecting the dots is the acid test of creativity – and which is why we have to rely on fate or “bahala na” as the cornerstone?

If the overarching goal is to move from an underdeveloped to a developed nation, we have to reach beyond these revenue drivers. Beyond managing the technical piece, of a $272-billion economy to grow by 7%, we must address the fundamentals and raise GDP by 50% or double GDP per capita, to make a dent on poverty . . . and be on our way to be a developed economy. Of course, as Deng Xiaoping rightly saw it, over the long-term we need to develop science, technology and education – the fourth leg of China’s “four modernizations” that included industry, agriculture and national defense.

How do we connect the dots? An economy is the aggregate of the products and services that a nation produces. Today that is largely electronics, specifically semiconductors, besides OFW remittances and BPOs. But we're not into competitive consumer electronic products that will attract a bigger regional if not global market. Our portfolio must be revisited. And the JFC has proposed, after doing their homework, the seven industry winners. They can comprise our new portfolio. The market will extend beyond the Philippines – and will attract major foreign investments, create millions of jobs and raise GDP to approximate those of our neighbors. 

That is a better hypothesis than what we've lived with for the longest time – and which must now be reckoned as a fallacy? We can't just talk a good game and put up a brave face. We must demonstrate a paradigm shift more than express a “kuro-kuro” – which we may consider and believe as an effort toward change while stuck in an old mindset?

We can’t seem to get our act together to amend the restrictive economic provisions of the Constitution, but can we focus and limit the effort to the Negative List? Indeed to amend the economic provisions as well as to move to a parliamentary system can be too much for Juan de la Cruz to chew. And to win his heart and mind we sorely need a concerted effort to educate ourselves on the imperative of doing these amendments. And that means leadership by example – as in the pursuit of the common good. It is more than relying on one’s “kaibigan, kaklase and kabarilan”? Mao was ruthless and Machiavellian yet as his health deteriorated, the person he punished for his capitalistic bend was the same person – Deng Xiaoping – he chose to lead the country despite the objections of his spouse and her Gang of Four.

If we continue the analogy with private enterprise, we need to examine the requisite marketing mix or drivers of this new portfolio, i.e., the products, their pricing, placements and promotions. That means learning more about innovation and creativity. A business if it is to be virtuous must satisfy a simple yardstick: does it make and sell things of value? And a product is of value if it addresses a human need or problem. And human need is best captured in Maslow's hierarchy of needs. In other words, man's need is progressive which marketers must then translate to an ever-increasing value-added proposition. And the greater the value-added the wider the market it will serve. And given economies of scale the healthier the margins will be which then brings about a sustainable business – i.e., attaining a virtuous cycle.

Then comes the resource mix. This is where the public and private sectors must work together and build on the efforts of the JFC and pull together the requisite resource requirements to support the seven industry winners. And that will include: men/women or talents, machinery/equipment, money/investment, materials, and methods/systems. And finally the execution imperatives: who will do what, when, where and how?

The exercise would address the strategic industries that we must develop. But it presupposes that government will drive the development of the requisite infrastructure. For example, where is the leadership to address our now evergreen power crisis? This should shame us all! And the way we’ve allowed our big boys to elbow each other to dominate major infrastructure projects speaks volumes – that indeed we're parochial (and thus have shut out the best the world has to offer) if not incompetent because we're new in the game and more fundamentally because of the absence of visionary leadership? And worst of all, it demonstrates a culture of impunity?

Did Vietnam, Hanoi specifically, just open a new airport? And soon Myanmar? And what is our response? It's more fun in the Philippines? It's classic “pwede na 'yan” or our penchant to make-do if not value the sub-optimal. More to the point, it's not a characteristic of competitive endeavors or winning teams. It is, sadly, a worsening of our Dutch disease being incremental to our reliance on OFW remittances. 

What about other industries? Enter Pareto – i.e., toss “pusong mamon”! There will be other needs that must be satisfied but we must bite the bullet and prioritize – i.e., toss “crab mentality.” And that demands leadership! And for government it means focusing on: (a) the strategic needs of the country as spelled above and (b) good governance. We cannot have the left hand not knowing what the right hand is doing. As importantly, we cannot continue with a culture of impunity. We need “daang matuwid 2.0.” We need the church, the education community and society at large engaged and committed to “team sport” – in a national agenda and campaign.

What about Pinoy compassion, sensitivity, bayanihan, love of God, love of neighbor, etc.? “[T]he Gospel is also a summons to conversion, to an examination of our consciences, as individuals and as a people. As the Bishops of the Philippines have rightly taught, the Church in the Philippines is called to acknowledge and combat the causes of the deeply rooted inequality and injustice which mar the face of Filipino society, plainly contradicting the teaching of Christ. The Gospel calls individual Christians to live lives of honesty, integrity and concern for the common good.  But it also calls Christian communities to create ‘circles of integrity,’ networks of solidarity which can expand to embrace and transform society by their prophetic witness.” [Homily of Pope Francis in Manila Cathedral,, 16th Jan 2015]

Wednesday, January 14, 2015

“A damsel in distress”

“We don’t care. We’re not a serious people. We shirk our responsibility to the people, to government, to our communities, to ourselves. That’s who and what we are.” [The kind of people we are, Leandro DD Coronel, Manila Bulletin, 7th Jan 2015]

“What kind of people have that kind of thinking? I think it’s people who are not serious about their social responsibilities, who have no sense of community, and indeed no sense of nationhood. It’s a people that cares very little, if at all, about preserving the quality of their surroundings, the environment, even their own property. It’s a people with no sense of social responsibility . . . We Filipinos like to leave things to others – to politicians, local and national public officials, civic organizations – as we go our merry ways. It’s the ways of Juan Tamad, who prefers to wait for a fruit to drop to him rather than pick it himself . . . No wonder our politicians feel no compunction about going about their own merry ways too as they steal from the public coffers because they know most people won’t mind anyway. No wonder politicians and local warlords take advantage of us because they know no protest will issue from our lips.”

“How were the natives of these islands described 50 years after Magellan was slain in Mactan and a decade after the Spaniards returned with Miguel Lopez de Legazpi? In an undated account by Legazpi, our ancestors were called heathens ‘with no law at all,’ superstitious, with ‘wretched practices’ that could be easily eradicated by priests who preached in the local languages. Mention was made of two stubborn Moro chiefs of Cubu (Cebu) who adamantly refused conversion, adverse as they were to monogamy.” [That’s us, Gemma Cruz Araneta, Manila Bulletin, 7th Jan 2015]

“The bulk of Legazpi’s ‘relacion’ (BR vol. III) described the ‘character and conditions’ of the inhabitants of these islands. They were lawless: ‘The people do not act in concert nor obey any ruling body; each man does whatever he pleases, and takes care only of himself and of his slaves. He who owns most slaves and the strongest, can obtain anything he pleases.’ Downright unflattering, yet today, the strong still ‘enslave’ the weaker ones, despite the Constitution.”

“Consequently, Legazpi observed that relations among relatives, between parents and offsprings and siblings were not governed by laws; ‘no person favors another, unless it is for his own interest.’ Legazpi observed that when someone provided a relative or a brother shelter and sustenance in time of need, that person could be ordered around like a slave.”

“He called us thieves: ‘Privateering and robbery have a natural attraction for them.  Whenever the occasion presents itself, they rob one another, even if they be neighbors or relatives; and when they see and meet one another in the open fields at nightfall, they rob and seize one another.’ Sadly enough, in the 21st century, we still behave like that, at all levels, notwithstanding 500 years of Christianity.”

“In the 28 years since we overthrew the dictatorship of Ferdinand Marcos, many of those who fought for democratic institutions also prioritized agrarian reform, believing that this was the central project that would bring about more equality.” [Does liberal democracy promote inequality (?), Walden Bello,, 16th Dec 2014]

“Things at first appeared to be headed in the right direction. With the ouster of Marcos in 1986, not only was a constitutional democracy set up, but a sweeping land reform law — the Comprehensive Agrarian Reform Program, or CARP — was passed to give millions of peasants a title to their land. Redistribution would be accomplished peacefully under democratic governance, in contrast to the coercive programs in China, Vietnam, and Cuba.”

“Over the next few years, however, competitive elections were reduced to a mechanism whereby members of the elite fought one another for the privilege of ruling while consolidating their control of the political system as a class. Indeed, the vast majority of those elected to Congress came from either landlord or big capitalist families. One of the victims of this congealing of landed class power was CARP.”

“With a combination of coercion, legal obstructionism, and the conversion of land from agricultural to commercial and industrial purposes, the agrarian reform process stalled. Ultimately, less than half of the original 10 million hectares designated for redistribution was actually disbursed to peasants by 2008 — some 20 years after the beginning of the program. Indeed, with little support in terms of social services, many peasants ended up reselling their lands back to the landlords, while other beneficiaries lost their recently acquired lands to aggressive legal action.”

“It was in my book, sheer hypocrisy of the Marcos Dictatorship who painted a rosy and glamorous picture of the Philippines…but unashamedly hides the real truth about the poverty of Filipinos. That was way back in the 1970’s when the Philippine economy were still better than most of ASEAN. Forty years later, the majority of our people still wallow in abject poverty.” [Are we ashamed of the poverty of the Filipino (?), Bobit S. Avila, SHOOTING STRAIGHT, The Philippine Star, 8th Jan 2015]

“This is something that our political establishment has to answer for. After all, all of them bar none; ran for public office using the name of the poor in vain. Yet, the politicians have become extremely rich beyond their wildest dreams, while the ordinary Filipino has remained poor. Why do you think that the ordinary Filipino, if given the opportunity would leave the comforts of their home to find work in foreign countries? Four decades ago, the Filipino Diaspora started and four decades later, it hasn’t stopped!”

“From the way things look, it is too late in the hour for the Philippine government to do something to hide the poverty of the Filipino people. Let me say it here, we Filipinos shouldn’t be ashamed of our poverty. It should be our politicians who should be ashamed for causing the poverty of the Filipino people.”

Do we even care? “Meanwhile, the Philippines is facing bright economic prospects for 2015. Manila Rotary, the oldest Rotary club in Asia with a large number of prominent businessmen as members, is looking forward to listening to guest speaker BSP Governor Say Tetangco during the RCM’s regular lunch meeting today.” [CIA financial threat adviser: US facing a 25-year ‘Great Depression’, Babe G. Romualdez, SPYBITS, The Philippine Star, 8th Jan 2015]

“Say is understandably upbeat about the country’s growth prospects, with a lot of positive indicators such as the higher dollar remittances from overseas Filipino workers estimated at $24 billion – higher than the $23 billion recorded in 2013 – and that does not even include the “informal” remittance channels utilized by OFWs. These dollar remittances have been a key factor in keeping the peso strong.”

Are we talking of one and the same country? Or are we a government of the few, by the few and for the few? “[T]rouble may be lurking beneath the picture-postcard outlook for this tropical island paradise . . . The problem, as European nations are learning, is that you can’t save your way to faster economic growth. Manila’s long spate of belt-tightening neglected much-needed investment in infrastructure, inhibiting new investment and job creation . . . While GDP growth has recovered since the global financial crisis, growth in per-capita incomes has been steadily slowing since 2010 when President Benigno Aquino took office. Investment growth has been slowing since 2012.” [Thriller in Manila in Aquino’s final round, Dow Jones, Manila Bulletin, 10th Jan 2015]

“Aquino promised to step up infrastructure investment. And the sunny economic forecasts for the country this year take him at his word. But with 59 proposed public-private projects on the drawing board, contracts to begin building have only been awarded for eight. Not one has been completed . . . Manila’s vaunted current account deficit may also have been photo-shopped. While exports have been improving, the Philippines runs a persistent trade deficit . . . [T]he surplus may also be overstated by widespread under-reporting of imports, a practice better known as smuggling. Importers routinely under-invoice imports (or fail to report them at all) to evade customs duties and other taxes.”

There's no Prince Charming that will rescue us – like a damsel in distress – from ourselves? Welcome Pope Francis!

Saturday, January 10, 2015

Overcoming cultures: East versus West

“Tagaytay City: Sad example in nation-building,” Former Philippine President Fidel V. Ramos, Manila Bulletin, 3rd Jan 2015. Instead of improving for the better, however, Tagaytay’s deterioration accelerated – in fact, nose-dived – as reflected in FVR’s follow-up article four years ago . . . President Aquino III’s appointment of former Tagaytay Mayor Francis Tolentino as MMDA chairman created waves of protests . . . It will be recalled that Francis Tolentino and his successor – brother Abraham, together with father Isaac Tolentino – have been among the most durable, authoritarian political dynasties in a major Philippine city, lasting some 40 years to-date.”

“Complaints against Chairman Tolentino and family have been exposed in various broadsheets . . . [T]he two Tolentino brothers… ‘Allegedly amassed some P500 million in ill-gotten wealth by way of unabated graft and corruption, abuse of power and authority in the form of real estate properties, businesses, vehicles, bank deposits, and other assets, which in no way can be justified as having been acquired legally through their earnings as public officials or even their private business ventures.’”

That is stretching “kaibigan, kaklase, kabarilan” one step too many? Or is that Pinoy culture as we call it, i.e., we can’t turn our back on family or friends? Yet, while leaders must have a heart, leadership demands much more. And fairness is one as opposed to nepotism or political patronage; that is, if we believe in freedom and equality and democracy being the path to the common good? And that was why Rizal made reference to the Age of Enlightenment – i.e., he saw that Padre Damaso had emasculated Juan de la Cruz?

“As today’s emerging giants face the challenge of moving beyond their home markets, they have much to learn from the path-breaking experience of South Korea’s Samsung Group, arguably the most successful globalizer of the previous generation.” [The Globe: The Paradox of Samsung’s Rise, Tarun Khanna, Jaeyong Song, Kyungmook Lee, Harvard Business Review, July 2011]

“Twenty years ago, few people would have predicted that Samsung could transform itself from a low-cost original equipment manufacturer to a world leader in R&D, marketing, and design, with a brand more valuable than Pepsi, Nike, or American Express. Fewer still would have predicted the success of the path it has taken. For two decades now, Samsung has been grafting Western business practices onto its essentially Japanese system, combining its traditional low-cost manufacturing prowess with an ability to bring high-quality, high-margin branded products swiftly to market.”

“The two sets of business practices could not have seemed more incompatible. Into an organization focused on continuous process improvement, Samsung introduced a focus on innovation. Into a homogeneous workforce, Samsung introduced outsiders who could not speak the language and were unfamiliar with the company’s culture. Into a Confucian tradition of reverence for elders, Samsung introduced merit pay and promotion, putting some young people in positions of authority over their elders. It has been a path marked by both disorienting disequilibrium and intense exhilaration.”

And thus this blog often talks about my Eastern European friends. They were once a tiny enterprise, and every now and again I would see snacks laid out by the pantry with a little sign that always made me curious. And it is to share one’s joy – which is inherent in the culture. It could be one’s birthday or there’s a new born or a promotion or one getting a new car. I had wondered how to embrace the culture since I’d be gone for stretches of time. Then I realized how they’d go for cheese and so finally whenever I was around, every Monday, I'd pick up some cheese and cold cuts. “It’s Monday, it’s a new week to celebrate.” But we have grown so much that today it’s no longer practical from the point of view of this foreigner. Still the locals keep to their culture, the idea is not to expect everyone to partake; it's the act of sharing one’s joy that matters.

In any case, we designed the offices to have many small meeting rooms and coffee-lounging areas for people to converge formally or informally and even watch important news or games on TV. And whenever I'd be “wandering around” it'd be easy to sense how passionate these little groups are in their pow-wows, if not take a pulse of the organization. For example, that these small teams – where plan execution occurs whether within a unit or across functions – are reflective of our GPS: where are we, where do we want to be, how will we get there. And it is an acquired culture, not one carried from the past.

How they’re adapting to different cultures and markets is amazing. When we sent two of them to Asia, first to Hong Kong and then to settle in Singapore, I had to share with them lots of do’s and don’ts. And in no time, from zero knowledge and instincts, they'd talk to me as though I was the non-Asian. And so we would very rapidly reward them “because it took you so much sooner to learn the ropes compared to how my old MNC company learned Asia.”

We Pinoys have had the benefit of access to the West just like our neighbors, if not ahead of them. Yet all of them have learned how to pick and choose what the West has to offer. While we’re still wedded to the past, if not our ideology – without the strong conviction how to move PHL forward in today’s highly competitive and globalized world? We’re not in oligarchic Russia, an underdeveloped economy, and a government for the few . . . cronies?

We can do better than that? First we must believe that we can be as good as anybody else? And we don’t have to forget about the past! I re-introduced my Eastern European friends to Leonardo da Vinci and the techniques of visualization and the concept (which is also not new) behind the modern GPS, including innovation and product-architecture modeling. And they have become part of the company's culture. [Yet we also have to disabuse their minds. That when all is said and done, it goes back to keeping it simple. As Steve Jobs would define “creativity, it is simply connecting the dots.”]

And America, the land of immigrants, has kept the efforts despite streaks of racism to embrace hundreds of cultures. In my old MNC headquarters, one would think they’re at the United Nations building because we represented every major market we catered to. And I remember a group of Koreans that had attended a course at Cornell and a professor-friend called with a request (because he knew how open, transparent and diverse our culture was) to show them our technology center. And as they bade goodbye, the head of the group gave a dig to the professor, “The few hours we spent at this technology center makes the period we spent in the classroom look shallow.” He was Asian and was, of course, grinning from ear-to-ear.

South Korea has shown the way. Beyond leadership, Juan de la Cruz must decide whether we shall remain wedded to the past? The Age of Enlightenment has been around, it’s from the past that we can embrace, but not those that hold us back? If FVR armed with evidence says Tolentino is a bad apple, President Aquino better dig deep into our way of life? And worst of all is finding excuses for our shortcomings? No wonder Pope Francis keeps hammering the Vatican, try self-criticism?