Monday, March 30, 2015

Defining the “creation” – the Philippines – we want

Is it time we think beyond family and of the community? I'm writing this while staying at my daughter's extra room in their SoHo apartment, which she offered since my wife had to extend her stay in Manila. Which means instead of a 45-minute train ride I have a 20-minute subway ride to my client in Midtown. It's all about family; and at home she with her husband still keeps “her bedroom.” And some time ago, they offered our pied-à-terre to a friend that badly needed a place in Manhattan.

Where are we as a nation? We must first define the Philippines that we want – because the future is in our hands but we have to create that future? And we must acknowledge the ambivalence in our traits and values to appreciate why we have been conflicted? And such ambivalence robs us of focus and commitment that successful undertakings represent, like running a tight ship – as opposed to a floundering ship?

There’s a news item that we can only welcome because we are urged to “formulate a long-term strategic plan for the country that transcends administrations to ensure continued development in the country despite changes in leaderships.” [Strategic plan that transcends administrations pushed, Bernie Magkilat, Manila Bulletin, 22nd Mar 2015]

Defining the creation we want? In military parlance it is defining the “hill” – i.e., how they would take down a target and return to base to celebrate, for example. The hill is defined not in a limited sense. It is similar to sustainable development that encompasses an ecosystem – i.e., imagine, visualize and think 360 degrees. In nation-building it is defining a people's belief like the pursuit of life, liberty and happiness. In an enterprise it is defining the object of the enterprise itself. And in a product it is defining its reason for being. In other words, what is the overarching goal or vision?

We get the drift? Because anyone can put together the words to best describe the creation they want. More to the point, we Pinoys must first know where we are going if we'd like to ever get there? And because misery loves company, the human tendency is to turn around and be critical of others. But winners behave differently, they benchmark. Because there is no perfect creation the key is to pick and choose best practices demonstrated by others.

If we are to look beyond family we have to learn to look outward not inward, and stop being parochial. As importantly, we have to be more demanding and less forgiving? “If you have so much patience you can withstand anything but it’s easy for your officials to say, our people are okay, it doesn’t really matter, we can take our time. The patience of Filipinos can be exploited. I don’t want them to be more impatient, however. I’d like them to be more demanding and less forgiving.” [The Ambassador who speaks Filipino, ASIF AHMAD Ambassador, United Kingdom, Bernie Magkilat, Manila Bulletin, 22nd Mar 2015]

“This all becomes more vital in light of the launch of the Asean Economic Community at the end of December this year. From a partisan politics perspective, the President and his men should also pay attention to these things. But they seem to have their priorities all messed up. They don’t seem to realize they have very little time left – assuming that Aquino is not forced to step down soon by an unexpected event as horrible as Mamasapano – to post some visible achievements and lay the socioeconomic groundwork for the next administration.” [Mr. Balisacan points out the real ‘straight path,’ The Manila Times, 21st Mar 2015]

Why can’t we get our priorities right? Try crab mentality? And does it come back to our inward-looking parochial bias that we like to claim is a positive because it’s premised on family? What about community and the common good?

“FOR all of de facto President Benigno S. Aquino 3rd’s pontificating about the ‘straight path,’ he has certainly failed to recognize the one that the country’s top economic planner has been pointing out all along. In a recent press briefing, Socioeconomic Planning Secretary and NEDA Director-General Arsenio M. Balisacan spelled out in rather frank terms the key obstacles to business expansion in the Philippines. Noting that the level of actual business growth trailed the apparent level of enthusiasm of domestic and foreign businesses about the Philippines’ economic prospects, Balisacan said that there was ‘a pressing need to address infrastructure bottlenecks, port congestion and power woes.’”[ibid.]

And why can’t we be on the same page? Take these two news reports talking about the same topic: (a) “DOF welcomes EO on coco levy funds,” Chino Leyco, Manila Bulletin, 21st Mar 2015; and (b) “Farmer groups hit Coco Levy Fund EOs,” Ding Cervantes, The Philippine Star, 21st Mar 2015.

Is it good or bad news? “The Department of Finance (DOF) has welcomed the issuance of an executive order governing the inventory, transfer, reconveyance and disposition of coco levy funds and coco levy assets. Finance Secretary Cesar V. Purisima, said President Aquino’s decision to issue Executive Order No. 179 will pave the way for the government to put an end to a long-standing issue for many of coconut farmers . . . President has signed EO 179 providing the guidelines that will govern the inventory, transfer, reconveyance and disposition of coco levy funds and coco levy assets.” [ibid]

That sounds like good news, yet: “[T]he small coconut farmers’ long demand is for the government to return the coco levy money and assets to its legitimate owners and not to privatize and sell these fund and assets for the benefit of big businesses in the coco industry and Aquino’s self-interest.” [ibid]

Does it remind us of the land reform program? Those behind it assumed it was good yet many years later we are still debating whether it was good or not? Have we defined “the hill”? What about defining sustainable development or an ecosystem or nation building? What about the object of the enterprise or the product’s reason for being? In other words, what is the overarching goal or vision?

Singapore isn't perfect yet is a good benchmark. “In his book "From Third World to First," Lee shared lessons on development, diplomacy, policy-making, history, culture and domestic affairs.” [15 things Lee Kuan Yew said about the Philippines, Camille Diola,, 23rd Mar 2015] And it appears the world can't get enough of Lee.

Can we define the Philippines that we want – and run a tight ship as opposed to a floundering ship?

Wednesday, March 25, 2015

It’s “Woo-ster” . . .

Not “War-ses-ter” . . . It’s “Hah-vud” not “Har-vrd” (Harvard). We were in Worcester, Massachusetts (only Boston/South Boston will be more populous) and were with a Texan and an Alabamian. And our host was laughing his heart out hearing “aliens” that had come down on their land. And, of course, my two Bulgarian friends could only roll their eyes seeing how in America people can be aliens in their own country.

Over dinner we learned that the Southerners in our group were marketing their products in the South and Southeast regions of the US and would like to expand the business thus their presence in the trade show in New England. “We hope to win more markets,” said the Texan. And added in jest that he had his stint in the military. And so we egged the young Bulgarian with us to share: “I had my stint in the Communist Party when I was a kid; but Pope John Paul could say that too.”

Left unsaid, of course, were the assumptions and biases people have, influenced by where they’re from . . . their experiences . . . and beyond . . . And we could laugh them all away . . .

“While social and economic factors account for some of what divides us into warring camps, psychologists since Freud have suspected that something more fundamental is at work. In 1963, the Yale psychologist Stanley Milgram famously showed that average people were capable of inflicting grievous harm on one another — in this case, administering what they believed were powerful electric shocks — if they thought they were following the orders of a superior.” [The Brain’s Empathy Gap: Can mapping neural pathways help us make friends with our enemies (?), Jeneen Interlandi, The New York Times Magazine, 19th Mar 2015]

“A few years later, in an equally famous experiment, the Stanford researcher Philip Zimbardo had subjects play prisoners and wardens and showed that context can be far more powerful than our own values and personality traits in determining how we treat other people. Together, the studies are perhaps the most emblematic of a generation of psychology research into the social cues that determine how one group treats another. What role does group identity play? Does authority make us passive or just reinforce our belief that we are right? How much of our empathy is innate and how much is instilled in us by our environment?

“In the past two decades, with the advent of f.M.R.I. technology, neuroscientists also began to tackle such questions. Emile Bruneau, a cognitive neuroscientist at the Massachusetts Institute of Technology, has spent the past seven years studying intractable conflicts around the world. He has looked at Israelis and Palestinians in Israel and the West Bank, Mexican immigrants and Americans along the Arizona border and Democrats and Republicans across the United States. By supplementing psychological experiments with brain scans, he is trying to map when and how our ability to empathize with one another break down, in hopes of finding a way to build it back up.

“Kornelia Magyar, director of the Hungarian Progressive Institute, thought the experiments sounded promising. She believed that racial prejudice was thwarting efforts to assimilate the Roma, and thought studies that exposed it could only help their cause. But she, too, was concerned about what the next steps might be. ‘Once you measure it,’ she asked, ‘How do you change it?’

“Bruneau said he thought the answer to that question might lie with non-Roma activists like her. And then he asked a question: What made her, an educated white woman, take up the Roma cause? This gave Magyar pause. After a brief silence, she explained that she grew up in a city close to the Austrian border and that she always felt like an outsider when her family would cross over to go shopping. Daroczi couldn’t help interjecting; after the fall of communism, he said, Hungarians crossed the border in droves, mostly to purchase basic goods. ‘It was written in Hungarian on the walls of the shops, ‘Hungarians: don’t steal!’ ” he said.

“‘It felt shameful,’ Magyar added, nodding. ‘I think that really affected me.’ Bruneau lit up at the anecdote; it was very similar to the stories he’d collected from other non-Roma activists. He told Magyar and Daroczi about the brain scans of the Israeli peace activists — the blue dots in a sea of red — and about his desire to somehow array the power of their experiences toward intervention efforts.

“‘Yes, but even that is tricky,’ Magyar said. The way a person related her own experiences to the experiences of others was complicated, she said. ‘Sometimes those same experiences trigger the exact opposite reaction.’

“‘Bruneau hopes that neural focus groups might help determine which interventions are most likely to succeed. ‘We would get people in the lab to view a number of different candidate anti-Roma bias campaigns,’ he said. ‘And then see which ones generated the greatest response in predefined brain regions.’ Ideally, social scientists working in Hungary would determine which programs to measure, and Bruneau’s research would help evaluate and refine those programs. In psychology experiments he conducted, short narratives about individuals from rival groups proved particularly effective at getting opponents to empathize with one another. He imagined intervention programs that used narratives like these in a variety of ways.”

“At the age of 14, I was displaced for three months in a violent civil war, without the protection of my parents. As a first hand witness of widespread carnage and having seen a dead baby clinging onto a lifeless mother, fighting for peace is an all-consuming priority for me.” [Fight for peace, Asif Ahmad, A GREAT BRITISH VIEW, The Philippine Star, 19th Mar 2015; Asif Ahmad is the British Ambassador]

“The pursuit of peace requires courage, commitment and compromise.  History rightly holds in high regard those who have forged peace in the midst of conflict. Naysayers and shallow opportunists fail to register even as a footnote. When a settlement is within touching distance, it is time for statesmen to step up and push through the last remaining obstacles and overcome setbacks.

“In the UK, we have had to fight hard to secure and maintain peace in Northern Ireland.  A conflict deeply rooted in history was ended 17 years ago with the signing of the Good Friday Agreement . . . Four months after the Good Friday Agreement was signed and just as the enacting Bill was in the hands of Parliament, a bomb exploded in the town of Omagh in Northern Ireland. Twenty-nine people were killed including 12 children and a mother pregnant with twins. With anger and emotion, some said there could be no peace deal with terrorists. Others said if the perpetrators could not be prosecuted there was no justice.  Instead, former combatants and political enemies worked for the good of their community. Today, Northern Ireland is a prosperous self-governing part of the United Kingdom and no one wants to return to troubled times.

“The Bangsamoro, as a devolved administration underpinned by the proposed law, is a step in the direction of long term peace. In exchange for limited autonomy, all who have been engaged in armed conflict have to submit to the rule of law and a system of democratic government that is not the exclusive purview of any one faction. If the MILF wants to play a part in the future Bangsamoro government, then its political party will have to secure support from the outlying islands, the indigenous people, Christians as well as their core base. The proposed form of government for Bangsamoro is designed to create a coalition of interests rather than a unilateral victory for one side.

“Senate Majority Leader Alan Peter Cayetano is aware that his strong opposition to the Bangsamoro Basic Law and the peace negotiations with the Moro Islamic Liberation Front (MILF) is affecting his chances in the 2016 elections. Despite this, the senator said he has no plan of backing down, adding he will instead let the people decide if they want him to run in the next elections or not” [Cayetano aware stand vs. BBL affecting his chances in 2016 polls, Amita O. Legaspi, GMA News, 12th Mar 2015]

The bottom line: We better do our homework . . . and better do it right?

Tuesday, March 24, 2015

When experts create insidious problems

Our economic managers are experts in their respective fields and so are the folks behind the rating agencies. What gives? “While specialization is often a good thing, it tends to create silos, and that in turn can create many insidious problems. There's always an inherent amount of tension between departments, simply because each one is pursuing different goals. The trouble begins when employees start to believe that their department creates more value than others, and fail to appreciate what co-workers bring to the table.” [Envy. Discord. Secrecy. Turns Out Silos Hold More Than Corn, Dino Signore,, 28th Mar 2014]

“People talk about ‘breaking down silos,’ but you can’t, really, because they're a natural phenomenon. More to the point, you need specialization to grow your company. The trick is to recognize when silos are beginning to cause trouble.”

“Bank of the Philippine Islands economist Nicholas Antonio Mapa said unless specific deficiencies are addressed, Fitch could stick by its conviction that the sovereign does not deserve an upgrade.  ‘True, our fiscal numbers continue to improve but if this comes at the expense of the failure to address deficiencies such as poor physical infrastructure, further upgrades may not be forthcoming,’ Mapa said.” [Purisima: PHL underrated, to see more credit upgrades, Bianca Cuaresma, Business Mirror, 18th Mar 2015]

“The indecision prompted Finance Secretary Cesar V. Purisima to remark that the Philippines, no matter its many fiscal and monetary policy victories, remain ‘underrated’ by Fitch. Still, Purisima is convinced the Philippine credit story should further improve in upcoming assessments.”

“Fitch also noted that Manila’s governance standards and its per- capita income were weak points of the economy even as its public finances remain a neutral factor. Fitch, likewise, said the steady inflow of worker remittances and growth of the business-process outsourcing (BPO) industry ‘underpins’ the country’s economic growth. The Philippines’s per-capita income stood at only $2,836 in 2014 compared against the ‘BBB’ median of $10,654 . . .”

Beyond the natural phenomenon that creates silos is that of the hammer: when all you have is a hammer, everything looks like a nail.

“Ayala Corp. Chairman and Chief Executive Officer Jaime Augusto Zobel de Ayala said Overseas Filipino Worker (OFW) remittances have largely fueled the Philippine growth story in recent years . . . Asian Development Bank President (ADB) Takehiko Nakao said yesterday that remittances from migrant workers help reduce poverty levels of developing countries and result in high spending on education and health among households.” [Deploy remittances for development -- ADB’s Nakao, Mikhail Franz E. Flores, Business World, 18th Mar 2015]

“‘These, however, come with a price as migrant workers experience long working hours, harsh environments, harassment and other working conditions. Many migrant workers are not properly covered by insurance or other protections in case of illness or accidents,’ Mr. Nakao said in his remarks.”

“Thus, Mr. Nakao said remittances should be channeled to funds that would contribute to economic development and allow the migrant worker to find job opportunities back home. ‘Remittances represent hard-earned money by migrant workers. It is therefore important to channel remittances to improve the social and economic status of migrant workers and their household as well as to contribute to the country’s development,’ he added.”

In other words, let’s not forget that at the end of the day, it is the 10 million OFWs – through what others have called modern-day slavery – that have fueled the economic growth of the country. But blurring out the magnitude of their remittances, we are able to talk about how smart our fiscal and monetary policies are. Yet what we must strive for is to develop a robust industrialization initiative that will generate a far greater income stream (ideally 4 times more than these remittances) and replicate the paths taken by the Asian Tigers.

And so why does it appear that we have dropped ‘Arangkada’ like a hot potato? If we aspire to be in the same league as our neighbors? Indeed there are gaps in our economic fundamentals even as we take pride calling them strong? And the Fitch report pointed them out.

One area that this senior citizen and his wife can relate to is the cruise industry (although in my younger days I could not imagine being confined in a ship.) And given the beauty of the Philippines, we have so much to show visitors and tourists and senior citizens yet we know infrastructure is a major industry barrier.

Our infrastructure deficits are like a broken record; and why we can’t truly accelerate infrastructure development boggles the mind! Or is it about corruption and/or incompetence? The reality is when there is incompetence corruption is fostered because there is no performance standards to speak of. In the private sector performance metrics (geared to nurture creativity, innovation and competitiveness) are built-in . . . the process called the enterprise. It is not consigned to some extraneous oversight like the ombudsman.

That is how we can better appreciate the language Fitch used: “Manila's governance standards . . . were a weak point of the economy . . .” and left unsaid is “despite ‘kung walang corrupt walang mahirap.’” What about we put our collective nose to the grindstone?

“MORE foreign cruise lines are making port calls in several destinations in the Philippines, making it more urgent for the government to fast-track its port-infrastructure projects. As such, ‘we need to improve cruise ports facilities in the Philippines, specifically in Manila, Puerto Princesa in Palawan, Bohol, Cagayan de Oro, Palawan and three other places, because nothing  we have is up to scratch. [Tourism Secretary Ramon R. Jimenez Jr.] added that in 2013, ‘the Philippines received 14 large cruise ships, nothing below 300 persons. Do you know how many cruise ships arrived between [February 23] and the end of March? Fourteen.’” [More cruise ships to visit PHL, Ma. Stella F. Arnaldo, Business Mirror, 18th Mar 2015]

Beyond vital infrastructure is our failure to move beyond services – even as agriculture has remained unproductive – with no strategic industry base under our belt. And why we badly need ‘Arangkada’! Said Fitch, “The Philippines’s per-capita income stood at only $2,836 in 2014 compared against the ‘BBB’ median of $10,654.”

That is a chasm if we ever saw one – and confirmed by over half of our people who claim hunger and poverty! Everyone wants to see the country move forward yet we can’t take our eye off the ball. “For 2014, the JFC’s overall assessment is that despite being Asia’s second fastest growing economy after China, the Philippines is still “growing too slow.” [“Growing too slow,” Ana Marie Pamintuan, SKETCHES, The Philippine Star, 13th Mar 2015]

“There are some other helpful things you can do to manage silos. Communicate a shared fate by making sure your employees understand where the organization is headed and how each person contributes to progress; employees need to understand they’re all co-dependent.”[Signore, op. cit.]

“Remember, silos by themselves aren't the problem. You need specialists working on specific projects and objectives, but you also need everyone working toward one unified vision. Ideally, group boundaries should be permeable, allowing people and information to move back and forth with ease. The bottom line: Make sure the people who work in various silos interact on a regular basis.”

In other words, government bureaucracy will have to be less of a bureaucracy and be more aligned against an overarching goal. That is easier said than done even in the private sector, all the more in the public sector? If government can learn something from private enterprise, it simply is: make a good if not an insanely great product and there will be no need for bootstrapping . . . Begin with the end in mind . . .

Poverty, backwardness . . . and ‘Arangkada’

“But as the erstwhile Jorge Bergoglio prepares to celebrate on Friday the second anniversary of his election, he will be keenly aware that a crunch is looming over the question of how to reconcile Catholic thinking on the family with the realities of how many believers live their lives in the early 21st century.” [Two years and counting: Pope's opponents play waiting game, Jean-Louis de la Vaissiere, AFP, 12th Mar 2015]

“‘What the synod confirmed is that there is now an open conflict within the Vatican over very serious questions,’ said Marco Politi, a Vatican expert who has recently published an essay entitled ‘Francis among the wolves’ . . . The pope himself is worried . . . Politi believes the historic decision of Benedict to retire rather than die in office -- and 78-year-old Francis's own hints he could do likewise -- have been game-changers inside the Holy See. This is a pontificate with a limited timeframe . . . That means opponents can watch the clock and tell themselves, ‘we only have to wait four, five years and it will be over.’”

“Francis has also encountered subtle opposition to his bid to reform the Curia, the Vatican bureaucracy that runs the Church worldwide. Publicly, resistance has been muted, but with long-established ways of doing things under threat, ‘changing mentalities is not so easy,’ says an inside source.”

“When he demands that servants of the Church live modestly, as he does, you do not see many bishops giving up their palaces.”

Poverty or backwardness? Which is our real enemy? The Catholic Church is a big part of our culture. And our efforts to fight poverty isn’t that different from the charity preached by the Church. Yet poverty like wealth, in the context of the region, is a function of economic development – i.e., it was how once impoverished nations became the Asian Tigers. Why are we then the regional laggard? Because we are the least developed – and where poverty is a given!

Because we value our hierarchical system and structure, we take its consequences for granted. And chances are, Juan de la Cruz won’t imagine a Philippines being a developed nation? Not surprisingly, we could be critical of our more advanced neighbors. Yet until we see evil in a feudal, oligarchic economy and embrace an egalitarian society, we will be no different from the opposition encountered by Francis in the Curia because of their long-established ways – changing mentalities is not so easy.

If bishops won’t give up their palaces, what are the chances of Juan de la Cruz seeing our feudal system being upended? In the meantime, we have taken as gospel truth that the way to address poverty is by alms-giving? And so President Aquino has been a no-show at Arangkada two years in a row? He has raised the budget for CCT, why bother with Arangkada? And who will be the next president, Binay?

Why ignore Arangkada? Because the administration sincerely believes they have succeeded in “kung walang ‘corrupt’ walang mahirap”? President Aquino as his sister points out doesn’t line his pocket. Yet has influence peddling stopped? And is Arangkada unwelcome because it would upset our culture of impunity and influence peddling?

And it explains why our power crisis is evergreen? But if we have to give credit where credit is due, indeed the campaign against corruption got the international community applauding. Yet as reality hits home, they continue to raise the imperative of reform. And that is where we as a people must truly get credit, our track record of non-delivery! And not surprisingly, poverty hasn’t gone away! 

“Politicians with feisty tongue and racy humor like Mayor Arsenio H. Lacson are a vanishing breed now . . . Lacson at Plaza Miranda could hold a big crowd for hours, including students who preferred to miss their classes. Lacson’s main targets were the squatters (now euphemistically called “informal settlers”) living near esteros, on riverbanks, uninhabited buildings and vacant public/private land in Intramuros. Lacson scolded and asked them NOT to vote for him. Local officials now view the squatter families as addition in politics, despite the filth and petty crimes attributed to them. Squatter ghettos enjoy the protection of most barangay officials.” [Oldies to replace the President (?), Atty. Romeo Pefianco, Manila Bulletin, 13th Mar 2015]

Over the recent past, we’ve had two presidents that were trained to be economists yet economic development continues to elude us. Because the challenge of nation building demands much more! Think leadership personified by Lee Kuan Yew, Mohamad Mahathir and even Deng Xiaoping. Nation building is more complex than private enterprise yet private enterprise – because there is no free lunch – continues to develop new thinking and new ways of enterprise development.

They swear by diversity in pursuing innovation and creativity and competitiveness because there is no one source of answers. But diversity does not equate to complexity. Simplicity is the best policy especially in the 21st century where speed is synonymous to success. And it demands even greater visionary leadership and strategic thinking, meaning the bias must be on the outcome not the activity.

On the other hand, both PHL and the Church are inward-looking and why Francis is invoking that catholic is universal, i.e., open and welcoming. And add the convolutions inherent in a hierarchical system and structure, we have two institutions stuck in a rut? But what is the old guard invoking, the truth? Why did the Church preach charity in the first place? That the truth is in the eyes of the downtrodden? Blessed are the poor in spirit for theirs is the kingdom of heaven – not in the “palaces” or the circles of bishops or in an oligarchic economy or in our exclusive schools, country clubs and gated communities.

Arangkada is our most credible attempt to finally crafting an industrialization program that would erect a truly robust platform for the economy, not one skewed to cater to a dozen vested interests. Is it a surprise foreign chambers are behind it? Because we Pinoys value a feudal not an egalitarian society? But then again, the reality of raw politics is that “the few” are the kingmakers, and if the most incorruptible presidency is unable to free itself from their clutches, it is not surprising that they would now be lining up to anoint the next king in Binay? If you cannot beat them join them!

If we had the Marcos dynasty and the Aquino dynasty, it's par for the course to be witnessing the next one? Who will demand that the next leadership must be committed to nation building not the personal or the party and friends or their hometown or the vested interests that funded the elections?

We like to see the glass as half full when we have yet to: (a) erect a platform that will support a (b) robust economic enterprise (c) designed for the pursuit of nation building. And what do we have? (a) The backs of 10 million OFWs that are (b) driving the economy but which (c) we take for granted yet (d) leaderships past and present would take credit for? If that is not a stark illustration of our backwardness, what is? 

“The Arangkada report tracks action on its detailed recommendations and releases an annual assessment . . . For 2014, the JFC’s overall assessment is that despite being Asia’s second fastest growing economy after China, the Philippines is still “growing too slow.” [“Growing too slow,” Ana Marie Pamintuan, SKETCHES, The Philippine Star, 13th Mar 2015]

“For a nation that’s trying to attract more foreign direct investment, the leader can use a bit more enthusiasm. Last week, President Aquino didn’t show up at the annual gathering of the Joint Foreign Chambers of the Philippines . . .”

And why do we even do those overseas roadshows when right at home we won’t engage the JFC that represent foreign investment? Are we fighting . . . poverty or backwardness?

Sunday, March 15, 2015

We think we do . . .

We say we do care but then again, does it have to do with the ambivalence in our traits and values? “Four Arangkada Forums have already been held. It will definitely be a shame if we enter the fifth Arangkada forum and a large number of these recommendations, which have garnered the consensus of almost all the major business groups in the country, remain unimplemented.” [Boo Chanco, DEMAND AND SUPPLY, The Philippine Star, 11th Mar 2015]

“In Energy, maybe they can deliver after a long wait, the proper policies and procedures to guide our so-called market-based rate setting for electricity . . . Reforming the power industry will be a gigantic achievement if they can do it. The biggest oligarchs are in the business and their influence on government policy cannot be underestimated.” [Juan de la Cruz is in good company; and can he overcome the influence of oligarchy? “What the synod confirmed is that there is now an open conflict within the Vatican over very serious questions,” said Marco Politi, a Vatican expert who has recently published an essay entitled “Francis among the wolves.” [Two years and counting: Pope’s opponents play waiting game, Business World, 12th Mar 2015]

“There are many other things that could be done as outlined in Arangkada, the reform agenda the foreign chambers presented to P-Noy in 2010. I decided to skip this year’s Arangkada reiteration of their suggestions because it is a waste of time to hear them speaking to a choir of businessmen with similar frustrations. Nothing really moved from their original list.”

“Makati Business Club chairman Ramon “Boy Blue” del Rosario Jr spoke during that Arangkada conference last week and he tried very hard to hide the frustration of the business sector.”

And President Aquino was a no-show? Should we wonder why we Pinoys seem unable to turn a plan or a roadmap into reality? Is it the path of least resistance? In the private sector there is an execution bias because of the profit motive. One would not want to lose their shirt.

“Yesterday, I watched a video in the ABS-CBN website of ADB Vice President Stephen Groff being interviewed by ANC’s Coco Alcuaz. Stephen Groff stressed the strategic importance of manufacturing in the Philippines, and specifically the need for industry policy and planning.” [Bobby Batungbakal, Philippine Manufacturing Revisited, 13th Apr 2012]

“This reminds me of Dr. Norio Usui, ADB’s Senior Economist who started talking about the need for structural transformation for inclusive growth in our country . . . According to Dr. Usui, our slow economic development vis-a-vis our neighbors can be traced to lack of structural transformation, which is to say that we failed to shift labor to higher productivity sectors of the economy. And the sectors with the highest productivity are industry and manufacturing….much higher than services and agriculture.”

“The good news is both government and private sector are listening. Last year, the DTI re-organized to form the Industry Development and Trade Policy Group under Usec. Adrian Cristobal. After the1st Philippine Manufacturers and Producers Summit by the FPI, industry associations started working with the BOI to create industry roadmaps as reported in our previous posts.”

Sound good . . . but what is reality? “The steel sector is pushing for the amendment of the Iron and Steel Act (RA 7103) stressing the steel sector is one of the country’s basic strategic industries that can promote real inclusive growth even as the industry laments over government’s penchant to craft an incentive scheme for non-inclusive automotive sector.” [Steel sector laments non-inclusive industry development priorities, Manila Bulletin, 2nd Mar 2015]

“[T]he country’s strong demand for steel cannot survive by rehabilitating the mothballed NSC . . . What we’ve left to the private sector in 1995 was a state of the art steel plant, but it is not anymore to today’s standards. The steel sector has already its roadmap, but it is not enough. A roadmap is a continuing tool of where we are, where we want to be and how to get there. The steel industry roadmap showed that the Philippines is the lone country among five ASEAN countries — Malaysia, Indonesia, Vietnam, Thailand — with no domestic steel industry to speak of.”

Crafting an industrialization or development program presupposes visionary leadership and strategic thinking. Yet it must be simple in order to engender execution; and it must have an overarching goal to facilitate priority setting and focus. And once it is reduced into a plan or roadmap, execution is a must, meaning it must be made real.
For example, can we trace our inability to move forward with Arangkada to our falling into an “activity trap” (e.g., 30 or so roadmaps, among others?) and can’t articulate where the priorities lie? Why? Because we’ve not kept an eye on a predetermined outcome – i.e., “begin with the end in mind,” meaning the bias must be on the outcome not the activity.

Let’s take the car program: saving $17 billion on imports without figuring out the impact on the revenue side (i.e., predetermined outcome) may disappoint, especially when we're looking at a niche auto model. Niche means small scale and the multiplier effect is limited. Niche works in “self-actualizing” (i.e., it responds to rational, emotional, experiential needs) innovations – like an iPhone 6S – for which consumers will pay a hefty premium.

And if it is a simple auto model – with a low competitive barrier – Thailand can develop a competing entry. And given economies of scale – or the size of their auto industry – and well-developed ecosystem (including roads and ports, etc.), they will easily upend us. We need clarity of strategic intent, like: (a) a sharper overarching goal and definition for the manufacturing industry that will be the core of an industrialization program; (b) that will yield a far greater multiplier effect – via intermediate and support industries – and a marked incremental economic output or GDP; and (c) be sustainable because we have competitive advantage.

In sum, we need more than an opportunistic approach. Recall the OFW phenomenon. It was opportunistic and became the key driver of the economy yet it failed to lift us up – i.e., we’re the regional laggard because we're the least developed. “Opportunistic” is a.k.a. Pinoy abilidad? Yet we must recognize that this is the 21st century, the age of Big Data and analytics. The caveat? Those ahead of the curve employ “creativity” (i.e., connecting the dots) to temper pure quantitative analysis – e.g., Steve Jobs ignored a dig from Bill Gates that he wasn't truly a techy.

In the meantime, given the incentive we are dangling, car manufacturers despite the low anticipated volume (of 120,000 units versus Thailand and Indonesia’s million-unit range) are professing keenness. And that is why they want to understand the mechanics and details of our incentive. Will the incentive we offer in fact subsidize and cover their potential margin shortfalls? And for us, the question is: what level of incremental GDP will we gain?
Clearly an auto program must demonstrate that it can be a driver of our manufacturing industry because it will spawn intermediate and support industries, which is the challenge being raised by the steel sector. And what we as a people must demonstrate is that what we have long invoked as our strength or quality of resiliency is not in fact a manifestation of complacency – i.e., we are unable to act and overcome our underdevelopment.

In the private sector, leadership is key to success. And in nation-building it is as well as the Asian Tigers have demonstrated. Should leadership then be at the top of the national agenda instead of poverty, for example, being our biggest challenge? In business education they talk about design thinking which is founded on human empathy – i.e., solve people’s problems.

In other words, we can’t overcome poverty if we don’t solve the problem that is underlying poverty. And alms-giving does not equate to problem-solving especially in a feudalistic society where it perpetuates a hierarchal system and structure . . . and its consequent subservience.

Where do we sorely need leadership? Think Arangkada or reforming the power industry or the importance of manufacturing or the Industry Development and Trade Policy or the steel sector. Have we stepped up to the plate to address and solve our problems? And if we haven’t, should we expect underdevelopment and poverty to persist? No one promised us a rose garden . . . Do we even care?

Friday, March 13, 2015

When do we put a stop to things . . .?

“Our bad news for 2014 comes from our group of Powerhouse five [or major subsidiaries] . . . During the year, BNSF disappointed many of its customers. These shippers depend on us, and service failures can badly hurt their businesses.” [Warren E. Buffett, Chairman of the Board, Berkshire Hathaway Inc., 2014 Annual Report]

That’s a great example of empathy that innovative and creative and competitive enterprises demonstrate via their business conduct. A business is only as good as the products and services it provides – i.e., it must respond to a consumer’s problem or need.

Empathy generates wealth even for a Buffett who must deliver tons of it to satisfy investors that have placed their trust in him, but how do we learn from it? We have to put a stop somehow to density, smog, bad traffic and the eye sore around us, for example? What about we start with Greenbelt 1? Because Greenbelt is our showcase and the attraction we want foreigners to appreciate – thus bet on or invest in PHL. And those can’t be the features and attributes of a competitive product that is PHL. “It’s more fun in the Philippines” must be founded on the right products and services!

A Brit who is a Makati and Bacolod resident and seems to like the Philippines wrote to a local paper to say he can see smog from his 22nd floor condo in Salcedo. But we like to applaud Greenbelt despite the teeny-weeny greenspace by the chapel? Shouldn’t we raise our standards as a people? Try the basement parking in Serendra at Bonifacio (that we call) Global City. Global means world-class? Thankfully parking in Aura is the saving grace. But try driving between Makati Business District and BGC! These are enclaves of the privileged few – and should we then wonder why Metro Manila seems hopeless?

“BNSF is, by far, Berkshire’s most important non-insurance subsidiary and, to improve its performance, we will spend $6 billion on plant and equipment in 2015. That sum is nearly 50% more than any other railroad has spent in a single year and is a truly extraordinary amount, whether compared to revenues, earnings or depreciation charges. Though weather, which was particularly severe last year, will always cause railroads a variety of operating problems, our responsibility is to do whatever it takes to restore our service to industry-leading levels. That can’t be done overnight. The extensive work required to increase system capacity sometimes disrupts operations while it is underway. Recently, however, our outsized expenditures are beginning to show results. During the last three months, BNSF’s performance metrics have materially improved from last year’s figures.” [ibid.]

In the meantime, in PHL, we read: “‘For March, if demand is as projected, if supply is as projected, and if the forced outages of 631 megawatts is still the same, we’re going to be okay,’ Petilla said. However, if the forced outages go way above 631 megawatts, may be 1,000 megawatts, then we have a problem . . . [T]hey were also looking at possible ‘minor glitches’ in other plants, like whether the 100-megawatt Millennium power plant would be able to go online on time and whether the 300-watt unit of GN Power would be back on the grid.” [Petilla hopes no more power plant breakdowns occur, Alena Mae S. Flores, Manila Standard Today, 2nd Mar 2015]

“MRT-3: Only half of trains running,” Jarius Bondoc, GOTCHA, The Philippine Star, 2nd Mar 2015. “That’s why riders have been waiting longer hours at stations since Transport Sec. Joseph Abaya raised fares last Jan. 4. More trains are bound to conk out. For, Abaya keeps contracting his Liberal Party mates for the shoddy maintenance.”

“MRT-3 was serviced for 12 years . . . by Sumitomo. In Oct. 2012 Sec. Abaya, U-Sec. Jose Lotilla, and then-MRT-3 general manager Al S. Vitangcol suddenly terminated the Japanese firm. In lieu was hired two-month-old, undercapitalized PH Trams, in joint venture with long-time LRT-1 manpower servicer CB&T. Why the experienced latter needed a seemingly worthless partner to get into MRT-3 later became clear. PH Trams consisted of LP members, an uncle-in-law of Vitangcol and a high official of a government agency. In ten months PH Trams collected P517.5 million.”

That is our reality; and what are we being told? “Multi-decade 6% GDP growth seen,” Kristyn Nika M. Lazo, The Manila Times, 26th Feb 2015. “The Philippines may sustain its current pace of growth in gross domestic product (GDP) at more than 6 percent for several decades, and could even step it up to 8 percent this year if oil prices stay below $60 a barrel, the head of the Department of Trade and Industry (DTI) said.”

“Economic growth is forecast to be sustained at above 6 percent if the government aims at level playing fields for investors, continued reform and calibrated liberalization . . . If we liberalize, there is long-term growth and competitiveness for our industries.”

If and more ifs is not reality? How can we learn reality? First we must learn to take in news – good and bad. [See above re Buffett.] Then we must seek them out. For example, “Benchmarking Australia-Asean food, agriculture trade,” Roland T. Dy, Mapping the future, Philippine Daily Inquirer, 2nd Mar 2015. “Australia is . . . an important market with a population of 24 million and a high income per capita of US $65,000 – among the highest in the world . . . The country is one of the largest agri-trade partners of Asean . . . Who are the Asean winners and losers?”

“The Philippines is an insignificant player in the Australian market. This was also confirmed by a Davao exporter who visited Sydney supermarkets in October . . . Thailand, Singapore and Malaysia are the largest Australian suppliers . . . The Philippines has the smallest two-way trade among the Asean countries . . . [T]he Philippines faces an uphill climb in the Australian market. For a while, the country was too focused on penetrating the protected (non-tariff barrier) Australian banana industry. Other fresh and processed products were neglected.”
“Export is a strategic avenue to expand markets and, therefore, rural incomes and jobs. But export is not a “walk in the park” if competitiveness factors such as cost, scale, quality and supply reliability, are not addressed. Export is the game of businessmen and entrepreneurs. But the government can help open up markets and improve goods logistics. Local governments can help by being enablers, rather than rent-seekers.”

And there is the reality of agribusiness – or enterprises and undertakings – for that matter. “Agrarian reform in the Philippines has failed because it has never been tried,” Agrarian reform can work, Ernesto Ordoñez, Philippine Daily Inquirer, 3rd Mar 2015. “The solution is for the government to follow the law and provide the necessary support services. But realizing the government’s poor track record in this area, the private sector must now get involved.”

“Economies of scale, optimal technologies and market access must be promoted aggressively by the private sector. There is no contradiction between economies of scale and small farmer land ownership. What needs to be done is to organize small farmers and consolidate them into an integrated agribusiness enterprise with the necessary economies of scale in production, financing and marketing.”

What about the government, can it be less dysfunctional? Indeed we must talk public-private partnership as though it's a mantra . . . but what we see is what we get? Impunity can’t run amok or “kanya-kanya” will push us to the abyss? And so while we're developing 30 or 50 industry roadmaps are there forces undermining our ability to prioritize and focus? For example, “Steel sector laments non-inclusive industry development priorities,” Manila Bulletin, 2nd Mar 2015. “The steel sector has already its roadmap, but it is not enough. A roadmap is a continuing tool of where we are, where we want to be and how to get there . . . The steel industry roadmap showed that the Philippines is the lone country among five ASEAN countries . . . with no domestic steel industry to speak of.”

We want to help ourselves? Then we can’t succumb to painting a rosy picture when we can be are our own worst enemy? Nor should we keep using the crutch “if and more ifs” – it’s so lame! We have to start chipping away at feudalism and backwardness – if we can't make a dead-stop – to overcome regional laggard!

Poverty, that we all like to headline, is not the enemy that we keep fighting! Why do the Singaporeans not want to touch populism with a ten-foot pole? They are a First-World nation for a reason? Try cause and effect?

When do we put a stop to what is wrong – and focus on the right things? Rome wasn’t built in a day as Buffett acknowledged, but demonstrates his commitment to empathy by putting his money where his mouth is – beyond being holier-than-thou (like our concern for poverty?) he is pursuing more wealth, tons of it!