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, www.inc.com, 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 . . .

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