Saturday, August 22, 2015

When progress is obstructed

“A new chapter: For only the second time in our history the ownership of The Economist changes,” The Economist, 15th Aug 2015. On August 12th we announced the most important change to our shareholding structure in almost 90 years. Pearson, the owner of the Financial Times, which has had a non-controlling 50% stake in us since 1928, is selling.”

All four of our living former editors have welcomed the change: it provides a platform for future generations to continue their work as a liberal voice in a world that needs to hear liberal arguments. Since 1843 this newspaper has engaged in what James Wilson, our founding editor, called ‘a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress.’”

Timid ignorance obstructing progress? Could this be an example? “Bountiful oil has made Bruneians the fourth most wealthy people in Asia, with generous state handouts. That has helped forestall criticism of an autocratic government. But now reserves of hydrocarbons are dwindling, to which the government seems to have few answers—other than fostering a harsher form of Islam. Last year it announced plans to introduce a severe form of sharia (Islamic law).” [All pray and no work: An autocratic sultanate turns more devout as oil money declines, The Economist, 15th Aug 2015]

“Yet Brunei is no brash Gulf emirate. The capital is quiet and surprisingly scruffy, even if Bruneians seem pretty content. The sultan, who has ruled since 1967, enjoys genuine popularity, especially among the ethnic Malays who make up the majority of the population. Bruneians pay no income tax, enjoy free education and have access to cheap home loans and social housing. Many men find comfortable jobs in government: attendance at Friday prayers and royal ceremonies is compulsory; hard work is optional.”

Is that something we Pinoys would call inclusive? Consider: “The elitist and oligarchic structure of Philippine society is no longer sustainable in the light of the truism that the real foundation of the country’s economic redemption after the 1997 Asian financial crisis and the collapse of fundamental institutions wrought by martial rule is not the taipans, the peninsulares, the ruling political and economic elite, or foreign investors. These groups are, in fact, the beneficiaries. Economic redemption happened despite them.” [Inclusive Way: An Aug. 21 initiative,Danilo S. VenidaPhilippine Daily Inquirer, 21st Aug 2015]

“The real movers are those who found no viable options in the country and were forced to go abroad to work: the overseas Filipino workers who remitted foreign currencies in the billions of US dollars year in and year out, through good times and bad, to support the families they left behind. In the process, they built up the Philippines’ economic resources way beyond what the elite could have mustered. The Inclusive Way is the challenge to which the OFWs will respond, along with their advocates, fellow Filipinos of goodwill, who will mobilize and organize with them for the cause.

“This is a real call, a challenge to pursue the Inclusive Way. This is a response to Pope Francis’ invitation to go to the peripheries of society and deliver opportunities for integral human development where these are dismally absent. Perhaps an Atip, a roof for all under one roof, can be organized to mobilize Filipinos who see the futility of relying on the present toxic and traditional politics to deliver the required transformation in society for all.”

The sad reality is so long as we have the elite class lording it over the country, we will be stuck with same old, same old. Why change when our hierarchical system and structure pays – like crime does in PHL that Juan de la Cruz has fallen into “learned helplessness”?

One can only smile when we call Juan de la Cruz “bobotante” as though it doesn’t apply to the elite class? Haven’t we all with our eyes wide open embraced the vicious circle of hierarchy, political patronage and oligarchy?

Consider: “Worst of all, import substitution lacking strong central authority preserved the dominance of the politically powerful landowning families—who used their political capital to transfer their assets from landowning to industry. In the World Bank’s view, these powerful vested interests came eventually to capture policymaking and to shape economic policy— ‘to protect and enhance their privileged position, often to the detriment of national well-being.’ This view sums up pithily our national situation until now.” [Protectionist tendencies hobble investment despite globalization, JUAN T. GATBONTON, EDITORIAL CONSULTANT, The Manila Times, 15th Aug 2015]

Have we learned our lesson? If we haven’t after decades, when and how can we expect change to be a reality in the Philippines? And we can’t find comfort in “the glass is half full” as a perspective when it equates to a “fixed mindset” that social scientists postulate as undermining progress – and which they link to a “growth mindset.”

“Revolutions and other political upheavals are supposed to result in dramatic changes. For the better, it is hoped, although this is not always the case . . . In our country after the 1986 people power revolt, the change from dictatorship to democracy was dramatic, but structural reforms remain a work in progress three decades later.” [Make freedom work, Ana Marie Pamintuan, SKETCHES, The Philippine Star, 21st Aug 2015]

“Anniversaries present opportunities for assessing how much has changed. Today we commemorate the 32nd anniversary of the assassination of Benigno “Ninoy” Aquino Jr . . . This failure to identify the brains and hold the person accountable for Ninoy Aquino’s murder surely contributed to the prevailing impunity in political violence. Today all over the country, political rivalries are still often settled by murder.

“The same impunity characterizes corruption. As I’ve written in previous articles, our government has confiscated billions in ill-gotten wealth but has failed to punish anyone who might have done the stealing. We have a crime – world-class plunder – without a criminal.

“And as in any crime where there’s no punishment, failure to bring any plunderer to justice breeds impunity and guarantees the persistence of the problem.”

And more problems? “The independently-formed Investigation Unit (IU) at the ERC had announced its findings last June that several companies allegedly committed breaches of the must-offer rule of the Wholesale Electricity Spot Market, hence, causing extreme supply tightness which had driven up the power rates. In essence, some sectors branded it as “collusive act” of the GenCos.” [ERC to flesh out concerns in ‘collusion case,’ Myrna Velasco, Manila Bulletin, 20th Aug 2015]

“Implicated companies include state-run Power Sector Assets and Liabilities Management Corporation (PSALM), Pan-Asia Energy Holdings, Therma-Mobile Inc. (TMO), CIP II Power Corporation, Trans-Asia Power Corporation, 1590 Bauang Private Power; AP Renewables Inc.; GNPower, Strategic Power Development Corporation, Sem-Calaca and Udenna Management Resources Corporation; as well as Manila Electric Company (Meralco) because it has been in-charge of nominating and pricing the offers of its TMO-contracted capacity.”

In the meantime, we are up in arms given MM traffic and the malfunctioning A/C system at the airport until we’re reminded of the “Pattern of incompetence,” Editorial, The Manila Times, 20th Aug 2015. “THE current inability of the Department of Foreign Affairs to keep up with the demand for new or renewed passports is only the latest embarrassing addition to a record of basic incompetence within the Aquino Administration. It is also further warning that ‘continuing Aquino’s reforms’ should be the exact opposite of the broad policy objective the next president should have.”

Do we have the capacity to overcome “an unworthy, timid ignorance obstructing our progress,” to quote James Wilson? 

Monday, August 17, 2015

Size and global competitiveness

The conventional wisdom is size matters. Except of course if one looks at the Fortune 500 top 10 companies in 1980 and 2014. Conventional wisdom would assume that IBM then at no. 8 would not be displaced from the top 10 and overtaken by Apple at no. 5. “[T]he scale of tangible assets is critical to doing business in the international markets.” [How companies can become global players, Francis Ed LimPoint of LawPhilippine Daily Inquirer, 6th Aug 2015]
“[S]everal Philippine companies that have done remarkably well in the international markets, including ICTSI, Jollibee, San Miguel, JG Summit, Ayala, Metro Pacific and Alliance Global . . . . [T]hey all have one thing in common—they are listed companies with large resources, revenues and market share.

“[There is] need for companies ‘to adopt international ideas’ and ‘incorporate best international practices’ to make them globally competitive . . . [G]ood corporate governance must not only be treated as a ‘new requirement’ but also an ‘inherent part’ of business . . . good governance is good economics.

“On June 24, 2015, the Shareholders’ Association of the Philippines (SharePHIL) held its second summit . . . We thought the theme “Transforming Philippine Companies to Become Global Players” was fitting given the onset of the Asean economic integration.”

And the website of SharePHIL reads in part: Its mission is to become a major catalyst in promoting the development of the capital market by advocating education in order to enlighten investors and shareholders of their rights, duties and responsibilities and to promote shareholder activism in a positive way. SharePHIL completes the institutional governance infrastructure required to promote capital market development and ensures the creation of a level field among shareholders, consistent with best practice in other developed economies.”

It appears the organization is a local effort to promote capital market development and ensure the creation of a level playing field.

In the bigger scheme of things, NEDA’s concerns are more expansive. “NEDA stresses continuing market reforms to boost competitiveness,”Edu Lopez, Manila Bulletin, 8th Aug 2015. “Another critical area of policy reform concerns economic regulation, including restrictive ownership rules. Investors generally look for credible, stable law and regulation surrounding investment.”

“[Economic Planning Secretary Arsenio] Balisacan noted that in some cases, however, the legislation is weak or not even in place to protect investors. As a result, investors face high transaction costs, petty corruption and red tape, and substandard regulatory practices . . . Balisacan pointed out that strict restrictions on foreign ownership could also hamper the growth of foreign direct investments in the country.”

While broader in scope, the concerns of NEDA are relevant to the challenge of good governance, capital market development and the creation of a level playing field. For instance, good governance is the antithesis of political patronage. And capital market development to be expansive presupposes a competitive as opposed to a restrictive economy, and which is why we are unable to attract FDI to the level of those of our neighbors.

And how do we encourage MSMEs into the mainstream of Philippine industry? By preaching global competitiveness to both major companies and MSMEs. And that goes back to our hierarchical system and structure. In other words, we have to move beyond the conventional wisdom that size matters in global competitiveness.

And that is where “learning and innovation” as postulated by William Pollard must become the motivation of global competitiveness.“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.”[William Pollard, 1911-1989, a physicist and Episcopalian priest and a colleague of Einstein in the Manhattan Project.]

It applies to enterprises big and small. And since there is no guarantee that big enterprises won’t succumb to arrogance of success, MSMEs must think big. That means we must overcome “learned helplessness.” Why did we think import substitution and “Filipino First” virtuous? Or our ambivalence if not hatred of MNCs and foreign direct investment? Until we woke up one day and realized we're underdeveloped because we can't attract investment and technology? Still, we sincerely believed poverty is the root of our problem.

They are all manifestations of learned helplessness that stemmed from our inward-looking, parochial instincts! To add insult to injury, we embraced oligarchy because we see them as our savior given our humongous deficits in investment. And so we go around in circles – a vicious circle – of hierarchy, political patronage and oligarchy. And we wonder why we're the regional laggard?

Is Binay or Roxas or Poe or Marcos the answer? Is anyone a visionary and a strategic thinker that can lift us from learned helplessness? And since transparency and government don’t come in the same sentence in the land of Juan de la Cruz, we can only go by their demonstration of the commitment to community and the common good. If we give President Aquino the benefit of the doubt, would it explain the selective prosecution that critics have charged, otherwise we won't have a quorum for a functioning legislature or even a public sector? Is ours a banana republic?

The Philippines may not have the Anglo-Saxon temperament or the rugged individualism of the Americans. And precisely why we cannot take a hierarchical system and structure for granted. For example, should the church take the lead in the pursuit of an egalitarian ethos – so that tsarist power doesn’t become the pursuit of national leadership? And what about the education community? We must seriously critique ourselves if in the West they recognized the shortcomings of higher education.

In progressive global companies, rugged American individualism is subordinated to a high-commitment team culture, for instance. And in this writer’s work with his Eastern European friends, he makes it his mission that teamwork is nurtured across the many countries – including in the West – they do business.

And as this blog has pointed out time and again, global competitiveness presupposes a commitment to investment, technology, innovation as well as people, product, supply chain and market development. It has never talked about size as a barrier.

When he first arrived in Eastern Europe as a development worker to assist a micro-scale enterprise, he had to open their eyes to Apple as the benchmark in their foray into the free market. (Because as most everyone would know, Apple was a micro-scale enterprise started by a college dropout, who wanted to change the world, and his friends in a garage.)

And 8 years later they were recognized as among the best companies in the European Union, from the 15,000 vetted for the honor. That was 4 years ago when obviously they were less competitive than they are today. And yes, they’ve graduated from a cottage industry to an MNC, similar to the ones the writer demonstrated against in his student days. And as some would recall, they inspired this blog.

Conventional wisdom says size matters. But in the 21st century, conventional wisdom is not failsafe or assured wisdom. 

Friday, August 14, 2015

“People make mistakes in their thinking”

Scanning our dailies, as this posting has done, would we recognize how much that applies to us too? “Unless we change drastically the approach to land reform in the coming years, these dismal figures will continue to prevail.  We cannot continue flogging a dead horse. In management, there is a principle which states that stupidity is defined as addressing the same problem with the same solutions that have been proven failures in the past.” [Land Reform in the Philippines (Part I), Bernardo M. Villegas, Manila Bulletin, 2nd Aug 2015]

“Obsession is undue preoccupation with an often unreasonable idea, feeling or object – (Merriam Webster). Some academics, mainly economists, contend that our obsession with rice and consequently the long-standing rice self-sufficiency policy stand in the way of a more productive and competitive agriculture. Public resources monopolized by the national rice program could have been better spent on other commodities with better returns and where we enjoy some comparative advantage.” [Intelligently managing our obsession with rice (Part 1),Dr. Emil Javier, Manila Bulletin, 25th Jul 2015]

“In the first place, why are we so obsessed with rice? The explanations are evident: Most of us eat rice three times a day. We feel still hungry after a meal if we did not have rice. Among the poor, we often hear the expression ‘Hindi na baleng mawalan ng maraming bagay, huwag lamang bigas!’ The biggest number of Filipino farm families grow rice.”

“People make mistakes in their thinking.” That is a fundamental given as postulated by behavioral economics, not to be confused with standard economic theory. According to standard economic theory, which gives humans (perhaps too much) credit for making rational choices, those efforts should be enough to change your behavior. If you know the consequences but still get fat, you must want to be overweight. Of course not, say Leslie John and Michael Norton, professors at Harvard Business School specializing in the burgeoning field of behavioral economics.” [Business of Behavioral Economics, Michael Branding, Harvard Business School, Forbes, 1st Aug 2014]

“‘Standard economic theory suggests that as long as people understand the full consequences of their actions, they tend to act in their self interest,’ says John. ‘If they want to be healthy, and you tell them how many calories are in a burger, then they’ll eat better.’ But behavioral economics suggests that people make mistakes in their thinking. For example, we have self-control problems that can lead us to knowingly ‘misbehave.’

“Such biases are the bread and butter of behavioral economics, and have been accepted into the mainstream of economics and pop culture, particularly since the recent publication of popular books such as Richard Thaler and Cass Sunstein’s Nudge, Dan Ariely’s Predictably Irrational, and Daniel Kahneman’s Thinking, Fast and Slow.
“Even so, relatively few companies have attempted to use behavioral economics to try to change people’s behavior around overeating, smoking, or other bad habits many are desperate to break.”

If behavioral economics raises such questions, should we assume that we Pinoys have embraced the imperatives of competitiveness, for example, or development for that matter? “[C]onsumer welfare alone does not lead to economic efficiency. For the economy to grow and develop, consideration must also be given to market players, especially domestic players. The issue lies on whether our local businesses can actually compete in such an open market where big players can freely participate. The question remains whether small local businesses can compete with other participants in terms of quality, quantity, cost or price, especially under the scrutiny of a well-informed consumer. Nonetheless, the creation of a national competition policy encourages all economic parties, businesses and consumers alike, towards a more progressive national economy.” [Last but not the least, TOP OF MIND, Juliet Marie M. Guevara, The Philippine Star, 11th Aug 2015]

“The passing of the Philippine Competition Act fulfills the Philippines’ obligation under the AEC which aims to create a highly competitive economic region by uniting its member states into a single market and production base. The end goal is to create a region fully integrated into the global economy. The establishment of a national competition policy not only equips the Philippines for regional and global economic integration under the AEC, but most importantly, it reinforces the Philippines as a country by addressing the issues of its national economy while promoting a competitive one at that.”

But does Juan de la Cruz in fact subscribe to that? Or he would rather be in bed with oligarchy because of “learned helplessness”? Which makes the job of Philippine leadership and the economic managers truly challenging! And behavioral economics is still too contemporary – and we have yet to figure it out? [“Behavioral economics and the related field, behavioral finance, study the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and the resource allocation.”]

“NEDA stresses continuing market reforms to boost competitiveness,” Edu Lopez, Manila Bulletin, 8th Aug 2015. “The National Economic and Development Authority (NEDA) has stressed the need to continue pursuing market reforms in order to sharpen the competitiveness of domestic industries and reap the benefits of the Asean economic integration.”

“While opportunities abound and growth prospects in the industrial sector and logistics are very encouraging, there remains a number of major challenges that we need to aggressively address in order to maximize the sector’s full potential,” said Economic Planning Secretary Arsenio Balisacan.

“Some of the critical constraints that need immediate action are the country’s weak public infrastructure and regulatory environment. While infrastructure spending as a percent of GDP has been increasing in recent years, there is a constant need for the infrastructure system to keep up with rising demands in our fast-growing economy as new property investments flood the market, said Balisacan. Poor public transportation and congestion in our roads, ports, airports, and seaports threaten to hamper the pace of economic activity and cap the growth of many major cities if left unaddressed.

“The government is already devoting greater focus on infrastructure investment and putting into place comprehensive transport road maps and critical logistics infrastructure road maps to keep up with the significant growth of the country’s primary business hubs.

“Another critical area of policy reform concerns economic regulation, including restrictive ownership rules. Investors generally look for credible, stable law and regulation surrounding investment. He noted that in some cases, however, the legislation is weak or not even in place to protect investors. As a result, investors face high transaction costs, petty corruption and red tape, and substandard regulatory practices, said Balisacan.

“He also stressed the need to pursue a number of other important legislative measures that will further reduce the cost of doing business in the country. The passage of the Competition Law last July 21 will help diffuse market power and concentration in a spectrum of key industries, including manufacturing and logistics, said Balisacan.”

Do they sound logical from the standpoint of standard economic theory? But how did we allow ourselves to be the regional laggard? What is our thinking process like? Even in something that at first may appear unrelated but in reality is about development – not only of Mindanao but of the Philippines?

“What would Jesus say about the BBL (?), Rina Jimenez-DavidAt LargePhilippine Daily Inquirer, 9th Aug 2015] “‘One would naturally wonder why anyone with little or no knowledge of the BBL would disapprove of it,’ said Cardinal Quevedo. He offered an explanation, citing a conversation he had with a Catholic religious leader. AS he reported in his talk, the cardinal said he asked the religious leader: ‘Do you support the BBL?’ The reply: ‘No I don’t support the BBL.’ Again he asked: ‘Have you read the BBL?’ ‘No.’ ‘So why don’t you agree with what you have not read?’ The reply: ‘Ah, basta, I don’t agree.’”

People are funny. The reality is “people make mistakes in their thinking.” Except Juan de la Cruz?

Sunday, August 9, 2015

Stuck in the past

“But to no avail. Dornbusch got the biggest insult of all when he came to the Philippines and was told by a finance undersecretary that he (Dornbusch) didn’t know his macroeconomics. Dornbusch was stunned into speechlessness.” [We lost 17 years of development, Solita Collas-MonsodGet RealPhilippine Daily Inquirer, 8th Aug 2015]

This blog's reason for being is to challenge us to reinvent ourselves and not be stuck in the past. For example, the above quoted article would confirm how we have mismanaged and undermined development. And the consequence is we are the regional laggard unable to move forward while our neighbors have accounted for the drastic reduction in world poverty, left underdevelopment behind and became Asian Tigers. We lost 17 years of development. And unless we reinvent ourselves, we will constantly mirror the referenced finance undersecretary. He is a microcosm; he is Juan de la Cruz?

Our parochial and inward-looking bias has restricted and narrowed our worldview and worse fed crab mentality and, not surprisingly, a culture of impunity? And to reinvent ourselves we must first recognize our instincts because wittingly or not, we have connected the dots not of a virtuous but a vicious circle: (a) hierarchy (instead of an egalitarian system and structure); (b) political patronage (instead of good governance); and (c) oligarchy (instead of a competitive, i.e., inclusive, economy.) More to the point, we don’t want to keep playing with fire, that republican and liberal democracy doesn’t fit our temperament. The Russians are still paying the price for the idiocy?

“Sachs was very critical of International Monetary Fund policy and the Philippines’ stance with respect to its creditors (his position has been validated since then). And my colleagues in Cory Aquino’s Cabinet (those involved in negotiations) treated him cavalierly. At first, he thought that it was because he was young (32 years old at the time, although he was a full professor at Harvard at 28) and baby-faced. So he called on his colleague, Rudiger Dornbusch (economics students will know his stature), to come and do the explaining. Which Dornbusch did, flying, at his own expense, to Washington from Massachusetts. It was something like the Avengers, helping each other.”

“Prof. Jeffrey Sachs flew in earlier this week to give a lecture on sustainable development and launch the Sustainable Development Solutions Network (SDSN), which is a United Nations initiative. Which is why Sachs was here in the first place . . . ‘Transforming our World: The 2030 Agenda for Sustainable Development . . . a roadmap to ending global poverty, building a life of dignity for all and … is also a clarion call to intensify efforts to heal our planet for the benefit of this and future generations, leaving no one.’”

Of course we expect a Philippine finance undersecretary to be high up in the hierarchy? And what an irony, Goal 4 of the SDG reads: Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all. And we don't want to be stuck in the past that we cling to ‘knowledge is power.’ And why this blog has discussed Peter Senge’s ‘the learning organization.’

“Learning organizations are those organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together. [Senge] argues that only those organizations that are able to adapt quickly and effectively will be able to excel . . . Rather than focusing on the individuals within an organization it prefers to look at a larger number of interactions within the organization and in between organizations as a whole.”

Yet because of our parochial bias and value of hierarchy, those in authority would matter-of-factly appropriate infinite knowledge. And who is paying the price? Juan de la Cruz himself. Because of our reality, of being the regional laggard. Do we have the capacity to develop a BlackBerry or a Nokia or a Polaroid, for instance? In 1980, Gulf Oil, IBM and Amoco were in the top 10 of the Fortune 500 list. A generation later, they’ve dropped!
“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.”[William Pollard, 1911-1989, a physicist and Episcopalian priest and a colleague of Einstein in the Manhattan Project.]

Aren’t we amused how we all keep pointing fingers yet we are the ones behind this failed state? If we've lost 17 years of development, have our instincts changed since?

Thursday, August 6, 2015

Should economic managers be the model of transparency?

Should our economic managers be prepared to deal with parallel questions (albeit they’re from the private sector discussed elsewhere in this posting) to address our reality – i.e., being the regional laggard? Why? Because transparency is fundamental to freedom and democracy and the free enterprise system! Is it about time we stop shooting ourselves in the foot, valuing: (a) a hierarchical instead of an egalitarian system and structure; (b) political patronage instead of good governance; and (c) an oligarchic instead of a competitive economy?

“Japan’s R&I underrates PH — Purisima,” Chino Leyco, Manila Bulletin, 31st Jul 2015. The Philippines deserves a much higher credit rating as the nation’s prospects remain one of the strongest among emerging economies, the Department of Finance (DOF) said.”

“In a statement, Finance Secretary Cesar V. Purisima, said the Philippines has been underrated by international credit rating agencies, including Tokyo-based Rating and Investment Information, Inc. (R&I). On Thursday, R&I affirmed the Philippines’ foreign currency issuer investment grade rating of ‘BBB’ with stable outlook. But Purisima said ‘we believe that the country’s rating should be higher.’”

For transparency’s sake, what questions should we pose our economic managers? Consider: “Poverty to linger despite robust growth,” Ben O. de VeraPhilippine Daily Inquirer, 18th Jul 2015. “Despite the faster economic growth enjoyed during the past few years, the poverty rate in the Philippines will still be high as the gap between the poor and the rich widens, according to the Economist Intelligence Unit (EIU) . . . By 2019, the Philippines will remain one of Southeast Asia’s poorest economies . . .”

We need to create jobs if we are to address unemployment and underemployment – and poverty. That means PHL needs a more robust income streams – of services, agriculture and industry – beyond OFW remittances and BPOs. Question: why haven’t we prioritized the JFCs 7 industry winners? For example, if shipbuilding is one of them, why did we not embrace the Korean project?

On the other hand, the following are typical questions [during an earnings call] that CEOs in the private sector have to wrestle with from individual Wall Street analysts. In a worst-case scenario, a business enterprise can go bankrupt; while in the public sector, poor economies equate to pervasive poverty.

The line of questioning would sound hostile but that is because “the sun is the best disinfectant” as they would say in Washington, DC. We have to let the sun shine in the corridors of power.

“Thanks, good morning. You guys have delivered a lot on the structural stuff, brand disposals, et cetera. And you're delivering on the productivity, as evidenced by the gross margin performance.

“But unlike many of the other companies . . . the underlying business appears to be getting worse and maybe at an accelerating rate. I think this could argue for two things. One, that the organization can't handle this much change at one time and you need to slow down. Or, conversely, there needs to be a lot more and bigger change, structural, leadership, et cetera.

“You guys are obviously going with option three right now, which is to stay the course with the initial plan. Why should we all feel comfortable that's the right course, given the results, and a little bit to some extent, the guidance?”

Would those questions bring to mind the question hour in the British Parliament? And here’s a few more pointed questions to the CEO.

“Good morning, thanks. As you look back at this year and the sales shortfall, can you talk through some of the key drivers? Was it more a lack of innovation or just innovation that missed their target? Or are the products not priced properly or was competition better? And then what are your categories growing at now? And how do you think about market share growth for next year?

And it doesn’t get easier.

“Good morning, guys, thanks. It feels like with the [acquisition] transaction and David's announcement this week as CEO, you really declared the recent phase of reshaping as in some ways done. Now it's time to move forward.

“My question is, building on your prepared remarks, what are you going to [do] differently as you move forward? While much of what you've outlined sounds reasonable and logical and make sense, it also seems . . . a continuation of what you've been doing and saying the last few years. And we haven't seen that return, at least as measured on the top line.

“What I'm looking for is less about what you're going to continue doing and more about where and how you and David are going to invest differently in the coming years. And I don't want to make this just about [a category], but as example, what deficiencies are you trying to overcome when it comes to [particular] brands and what is that going to cost?

Transparency is getting to the truth. And the truth hurts. But that is what it takes.

Have we made it so easy for our leadership that in turn they have become condescending – true to our hierarchical system and structure? How do we introduce good governance then and say adios to political patronage? How do we embrace a competitive economy and toss oligarchy?

Never? Because we’re too nice a people?

Who will ask our economic managers the pointed questions like Wall Street analysts ask CEOs of Fortune 500 companies? Consider: “Poverty worsening,” Genalyn D. Kabiling and Chito A. Chavez, Manila Bulletin, 5th Aug 2015.

“The poverty level in the country continues to worsen despite the P178-billion spent by the government under the Pantawid Pamilyang Pilipino Program (4Ps) from 2010 to 2014, a private survey agency said yesterday . . . In a national survey conducted by Ibon Foundation in May, 2015, it showed that seven out of 10 respondents (or about 67 percent) see themselves as poor. This translates to about 67 million poor Filipinos.

“This larger figure is more consistent with the 66 million poor Filipinos earlier calculated by Ibon, using Family Income and Expenditure Survey (FIES) data for 2012.

“Critics noted that the poverty remains massive despite the government’s P78-billion 4Ps or the Conditional Cash Transfer (CCT) program budget for 2015.

“In contrast, the wealth of the 10 richest Filipinos has already more than tripled under the Aquino administration from P630 billion in 2010 to P2.2 trillion in 2015 for a 250 percent increase.”

Sunday, August 2, 2015

We don’t have to be farther back

“Learning from Singapore,” Michael L. Tan, Pinoy Kasi, Philippine Daily Inquirer, 22nd Jul 2015. “It used to be that Asians would point to some western country, usually the United States or Britain, as the model to emulate. In the last decade or so, it’s been Singapore.”

“Singapore’s universities have consistently been ranked among the top 10 in various ratings, with the National University of Singapore (NUS) ranking first, beating many venerable centuries-old British and American universities. To say the least, then, Singapore can be intimidating for administrators.

“Last May I joined administrators from six other Philippine universities—all government-run except for two—for a brief study-visit in Singapore that took us through the NUS, the Nanyang Technological University and the Singapore Management University.

“First, while Singapore is a leader in the development of new information technologies, its educational system is going back to the basics of group learning, folded into the technologies. The Nanyang Technological University, for example, has reconfigured all its classrooms, moving away from the rows of seats where students listen to teachers lecturing, to each classroom having hexagonal tables, each with its own computer screen so students can work together and present results of their group work.

“Perhaps most emblematic of this approach to education are the ‘huddle rooms,’ small places where students can study in groups . . . The huddle rooms are high-tech, but based on the much older principles of collective and collaborative work, encouraging students to learn together, speak up and challenge each other, even as they come to a consensus. It is a blend of independent thinking, articulation and consensus that I would like to see in our schools.

“In many ways it goes back to older East Asian methods of teaching and learning, emphasizing group work and hard work. This is in contrast to western styles emphasizing individuals competing with each other. This group approach is crucial for success in science and technology. I fear that in the Philippines—and the University of the Philippines in particular—we are encouraging more of individual achievements and even combative styles of academic performance (just look at how faculty members attack each other and students rather than address basic issues). All this creates a meanness of spirit that erodes the academic environment. I fear especially for our students who will go out into the world thinking it’s mean-spirited aggressiveness that will get them ahead.”

Some postings ago, this blog discussed the shortcomings of the Western educational system from the perspective of industry: teamwork, communication and critical thinking. And it’s no wonder Singapore’s universities given the “huddle rooms” and “collective and collaborative work where students are encouraged to learn together, speak up and challenge each other and even come to a consensus . . . are beating many venerable centuries-old British and American universities.”

And given the American influence in our educational system, should we be surprised that “faculty members attack each other and students rather than address basic issues”? Because “we are encouraging more of individual achievements and even combative styles of academic performance”?

But ‘crab mentality’ and its resulting chaos is something we don’t want in our educational system, beyond what we see in politics, governance and society at large? “According to the Hanjin plan, by 2010, the Phividec facility would be building ocean-going vessels. They expected that by 2012, Hanjin in Phividec would be earning $1.7 billion in exports of ocean-going vessels.” [The discontinued Hanjin project in northern Mindanao: Large foreign direct investments and local governments, Gerardo P. Sicat, CROSSROADS (Toward Philippine Economic and Social Progress), The Philippine Star, 22nd Jul 2015]

“The project failed to see the light of day. Local politics and the insensitive acts of local government officials killed the project. They interceded in the critical steps toward the construction of the project . . . I blame the failure of the project squarely on the local mayors of the municipalities of Tagaloan and Villanueva. These municipalities bordered the Hanjin shipbuilding project from east and west. The local mayors played to the hilt their local power over a major investor to the point the investor decided to stop the project cold.

“A project that is as large and with regional and national importance should not be left to the whims of local politicians playing their little games. The national government should have managed the process fully. In this instance, the Phividec should have played a strong hand and settled the major local issues with the national government agencies so the project would go through. Both failed to do their job and let local issues trump the project.”

Is that why the JFC’s 7 industry winners have fallen by the wayside? If we are to be a developed economy, this blog has argued, we don’t have to go very far for inspiration. We can create Philippine Inc. modeled after Japan Inc. or Singapore Inc., even China Inc. That is how the Asian Tigers developed a competitive platform and successfully moved beyond agriculture and services and into industry.

But that precisely demands a strong government role – not unfettered free market – in defining and focusing on a handful of industry where we can be competitive. It means going beyond OFW remittances and BPOs – that have become our fixation if not pride and joy. A competitive larger pie will spawn a more robust MSMEs via intermediate industries and beyond. Yet to prioritize is not in our nature – and why our economic managers are looking at 40-50 industries. Sadly, reflective of our crab mentality? When what we need is visionary and strategic leadership!

And to overcome crab mentality – and dismantle a culture of impunity – we must shun political patronage. “Villegas urged the voters to help end the system of cultural patronage in the country now. ‘(Please) do not tempt our public officials because if you make excessive demands on public officials, you might be forcing them to live beyond their means,’ he said. ‘We should not promote a culture of patronage in our relationship with politicians.’” [Archbishop Villegas asks voters to end political patronage now, Ador Vincent MayolInquirer Visayas, 19th Jul 2015]

Because it is consistent with what CJ Panganiban calls “kinship” – a trap even for justices? What more of family dynasties? “Politicians have all the arguments in favor of a political dynasty because their stay in public office can be protected by this system that converts public office into an abundant source of livelihood . . . The 1986 Con-Com left to Congress the idea of crafting an anti-dynasty law.  But the prohibition was left untouched for more than 28 years and the pending bill now has not encouraged much support . . . In Metro Manila and the neighboring provinces, people are too familiar with political families who promoted dynasties and benefitted from tax money . . .” [After 28 years, anti-dynasty provision faces ‘prescription,’Atty. Romeo Pefianco, Manila Bulletin, 22nd Jul 2015]

How do we not lag that far behind a Singapore? How does the private sector respond when faced with a similar challenge? They aspire to be learning organizations, where ‘knowledge workers’ won’t suffice. Because continuous leaning is what the 21st century demands. “In 1997, Harvard Business Review identified [Peter Senge’s] The Fifth Discipline as one of the seminal management books of the previous 75 years.” [Wikipedia]

“Learning organizations are those organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together. [Senge] argues that only those organizations that are able to adapt quickly and effectively will be able to excel . . . Rather than focusing on the individuals within an organization it prefers to look at a larger number of interactions within the organization and in between organizations as a whole.”

The bottom line: Singapore will continue to dominate if we can’t toss our archaic worldview – a parochial bias that feeds crab mentality and a culture of impunity. And we must rapidly move Philippine education beyond ‘knowledge is power’ to ‘learning is power.’ That means equipping our graduates to excel in group work and the requisite competencies of communication and critical thinking that teamwork demands. And engender the ethos of community and the common good – beyond self, family (and political dynasties.)