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.”

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