Monday, September 28, 2015

A passive and fixed mindset?

“DTI cuts exports growth forecast to single digit,” Catherine Pillas, Business Mirror, 17th Sept 2015. “The Department of Trade and Industry (DTI) has also abandoned the government goal of growing merchandise exports by twin digits this year, as demand from China and other top export markets continues to diminish.”

“We just have to live with it for the time being because our main market is really China. The US is good, but China’s really bad,” Export Marketing Bureau Director Senen M. Perlada told reporters . . . The National Economic and Development Authority had also declared that the government target of 10-percent growth in export receipts this year will no longer be achieved . . . The rise in exports to the US and the European Union has not been enough to offset China’s diminishing demand, while the impact of the peso depreciation is negligible, the DTI director said.

“[E]ven if electronics exports—the country’s major manufactured export segment—have grown . . . this is being offset by the slowdown in agricultural products . . . Banana, pineapple, mango and other processed foods that use these as raw materials are down because of the drought . . . Agro-based products . . . dropped by 24.5 percent . . .”

Ergo: We’re not in the driver’s seat as far as industry and exports are concerned – because industrialization in the Philippines is decades behind. We export intermediate goods if not basic raw materials. And the more we fall behind in industrialization the more we will fall behind in investment, technology, innovation as well as people, product, supply chain and market development. They are the building blocks of an ecosystem that we can't afford to ignore!

Silicon Valley is well developed; it is an ecosystem in and of itself – starting from investment all the way to market development, the Apple Store and iTunes being concrete examples and where buyers and Apple come together. And this continuing direct engagement edifies and equips Apple to develop products that consumers cherish. The evidence? They would camp out of an Apple Store the night before a new Apple product is launched.

“The company announced Monday that it is ‘on pace’ to beat last year's opening weekend sales record of 10 million units sold . . . ‘We are on pace to beat last year's 10 million unit first-weekend record when the new iPhones go on sale September 25,’ a spokesperson for Apple said in a statement to Mashable. ‘As many customers noticed, the online demand for iPhone 6s Plus has been exceptionally strong and exceeded our own forecasts for the preorder period. We are working to catch up as quickly as we can.’” []

But Apple is in the private sector – and what about the public sector? “The two Mexicos: With its combination of modernity and poverty, Mexico provides lessons for all emerging markets,” The Economist, 19th Sept 2015. “The first lesson, and easiest to learn, is the centrality of urbanization. Cities offer people opportunities to prosper that cannot be found in the countryside: about 120,000 people in Asia are migrating to cities every day, for example. But unless cities provide transport, power, sanitation and security, they will fail to fulfil their economic potential. Violent, drug-related crime stalks Mexico’s scruffy barrios, where city-dwellers live. In South Africa the lack of public transport obliges slum-dwellers to take expensive minibus-taxis to work. Cities in Pakistan and the Philippines are plagued by blackouts. Slums ought to be every modernizer’s priority. They are where most people live, and where jobs, schools and technology are closest to hand.

“The second is the importance of infrastructure, and not just in the cities. Many of the foundations of the modern Mexican economy were laid a century ago, in the form of roads and railways tying its industrial heartland to its ports and the northern border. That leaves swathes of the country unconnected. Centralization breeds anomalies: beach resorts often buy their seafood in Mexico City’s wholesale market, hundreds of miles from the coast. Yet linking up parts of a country is not easy. It takes both investors willing to bear risk and also politicians prepared to take on the status quo. In India, for example, plans for big infrastructure projects have been frustrated by squabbles over land and a dearth of long-term financing.”

“ENDING EXTREME POVERTY IN THE PHILIPPINES THROUGH URBAN-LED GROWTH,” Gloria Steele, John Avila, Daniel Miller and Gerald Britan,“In the Philippines — and quite possibly in many other rapidly developing countries — urban-led development focused on second-tier cities as engines of growth promises to be an effective approach for addressing poverty and the inequitable distribution of income.”

“A development paradigm focusing on cities as engines of growth. USAID’s mission in the Philippines believes that the development of more competitive second tier cities can drive inclusive growth that improves the welfare of both urban populations and people living in surrounding peri-urban and rural areas. As a recent white paper on urbanization noted, ‘cities can be engines of economic growth’ and ‘urban growth, in turn, drives rural development.’

“This approach is grounded in data that report higher growth in economic output in several increasingly urbanizing Asian countries. In these countries, the development of secondary cities effectively stimulated surrounding rural development. For example, from 1970 to 2006, China and India each produced an average 6 percent increase in per capita GDP for every 1 percent increase in urban population. Vietnam and Thailand exhibited 8 percent and 10 percent increases, respectively.

“Cities in the Philippines, however, have not generated the same high rates of economic growth or reductions in poverty that were realized in China, India, Vietnam and Thailand. This has been attributed to the nation’s archipelagic geography, highly fragmented structures for spatial and infrastructure planning and poor metropolitan governance.”

Still, industrialization cannot be taken for granted. Without the benefit of large-scale enterprises, say, Thailand’s auto industry, the role of second-tier cities would not be as robust. Another example would be Nestlé. The ecosystem of Nestlé covers from coffee farming to their mind-boggling range of products one would find in mom & pop’s, convenience stores, groceries, supermarkets and hypermarkets, even online stores like Amazon and all the way to boutique cafes serving premium Nespresso coffee brewed from Nespresso pod machines that one could purchase for home use.

Our inability to embrace and champion the efforts behind the 7 industry winners teed up by the JFC speaks volumes: we’re nowhere near approaching an industrialized economy. Not surprisingly, we continue to rely on OFW remittances. And while the BPO industry is a welcome addition, the multiplier effect of industry is something we sorely miss. Another imperative we can’t ignore – and why we aren’t an inclusive economy!

But what about our SMEs that make up 99% of industry? They make Pareto a reality that we continue to overlook! Their share of PHL’s economic output would continue to be miniscule until we learn to transcend size and influence. And AEC can’t do that for us. It can only come to fruition if we learn to value technology and innovation over and above hierarchy, political patronage and oligarchy. And to not assume Pangilinan and Pacquiao can bring home the bacon, even of the sports kind.

More to the point, we have to pull together a robust large-scale strategic industry base and SMEs. That is, to connect the dots: from freedom and democracy to the rule of law to free enterprise but not the unfettered kind – as in Japan Inc. or China Inc. or Singapore Inc. And be geared to continually develop, innovate and respond to lifestyle and productivity needs of people. In the final analysis, to market competitive products and services.

Our mindset – passive and fixed as it were – must be shaped to imagine that a college dropout tinkering with gadgets in his parent’s garage could become the world’s largest enterprise! SMEs mustn’t just be destined to be small family-owned businesses. But that demands a worldview that isn’t restricted and confined – by a parochial, inward-looking bias. Perseverance in pursuing development outside our comfort zone – custom and tradition – is a must.

“Even the boldest reformer could not rapidly resolve all of these problems. This is the less cheering message of the two Mexicos: for all but a handful of countries, the road to prosperity is hard and long. But Mexico’s successes also demonstrate that it does exist. Even if the gains must be measured in decades, perseverance eventually brings rewards.” [The Economist, op. cit.]

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