Saturday, September 12, 2015

Analysis and leadership

Merriam-Webster: Analysis – a careful study of something to learn about its parts, what they do, and how they are related to each other; an explanation of the nature and meaning of something. Leadership – a position as a leader of a group, organization, etc.; the power or ability to lead other people.

President Aquino’s presidency is being analyzed by all and sundry as we begin the process of choosing and electing the next president. And by definition the performance of the economy comes with that. And so are the perceived strengths and weaknesses of Binay or Roxas, for example. The reality is analysis and leadership are two different construct. And candidates with executive or managerial experience [e.g., Binay for being a mayor of Makati] including in the US are deemed to be better equipped for the very demanding leadership position of president.

Two Nobel Prize winners would come to mind if one would dissect the limits of analysis. Is the converse then the looming inevitability of Binay? And Binay, of course, can promise anything including free birthday cakes and movies to seniors, among others. But what is reality for the Philippines and its economy? We badly need a president committed to nation building, beyond self and family. [Beyond the Marcos family and the Binay family.] Sadly, we’re between a rock and a hard place!

“Can you devise surefire ways to beat the markets? The rocket scientists thought they could. Boy, were they ever wrong.” [FAILED WIZARDS OF WALL STREET, Peter Coy and Suzanne Woolley, with Leah Nathans Spiro and William Glasgall in New York and bureau reports, Business Week, 21 Sept 1998]

“Smart people aren't supposed to get into this kind of a mess. With two Nobel Prize winners among its partners, Long-Term Capital Management L.P. was considered too clever to get caught in a market downdraft. The Greenwich (Conn.) hedge fund nearly tripled the money of its wealthy investors between its inception in March, 1994, and the end of 1997. Its sophisticated arbitrage strategy was avowedly ‘market-neutral’--designed to make money whether prices were rising or falling. Indeed, until last spring its net asset value never fell more than 3% in a single month.

“Then came the guns of August. Long-Term Capital's rocket science exploded on the launchpad. Its portfolio's value fell 44%, giving it a year-to-date decline of 52%. That's a loss of almost $2 billion. ‘August has been very painful for all of us,’ Chief Executive John W. Meriwether, a legendary bond trader, said in a letter to investors.”

Since there is no guarantee that an analysis despite its thoroughness and insights like a dissertation will in fact hold water, leading institutions in the West are pushing for the commercialization of certain dissertations. The reality being countless of them won’t ever see the light of day. And commercialization presupposes accountability.

In the case of economic managers, they are not mere analysts, they are managers; they are leaders. And they are accountable to Juan de la Cruz. And it doesn’t mean being patronizing and condescending. Sadly, in our hierarchical system and structure, they are licensed – to the detriment of Juan de la Cruz. For instance, instead of acknowledging the crisis proportion the traffic situation in the metropolis has reached, at least two people from the administration invoked “improving auto sales.” Even when that’s part but not the crux of the matter!

“Metro ‘traffic dream’ to take 15 years, cost $65 B – study,” Christina Mendez, The Philippine Star, 7th Sept 2015. “It could take another 15 years and $65.3 billion worth of investments to solve the horrendous traffic in Metro Manila, according to the National Economic and Development Authority (NEDA).”

“This was contained in a NEDA study conducted with technical assistance from the Japan International Cooperation Agency (JICA), which recommended a roadmap for the implementation of a comprehensive Dream Plan by 2030 for Metro Manila and mega Manila to address the growing population and demand for better transport in the National Capital Region.

“‘If nothing is done, the situation in 2030 will become a nightmare. All roads will be saturated. Negative impact on economic, social and environmental aspects will be so large, deterring the function and livability of Metro Manila,’ the report added.

“The same report showed the transport cost of road users, including vehicle operating cost and time cost, is pegged at P2.4 billion a day in Metro Manila. The amount will increase to P6 billion day by 2030 if the government and the private sector will not act on the problems today.

“If no interventions are made, the study showed the average low-income households will have to spend no less than 20 percent of their monthly household income for transport. If Metro Manila’s current transport system is not improved, roads and railways will be insufficient in solving traffic congestion, the report said.”

Did we hear something similar before with NAIA 3? And do we stew our problems in chunks of decades? And the consequence? We’re missing the aggressive tourism numbers despite frenetic efforts in building roads to major tourist attractions. And everyone knows the answer: we don’t have the infrastructure to drive a systemic, sustainable and competitive industry – including one where we have the natural beauty that we can leverage!

If we put that scenario side-by-side with rural poverty and our consistent cry for farm-to-market roads, do we think we can alleviate rural poverty when we don’t have the infrastructure and, much less, the ecosystem to drive a systemic, sustainable and competitive agribusiness – that connects the dots? If we expect agribusiness to be a pillar of the economy, we need beyond infrastructure the commitment to investment, technology, innovation as well as people, product, supply chain and market development.

Take coconut. A major proportion of our farmers are dependent on coconut yet we don’t have the ecosystem of a technology- and innovation-driven coconut-based industry, for instance. We didn’t purposely design it to be systemic, sustainable and competitive – i.e., for the common good. Political patronage would always trump all!

And back to infrastructure. ‘Focus on infrastructure to step up growth’ – IMF URGES THE PHILIPPINES, Mayvelin U. Caraballo, 6th Sept 2015. “The International Monetary Fund (IMF) said the Philippines must focus on improving public infrastructure to attract investment if it seriously seeks to step up economic growth and cut poverty more significantly. The Philippines has been lagging its Asian peers in investment due to poor infrastructure, which has been traced to government underspending on such projects.

“Benchmarking the Philippines relative to its neighbors in terms of the size of public investment and capital stock; the quality of public infrastructure; and public investment efficiency, the IMF confirms in a country report that the level of public capital and the quality of public infrastructure in the country are low, and that there is room for improvement in public investment efficiency.

“‘At 21.8 percent of GDP [gross domestic product] in 2014, the investment rate in the Philippines is well below regional peers, as reflected in its low capital stock and infrastructure quality’ . . . The report added that model simulations suggest that improving public infrastructure would result in a sustained output increase and leads to permanent gains in productivity, which crowds in private investment.

“In the report, the IMF said it measured public investment and the stock of public capital for a large sample of countries, finding that the Philippines consistently had lower public investment than other members of the Association of Southeast Asian Nations (Asean) in the recent past, averaging 2.5 percent of GDP in 2000 to 2014.

“As a result, the public capital stock is also one of the lowest among Asean countries, at about 35 percent of GDP in 2013, compared with the regional average of 72 percent of GDP.”

Does Juan de la Cruz see that we’re the regional laggard? We can’t be in denial . . . on top of our dearth of leadership committed – beyond self and family – to community and the common good? That’s a double whammy – a formula for disaster!

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