Thursday, May 19, 2016

Don't count chickens

That is, before they're hatched? Whether it’s an enterprise or an economy the leadership must pay particular attention to its income streams. It must be concerned with the products and services that it produces. In the case of PH, they must go beyond OFW remittances and the BPO industry. Granted they made us financially stable. But there is more beyond “pwede na ‘yan” – like moving beyond underdeveloped.

When the Aquino administration came into the picture, it had the benefit of the JFC’s “Arangkada Philippines” – the 7 industry winners. It was an opportunity to attract investments, create jobs and expand our portfolio and income streams – all in a major way. But non-business types can’t appreciate it like this writer's late mother? For instance, agriculture productivity comes from economies of scale which newcomer Vietnam can teach us. Not populism or “retail politics” which is what PH land reform was.

Arangkada is the outcome of a rigorous process that involved a cross-section of society. It is a hypothesis that should have been tested by the administration. Did the euphoria of a political victory or the influence of vested interests or the leadership’s own set of priorities undermine the primacy of Arangkada?

Meanwhile the budget allocated for the countless needs in running government and PHL no matter how large it appears in absolute terms won’t suffice given our meager average or per capita income. Granted that our economic managers would be focused on their wares – i.e., fiscal and monetary policies – who would raise the consciousness of Juan de la Cruz that our economic output is deficient? That the pie is too small for 100 million Pinoys – even when it’s large enough for vultures to feast on?

If the new administration would focus on the 7 industry winners, we will send the right signal to investors – that we truly are open for business. The DTI appears to be doing its homework, but they can’t deliver the desired outcome if the leadership and the bureaucracy aren’t behind them.

The infrastructure roadmap seems to be in place. We need a Dirty Harry to get it moving beyond a snail’s pace. While to shift to a federal system can’t happen overnight. As important, given our culture where political dynasties rule local communities, we better be careful what we wish for. How many of the recent local elections were sham elections?

Even a Dirty Harry can’t control an Ampatuan? It is synergy [remember Habit 6 from Stephen Covey?] that we must pursue if we are to have a chance at nation building. Abandoning the two-party system, for example, supposedly to democratize PH instead enshrined crab mentality and plurality- as opposed to majority-rule. We like to tweak the system proud of Pinoy abilidad forgetting that freedom and democracy must come with maturity and accountability – the sense of community and the common good.

Pushing one ideology for another is not problem-solving – i.e., the latter demands “academic rigor” if you will. But is Juan de la Cruz “sabog” – being neither here nor there? And everything goes downhill from there? We espouse parochialism in the name of nationalism and can’t internalize the imperative of FDIs?

China is what it is today because they took practically everything foreigners (including this writer's old MNC-company) had to offer. Beyond investment and technology they learned problem-solving. Which as proud Pinoys we believe we know but our track record says otherwise? Power? Infrastructure? Industrialization? Underdeveloped? Poor? It was the shutting out of the rest of the world while living under socialism that made them poor. Ditto for Eastern Europe. But that's not a secret! Every other nation knows it – and they’ve all left us behind. 

The “ideology of federalism” had also threatened the private sector. MNCs had to evolve. In the old days subsidiaries could be ruled by “emperors”. And given this history, when the writer moved to their headquarters, he worked on a new budget process that was outcome or purpose-driven [e.g., strategic intent; brand(s) vision; etc.] not simply finance-driven – and founded on a set of shared values. 

And where is PHL today? “[A] recent paper . . . indicates the Philippine economy is due for a period of slower growth, and may have already been decelerating along with much of the rest of the world.

“Christopher Mills analyzed the performance of seven of the country’s largest conglomerates and compared them to the overall economy. The data he used were publicly audited financial statements of Aboitiz Group, Alliance Global Group, Ayala Corp., DMCI Holdings, JG Summit Holdings, San Miguel Corp. and SM Investments.

“[T]he averaged revenues of the seven conglomerates are very highly correlated to the overall Philippine economy. In mathematical terms, they had a correlation coefficient above 0.95 (where 1 is perfect correlation). This makes complete sense, since the nation is dominated by these organizations, and their success is critical to the economic success of the Filipino nation and vice versa.

“When the researcher next analyzed growth rates over the past few years, he found a striking divergence. While the general economy showed a trend of increasing growth rates, the audited statements of its seven large conglomerates showed decreasing trend lines. Clearly, the two cannot diverge for long based on mathematical analysis and common sense.

“Mills also studied profitability measures for the seven conglomerates, and found similarly disturbing trends. Both return-on-assets and return-on-equity have been in clear decline over the same period.” [The Philippine economy may have overshot its largest companies, Richard Mills, Asia CEO Forum Chairman, Business Mirror, 13th May 2016]

In other words, since we’re not an industrialized economy driven by investments geared for global competition, our income sources that drive consumption and power the economy are limited. And why we’re an underdeveloped poor nation notwithstanding the celebrity-like status of the above seven enterprises.

We have a new administration that will lead PHL. But where is our head? Still with a fixed mindset as in “Pinoy kasi” if not driven by ideologies? How do we expect to develop a growth mindset – and adapt to a world that is not standing still – and not be a fish out of water if not go extinct?

Consider: “Keeping the CCT seems a mere consolation prize, as the Duterte team is silent on change in priorities in budget-making. No commitments in raising budgets for health, education, and housing? Just give the people CCT.

“Raising budgets for these expenditures is a long-running demand of citizens. Because it means more hospitals, free college, and less “squatters” in the country – basics in poverty alleviation.

“The tax plan is to basically to keep the rates, and merely adjust the brackets and tables . . . It is sad that Duterte’s team are not creative on the issue of taxes and could only give the middle class and entrepreneurs some vague, unsure reform. Duterte misses the opportunity to democratize wealth, weaken dynasties, and raise millions of poor people. Why? His plan is silent on land reform. It is a plan only hacienderos could be excited about.

“All in all, the plan offers nothing new. The most diehard Duterte supporters may not find these as coming close to the change they expected and which Duterte promised . . . The workers, farmers, professionals, entrepreneurs, OFWs, and others who thought change is coming should brace for disappointment. Duterte’s economic plan should be denounced pronto.” [Duterte’s not-so-new economic plan, Tonyo Cruz, Manila Bulletin, 13th May 2016]

Is there a bigger picture from the standpoint of the new administration? “PDP-Laban has a well-defined ideology based on these principles: freedom, solidarity, justice, self-reliance, enlightened nationalism, and the federal system of government. 

“With the continuing expression of support from various sectors – Malacañang, presidential contenders Secretary Roxas and Senator Poe who conceded defeat, the United States, the European Union, China (which has expressed interest in strengthening bilateral relations) among the first countries, the Makati Business Club, the Church, among several others, President-elect Duterte and his team can now move on. There has been a positive response from the market — stock and foreign exchange, and even with a bit of uncertainty, foreign investment.

“This is perhaps a good time to reflect on our current economic thrusts by focusing on how we can further strengthen our domestic market by increasing local demand for goods and services which can happen only with increased consumer purchasing power. Again, this concern shared by many goes back to what has plagued the country for decades now — low productivity, lack of access to land, capital, and skills — the critical resources that could reduce the current income inequality.” [A federal system of government (?), Florangel Rosario Braid, 13th May 2016]

It’s too early to tell how the new administration will run the country. But are vested interests waiting in the wings if they haven’t flexed their muscles yet. And vested interests are not only the fat cats that funded the recent elections, but ideologues too. And why we can’t toss “crab mentality”?

The challenge is for Duterte to indeed exercise leadership, not the Marcos-way but the right way. Meaning to prioritize while edifying Juan de la Cruz on the hypothesis he is testing for nation-building’s sake. So that they would rally behind him. [Note we’re talking hypotheses not absolutes. We’re earthlings!]

But it demands transparency. And that means letting the sun shine inside Malacañang. And if he is to be the Dirty Harry, to get the bureaucracy including the legislative and the judicial branches to toe the line. The rule of law must triumph over our culture of impunity.

And the media ought to dedicate space that will be the “Transparency Watch.” We Pinoys need adult supervision – and oversight. We haven’t grown up despite the lapse of a hundred years?

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]

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