Monday, July 11, 2016

Where do we want to be?

“NEDA Assistant Director General Rosemarie G. Edillon said eradicating poverty and hunger, and having decent jobs are considered the primary goals and aspirations of Filipinos for their country, according to ‘AmBisyon Natin 2040,’ the long-term vision of the Philippines.

“[T]he country’s current per-capita income is pegged at $3,500, using 2014 purchasing power parity terms. If the country will eradicate poverty in 25 years or earlier, this must steadily increase to around $11,000, or three times the current per-capita income. This is comparable to the current per-capita income of Malaysia, $11,120. The poverty rate there is 0.6 percent.

“However, increasing incomes is insufficient and must be coupled by the narrowing of the gap between the rich and the poor. [T]his can be done through the reduction in the Gini coefficient—a measure of inequality. The country’s Gini coefficient is currently pegged at 0.46 – this is the highest in Asean.” [‘Cutting poverty requires tripling Filipinos’ income,’ Cai Ordinario, Business Mirror, 28th Jun 2016]

“The Philippine economy needs to be more ‘outward-looking’ to reach new growth levels, opening up several sectors such as infrastructure and tourism to foreign investment. NCC co-chairman for the private sector Guillermo Luz stressed the need for the Philippines to draw in more foreign investment and business partnerships.

‘I don’t think that we can maintain the type of growth rate that we want to maintain and lift more people above the poverty line if we just continue to sell just to each other. I think we need to look outside and see what are the other big trading blocs out there that we can sell to.’ Luz pointed out that the resulting growth of a more open economy would reduce the number of families living below the poverty line.

“Luz emphasized that to be able to boost infrastructure spending in the country, more players should be introduced, as there are not enough developers to meet the growing local infrastructure needs. Aside from the infrastructure sector, Luz also described the tourism sector as an area that could experience a boom if opened up.

“Luz noted that the BPO industry has about 1.2 to 1.3 million workers that generate about $20 billion in annual revenues, or about double what tourism-related workers generate. We have tourism, which is generating maybe half of that, close to $10 million. If you can double that, these are areas for big opportunities.” [Be more outward-looking, Catherine Talavera, The Manila Times, 28th Jun 2016]

Ergo: To be where we want to be we need a tripling of our income by being an open economy and by being outward-looking . . . and that means there must be change in our mindset and values.

Why don’t we move to a federal system instead? Let’s put that to a test that the blog discussed in an earlier posting. Is the idea of federalism still at the level of rhetoric? Are we connecting the dots and thinking ecosystem? Is there a road map to attain a virtuous circle?

“Unitary government failed us. ‘Federalism challenges the political norm that power is best when centralized, that sovereignty is indivisible and cannot be shared and posits the thesis that states can be bound together on the basis of responsible power-sharing, where the will of the majority of the people will reign but where the rights of the minority will be allowed to flourish,’ Puno explained.” [Puno pushes federalism, Jaime R. Pilapil, The Manila Times, 28th Jun 2016]

It is easy to point to the current system. But is it the system that failed us or our mindset and values? If we accept the premise that we are not making enough income-wise, will federalism be a driver to the tripling of our income? Note that federalism talks about being bound together on the basis of power sharing, where the will of the majority of the people will reign but where rights of the minority will be allowed to flourish.

“Our unitary government is bad enough for its wrong allocation of the powers of government but what is worse is that our unitary government has been captured by vested interests. We are ruled by dynasties. We are run by economic elite. And we are threatened by criminal syndicates. It is far more difficult to capture powers of government in a federal state than a unitary state.” [Pilapil, op. cit.]

In the end federalism is about power and power-sharing? And sharing and fragmenting power is the antidote to minimize capture by vested interests, dynasties, economic elite, criminal syndicates? Yet it has a converse: it is easier for local interests to capture a local government unit.

And a federal system does not respond foursquare to the challenge of tripling the income of Filipinos? But it will ensure taxes collected locally stay local? That’s the confusion we continue to entertain. We see income as the taxes collected by government not the economic output generated by the economy. That hole will be there irrespective of government system. And the move to a federal system likewise demands a change of mindset and values – and is not a slam dunk.

“Alex Brillantes, former University of the Philippines’ Dean of the College of Public Administration and Governance, however, said there is a need to change the people’s mindset before the country can make the shift from presidential to federal form of government. Brillantes also noted that it is not easy to give up powers . . . That is why we need to change values.” [Pilapil, op. cit.]

There is no doubt that government system is an enabler but if we are to prioritize our efforts, including working on our mindset and values, we need to first focus on the drivers that will bring us closer to our aspirations?

Federalism may indeed minimize capture by vested interests, dynasties, economic elites and criminal syndicates at the national level. But what about the reality of extra-judicial executions at the local levels? Is federalism the answer? And there are no vested interests, dynasties, economic elites and criminal syndicates locally?

One of our biggest failings as a nation is that community and the common good is alien to us. As well as the ability to prioritize. Given our “kuro-kuro” culture, wittingly or not, “crab mentality” has dogged us. And if there is one thing we have yet to learn, it is to “think less, think better.” Which is not a slogan but supported by a body of knowledge, as discussed in an earlier posting.

And given today’s reality, while federalism may be an enabler, it is not necessarily a driver of prosperity, i.e., we recognize it as allocating current levels of taxes – but not directly raising economic output.

The Duterte administration has six years to move us forward. That will not be enough to bring us to its vision of moving from a consumption-driven economy to one that is investment and export-driven. We're looking at 25 years to be the next Malaysia.

And how much would their efforts be distracted if they allocate time to change our system of government? And if both would demand a change in mindset and values, will their time be better spent precisely on such change? And thereafter we could be better prepared if indeed we want to be a federal system?

This writer has been involved in change management for decades, including getting a bunch of ex-socialists embrace free enterprise. And if there’s a silver bullet that he has discovered it is to open the eyes of people to a sense of purpose or more broadly to community and the common good. But specific to his Eastern European friends, it meant turning them from a cottage industry that had vestiges of its communist past to that of an MNC. It is common knowledge that MNCs pay top dollar, for example.

In the Philippines we see the dark side of MNCs yet, wittingly or not, nurture political patronage, crony capitalism and oligarchy. MNCs are considered the epitome of progress, innovation and global competitiveness. While we are constantly fighting poverty. And the Duterte administration wants to raise the minimum wage because our industry can’t pay top dollar. But are we again rehashing the days when we drove industries to the ground?

Are we connecting the dots, thinking ecosystem? Does raising the minimum wage make us attain a virtuous circle? As this blog has argued, it is not poverty, it is the economy. And an economy is simply the aggregate of the products and services a country produces. That is why we must turn our enterprises, including SMEs, into MNC-like, i.e., in pursuit of innovation and global competitiveness.

And back to the question of federalism. The first step in any change effort is to start with the familiar. For instance, most everyone knows we need investment to generate incremental economic returns yet how come we can't attract foreign investments to the levels enjoyed by our neighbors? Because we need a change in mindset and values. We need it too to move to federalism.

Which is more familiar and – ought to be – the priority? In other words, the best way to describe federalism at this point is it is a hypothesis. And if the experiment's protocol calls for a change in mindset and values, then that is what we must first perform? [There are two TED Talks about mindset that we would want to watch given our “crab mentality”: (a) Julia Galef: Why you think you're right -- even if you're wrong; and (b) Carol Dweck: The power of believing that you can improve.]

“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]

1 comment: