Why we’re the regional laggard

Two articles can only make the writer shake his head. Because we’re supposed to be in the 21st century, several decades removed from his childhood days in Sampaloc (near the Holy Trinity Church on Calabash Road), an inner city of Manila, where as a young boy he witnessed roads being laid out in their neighborhood – and brought the demise of the “looban.”

He understood from his elders that it was a sign of the progress to come. He still remembers his first escalator ride in a movie house on Azcarraga Street and the time his father’s employer moved from Plaza Moraga to Ayala Avenue, which was essentially an open field saved for the sprinkling of buildings under construction and the gated communities surrounding them.

Every time he drives along Paseo de Roxas, he remembers how as an 11-year old he successfully steered on a straight line the VW Beetle driven by the PR Manager of his father’s company though seated away from the steering wheel, and qualified him to represent the company, with another boy, in the Philippine Soap Box Derby. (Which was not a surprise given he was experienced driving bumper cars, then popular in Burnham Park, Baguio.) The race track was a converted section of Quezon Boulevard by JUSMAG, where they erected an elevated ramp at the starting line – given the cars were gravity-propelled. Those were the good old days:  how pleasant Quezon Boulevard was and, of course, the old Makati Commercial Center.

It also introduced him to the real world. In the US, boys personally built their soapbox derby cars, as mandated by the rules. But not in his case. Bigger boys at Don Bosco San Lorenzo did it for him. Yet the photo ops, which appeared in a couple of dailies, showed him hard at work on his car.

We always had it so good and easy – living for the moment and oblivious that man is meant to look far out into the future because there is no free lunch even for succeeding generations – and decades later are paying the price?

And these are the two articles referenced above: (a) “Ang acquiring Prieto interest in Inquirer,” [Krista A. M. Montealegre, BusinessWorld, 18th Jul 2017] and (b) “Starving the small firms (and farms),” [Cielito F. Habito, Philippine Daily Inquirer, 18th Jul 2017]

Is this Marcos Martial Law redux – that was supposed to rid us of oligarchy only to reinvent it in another form? While small firms and farms continue to starve?

In an earlier post the blog spoke to Modern Math and the concept of sets and subsets. This one can build on that. How do we solve a problem like Maria?

“There is wide scope for widening our MSMEs’ access to capital, and unless we succeed in this, we will remain the region’s bottom-dweller in having small firms become the inclusive economic growth driver they could and should be.” [Habito, op. cit.]

Capital is indeed a subset of development. But as the blog has argued, our challenge goes beyond the conventional wisdom of monetary and fiscal policies.

Coming from the private sector, the writer has a free-enterprise bias which can best be illustrated by this piece. “This Is The Shakeup Procter & Gamble Needs,” Josh Arnold, seekingalpha.com, 18th Jul 2017.

Procter & Gamble, an old, familiar pre-WW II name in the Philippines, was associated with “Tawag ng Tanghalan, emceed by the venerable Patsy and Lupito, whom the writer met as a kid through the step-father of his dad who was in show business (he went by the name of Gregorio Ticman). And as fate would have it, the writer would be at the opposite camp, competing against P&G during his MNC days … and up to the present as a consultant to his Eastern European friends.

What’s the latest with P&G? “To say that I haven't exactly been a huge fan of consumer staple giant Procter & Gamble (PG) in the past is quite the understatement. I've felt the stock was tremendously overpriced for a long time based upon a complete inability to grow or even adapt to changing markets, such as the turmoil it has experienced recently with its Gillette business, as an example, as newcomers like Harry's and Dollar Shave Club have taken share. To me, PG is a shining example of a bloated corporate iceberg unwilling to accept that there are actually competitive companies out there willing and able to take market share from it and as a result, I haven't been interested in the stock.” [Arnold, op. cit.]

What can we learn from this? “PG is a shining example of a bloated corporate iceberg unwilling to accept that there are actually competitive companies out there willing and able to take market share from it …”

Does it sound like PH when compared with our neighbors? Are we unwilling to accept that there are actually competitive countries out there? As the blog has argued, we don’t have the platform of an inclusive economy – unlike the rest of the region that they drastically reduced poverty.

We now appreciate that our failure in infrastructure development, industrialization and competitiveness cannot easily be compensated by our two major income streams, OFW remittances and the BPO industry. Nor can tourism turn PH into an economic miracle like an Asian Tiger – and Greece is the example to avoid.

And what about our inability to support MSMEs via access to capital? We have a couple of handicaps that unless we harness into the bigger set of development – i.e., beyond the subsets of capital and alternative financial instruments – we shall be in an untenable position against our neighbors.

MSMEs thrive and flourish when a nation is industrialized like Japan and South Korea have demonstrated, and where MSMEs play the role of auxiliary or support industries. And which is the real world’s translation of the multiplier effect of investment economists talk about; and cars and consumer electronics products and their support industries are good examples which these Asian countries can be proud of.

An industrialized nation is more competitive than one that is not – like PH where we lag in infrastructure development, industry development and innovation and competitiveness.

To illustrate, our economy is consumption and domestic driven which is reflective of our inability to compete in the global arena. More to the point, the exports of our neighbors are so staggering when compared to ours: Indonesia are 358% more, Malaysia – 438%, Vietnam – 443%, and Thailand – 497%.

And precisely because of our inability to compete in a free enterprise system, banks will not be gung-ho to support our MSMEs. On the other hand, if our MSMEs are globally competitive, even foreign banks will come knocking on our door. It is again the laws of physics, i.e., water seeks its own level.

And why the blog often talks about the writer’s Eastern European friends, with their principal banker coming from the West but had to aggressively compete against local banks – to win their business.

Which comes first, the chicken or the egg? We must first, as the blog has argued, overcome our parochial and insular instincts as well as our values of hierarchy and paternalism, political patronage and dynasties as well as oligarchy. Because they are the subsets of the vicious circle that we know as culture of impunity.

Not surprisingly, we are starving ourselves of investment – which in the case of Singapore equated to over a trillion US dollars in FDI – technology and innovation as well as people, product and market development.

But how can small farms, for example, even have a chance in a free enterprise system that is highly globalized and competitive?

“Economic development depends upon exploiting scale and specialization, but poor societies start with neither. How can government policies promote or inhibit the exploitation of scale and specialization?”

That is lifted from the course “From Poverty to Prosperity: Understanding Economic Development” offered by Oxford University. In other words, we must be able to respond to the question: How can government policies promote or inhibit the exploitation of scale and specialization?

The challenge goes beyond capital formation. We cannot look back and inward to supporting small farms. We must look forward and outward and develop the foresight to exploit scale (e.g., consolidated not individually fragmented farms to attain economies of scale) and specialization. Until we learn from our mistakes and continue to assume populism is the be-all and end-all, we can kiss prosperity for Juan de la Cruz good bye. And why in previous posts the blog discussed the imperative of foresight.

The Marcos Martial Law did not turn us into an Asia Tiger. Marcos was no Lee, no Mahathir or Deng. And Marcos is the idol of Du30?

We are in a downward spiral … do we need a Proctor & Gamble-like shake up so that we don’t get into a death spiral?

“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]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“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]

Downward spiral v. Death spiral

On the plane from Warsaw to New York recently the writer thought about the subject of this post while reading “The Book of Joy” by His Holiness the Dalai Lama and Archbishop Desmond Tutu with Douglas Abrams. Says Archbishop Tutu, I can be hopeful but not be optimistic – a lesson from his apartheid experience. Is it another way of saying, we may not be in a death spiral but are we in a downward spiral?

“4 of 10 nonpoor Filipino households could slip into poverty in 3 years,” Cai Ordinario, BusinessMirror, 13th Jul 2017. “The lack of access to transportation, decent employment and timely government intervention could send a lot of nonpoor households to poor status in three years, according to the Philippine Institute for Development Studies (PIDS).

“In a policy note, titled “Estimating Filipinos’ Vulnerability to Poverty”, PIDS supervising research specialist Christian D. Mina and senior research fellow Celia M. Reyes said four of 10 Filipino households are vulnerable to poverty.”

The article brought the writer decades back to their freshman class that was introduced to Modern Math and the concept of sets and subsets. “Access to transportation, decent employment and timely government intervention could send a lot of nonpoor households to poor status in three years.” Are those subsets of the bigger set of development?

If it isn’t obvious yet, while the blog is about the Philippine economy, it is founded on the imperative to reinvent ourselves. And the blog argues that it goes beyond the conventional wisdom of monetary and fiscal policies, with its constant reference to the Asian Tigers – and the compounding effect of FDIs and rapid growth over decades left us in the dust – and, more recently, a course offered by Oxford University, “From poverty to prosperity: Understanding economic development.”

Coming from the private sector, the writer has experienced countless times being too close to the trees to see the forest. And why the blog often discusses themes around vision and values and worldview as well as instincts. And the primacy of sustainable profitable growth, i.e., competitiveness – defined by its own subsets of investment, technology and innovation as well as people, product and market development – for enterprises.

Which is what free enterprise is, derived from “the pursuit of life, liberty and happiness”? And it explains American exceptionalism espoused by the forebears but sadly undermined by Trump? Who is enamored with autocracy and autocratic leaders and oligarchy. And why in a recent post the blog spoke to Du30 – similarly captivated by autocracy – and his popularity, leader dependency and foresight.

Let’s put that in our back pocket for the moment and think of how we’ve traversed the PH course so far. And do a simple cause-and-effect exercise. There is now the debate about the jeepney. Indeed, it gives Juan de la Cruz access to transportation and, as important, provides employment to many.

And the government wants to intervene and modernize transportation. But modernization is just another subset of the bigger set of development? Think OFW remittances and the BPO industry – and where we’re losing our competitive advantage given our fixed mindset and lack of foresight? Put another way, we must get ahead of the curve and move up the value chain.

While these two income streams have become the drivers of PH economy, we are still kicking and screaming: We want an inclusive economy! The reality is we don’t have the platform of an inclusive economy … because we chose to build upon the sand! And we chose to be in denial?

Have we learned our lesson? Take tourism. Tourism is a low-hanging fruit but doesn’t equate to an economic miracle despite its positive impact on employment and GDP. Think Greece where travel and tourism account for 7.5% (second only to Malta) of GDP: “As Greece continues talks with creditors over the next stages of its international bailout program, Donald Tusk, president of the European Council, has warned that it is ‘no success story’ yet … Greek prime minister Alexis Tsipras has called for an emergency summit of EU leaders if a deal is not struck [soonest].

“But while Greece tussles over the reforms required to unlock the next tranche of bailout aid, its economy is sliding back towards recession, making the need for funding all the more urgent.” [Financial Times, 6th Apr 2017]

And while with Marawi and Martial Law, PH can only have another layer of challenges. Consider: The writer's European friends had booked holidays to the Philippines but had to cancel, following advisories in their countries, and are going to Vietnam instead. Are we in a downward spiral?

Think of the forest beyond the trees. What are the critical subsets of development if we benchmark against the Asian Tigers? Think of Lee and Mahathir showing Deng and PH the way: You don’t have to love the West but beg for their money and technology. Of course, given our poor self-esteem, we pooh-poohed it while Deng obliged. Surprise, surprise ... These Asian nations have become the benchmarks for infrastructure development, industrialization and competitiveness.

What about the Oxford University course (which we can Google) so that we can do our homework, gear up and take the journey from poverty to prosperity?

Can we establish a true north for PH ever? Can we ever establish our priority initiatives? For instance, Germany’s trade surplus at $300-B is 50% greater than China’s – being the gold standard in manufacturing technology. Do they have 50 or so industry road maps? What about the Asian Tigers? Prioritize. Prioritize. Prioritize. The vital few not the trivial many. We must seek to get the biggest bang for the buck every …  every … step of the industrialization pursuit and generate the capacity for further investment – and attain a virtuous circle. We’re totally confused about what an inclusive economy means? Because crab mentality gets in the way?

And the top exports are a good starting point while we inject greater market orientation and figure out consumer needs – and scale and ascend the value chain. [These are PH’s top exports that yield a trade balance surplus: (1) Electronic machinery, equipment; (2) Wood; (3) Optical, technical, medical apparatus; (4) Ships, boats; (5) Fruits, nuts; (6) Ores, slag, ash; (7) Gems, precious metals; (8) Knit or crochet clothing, accessories; (9) Leather/animal gut articles; (10) Vegetable/fruit/nut preparations]

To establish a true North and to prioritize both demand foresight.

An Italian friend, an expat in Bulgaria like the writer, just before he left for New York, narrated that Line 3 of the Sofia subway system was progressing. And the writer retreated to trusty Google to learn more.

“The European Commission (EC) has approved another EUR 86.6 million from the European Regional Development Fund to finance further construction works on the western part of Line 3 of the underground in Sofia, according to a EC press release … Sofia Metro is an underground railway network in Sofia, capital of Bulgaria. The metro system will include three lines and will connect different regions of the city … Sofia is largest city of Bulgaria and the 12th-highest populated city, with 1.4 million occupants, in Europe. The increased population of Sofia forced the construction of the metro system.

“The project was planned in the 1960s and was executed for the first time in 1990s. It was planned to provide quick and safe transport to commuters … The execution of the project was delayed as Sofia did not require an immediate underground system. The historical layers underneath Sofia's core are also a cause for the delay.

“The metro system incorporates three lines with branches in the periphery. The 65km three lines connect 63 stations of Sofia.”

Why is foresight imperative? Sofia is a very small city compared to Metro Manila and by the time they complete the project in 2020, it would have taken over 50 years. Think of NAIA Terminal 3 and the on-again, off-again airport project.

Can we establish a true north for PH ever? Can we ever establish our priority initiatives? Not if we can’t internalize community and the common good. Not if we can’t undo a culture of impunity.

Let’s get back to the Dalai Lama. Archbishop Tutu, the more eloquent speaker of the two, acknowledges that he cannot fill a stadium with people to listen to him unlike the Dalai Lama. It is the singer not the song. As the Dalai Lama puts it, even in front of a humongous crowd, he does not think of himself as special.

He thinks and prays for the 7 billion humans on this planet once he opens his eyes in the morning – and sees himself as one of them ... And the rest of humanity can learn from the Dalai Lama … It is about community and the common good … Which is alien to Juan de la Cruz to begin with? 

Are we in a downward spiral though not in a death spiral?

“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]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“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]

Du30 popularity, leader dependency and foresight

We need a national examination of conscience and not more of the same – as in same old, same old. And the latter explains why a Marcos, for example, remains in our consciousness as a potential if not indeed the next savior after Du30? We like to look back not forward.

But how will we develop the capacity to demonstrate foresight? “Pinoy abilidad” if we think about it is making-do! It is not about the pursuit of innovation and competitiveness which demands a healthy dose of foresight.

Du30 is popular because we believe he will get things done? Like engage in and win the war on drugs – and undo Imperial Manila?

What we miss is the body of knowledge – and there is one on foresight, i.e., it is what makes man superior to the rest of creation – that postulates that the foundation of development is the rule of law. It simply means that in a democracy, freedom comes with responsibility.

There is no free lunch. We may deny it, but subconsciously we in fact – since Rizal called out our submission to tyranny – assumed lunch is free?

A generation ago, Marcos was told by the employers group (where the writer belonged) after visiting Malaysia, that Mahathir was doing something superior to the Pan-Philippine Highway. We were proud of San Juanico Bridge but the Malaysians had every reason to be proud of their Expressway System.

From Wikipedia: “The expressway network of Malaysia is considered the best controlled-access expressway network in Southeast Asiaand also among the best network in Asia after China, Japan and South Korea.” Meanwhile, Bongbong Marcos is exalting the greatness of his father – and that he is the second coming?

Are we surprised it will take a generation to fix our highway system – and critical infrastructure? We are a generation behind – vision-, values- and execution-wise. And at the rate we’re going, we are yet to figure out what it means (a) to have a vision, (b) to embrace a set of values and (c) to demonstrate them through dedication and execution – the inverse of a corrupt system and culture of impunity.

As the blog has argued, our fixed mindset comes from who and what we are: Parochial and insular; hierarchical and paternalistic; political patronage and dynasties; and oligarchic; that when all is said and done, a culture of impunity.

It explains why we submit to tyranny … and why Du30 is popular. Davao – near and dear to the writer’s heart being once a resident – with all its positives is not the template of the economic miracles the world witnessed in Taiwan, Singapore, South Korea and Hong Kong. But subconsciously we think so given our parochialism and insularity.

And with due respect to our economic managers, our challenge goes beyond the sin of underspending that we attribute to the previous administration. Right-spending is an activity. There must be a desired outcome that we must seek bearing in mind that the requisite activity cannot be one-dimensional.

We need to overcome (a) the generational lead that Malaysia has in infrastructure development, (b) the state of industrialization that the Asian Tigers have attained and (c) their competitiveness. Think the JFC’s 7 big industry winners under “Arangkada Philippines” – which the previous administration back-burnered. And what does the Du30 administration say about Arangkada?

Think the EU. The EU infrastructure initiative benefited countries like Spain and Portugal and even Greece. And more recently, Bulgaria and Romania. But these countries still have work to do competitiveness-wise.

PH has ways to go too and why the blog recently called out the need for us to get our act together.

What about the efforts to woo foreign investment – which Du30 is proud of like his predecessors? Our need for investment is not all there is to put on the table. And it goes beyond the incentives we offer – and the “sweet spot” we are in given our youthful median age. It is crucial that we demonstrate we are investor-friendly, and the best-practice model is Singapore – a tiny city-state that has generated over a trillion US dollars in FDI.

We must recognize that what we call patriotism is reflected in our hierarchical and paternalistic instincts – that perpetuate an oligarchic economy – and that is not lost to foreign investors. Have we ever asked if our capitalists can collectively raise over a trillion dollars in investment?

Singapore is teeny tiny yet demonstrated man’s unique gift of foresight.

And is Singapore now “owned” by foreign investors? While we are fixated by local/foreign ownership ratios as though the Great Commandments? Have we watched those country promotions on CNN, for instance, which countries advertise how investor-friendly they are, to the extent of 100% foreign ownership? 

Can we internalize the reality that we cannot have our cake and eat it too? Like kids in a candy store? And does it explain why community and the common good is alien to us, constantly falling into the trap of crab mentality? Because growing up is so very hard to do?

Why are we the regional laggard, again? Have we understood what makes man superior to the rest of creation?

Our inward bias is likewise reflected in the assumption that we can beef up defense spending as though we can stand up to the big guns.

Trump is cajoling the EU to pay up their defense commitments under NATO; while poor PH is entertaining the idea that we can play the big-boys game? Not surprising given we kicked out the occupants of Clark and Subic?

Because we’ve long confused poor self-esteem – the need for over protection aka paternalism – with patriotism? Think about it!

"Critics of our foreign policy have cited our Mutual Defense Treaty with America as an indication of our lack of an independent foreign policy. This is [a] misrepresentation. A policy of non-alliance is a policy of neutrality. There are only three neutral countries now: Sweden, Switzerland and Finland. A neutral foreign policy is expensive. The three neutral countries cite their own state-of-the-art Leopard II main battle tanks and F-18 Hornets and Gripen jets in their arsenal. We cannot afford such an arsenal.” [“We abandoned our independent foreign policy,”Hermenegildo C. Cruz, inquirer.net, 26th Jun 2017; Hermenegildo C. Cruz was Philippine ambassador to the United Nations in 1984-1986]

Is it time for a national examination of conscience? Or will que sera, sera prevail?

Can we imagine how heavy a price we pay for our parochialism and insularity? It is where our very high tyranny quotient comes from; when what we need is a Mensa-like competitiveness quotient.

And we cannot get there until we figure out our vision of the future ... and the values that we must hold. It is beyond leader dependency. It demands a healthy dose of foresight.

Du30 hasn’t delivered on the declaration that the war on drugs is to be won in a few [months] and now we have ISIS to contend with. He knows Mindanao and its complexities and why he is the man?

If EJK hasn’t won the war on drugs, will Ps 20-billion win Marawi? Tyranny may be one-dimensional – as in autocracy – but problem-solving isn’t. 

“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]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

“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]