Kicking up a perfect storm – wittingly or otherwise

But we believe we’re being patriotic by cherry-picking our positives forgetting that there is such a thing our accountants call “net worth.” Yes, we can’t keep advertising our assets – that we’re the fastest growing economy in the region, forgetting that in grade school we learned about fractions and the laws of small and big numbers; and as mind boggling is our/our economic managers’ inability to acknowledge so that we don’t keep falling into the trap of “pwede na ‘yan” that behind our vast consumption economy aka our own Dutch disease and why we can’t move up to the next level is the remittances of over 10 million OFWs and the BPO industry and PH newest “industry,” gambling – and sweeping our liabilities under the rug. And our net worth is aptly described as: we’re the regional laggard.

Why? Our neighbors like the Asian Tigers through visionary leadership saw what the future can be like and figured out how to traverse the road from poverty to prosperity. And over the nine years the blog has been around, it appears we still haven’t stepped up to the plate to recognize and acknowledge what our neighbors have done. Sadly, the blog is sounding more and more like a broken record. Because it hates to simply say, “I told you so.” Because he is intimately aware that it takes efforts. 

The writer saw how his former MNC-company changed despite being a 200-year old enterprise and how his Eastern European friends in a matter of 15 years transformed themselves – born and raised as socialists under communist rule – to be an innovation- and globally competitive-driven enterprise able to thrive in the 21st century. Yet, neither was a cakewalk. 

Consider: (a) “The lesson for us ought to be clear: We must keep our eye on the ball, as there’s still a lot of catching up to do,” ‘Beyond ‘PiTiK,’Cielito F. Habito, No Free Lunch, Philippine Daily Inquirer, 12th Jun 2018; (b) “Taxation by LGUs emerging as a key TRAIN concern,” Elijah Joseph C. Tubayan, BusinessWorld, 19th Jun 2018; (c) “Foreign chambers blame TRAIN uncertainty for flat FDI outlook,” Janina C. Lim, BusinessWorld, 19th Jun 2018; (d) “Philippines losing digital edge — IMD,” Janina C. Lim, BusinessWorld, 20th Jun 2018.

The bottom line: We’re neither here nor there. And what is our response? “Now the BSP is saying they expect more dollar outflows and they are blaming it on our trade imbalance. They are expecting the value of the country’s imports to outpace what we earn from exports by over three times its original forecast.

“The BSP is now saying the country’s current account would likely end the year at a deficit of $3.1 billion, or a 342-percent increase over the original deficit projection of $700 million announced in late 2017. Exports are seen growing by 10 percent and imports climbing by 11 percent YoY.

“But the central bank is saying not to worry because this large deficit will be propped up by service-related inflows and the entry of more foreign capital. That’s optimism bias again.” [Optimism bias, Boo Chanco, DEMAND AND SUPPLY, The Philippine Star, 20th Jun 2018]

Of course, we’re doing more. “President Duterte is expected to issue a memorandum circular ordering concerned government agencies and requesting Congress to fast-track removal of foreign investment restrictions that require legislation, the country’s chief economist said Thursday.

“Socioeconomic Planning Secretary Ernesto M. Pernia told reporters that the upcoming presidential order will complement the moves to liberalize the foreign investment negative list (FINL), which is also pending the President’s approval.” [Duterte to ask Congress to rush removal of foreign investment limits, Ben O. de Vera, Inquirer Business, 16th Nov 2017]

So, has President Duterte issued the circular? And beyond the circular, what are our next steps? We have a perfect storm, remember. We need more than a circular. We need the building blocks of the 21st century ecosystem. Yes, rapid infrastructure development is fundamental especially given we’re at least 50 years behind. And the administration’s mantra of “Build, Build, Build” is spot on. Yet we cannot eat a mantra. And we appear stuck and can’t move forward. Que sera, sera!

In the meantime, what are we doing about rapid industrial development? [“Focus on key industries could double FDI — AmCham,” Janina C. Lim, BusinessWorld, 21st Jun 2018] It is not about making PH the gambling Mecca and calling it an industry. We don’t have to choose between drugs and gambling. 

And it’s beyond MSMEs. Because we need to simultaneously learn innovation and global competitiveness. Recall our neighbors were able to leapfrog the rest of the world because they begged for Western money and technology.

Yes, including Vietnam. Note that “7 million tons of bombs had been dropped on Vietnam, Laos, and Cambodia – more than twice the amount of bombs dropped on Europe and Asia in World War II.” [libcom.org]

How badly did we suffer from Spain, the Americans and whoever else? People get over it. Like we have embraced the Japanese and remain proud of our Spanish heritage. It’s called moving from a fixed mindset to a growth mindset – aka dynamism.

As the blog keeps saying, the road to prosperity is an exercise in building the requisite ecosystem, not a perfect storm.

Yes, our “culture” or way or life is what is kicking up this perfect storm. That we are parochial and insular. That we value hierarchy and paternalism. That we love tyranny and embrace political dynasties and oligarchies for dispensing the spoils of patronage.

And it also explains why we have the Mindanao problem – and why despite being called the gates of hell the notion of imperial Manila continues to rankle – and why we can’t find peace. Imagine how long ago since China embraced capitalism and we’re still negotiating with PH rebels to get us into the time machine that embraces decades-old assumptions? It explains why we can’t grasp how the Asian Tigers left us in the dust.

It has nothing to do with the system of government. [“It … would be counterproductive if we go into a new government system and we’re starting from square one,” Business groups want policy stability amid shift to federalism,” Camille A. Aguinaldo, BusinessWorld, 21st Jun 2018.] See above re taxation by LGUs. And we will have more of that in a federal system. And see below re perceptive judgment why we can’t seem to figure out if we’re coming or going. It’s reflective of our adolescence in nation building and development.

On the other hand, Trump fails to understand that industry as in manufacturing has traveled to Asia – no different from the first industrial revolution which the Britons themselves brought overseas given the opportunities they saw; and history repeated itself when US companies (including the writer’s) brought money and technology to China – while the US has become a service economy … and must then move the technology revolution up to the next level. And engaging China in a trade war isn’t going to flip the scenario. And the latest casualty being General Electric, one of the titans of the original 30 industries (which will be down to “seven against six tech firms, five financial institutions, three drug makers, three consumer-product companies, three retailers and an entertainment giant,” Yahoo Finance, 20th Jun 2018) represented in the Dow Jones Industrial Average formed by Charles Dow in 1896.

Trump comes from America, still the largest economy in the world. They can afford the misstep. But can we in PH continue to be the regional laggard? Which brings to the fore the concept of perceptive judgment that the blog has discussed as well as visionary leadership. The latter is the common denominator in the case of the Asian Tigers, the writer’s old MNC-company and his Eastern European friends.

What about perceptive judgment? The imperative to succeed was the motivation of the MNC-company and the Eastern Europeans. The former was driven by a threat of a takeover that it wanted to fight. And for the latter it was the eight years they were in the red. And in both cases, the personal experience of going through both failing and successful efforts rounded out their confidence knowing full well there is a way forward to prosperity.

Which brings us back to PH. We need to seek a visionary leadership as well as gain personal experience beyond failing efforts, that is, successful efforts in pursuit of community and the common good. We’ve had too much focus on oligopoly that it has become our success model. And given its symbiotic relationship with politics they can only perpetuate patronage and a culture of impunity. If we haven’t figured that out yet, it will get worse before it gets better for Juan de la Cruz.

“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]

“Now I know why Paul dared to speak of ‘the curse of the law’ (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant.” [Faith and Science, Open to Change, Richard Rohr’s Daily Meditation, 23rd Oct 2017]

“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]

Metro Manila – What an ecosystem isn’t

Imagine if the solar system mirrors Metro Manila, do we think there will be the phenomenon of photosynthesis? Will there be life on earth? If Boracay is a cesspool, what about Manila Bay?

The blog has raised that the dynamism and oneness of creation is reflected in its ecosystem. And conversely why we persist to be underdeveloped and poor. And why linear thinking or looking at a silver bullet (is that what the war on drugs is?) to solve our woes will keep sinking us down the abyss. And why unemployment in the US can’t be compared with unemployment in underdeveloped Philippines.

More to the point, the US being a well-developed nation has a well-developed ecosystem too. And we can start with its (a) political system – because we Pinoys are consumed by politics. A tyrannical Trump is held in check by people from his own party and conservative pundits, among others. And there is the element of (b) infrastructure albeit it can afford updates and upgrades. As well as (c) industry and (d) innovation and global competitiveness.

In other words, classical economics – as in monetary and fiscal policies – when done right has a knock-on effect on the economy in a developed economy like the US. “The last time the unemployment rate remained below 4 percent for a sustained period was in the late 1960s.” [Unemployment Rate Hits 3.9%, a Rare Low, as Job Market Becomes More Competitive, Natalie Kitroeff, The New York Times, 4th May 2018]

Of course, we cannot forget California. “California recorded another milestone … one reflecting a prouder facet of the state’s success. If the state were an independent country, its economy would rank as the fifth-largest in the world, ahead of Britain’s (which has been crawling lately). California held that spot once before, but it slipped a bit during the Great Recession a decade ago.

“California’s economic success underpins the state’s audacity and its defiance of President Trump. It is an invisible buttress when the governor and attorney general harangue the Trump administration … for basically going to war against the state of California.” [The Pleasure and Pain of Being California, the World’s 5th-Largest Economy, Thomas Fuller, The New York Times, 7th May 2018]

But let’s get back to the Philippines. Reads a column, “Eight former Finance Secretaries support TRAIN 2.” The long and short of it is TRAIN is a tax reform legislation, lifted from classical economics. On the other hand, how much drumbeating is there behind “Arangkada” today? 

Six years ago, there was this news report, “Gov't not moving fast enough, say foreign chambers,” Max V. de Leon, BusinessMirror, 27th Jan 2012. “The government only managed to start implementing about 55 percent of the 471 policy recommendations that the Joint Foreign Chambers (JFC) forwarded to Malacañang a year ago to spur economic development and boost investment inflows.

“It means that we are going forward but not fast enough … The JFC recommendations are important because right now, the foreign investors are passing us by … if all the recommended changes were followed, the country could attract as much as $75 billion in foreign direct investments.”

In engineering and project management, there is such a thing as “organizing in parallel” – as in PERT-CPM. It is a great example of how to overcome linear thinking – and move towards lateral and creative thinking. 

Which brings us back to the ecosystem. With due respect to our economic managers, for decades we’ve relied on classical economics, precisely why the Asian Tigers pulled the rug from under the rest of the world. They understood the imperative of creating an ecosystem. Think of Singapore being more competitive than the US.

More than the system of government, what the Asian Tigers and before them the US had was visionary leadership. And the blog singled out FDR, Lee, Mahathir and Deng. These leaders had lots of foresight. That their journey from poverty to prosperity can be characterized by such forward-looking initiatives as infrastructure development, industry and innovation and competitiveness. And which taken together mirrors an ecosystem.

While Metro-Manila is what an ecosystem isn’t. If indeed there is imperial Manila, explain why it has been called the gates of hell? Because our string of leaderships did not demonstrate vision and foresight. Our infrastructure is third-world and we are not an industrialized economy that is founded on innovation and global competitiveness.

We need a master plan of an ecosystem for Metro Manila and beyond – or from Hacienda Luisita down to Calabarzon. Not because JICA says so but because we needed one at least 50 years ago. But we will never have a master plan if patronage and a culture of impunity – leadership after leadership – would reflect who we truly are.

Beyond infrastructure development, as the JFC pointed out, we can [and must] attract as much as $75 billion in FDIs. [Note the collective wealth of our 12 billionaires totals $55.3-B.] We need this magnitude of investment so that we can compete with the likes of Vietnam and Thailand.

We lag Vietnam’s exports by over $140-B and Thailand’s by $175-B. And what are we talking about? MSMEs? They thrive when there is an industrial base that is robust. Not even our billionaires can raise the kind of numbers we badly need. 

And what about financing for subsistence farming? What we need is a massive agro-industrial initiative like the one that was reported to be under consideration for Central Luzon within the framework of the JFC’s seven industry winners. And, yes, then small farms effectively organized consistent with economies of scale and geared for world-class productivity will flourish. It is not new. Our neighbors have done it. Tossing “crab mentality” is key.

Sadly, man sees what he cares to see and why reality is elusive. And why the blog often discusses our “culture” or way of life. For example, given our parochial and insular instincts, we take such stark deficits (against Vietnam and Thailand) for granted instead of a challenge – an existential threat – and why underdevelopment and poverty have come to define us: losers not winners.

Which is not new to the writer. He has encountered such perspectives in emerging and developing nations as well as developed ones where older enterprises failed to stay abreast with technology especially disruptive ones. Or for failing to move their products and/or services up the value chain to respond to ever-changing human needs. It also explains the 1-percent phenomenon, i.e., when the 99% suffer from lack of personal experience on the challenge at hand that their perceptive judgment is suspect.

Where is our foresight? We’re talking poverty and livelihood, not generating the wealth we sorely need via the requisite ecosystem.

If war-torn Vietnam can do it, why can’t we? And why the blog has argued that we must toss “crab mentality” and pursue rapid development consistent with the demands of Pareto and the 1-percent phenomenon. And that means starting with Luzon (as above) plus Cebu, Davao and Cagayan de Oro.

And leverage the top ten export industries because we have the most knowledge in them and can move up the next level much faster, i.e., the pursuit of innovation and global competitiveness. That means the right product portfolio that is scaled up the value chain. The caveat: our industry must intimately understand human needs – that they are ever-changing because of the imperative to raise their well-being, and not be a candidate for extinction.

Which we Pinoys are courting given our fixed mindset instead of a dynamic and growth mindset. That beyond the here and now of poverty, we mustn’t forget to leverage man’s greatest gift compared to the rest of creation, i.e., foresight. And when we think of the ecosystem the buzz word that is inclusion falls short because creation is about oneness.

Sadly, PH not only Metro Manila is what an ecosystem 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]

“Now I know why Paul dared to speak of ‘the curse of the law’ (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant.” [Faith and Science, Open to Change, Richard Rohr’s Daily Meditation, 23rd Oct 2017]

“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]