Thursday, November 29, 2018

So where are we?

"In Asean, considering the past 50 years, the Philippines has a lot of catching up to do. The 'golden years' were elusive. The past six years dramatically improved but its poverty remained very high (21.6 percent in 2015), way more than double that of Asean peers. "[Is there hope for the Philippines (?),  Rolando T. Dy , MAPPING THE FUTURE,  business .inquirer.net , 19th Nov 2018]

How do we respond to the challenge that has been staring us for decades?

"[D] evolution and loyalty to one's own nation ... that is what we continue to hold dear in our country as it applies to Rizal and our other national heroes and to the nationalist policies that we continue to push to overcome the obstacles that remain from our colonial past. "[We value our own brand of nationalism, EDITORIAL, Manila Bulletin, 20th Nov 2018]

So the obstacles responsible for our being the regional laggard, ie, a third-world, underdeveloped, poverty-gripped nation must be traced to our colonial past?

"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]

So do we look back to our colonial past or look forward and develop our sense of foresight?

Consider: " Vietnam has a history as rich and evocative as anywhere on the planet. Sure, the American War in Vietnam captured the attention of the West, but centuries before that Vietnam was scrapping with the Chinese, the Khmers, the Chams and the Mongols.

"Later came the French and the humbling period of colonialism from which Vietnam was not to emerge until the second half of the 20th century. The Americans were simply the last in a long line of invaders who had come and gone through the centuries and, no matter what was required or how long it took, they would also be vanquished. "[ Https://www.lonelyplanet.com / vietnam / history ]

Is Vietnam looking backward or looking forward? "Despite the fact that the US is Vietnam's largest export destination and second-largest trading partner behind China, Vietnamese leaders believe American FDI investment should be higher.

"From $ 3 billion in 2005, $ 4 billion in 2006, and $ 11.5 billion in 2008, Vietnam's FDI attraction grew to $ 15.8 billion in 2016.

"It is important to note that American investment in Vietnam is higher than shown by its FDI ranking. For you see, there are a number of FDI projects in Vietnam which are registered via US-backed subsidiaries based in different regions. "[ Https://www.vir.com.vn/long-term-us-fdi-in- vietnam-is-on-an-upward-trend-53744.html ]

Do we need to pause for a moment as a people and ask: how and how quickly can we develop our sense of foresight? Consider, outside Boracay and now Palawan, compared to our neighbors we have persistently lagged in infrastructure development, export development and attracting foreign direct investment. And they are critical if we are to ever be an industrialized economy and not a third-world, underdeveloped, poverty-gripped nation.

"As the elections draw near, I would like to challenge Palawan's local officials to put environmental conversation and long-term planning at the heart of their policies and programs. Alas, the Palawan Council for Sustainable Development has lacked the political support to implement its mandate, and local officials have been slow to act on environmental concerns.

"For his part, President Duterte speaks of the need to protect Palawan, but he must realize that significant threats to the province include the island-building in Kalayaan and the illegal poaching by Chinese fishermen in the West Philippine Sea." [Palawan's (un ) sustainable development,  Gideon Lasco , SECOND OPINION, Philippine Daily Inquirer, 22nd Nov 2018]

So where are we? "What I'm trying to say in these recent columns is that we have problems today that are worrying many as they impact on their daily lives, all narrowly concentrated on the cost of food and fuel. But these are short-term problems. In the longer term, they'll be absorbed, and there will be recovery as the economy is fundamentally strong. "[It's not as bad as it looks,  Peter Wallace , LIKE IT IS, Philippine Daily Inquirer, 15th Nov 2018]

So it's not bad as it looks? "One has to worry when agriculture production falls, or even if it still grows, but at a pace slower than the growth of overall population, now about 1.7 percent. What that means, in the favorite analogy of former president Fidel Ramos, is that every Filipino gets a smaller slice of the bibingka (rice cake).

"Fortunately, industry and services grew by a healthy 6.2 and 6.9 percent, respectively, although slower than last year's corresponding rates of 8.1 and 7.3 percent." [What caused the slowdown (?),  Cielito F. Habito , NO FREE LUNCH, Philippine Daily Inquirer, 16th Nov 2018]

"Is there hope for the Philippines? Yes, if it gets its act together. It will be one of the fastest emerging economies: if government will not mess up its mandate of growth and poverty reduction, if it will sustain investments and global linkages, if it improves institutions and appoint people for competence and integrity, and not just political connections . "[Dy, op. cit.]

That is a humongous "if" until we learn to look forward and not backward and rapidly learn to develop a sense of foresight. More precisely a sense of purpose as a nation instead of simply mouthing nationalism? More to the point, can we embrace the common good? Of course it is not easy if we give way to tribalism. As in: when humans lived in caves. 

And our neighbors like the Asian Tigers have demonstrated what the common good can be: rapid economic development. Is that worth repeating? Rapid economic development must define the common good for Juan de la Cruz!

But let's get back to nationalism. If we do not connect the dots, we will not connect Hitler's fascism to nationalism aka the superior race. Consequently civilization has to advance and prevent another World War, with the community of nations striving to live as one community. And why the Jews in particular are supportive of legal migration and asylum seekers. They know nationalism cum fascism equals the Holocaust. And why the Pittsburg synagogue massacre will not cow them. 

And more to the point, Europeans who were in the middle of WWI and WWII had to call out Hillary Clinton for - "the pointlessness of her politics ... a lack of core beliefs" and - her conclusion that the growing menace of right- wing populism comes down to the EU's embrace of migration. 

Clinton seems to forget that the EU experiment is essentially the free movement of goods, service, capital and people. It is the way forward for the EU's 28 fragmented markets to approximate the economies of scale of the US, a single market of over 300 million. Because for the global economy to be a true free market and inclusive, there must be competition. 

But then again, like freedom that carries inherent responsibility, the free market and competition are not free. Which Juan de La Cruz struggles to reconcile given the paternalism embedded in our culture. Because of this prism, we view poverty as demanding charity and patronage, perpetuating hierarchy and tyranny. And not the pursuit of rapid economic development. And until we develop a sense of foresight we will not imagine and visualize the Philippines as a developed, wealthy nation.

Consider: To participate in the electoral process one must be of age, an adult. To participate in the global economy in the 21st century a nation must meet a similar hurdle. 

And that means to be committed to innovation and global competitiveness. And why USAID assisted former Soviet satellite states as they geared up for accession into the EU. In other words, Pinoy abilities or native intelligence will not suffice to elevate PH to meet the demands of the 21st century, that of innovation and global competitiveness.

And that same hurdle applies to NAFTA, AEC, TPP, etc. And why the UK must pay a steep price for Brexit. But which a Trump that built his business on political patronage, beyond inheritance, can not comprehend. The evidence? Tell me who your friends are and I'll tell who you are. And how many of them have been indicted?

And as far as the US immigration challenge is concerned, despite DACA - an attempt to pave a path to citizenship which failed to pass muster - Obama deported the most number that anti-deportation activists called him "deporter-in-chief." Trump's hype meant to please his base has achieved its intended purpose and successfully terrified immigrants, legal and illegal but not the ones in Tijuana apparently that they had to be stopped by tear gas, it has so far failed to match Obama's deportation numbers. 

In other words, Trump sticks to his brand of marketing - and aspiring marketers better take heed - that a campaign or slogan is successful if it catches attention, good or bad. It explains why he has to overstate the size of his wealth. 

Because a great brand generates market value in multiples given its credibility. And credibility and the Trump brand do not come together in the same sentence. And as extensive surveys showed, Trump's base is skewed to individuals who are not race neutral. See below re white nationalism.

And what is Clinton up to? Her spiel comes on the heels of the Paris Peace Forum. "The Paris Peace Forum ... was to convene all those among States and civil society that still believe that collective action, multilateralism and the good stewardship of common public goods are our best chance to address common challenges and maintain peace." And who was a no -show? Trump, of course!

And Bob Woodward in an interview about his latest book, Fear, quotes a defense secretary addressing Trump, "We are doing all this to prevent World War III." And Trump does not comprehend it. In the meantime his rabble rousing gives fodder to white nationalism that nourishes tribalism. 

How can he then understand that Putin is married to the past and can not accept the fall of the Soviet empire - and why Gorbachev, who espouses freedom and democracy, is a critic? And so the US is committed to arm and protect Ukraine which explains why things are quiet in that part of the world. 

In other words, US institutions are going about their missions over Trump's narrow worldview. Even Chief Justice Roberts can not keep his to himself in a rebuke of Trump. Because Trump appears clueless that his constant undermining of these institutions undercuts the efforts of the community of nations to live as one community. That it emboldens Putin to play with fire like he did over Black Friday weekend in the Black Sea.

But let's get back to the Philippines. Sadly, every time we talk about the GDP we are lulled into a very narrow perspective of the world. And we can not overcome decades of backwardness with a narrow perspective.

And it is not about one transaction after another devoid of a moral compass. That's the Trump model where hype rules. To wit: "I will drain the swamp in Washington." Instead he brought it right into the Oval Office. News report: "Federal judge allows emoluments clause lawsuit against Trump to proceed."

And the outcome? " The analysis found Democrats led Republicans in House races by a whopping 8.6 million votes in this year's midterms. NBC News reports that number is the largest margin that Democrats have defeated Republicans in a midterm House election since 1974.

"That midterm race, shortly after Nixon resigned, allowed Democrats to win the popular vote by 8.7 million votes, NBC reported." [Democrats won House midterms by largest margin since Watergate scandal, report says, Christal Hayes, USA TODAY, 22nd Nov 2018 ]

Foresight as far as PH is concerned is beyond the multi-deals we signed with China or the one with IKEA. See above re the common good, ie, rapid economic development. Foresight is beyond our brand of nationalism too.

Does our brand of nationalism explain our myopia? Consider the writer's takeaway from 30 years ago that still resonates today: "It is not as bad as it looks in PH." Then the writer was a regional manager in Asia Pacific involved in investing in China, India and Vietnam as well as Malaysia and Thailand. Yet he never acknowledged that we're foresight-challenged. Then consider that Cambodia, Ethiopia, Laos and Myanmar, among others, have outperformed us the last 20 years.

If we are to ever attain rapid economic development, we can not remain parochial and insular. And value hierarchy and paternalism. And rely on patronage and oligarchy. That at the end of the day we bite the bullet - that of our culture of impunity. 

Sadly, we've consistently underestimated the challenge we face. Our poverty rate equates to almost the entire population of Australia and more than that of Romania. And neither our incurable optimism nor boom forecasts will make it easier because our perceptive judgment is suspect at best? Que sera, sera?

Consider: Our SMEs that make up over 99% of registered enterprises do not have the confidence to compete either locally or globally. And the less than 1-% that represents oligarchy are rent-seeking. At the end of the day, the PH economy is on the backs of OFWs and the BPO industry. That explains the manufacturing uptick that both the Aquino and Duterte administrations crowed about. It is hollow!

[Unfortunately the supposed leader of the free world does not comprehend it too. That the US must indeed lead the community of nations to prevent World War III. The good news is the midterms sent a message a la post -Watergate.]

Gising bayan!

"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]

Tuesday, November 20, 2018

Juan de la Cruz and his instincts

It's complicated and complex. But let's give it the old college try.

Which comes first the chicken or the egg? Enter: "Pinoy abilidad." Which is our default posture whenever we're faced with a dilemma. And we like to believe that we are simply being commonsensical. And here lies the root of our problem, our underdevelopment. 

Consider: " SMEs cite competition, product quality as top challenges,"  Janina C. Lim, BusinessWorld, 14th Nov 2018. "Competition was more often cited as a challenge than the need to deliver quality products, cited by 32.1% or respondents, and corruption, cited by 30.4%. Based on these findings, the policy center recommends strengthening government institutions, promoting a mind-set geared toward growth and increasing SMEs' awareness of tools that can spur their growth.

'Strengthening institutions is crucial to curb inefficiency caused by corruption, poor infrastructure and complicated export processes - which hamper capacity of SMEs to compete ... Increasing awareness of SMEs of the benefits of access to technology, finance, government programs, and linkages with large and foreign firms can allow them to take advantage of available opportunities ... '

"In 2016, about 99.6% of operating firms in the Philippines were micro, small and medium enterprises."

Let's hear from an economist: " Austrian economist Henry Hazlitt explains, 'If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself. In other words, profits let companies know whether an item is worth producing. Theoretically in free and competitive markets, if an individual firm maximizes profits, it ensures that resources are not wasted.  

"However, the market itself, should minimize profits as it is the cost to the value chain. Competition is the key tool by which markets overcome the individual firm's profit maximization incentive. The profit motive is a good of value to the economy. It is needed to provide incentive to generate efficiency and innovation. However over-remuneration of the profit motive creates  profit inefficiency . "[Wikipedia]

In plain language, there is no free lunch. Do our instincts reveal a "fixed mindset"?

Consider: Political patronage sustains rent-seeking oligarchy who are at one end of two extremes, a minuscule minority to be sure yet like the Wall Street version, the 1-% phenomenon, have held PHL economy hostage; and at the other are our SMEs, the vast majority of over 99%. Still, both represent Juan de la Cruz. As in: we all share the same instincts.

And implied in our instincts is our desire to be shielded and protected, to be an island unto ourselves, ensconced in our parochial and insular cocoon. And we like the euphemism even more, to be sovereign. And why we lag in FDIs, in technology, in innovation and global competitiveness. And why we are an underdeveloped, poverty-gripped third-world nation. There is no free lunch.

The writer is sitting in his friends' offices in Sofia, Bulgaria as he writes. The reason he was tapped by an arm of USAID 15 years ago is to help a couple of Bulgarian firms and get them up to speed given the new competitive arena they implicitly entered as they prepared for accession into the EU. They had no time to put on their training wheels. The moment the Soviet Union fell, Western global behemoths straightaway planted their competitive flags in their tiny nation.

And when they proudly gave the writer a tour of their factory - a small dilapidated old communist-built structure that was far from efficient - he realized they needed a quantum leap lest they eaten alive by Western competition.
"We are getting our products into the stores but have not made money for 8 years. We must move up to the next level but do not know how, we need help. " 

It was a good starting point as the writer introduced them to the GPS concept. Their eyes were wide open, they knew exactly where they were. They were honest to themselves and with no shade of denial or rationalization. Unsurprisingly, they recognized what they were up against.

"We must win against competition for more stores to take more of our products, enough for us to turn a profit." They had the foresight to see where they wanted to be.

How to get there? And so they had to fine-tune their foresight. It is about foresight. That means becoming the best in the business from their part of the world. By first defining the business they were in; and the product categories closest to what they were doing but with a big caveat: the products must generate the biggest returns and the largest margins. 

They would then pull a business plan together and demonstrate to banks how they were moving up to the next level and qualified for credit. That the pursuit of innovation and global competitiveness is at the heart of the enterprise, tapping knowledge and technology wherever they are. That they will rapidly attain critical mass, competitive heft and confidently go against competition from wherever. 

And what a dizzying ride indeed. Beyond the recognition they received from the EU 7 years ago, as among the best and fastest growing companies in the EU, the writer has pronounced them well beyond earth's gravitational pull, poised to attain greater heights and glory.

And it applies as well to the Philippines. If we want to win against competition and overcome poverty, we must think foresight, not retreat. But note that foresight and "pwede na 'yan" are like oil and water. No different from why the writer chose to focus on one Bulgarian enterprise and not the other.

If we can not foresee how to compete and how to develop PHL, we better recognize what we are missing. As the blog has repeatedly discussed, both Lee and Mahathir told Deng that for China to raise its people from poverty, they must beg for Western money and technology.

Which brings up a conversation the writer had very recently with a European tourism consultant. "Do you know that as early as 1994 there was an offer from the West to put up a sewerage system in Boracay? The locals rejected the idea and said, why not just give us the money and we will take care of it ourselves. "

In other words, "Pinoy abilities" and its best. While Deng was told and did beg for money and technology to lift their people from poverty. We only want dole outs but none of the sense of the future as in foresight. And unsurprisingly, we are now talking of shutting down El Nido and Coron too.

To say tourism is a desired industry does not make it so. We must benchmark our efforts against global standards if we are to overcome our backwardness. Tourism is beyond a new airport in Boracay. And beyond any campaign slogans.

Here's a website the European tourism consultant shared with the writer if we want to get a sense of how extensive tourism thinking must be - and how the dots connect:  http://www.visiturfa.com/

It brings us back to the imperative of creating an ecosystem. In other words, if Philippine tourism is to be a virtuous circle, we must think ecosystem - beyond shutting down Boracay and El Nido and Coron for 6 months and it is also beyond an airport or two.

But we are in our element with our way of life - take parochial and insular, for example - and why we are today the regional laggard. Worse, they come with other dimensions that make us even proud of our instincts.

Take our being the only Christian nation in the region. And so for the blog to say that our focus on poverty and populist initiatives is wrongheaded is heresy. Forgetting that it was rapid economic development - from infrastructure development to export development to foreign direct investments, among others - that brought the world's poverty lower than ours. But does our being the only Christian nation make us holier-than-thou? And more to the point, does it make shifting paradigms an impossibility?

Neuroscience tells us that the chamber of the brain that triggers a growth mindset is less developed than that for the fixed mindset. It is like the contrast between linear and lateral thinking. Linear and logical thinking is more developed than lateral and critical or creative thinking. And that the brain's chambers like muscles can be toned. As in: use it or lose it.

And in the case of the Philippines, we in the elite class that are calling the shots will never for a moment consider that certain chambers of our brains are less developed - given our hierarchical culture where rank has its privileges.

And why the blog has raised the concept of perceptive judgment. Every day the writer is in Eastern Europe he is witness to the contrast between experience and native intelligence. And if third parties are awed by what his friends have done, it was not a cakewalk.

And if we take that to the Philippines, while we recognize that our neighbors have left us behind, we can not accept that it is for lack of smarts. Yet, it is not about smarts. Think of IBM being the holder of the most patents in the world and how a young Steve Jobs and cohort upended the technology world. Jobs was wired to think laterally and possessed a growth mindset, both being inherent.

"There was palpable disappointment among foreign investors' groups when Malacañang finally released last week the 11th Foreign Investment Negative List (FINL), which specifies sectors where foreigners are not allowed to invest in or are limited to a maximum of 40 percent.

"But, when the list came out, even Socioeconomic Planning Secretary Ernesto Pernia could not hide his dissatisfaction, describing the changes in the latest FINL as 'marginal improvements in our efforts to attract foreign direct investments (FDIs).'" [Still restrictive, Editorial,  Philippine Daily Inquirer , 5th Nov 2018]

But is President Duterte alone with these instincts? Or must we own up? It is not only because of the FINL that we are the regional laggard. Recall the admonition of Fitch: "That PH has (a) lower per capita income and (b) weaker governance and (c) business environment indicators ... compared to our peers."

And we have accepted, even resigned to, this status quo as "Pinoy kasi" for decades, over a century if we go by Rizal's take, that we can not pin the blame on one person. It has to be pinned on Juan de la Cruz.

And so the blog has made our way of life its centerpiece:  " We are parochial and insular. We value hierarchy and the paternalism it brings. And we rely on political patronage and oligarchy given the spoils they bestow. That when all is said and done, we bite the bullet - aka a culture of impunity. "

It is no different from why Europe per The Economist will never produce a Google. And why the EU experiment is floundering - think of Brexit and Hungary and Poland's tilt to the alt-right.

On the other hand, countries we once discounted are now speeding ahead of us in development: Cambodia, Ethiopia, Laos and Myanmar, among others.

Again, consider: "In 2017, FDI inflow to the Philippines reached $ 10 billion. Although a record compared with previous years, this paled in comparison with the top three recipients in the region last year: Singapore with $ 63.57 billion, Indonesia with $ 22.17 billion, and Vietnam with $ 14.1 billion.

"Given the limitations of the FINL, the Duterte administration should now pursue the scrapping or revision of existing laws that restrict the entry of foreign investors in many industries.

"There are at least six bills pending in Congress seeking to amend the Public Service Act, the Retail Trade Liberalization Act, the Foreign Investments Act and three laws to liberalize foreign participation in government projects.

"There is also a strong clamor from the business community to remove restrictions on foreign equity in the 1987 Constitution." [Editorial, op. cit.]

But is that an impossibility given Juan de la Cruz and his instincts? 

Gising bayan!

"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]