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]