Here’s what’s happening in the region according to McKinsey & Company, a consultancy: “Asia is increasingly the center of the world economy. By 2040, the region could account for more than half of global GDP and about 40 percent of global consumption. Global cross-border flows are shifting towards Asia on seven of eight dimensions, and the region’s growth is becoming more broad-based and sustainable as its constituent economies increasingly integrate.
“The dimensions are trade, capital, people, knowledge, transport, culture, resources, and the environment. The only flow that has declined is waste, i.e., environment.
“Increasing flows between countries in the four Asias are creating powerful new networks. Three in particular—industrialization, innovation, and cultural and mobility—are helping to reinforce those flows and connections.”
If we can pause and think industrialization and innovation: Are they in our consciousness? Because even when Asia becomes the center of the world economy, it won’t mean a thing for Juan de la Cruz.
Consider these topics of our conversations: What happened to poverty, Mayor Isko (?), Mahar Mangahas, SOCIAL CLIMATE, Philippine Daily Inquirer, 21st Sep 2019; ‘Agricultural renaissance’ is either official nonsense or punditry’s idiocy, MARLEN V. RONQUILLO, The Manila Times, 22nd Sep 2019; Philippines halts loan, aid talks with 18 states backing UN rights probe, Ben O. de Vera, Philippine Daily Inquirer, 21st Sep 2019; Ensure dictators have no place in free country, Robredo urges Filipinos, Neil Arwin Mercado, INQUIRER.net, 21st Sep 2019.
Worse, for the longest time, we’ve declared the resiliency of our economy being inward-focused yet reliant on OFW remittances and the BPO industry. In other words, even with these two drivers of the economy, we are not isolated, being recipients of these bounties from the outside world.
What we are doing is to rationalize our failures in industrialization and innovation. Likewise, we say we welcome FDI, yet our Constitution is designed not to attract foreign investment.
Let’s get back to McKinsey: “We identified four distinct groups of economies based on scale, economic development, interactions with one another, and connectedness to the world. Each of these ‘four Asias’ has characteristics that complement the other three. As they integrate, this may make the region more resilient in the face of any global volatility.
“The four Asias are (1) Advanced Asia: Australia, Japan, New Zealand, Singapore, and South Korea; (2) China, big enough and sufficiently distinct; (3) Emerging Asia: Bhutan, Brunei, Cambodia, Indonesia, Laos, Malaysia, Mongolia, Myanmar, Nepal, the Philippines, Thailand, and Vietnam; (4) Frontier Asia and India: Afghanistan, Bangladesh, Fiji, India, Kazakhstan, Kyrgyzstan, Maldives, Pakistan, Sri Lanka, Tajikistan, Turkmenistan, and Uzbekistan.
“Rising consumption, maturing domestic value chains, and uncertainties around global trade are driving the formation of Asia-for-Asia supply chains.
“Manufacturing sector employment tends to peak at about 30 percent of total employment, usually after economies reach per capita GDP of between $10,000 and $20,000.
“Many Asian countries are at 15 to 20 percent in terms of employment in manufacturing, suggesting a huge potential for further industrialization.”
Let’s again pause and ask: How come when we talk of employment – and by extension, poverty – we don’t recognize that manufacturing, driven by industrialization, or its absence, is the root of the problem?
Why the blindness? Is it a function of our inability to open the economy to foreign investment and technology because of our reliance on political patronage and oligarchy? Which we do take as a given being parochial and insular? How long have we celebrated OFW remittances instead of pursuing industrialization? Of course, we continued BPO and more recently POGO, but they’re not equivalent metrics against manufacturing and industrialization.
Here’s McKinsey again: “In this developing industrialization network, we discern three significant developments:
“China is phasing out labor-intensive manufacturing, and Emerging Asia and Frontier Asia and India are picking up share.
“Underpinning this growth is Advanced Asia and China, which are investing heavily in Emerging Asia and facilitating their growth. These two Asias account for 43 percent of Emerging Asia’s exports and 61 percent of its imports, and for 47 percent of Emerging Asia’s FDI inflows and outflows.
“For example, 79 percent of Vietnam’s FDI inflows in the electronics sector between 2013 and 2017 came from South Korea, helping the country to become a hub for electronics manufacturing.”
That is not the first time we learn this. Vietnam became the hub of electronics manufacturing while we’re stuck as third-party providers of computer chips.
In the meantime, look how supposedly weaker nations are poised to shame us for the umpteenth time: “Exports from Bangladesh, Pakistan, and Sri Lanka to the rest of Asia are now growing at a faster compound annual growth rate than to other regions.
“Frontier Asia and India has a large potential to grow its industrial base but has found it challenging thus far. Infrastructure is insufficient and lacks quality, and heavy and time-consuming bureaucracy has made decision making slow, deterring investment.”
That is a lesson we seem unable to comprehend: failure in infrastructure development and poor governance, including slow decision making, thus deterring investment. What else is new?
Consider: “New cities across Asia are developing as dynamic industrialization hubs. These ‘rising cities’ on Asia's industrialization network—among them, Jamnagar in India, Phnom Penh in Cambodia, Hai Phong in Vietnam, and Bekasi in Indonesia—tend to have received strategic and investment support from their respective governments including in infrastructure, and incentives to attract large businesses.
As the blog has argued, industrialization is the ante, the price of entry in the 21st century. Given we’re not in the game, how can we expect to make innovation our ticket to prosperity? As we will note below, the ability to attract capital, as in FDI, is an indicator that innovation is taking roots.
“Asia’s innovation network is much more localized than its industrialization network. We are seeing an innovation network powered with local talent but funded with regional capital that has led to the formation of ‘multilocal networks.’ In other words, the solutions are tailored to local consumers and regulation and usually founded by local entrepreneurs. Multilocal innovation is happening in all four Asias in different ways.
“Advanced Asia and China have built strong innovation foundations, including a base of large incumbent companies and institutions that are providing capital and knowledge to power innovation in other Asian economies. They have invested—and continue to invest—heavily in innovation and have built up substantial intellectual property.
“Emerging Asia and Frontier Asia offer considerable opportunities to deploy proven business models, capital, and innovative ideas. Inefficiencies in consumer-facing sectors and industry provide an opportunity to leapfrog in terms of innovation, and the pace of growth of start-ups and funding is much faster in these regions than it is in Advanced Asia. As these start-ups and innovation take off, the soft tissue connecting Asia's multilocal innovation network starts to form.
“Capital flows are often a leading indicator of where innovation is taking root, and these flows are changing dynamically. Asia's share of global start-up funding increased from 16 percent in 2013 to 47 percent in 2018. About 70 percent of venture capital funding in Asia is intraregional. As companies in Advanced Asia open manufacturing companies in Emerging Asia, local labor and firms can benefit from technology spillovers from these foreign companies.
“Asian cities are competing with one another to become innovation hubs—the region's equivalent of Silicon Valley, but with an Asian twist. Each city has different approaches and offerings based on differing competitive advantage. Beijing and Shenzhen in China are well-established as innovation centers, and new players are rising on Asia's innovation network including Wuhan in China, Indonesia's capital city Jakarta, Yangon in Myanmar, and Hyderabad in India.” [The future of Asia: Asian flows and networks are defining the next phase of globalization, McKinsey & Company, September 2019]
Are we out of step or behind the times or both?
In other words, we should not be surprised at all that we are the regional laggard – a third-world, underdeveloped, impoverished nation.
“That last Wednesday‘s monthly dinner of the Foundation for Economic Freedom was the best attended in its history was due, of course, to the guest speaker being the honorable Isko Moreno Domagoso, the new mayor of the City of Manila.
“Mayor Isko, aka Yorme, is the rock star among the winners in the May 2019 elections. He said that he had had courtesy calls from 14 ambassadors already. The video of the FEF event, posted live on his Facebook page, had 97,200 views and 6,100 likes by Thursday afternoon.
“After his speech, the Yorme revealed to the FEF crowd, without prodding, that he has been an SWS client for many years. He visits SWS, sans fanfare or advance notice, to review his commissioned surveys.
“My advice to him is to be very cautious in relying on statistics of the national government, and thus avoid being fed with misleading pictures of poverty and other vital social conditions of the Manileños.
“In the City of Manila specifically, the officially poor are only 5.7 percent, and the officially food-poor are only 2.1 percent, of all families. Officially, the poverty problem in Manila seems solved already!” [Mangahas, op. cit.]
Are we out of step or behind the times or both?
Gising bayan!
“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]
“You have to have a dream, whether big or small. Then plan, focus, work hard and be very determined to achieve your goals.” [Henry Sy Sr., Chairman Emeritus and Founder, SM Group (1924 - 2019)]
“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]
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