Beyond the “Pinoy abilidad”

We take pride in our “resilience” – the ability to overcome challenges and misfortunes.

We are not alone. National pride or patriotism, or the love of and devotion to one’s country, is universal. [A Ukrainian friend said as much in the email he sent to friends just before his family left their home to a safer place given the Russian attack.]

“I will always be proud of my Filipino roots,” said Yuka Saso, the reigning US Open Women’s champion. “The main reason I had to choose Japanese citizenship is because of the passport I will use to travel.” She has to go through hoops to acquire a visa when going to another country.

I could only smile. That arduous process is why the president of my old MNC-company chose to obtain a US passport for me. “Are we working in the same company – he must be able to travel where I travel?” He posed the question to the travel and legal departments; they didn’t leave any stone unturned.

Please recall that I was a regional manager for the Asia Pacific. And here I am, thirteen years and counting, pounding my laptop ever since I started the blog. I know these people that keep leaving us in the dust.

But why?

The wife and I were chatting about it, and she gathered that we in the Philippine elite class point to Juan de la Cruz: “tamad kasi.”

But aren’t there over ten million OFWs working their butts off and away from family. And together with the over one million “call center” workers, they bring over $50 billion to this country.

How can these “lazy” people be driving the Philippine economy? They are the ones that keep us ensconced high up in the hierarchy – enjoying the privileges that come with rank.

Then consider that our eight top companies combined can’t generate revenues to match Samsung Vietnam, for example, over $50 billion.

News item: “PHL’s exports of ‘strategic goods’ rise to $4.5B in 2021.” See above, over $50 billion in OFW remittances and BPO revenues.

Or what about this? “What it takes to get back: 7-8% GDP growth in 6 years,” Cai Ordinario, BusinessMirror, 22nd Feb 2022.

“THE Philippines needs to post GDP growth of 7 to 8 percent annually in the next six years to regain what the economy lost during the pandemic, according to an economist from the University of the Philippines School of Economics (UPSE).

“In a presentation on Monday, UPSE Associate Professor Renato Reside Jr. said this level of growth annually, or higher, could help finance future deficits.

“Meanwhile, UPSE Assistant Professor Adrian Mendoza said apart from strengthening institutions; the next regime must beef up support for Science and Technology as well as innovation to boost the manufacturing industry.

“Other guests, including Trade Undersecretary Rafaelita Aldaba, agreed with Mendoza and said efforts to push forward the country's inclusive innovation strategy.

“Aldaba said efforts to innovate are vital to helping diversify exports and bolster the domestic market base, as well as to modernize agriculture and move more workers to the formal from the informal sector.”

Question: Did we not deliver 6%-7% GDP growth over ten years, 2009-2019, yet left behind by Vietnam?

In other words, the preceding represents a textbook approach to our nation-building challenge. It is not wrong.

But does it measure up to the real world?

We have a structural problem and can learn from the private sector, i.e., enterprises that face existential risks to their business restructure like religion.

It is not easy for nations to do the same. But the Asian Tigers did. And the Latin American countries could not. If we believe “autocracy” is the common denominator in the case of our neighbors, how do we explain the “banana republics” of Latin America?

In other words, we are the regional laggard not because Juan de la Cruz is tamad.

The OFW or call center worker Juan de la Cruz brings over $50 billion to the Philippine economy. Without Juan de la Cruz, we can’t even have a consumption economy to celebrate.

Nor could we be in a position to rely on monetary and fiscal interventions.

Simply put, the difference between the Binondo Central Bank and today’s Bangko Sentral is the over $50 billion from Juan de la Cruz. [See below; our GDP capita.]

But we in the Philippine elite – with due respect to our economic managers – want to take credit, e.g., that our debt ratio was less than 40% before borrowing for Covid?

Consider: Singapore’s debt ratio is over 100%, yet its credit rating is AAA.

Why? Singapore has no external public debt, not since the 1980s. But it issues government securities to assist its national pension fund. And its GDP per capita is $93,400, even greater than that of the US ($60,200).

Moreover, Singapore allots 173.3% of its GDP to export goods and services while we do 31%.

That’s how loud our structural challenge screams.

Here’s again a quote from an earlier posting:

“We must beat the hell out of the competition, full stop. [See above; how the US lags Singapore in GDP per capita]

“Because we are a consumption economy, household consumption accounts for 73.5% of our GDP end-use. Compare that to 49% for Thailand and 55% in the case of Malaysia.

“On the other hand, we allocate 31% for export initiatives, while Thailand puts 68% and Malaysia 71%.

“Unsurprisingly, the Philippine industry contributes a low-31% to GDP, against Thailand’s 36% and Malaysia’s 38%.

“That explains why the exports of these countries are 3.3 times in the case of Thailand and 2.6 times for Malaysia.

“Finally, where it hits Juan de la Cruz, Thailand’s GDP per capita is 2.2 times that of the Philippines, and Malaysia’s is 3.3 times.”

A textbook approach to address the structural challenge posed by the Philippine economy has not worked for us. More of the same is what Einstein called “insanity.”

In other words, logical yet linear thinking generates incremental outcomes. And we have seen that after delivering 6%-7% GDP growth over ten years, 2009-2019.

Given our lack of experience in development, we can’t visualize a “quantum leap,” for example. And it comes from quantum physics or mechanics; only physicists dabble in it.

Let’s step back.

Why can’t we overcome these blinders? Do we need to master quantum mechanics?

That’s irrelevant. All our neighbors did was learn from experience. And so Lee and Mahathir advised Deng to beg for Western money and technology. And Vietnam merely did “copy and paste.”

The question then is, why can’t we “copy and paste”?

Consider our instincts: We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

And we in the Philippine elite are in that hierarchy and share in the inability to overcome these blinders.

News item: EU lawmakers warn PH of losing trade “perks” due to rights records.

We are reacting negatively to that news. Why? See above; ours is a culture of impunity.

Look at what Russia is doing in Ukraine, with some help from Belarus. And we can add China.

Isn’t impunity their common denominator?

What to do?

Why can’t we do a “copy and paste” as our neighbors have done?

For example, why can’t we wrap our heads around the imperative of FDIs; but not only, they must be “humongous”! And they must come with 21st-century technology.

In other words, we must first look beyond our shores and then recognize that we can’t build 21st-century technology from the ground up.

It’s tiring to hear it, but Samsung Vietnam is a classic example.

But why can’t we think “out-of-the-box,” a 6%-7%, or even 8%, GDP growth? It’s called Grade V arithmetic.

Think of our “crab mentality.” It explains why we can’t prioritize. But it comes from the inability to forward-think given our lack of experience in development.

For example, how come we haven’t articulated that we face a “structural challenge”?

In other words, we must seek a quantum leap in national income. And it will not come if we’re stuck to GDP growth metric, be it 6%, 7%, or 8%.

Recall that the blog raised the challenge of raising GDP by an incremental $200 billion. Why? The perspective will open our eyes to the magnitude of our challenge. That we need not a drop in the bucket but a “ton of FDI.”

It will also tell us that we must prioritize. For example, CREATE and SIPP will not match Vietnam’s revenues from Samsung Vietnam.

And that’s the “real world” that we can’t visualize.

The abject poverty Juan de la Cruz suffers is beyond the “Pinoy abilidad.”

Gising bayan!

We must swing to an investment-industrial economy.

Indeed, we must, not tomorrow, but yesterday. And there is theology to it.

Did we grow up hearing the parable of the talents?

Then consider: We are a consumption-service economy and are proud to keep to the paradigm. What’s behind the initiatives to cast a wider net via the public service act and the retail business?

Granted, we are looking at FDIs. But an enormous hole in the Philippine economy is in industrial development and exports.

In other words, it is not that we don’t need a public service act. But that is merely to get us in the game. We must take that giant leap from a consumption-service economy to an investment-industrial economy as demonstrated by the Asian Tigers, then China, and more recently, Vietnam.

Do we recognize that we’re stuck with logical yet linear and incremental thinking? Does that explain why our neighbors left us in the dust?

Enough of “pwede na ‘yan?”

Why can’t we get ahead of the curve with our electricity needs? Unless we forward-think and aggressively pursue industrial development, we won’t ever figure out the electricity challenge!

We must beat the hell out of the competition, full stop.

The following must be front and center, so here it is again, a quote from a prior posting:

“Because we are a consumption economy, household consumption accounts for 73.5% of our GDP end-use. Compare that to 49% for Thailand and 55% in the case of Malaysia.

“On the other hand, we allocate 31% for export initiatives, while Thailand puts 68% and Malaysia 71%.

“Unsurprisingly, the Philippine industry contributes a low-31% to GDP, against Thailand’s 36% and Malaysia’s 38%.

“That explains why the exports of these countries are 3.3 times in the case of Thailand and 2.6 times for Malaysia.

“Finally, where it hits Juan de la Cruz, Thailand’s GDP per capita is 2.2 times that of the Philippines, and Malaysia’s is 3.3 times.”

If the above doesn’t sound straightforward, we people – and that goes beyond us Filipinos – woke up to a world where logical yet linear and incremental thinking brought success.

Still, progress-wise, the most significant leaps came from visionaries because they could forward-think. And with it comes the ability of lateral and creative thinking, captured in bodies of knowledge that single out Einstein, Beethoven, Rembrandt, Jobs, among others.

Unsurprisingly, social scientists distilled the 4 Cs to 21st-century skills, i.e., critical thinking, creative thinking, collaboration, and communication.

Why have we become the regional laggard – with Juan de la Cruz paying a heavy price, i.e., abject poverty? Because despite the lapse of decades that saw our neighbors do it, we have failed to Industrialize.

It is not rocket science. World history continues to play it out.

But why can’t we?

Our caste system assumes that rank has its privileges. And that reinforces our inward-looking bias and inability to look and take in the bigger world out there.

For example, we can’t get over lionizing our tycoons and top companies despite being embarrassed by the Vietnamese. It’s called the real world. Still, we can’t figure out a way to look outward that the world keeps leaving us behind.

It is not to be ungrateful; there is theology to it

Beyond the parable of the talents is the creation story and the character of this universe, i.e., dynamism and interdependence.

Here’s again a quote from a prior posting:

“When everything affects everything, you have a “dynamic system.”

“Dynamic systems are hard to understand and nearly impossible to copy.

“We humans are no good at modeling more than a couple of variables simultaneously. The math quickly becomes overwhelming. If you have two variables that affect each other, you have, most likely, one interaction. If you have eight variables, there are roughly 251,548,592 interactions. [Here’s an aside. Recall how the blog speaks to mirroring the photosynthesis phenomenon when pursuing a challenge or an undertaking. Whatever the object is, a business example will still illustrate it. There are three sets of variables to manage: the  (1) marketing mix — product or service, pricing, placement, promotion; (2) resource mix — men/women, machine, materials, money, method; (3) execution mix — who will do what, when, where, and how. That makes for fourteen variables. What math can pull them together? Then recall the Ph.D. I assisted in her dissertation. Her master’s degree thesis was a market research project, so she and the professor agreed that the Markov algorithm would be central to the dissertation. But the real world is more complex. See the fourteen variables, explaining why her dissertation became the roadmap of a world-famous brand.]

“You’re never going to model an “innovation stack” on a spreadsheet – you can’t do the math.

“But companies love math, especially math that senior managers can use to make decisions. Take that math away, and they’ve nothing concrete upon which to base a decision.

“Entrepreneurs fighting for survival outside the civilized market don’t build mathematical models of what will happen; they do it and observe.

“You cannot view the elements of an “innovation stack” individually. No single element can link or unlink without changing the behavior of the other “elements.” The innovation evolves as a whole. Even without mathematical certainty, it makes intuitive sense.” [James Morgan McKelvey Jr., “an American billionaire businessman, co-founder of Square, Inc., a financial payments company. He is the appointed independent director of the Federal Reserve Bank of St. Louis.’]

But then again, please recall my simple verbiage speaking to my Eastern European friends:

“What must be the minimum level of sale to a client and then to the collective universe to reap the benefits of scale? But to do the math in advance doesn’t guarantee correctness. But with experience, big data, and extrapolation, the scenario comes to life. And it will guide future efforts too, but bear in mind that as the numbers grow, they become more dynamic.”

What’s the point? It is about forward-thinking, not logical yet linear, and incremental thinking. See above; the most significant leaps progress-wise came from visionaries.

But we don’t have to be geniuses or a billionaire like McKelvey.

It is about thinking scale and overcoming the crab mentality. It is about overcoming our inexperience in nation-building and development by copying what our neighbors have done and are still doing.

It is about the discipline of distilling the “vital few” from the “trivial many,” i.e., big data is meaningless if we don’t separate the wheat from the chaff.

It is about extrapolation, but simple math will do.

Let’s assess that. Don’t we know now that CREATE and SIPP won’t generate the tax revenues a Samsung Vietnam contributes to Vietnam? We don’t even have to do the math. Samsung Vietnam delivers more revenues (over $50 billion) than the Philippine eight top companies combined.

Can we not extrapolate that?

Here’s another example. Back in 2009, our GDP was twice that of Vietnam’s. But, and it’s a BIG BUT, their FDIs were 377% of ours, and in total investment, they were 137% more.

Can we not foresee that they will overtake us because we rely on a consumption economy driven by OFW remittances and call centers? While they attracted the likes of Samsung, i.e., tech devices that require layers of subindustries to pull together and hence the multiplier effect in quality and high-paying jobs?

That is not rocket science. Instead, it demands that we reinvent ourselves.

Please recall that the blog started in 2009, and the preceding explains why its title came to be Philippine Economy: reinventing ourselves.

Think how we haven’t gotten off our Pinoy paradigm.

Start with the comprehensive agrarian reform program. The celebration of the OFW phenomenon. The celebration of the BPO sector. The celebration of the manufacturing uptick.

Or think of the scores of industry road maps or even Arangkada or AmBisyon.

And so our answer is the public service act and foreign retailers?

How will they compete against the likes of Samsung Vietnam in delivering incremental GDP and tax revenues?

That’s why we need people that think out of the box to brainstorm with us. Think of Tim Cone and Jon Canto.

We need people that don’t think like us. Otherwise, we won’t take those blinders out.

We must swing to an investment-industrial economy.

Indeed, we must, not tomorrow, but yesterday.

Gising bayan!

How do we overcome the “insanity trap”?

First, we can’t keep looking for problems armed with the same set of arrows in our quiver?

In leadership, it goes by the adage, “When all you have is a hammer, everything looks like a nail.”

Think of our celebration — running over ten years, 2009 to 2019 — of a 6%-7% GDP growth, yet Vietnam outperformed us. It is no different from our celebration of the manufacturing uptick earlier.

Translation: We remain the underachiever, thus the regional laggard, with Juan de la Cruz paying a heavy price – abject poverty.

Let’s hold it right there.

For the umpteenth time, let’s recognize that we have a structural problem.

Ergo: We need beyond the arrows in our quiver. 

For example, logical yet linear and incremental thinking will not put us on a different path, but the same old, worn one. That’s why Einstein called it insanity.

We are a consumption economy, full stop.

None of the monetary and fiscal interventions we pursue will swing us to an investment-industrial economy, not in the medium term.

CREATE and SIPP aren’t world-class. We need a Jon Canto of McKinsey to challenge our tax policy-making mindset.

Consider: Where are we with Arangkada or AmBisyon? They were supposed to attract FDIs to the big industry winners we identified. That’s why we must think out of the box. 

But taxing the rich will not do the trick. That is still linear and incremental. The businesses of our dollar billionaires combined can’t generate revenues to match Samsung Vietnam, for example. That is the kind of FDI we need if we want a quantum leap in tax revenues.

Because we are a consumption economy, household consumption accounts for 73.5% of our GDP end-use. Compare that to 49% for Thailand and 55% in the case of Malaysia.

On the other hand, we allocate 31% for export initiatives, while Thailand puts 68% and Malaysia 71%.

Unsurprisingly, the Philippine industry contributes a low-31% to GDP, against Thailand’s 36% and Malaysia’s 38%.

That explains why the exports of these countries are 3.3 times in the case of Thailand and 2.6 times for Malaysia.

Finally, where it hits Juan de la Cruz, Thailand’s GDP per capita is 2.2 times that of the Philippines, and Malaysia’s is 3.3 times.

And we can’t turn things upside down because we rely on OFW remittances and “call centers” to drive the Philippine economy.

We will continue to be a consumption economy with little ability to drive industry and exports – they are the ones that generate quality jobs and wages.

That is why the blog keeps pointing out the genius of the Vietnamese. Samsung Vietnam alone delivers far more revenues than our eight top companies combined.

Translation: We remain the underachiever, thus the regional laggard, with Juan de la Cruz paying a heavy price – abject poverty.

Let’s hold it right there.

Do we wonder why the blog often speaks to Edward de Bono’s “lateral thinking” treatise? And “design thinking” is its latest version, which Silicon Valley adopted to pursue innovation.

Why? Innovation is not a one-dimensional challenge – as in R&D alone. Similarly, nation-building and economic development can’t be all-economics.

Those familiar with the blog may know that the bodies of knowledge that sprinkle the postings came after the fact. [Recall that I am thankful to the late Anacleto del Rosario, who introduced me to de Bono in my early twenties, yet too naïve to take it all even when I was up close and personal.]

That I can speak matter-of-factly to lateral thinking because I am a practitioner.

I had a traveling job for decades, and doing 13-14 hour flights wasn’t uncommon. That was before the age of Kindle and the iPad. And as a frequent flyer, airlines gave me “ownership” of seat 2-B, with 2-A, left vacant – and where I stack my files, books, and periodicals. It was my virtual office cum bedroom and dining room before “pandemic” came to our lexicon.

I learned by doing. The readings that came later reinforced my encounters with the real world. I break into a smile when I hear that American companies no longer demand any formal degrees and instead dig into the applicant’s experience. But then, think of college dropouts Bill Gates and Steve Jobs.

The belief is that progress is moving at warp speed that it requires adaptability and the knack to learn and overcome dynamic challenges constantly.

When it comes to R&D and innovation, for example, Thomas Edison started the practice of team research; instead of scientists pursuing individual efforts.

Why must we Filipinos engage in brainstorming? To overcome our predicament and embarrassment – as the laughingstock of our neighbors?

We’ve been diligent in pursuing monetary and fiscal interventions for decades, and where has that brought us?

Consider: Despite my experience in strategy, planning and execution, innovation, and beating the hell out of competition – at the local, regional, and global arenas – why did I not spoon-feed my Eastern European friends, notwithstanding their outrage?

The story of creation and the character of this universe must be our guiding light. It is about dynamism and interdependence.

Look at how Facebook dropped like a lead – with TikTok giving it a run for its money.

But it is not about being a business enterprise per se.

It is about respecting the hierarchy of human needs, i.e., “creation is good,” said the Creator.

And those needs equip humankind to respond to the demands of dynamism and interdependence. For example, because of climate phenomena, humanity migrated from Africa – and sought better abodes than caves.

Imagine if the pandemic came before the age of our digitized world. Humankind would not have invented WFH. How much more would the global economy have sunk?

I have been working from home for more than two years and will finally travel to Europe in April. By then, the wife and I would have had two boosters of the covid vaccine.

But even this little anecdote is a learning experience. Recall that when the wife and I first came to Eastern Europe, my friends assigned me an assistant cum driver and translator.

He was still in college. But he had the benefit of constantly querying me to ensure he was doing justice to his translations. And when I was leading workshops, he still had to translate because I wanted the people to be at home with the language, especially from a local.

Fast-forward to the present. My assistant earned two bachelor’s degrees and a master’s degree in engineering. And he experienced firsthand how we introduced big data and analytics using simple Excel models.

We then appointed him analytics manager, and in short order, he acquired an AI-driven information management software that he kept iterating and polishing. Today, I can be anywhere in the world, and I will see what we sold of every stock-keeping unit in every country, channel, and store and the margins we generate for every sale given the investments in marketing and selling, including “logistics.”

When the blog speaks to Pareto, I reference the big data I access remotely. And that is where the force-field change theory (postulated by Kurt Lewin) comes in – i.e., exploit the driving forces and fix the restraining ones. And the power comes from deriving trends, be they growth or decline.

For example, a brand may not be responding to ever-changing human needs. Think of simple detergents. They now come in pods for single loads. That is to address the need for convenience, especially for working couples.

And they want their clothes to bring out a pleasant scent too.

Of course, we Filipino men don’t necessarily relate to the example. But not in the developed world, especially when the wife is indisposed. I find it convenient for pods to throw in the dishwasher. But my favorite is Roomba, the robot vacuum cleaner that allows me to multitask. I am still waiting for robotic irons and a robot to recycle our trash on Monday nights.

That is not to complain. There is a gas fireplace I can turn on by the flick of a switch – and with no logs to stack up and soot to clean, as I did for twenty years. To top it all, first thing in the morning, I can prop up my feet by the fireplace with my first coffee, a great brew, courtesy of a pod-fed espresso maker that froths milk like a barista.

In other words, human needs show us how to raise the well-being of people. See above; "creation is good," said the Creator.

But back to my Eastern European friends. They are learning fast. They understand Maslow’s hierarchy of human needs and consumer insights, among others. Even a bit of quantum mechanics.

What must be the minimum level of sale to a client and then to the collective universe to reap the benefits of scale? But to do the math in advance doesn’t guarantee correctness. But with experience, big data, and extrapolation, the scenario comes to life. And it will guide future efforts too, but bear in mind that as the numbers grow, they become more dynamic.

That is my simple verbiage.

Let’s hear from James Morgan McKelvey Jr., “an American billionaire businessman, co-founder of Square, Inc., a financial payments company. He is the appointed independent director of the Federal Reserve Bank of St. Louis.”

And the following is from his book, “The Innovation Stack: Building an unbeatable business one crazy idea at a time.”

“Quantum mechanics versus classical physics. Both systems have the concept of energy, but the quantum explanation of energy is rarely necessary for daily life. Using quantum mechanics as an analogy is odd because you don’t think quantum mechanics unless you’re a physicist.

“Which is my point. Billions of people live their lives with no concept of perturbation theory or eigenstates. Classical physics explains daily life; the situations when understanding the world requires quantum mechanics are so rare that you can avoid them.

“But then, an “innovation stack” isn’t simply a list of independent changes (elements) to an existing business model.

“The innovation weaves into the fabric of the undertaking. Each block in the “stack” only works in conjunction with all the others, and the entire “stack” fails if one block is missing.” [Here’s an aside. Why does the blog speak to the photosynthesis phenomenon incessantly? And why is logical yet linear and incremental thinking devoid of innovation?]

“The complexities generated by a set of innovation elements have when simultaneously unleashed on the industry are compounded by the interrelationships of those elements themselves.

“When everything affects everything, you have a “dynamic system.”

“Dynamic systems are hard to understand and nearly impossible to copy.

“We humans are no good at modeling more than a couple of variables simultaneously. The math quickly becomes overwhelming. If you have two variables that affect each other, you have, most likely, one interaction. If you have eight variables, there are roughly 251,548,592 interactions.

“You’re never going to model an “innovation stack” on a spreadsheet – you can’t do the math.

“But companies love math, especially math that senior managers can use to make decisions. Take that math away, and they’ve nothing concrete upon which to base a decision.

“Entrepreneurs fighting for survival outside the civilized market don’t build mathematical models of what will happen; they do it and observe.

“You cannot view the elements of an “innovation stack” individually. No single element can link or unlink without changing the behavior of the other “elements.” The innovation evolves as a whole. Even without mathematical certainty, it makes intuitive sense.”

In other words, we can’t keep looking for problems armed with the same set of arrows in our quiver – because we have such faith in monetary and fiscal interventions, for example.

In leadership, it goes by the adage, “When all you have is a hammer, everything looks like a nail.”

The bottom line: We must recognize that nation-building and economic development can’t be all but monetary and fiscal interventions.

For instance, how do we make Philippine agriculture – e.g., rice – competitive to win against Vietnam and Thailand? Farm-to-market roads, fertilizer subsidies, irrigation systems, modern rice varieties, among others, are critical elements. [With due respect to Ciel Habito, we can’t cherry-pick the positives of Philippine agriculture when it accounts for the most significant piece of poverty. Think of Tim Cone. There is a much bigger world out there. And we can’t face and win in that world without beating the hell out of the competition.]

But how do we create a sustainable ecosystem that mirrors the best-practice model, i.e., the photosynthesis phenomenon? And we don’t have to “reinvent the wheel.” Thailand approximates the best-practice model, and so we must learn from them.

We must focus on farms that benefit from our dams irrigation-wise. But then we must expand the farms too – and keep running after scale – and manage them as a collective universe to reap economies of scale.

What about the industry? CREATE and SIPP aren’t world-class, as proven by Vietnam, i.e., it successfully attracted Samsung to make Vietnam their smartphone regional manufacturing hub.

That’s what it means to meet the demands of the real world. A tax policy crafted in isolation can miss critical elements. We must engage all relevant parties to brainstorm on the challenge. Think of Jon Canto of McKinsey.

In other words, we can’t keep looking for problems armed with the same set of arrows in our quiver.

In leadership, it goes by the adage, “When all you have is a hammer, everything looks like a nail.”

Gising bayan!

In one ear and out the other (II)

It’s not the first time the blog used the above title.

Let’s hold it right there.

The posting builds on an earlier one, “There is a bigger world out there.”

Consider: “The economic costs of closed minds,” Kaushik Basu, Project Syndicate, Philippine Daily Inquirer, 3rd Feb 2022.

“Barriers to foreign direct investment (FDI) in the Philippines are highly restrictive. In 2020, the Philippines ranked third-most restrictive out of the eighty-four countries in the Organization for Economic Cooperation and Development’s (OECD) foreign direct investment regulatory restrictiveness index (FDI Index).” [“Easing barriers to foreign direct investment,” Kyra Kae B. Diola, Tax Or Otherwise, BusinessWorld, 2nd Feb 2022]

Question: Are the barriers to FDI coming from the closed mind of Juan de la Cruz?

“The World Bank forecasts that global economic growth will slow to 4.1 percent in 2022, from 5.5 percent last year. The report warns that the surge in debt caused by countries trying to soften the “pandemic-induced global recession” means weak economies are now at “elevated risk” of debt distress. With debt burdens rising, supply chain bottlenecks impeding the flow of goods and services, and inflation picking up, governments are losing the capacity to provide further fiscal support.

“And energy prices, which surged in the second half of 2021, will increase further—and by more than the World Bank was projecting six months ago.

“Usually, emerging markets and developing economies grow faster than advanced economies, helped by their lower base.

“But, according to Global Economic Prospects, the prognosis for EMDEs through the end of 2023 is worse than for advanced economies because EMDEs have limited policy space to provide additional support and face a greater risk of hard landings.

“While there are exceptions, “hyper-nationalism” is usually disastrous for an economy eventually. That makes sense because strident nationalism leads to bloated egos and blurry thinking. Countries in their grip try to become self-sufficient by raising barriers to trade, capital, and ideas elsewhere.

“In a globalized world, with latest ideas and research emerging everywhere, countries that succumb to nationalist solipsism and pull down their economies’ and societies’ shutters will be anything but great.” [Basu, op. cit.]

Indeed, there is a bigger world out there, with due respect to our opinion leaders and economic managers.

But are we hopeless? Not by any stretch of the imagination.

Yet, there is no free lunch. That is the one thing we must recognize.

And it will take “some” doing.

That’s why the blog keeps giving examples: Apple over IBM, my Eastern European friends from the poorest country in Europe over the most significant industry competition from the West, Tim Cone winning twenty-three championships, among others.

But we must grow up. We can’t settle for Padre Damaso throwing candies our way. That is too juvenile, given the enormity of the challenges we face.

“Why we need a political reboot,” Andrew J. Masigan, THE CORNER ORACLE, The Philippine Star, 2nd Feb 2022.

“The unfortunate reality is that despite our rich natural resources, youthful workforce, and favorable geographic location, the Philippines’ liabilities consign it to be the region’s perennial underachiever. These liabilities are our defective political institution and low caliber of leaders.”

“Through the years, our political system – because of manipulation – serves the interest of the narrow elite, not the more significant majority, i.e., it railroads the interest of the rich and powerful while blocking and watering down vital reforms. Nothing less than a political reboot is necessary to harness our true economic potential.

“The political elite and the business elite have become identical. Here, it is common for the largest conglomerates to represent the legislature to defend and forward their interest.”

Let’s pause – and ponder.

I know what Andrew is saying. I worked for eight years with one Philippine oligarchy. They did not want me to leave. Had I stayed, the blog would not have existed.

Those in the Philippine elite and chattering classes don’t have the option I have, and I understand why we suffer from nonchalance, “In one ear and out the other.”

In other words, we are not doing Juan de la Cruz a favor by cherry-picking the positives of our predicament while missing its context. Instead, we are doing a disservice because the status quo persists – to one that appears impregnable.

Are we finally waking up?

“House approves bill creating a department of development planning on second reading,” Jaspearl Emerald G. Tan, BusinessWorld, 26th Jan 2022.

“House Bill 10625 or the Department of Economics and Development Planning Act aims to enhance the government’s planning system through a separate department. 

“Under the proposed law, NEDA will fall under the new department, to be headed by a Cabinet-level secretary who will be the country’s chief economist and serve as the President’s economic advisor.

“The establishment of the department also aims to streamline national plans, strengthen the distribution of projects, ensure continuity of plans and programs, and expand multi-sector participation.

“The measure will also create the Economic and Development Council that will oversee the policy direction on economic, social, financial, and environmental issues. The President will chair the council.”

Question: Has the Philippine Competition Commission measured up to its vision, for example? “PCC aims to be a world-class authority in promoting fair market competition to help achieve a vibrant and inclusive economy and to advance consumer welfare.”

“World-class authority” has a nice ring to it. Then consider that Samsung Vietnam, by its lonesome self, delivers far more revenues than our eight top companies combined.

Recall that my Eastern European friends, who had asked, “Can we even compete against the West,” given they were a cottage industry and a losing proposition going eight years, killed a brand of the most significant industry competition from the West. Unsurprisingly, the European Competition Commission recognized them as a model for the EU.

The blog keeps raising that strategic planning presupposes strategic thinking; otherwise, it is mechanical and linear.

That comes from distinguishing between a “growth mindset” and a “fixed mindset.”

And a growth mindset is “forward, lateral, and creative thinking.” It responds to the 4 Cs to 21st-century skills, i.e., critical thinking, creative thinking, collaboration, and communication.

Recall too the dissertation of the Ph.D. candidate I assisted. Do we know of any dissertation that has become the road map of a famous global brand?

There is reality, and there is “reality.” That “reality” is beyond human experience and a human-construct system. And why the blog never fails to mention the treatise of the late George Gorospe, SJ.

And the story of creation and character of this universe will come to mind, i.e., dynamism and interdependence.

Then think of Brexit or MAGA.

Here’s a retired Thomas Jefferson, one of the framers of the US Constitution, making the point: “[Countless] may look at constitutions with sanctimonious reverence and deem them like the ark of the covenant, too sacred to be touched. They ascribe to the men of the preceding age a wisdom more than human and suppose what they did to be beyond amendment.

“I knew that age well; I belonged to it and labored with it. It deserved well of its country. It was genuinely like the present, but without the experience of the present, and forty years of experience in government is worth a century of book-reading; and this they would say themselves, were they to rise from the dead.

“I am certainly not advocating for frequent and untried changes in laws and constitutions. Moderate imperfections are a given; once known, we accommodate ourselves to them and find practical means of correcting their ill effects.

“But I also know that laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as discoveries appear, new truths disclosed, and manners and opinions change with the change of circumstances, institutions must also advance and keep pace with the times.

“We might as well require a man to wear still the coat which fitted him when a boy, as civilized society to remain ever under the regimen of their barbarous ancestors.” [Source: “Proposals to Revise the Virginia Constitution: I. Thomas Jefferson to “Henry Tompkinson” (Samuel Kercheval), 12th Jul 1816,” Founders Online, National Archives, https://founders.archives.gov/documents/Jefferson/03-10-02-0128-0002.]

Then consider our caste system, expressed in our instincts as Pinoys: Parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

In other words, we can join RCEP, but if we can’t come out with products and services that are far beyond the competition, we won’t win in either the regional or global arenas.

“Dominguez flags tax advisers’ role in raising gov’t borrowing,” Jenina P. Ibañez, BusinessWorld, 3rd Feb 2022.

“THE effective tax rate for value-added tax (VAT) in 2021 was significantly lower than the posted rate of 12%, reflecting the tax avoidance strategies provided by tax advisers, Finance Secretary Carlos G. Dominguez III said.”

With due respect to the Secretary, he is making a factual statement, yet, we have a much more significant challenge than rationalizing our tax policies.

First, we have a much meager tax base than our neighbors, i.e., Philippine GDP per person is one-third of Malaysia and half of Thailand.

Recall the three legs of the economy: services, industry, agriculture.

Except for services, we lag our neighbors in the revenues generated by these undertakings. And in services – the driver of the Philippine economy, we are vulnerable because our BPO industry is predominantly “call centers.” We haven’t moved up the value chain.

Moreover, services don’t generate the multiplier effect in employment, especially quality jobs and subindustries – for a more far-reaching employment environment – as do technology and export-driven industries. The best example is Samsung Vietnam.

And that brings us back to our tax policies. We must have world-class tax-policy making. That’s why the blog raised that CREATE and SIPP are too generic.

Until we can attract the FDIs our neighbors have been doing for decades, we can’t celebrate the feather in our cap. They aren’t world-class.

Let’s pull things together:

Recall the blog’s theme of reinforcing the photosynthesis phenomenon, being the best example of an ecosystem. Because a human undertaking that is sustainable mirrors an ecosystem.

Sadly, given our lack of experience in development – or nation-building – we rely on our logical mind that generates linear and incremental thinking, i.e., “cognitive development” is a function of experience. See above; what Jefferson says about the sacredness of a Constitution, that it must go hand in hand with the progress of the human mind.

But we in the Philippine elite and chattering classes find that offensive. We can’t be juvenile, given the enormity of our challenges. On the other hand, we know that “experience is the best teacher.” See above; it’s time we grow up.

If we want to establish the requisite ecosystem of the Philippine economy – and nation – we must acknowledge our instincts, the expression of our caste system because it is the source of our closed minds.

And the most glaring evidence is our failure – going decades – to embrace what our neighbors have, i.e., foreign money and technology.

Foreign money and technology explain why the Asian Tigers, then China, and more recently, Vietnam, have fortified the legs of their economy.

On the other hand, we continue to celebrate monetary and fiscal interventions despite their failures over a 10-year run – that enabled our economy to deliver 6%-7% growth – to match the performance of our neighbors.

Einstein called it insanity.

For example, no monetary and fiscal interventions have raised the competitiveness of Philippine agriculture. Nor industry.

Because of the OFW phenomenon, services are classic “pwede na ‘yan.” We did not pursue industrial development because of parochialism and insularity. We assumed that we did not have a competitive advantage in this sector. And rent-seeking oligarchy and political patronage hammered it on us.

And the outcome? A perfect storm – as in our being the regional laggard.

And what is the common denominator? A culture of impunity.

But is that something that comes in one ear and out the other?

There is a bigger world out there.

Gising bayan!