Consider this news item: “DTI to present 6-year industrialization plan. The DTI and Board of Investments (BOI) will hold the first-ever Industrial Digital Transformation Congress (IDTC) on Dec. 6. Trade Secretary Alfredo Pascual will present the agency’s six-year industrialization direction.
“For the past six years, guided by our ‘Inclusive Innovation Industrial Strategy (i3S),’ we have worked hard in establishing a solid foundation upon which our industries could stand firm and shoulder to shoulder with their global counterparts. As we move forward, we remain anchored on our longstanding vision that growth and development must be for all Filipinos. In this vein, the DTI adopts a new approach driven by science, technology, and innovation to capacitate and prepare our industries and us for what lies ahead.
“DTI is pursuing a renewed industrial policy that is science, technology, and innovation-(STI) driven. Through STI and essential digital technologies, industries can transform and face competition in domestic and export markets. Dynamic industry ecosystems are the foundation for generating quality jobs and investments, creating new products and services, and improving environmental sustainability.”
The above efforts are welcome given the following news: “PHL urged to focus economic policy on keeping middle class prosperous. Income inequality did not begin to decline until 2012. It is still high: the top 1% of earners together capture 17% of national income, with only 14% shared by the bottom 50%.
“It’s no longer just economics. We must open our eyes and focus on a bigger canvas, not just economic indicators. Still, most social, political, and other inequality indicators frustrate our efforts to build social cohesion and unite people around certain reforms.”
It’s worth repeating the following: We must open our eyes and focus on a “bigger” canvas, not just economic indicators. Laos and the Philippines have been amongst the fastest in Asia, averaging more than 7% GDP growth per year for most of the last decade. Yet, both are cellar dwellers compared to the rest of the region.
Without being privy to the full story of the 6-year industrialization plan, I have a question: Is the focus on digital transformation key across the priority industry clusters? The industry clusters are (1) industrial, manufacturing, and transport (IMT); (2) technology, media, and telecommunications (TMT); (3) health and life sciences (HLS); (4) and modern basic needs and resilient economy (MBNRE).
Note that the service sector drives the Philippine economy by 61% against 31% by the industry sector.
And so, the next question is, isn’t the shortcoming of the initial industrialization plan the failure to make a quantum leap in the industry sector?
I am a practitioner, not an academic, but I can confirm from decades of industry experience the real-world import of the force-field theory. To manage change, we must (a) put front and center the forces driving the change and, as necessary, (b) the forces restricting the change.
In other words, before we embrace an STI-driven plan, shouldn’t we first figure out what has restrained our industrialization efforts? Said differently, we’re dealing with the “real world” – dynamic yet chaotic – and must overcome the “ivory tower” syndrome.
That is why the blog keeps raising our instincts, reflected in the Philippine caste system: We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy; ours is a culture of impunity.
And so, back to the question, how do we take a quantum leap in the industry sector? For example, to match the export revenues of our neighbors, we must drive industry – doggedly – to generate incremental exports of $200 billion.
And the next logical question will be, which of the priority industry clusters must we prioritize to get us to the $200 billion?
I have led digital transformation – in my previous and current lives – counting decades. For example, how many Philippine companies have installed SAP, and how many can leverage “analytics” to meet the 21st-century challenge of “innovation and global competitiveness”?
In other words, digital technology is a tool but not every enterprise is ready for it. Of course, telecommunication must digitize. And we have that with digital banking.
Back to the question: Which of the priority industry clusters must we prioritize to generate “incremental” exports of $200 billion? And the next question will be, what products and services must they have in the portfolio that will confirm the projected revenues?
And that is where we talk about innovation and global competitiveness. What is the product architecture (of these products and services) that will give it a leg up against the domestic and international competition? The product architecture amplifies the hierarchy of human needs – from “basic” to self-actualization.
Recall from a prior posting that I was impressed by Axelum, highlighted by the Bernie Villegas article (Hope for coconut farmers.) For example, of their $125 million revenues, 33% still comes from desiccated coconut. But coconut water accounts for 25%, with coconut milk at 15%, sweetened coconut at 14%, and coconut milk/cream at 3%. Also noteworthy is that 75% goes to the US, and only 8% remains in the Philippines, with the balance shared by Europe, Australia, and Asia.
They are a great example of getting Philippine agribusiness on the world map. They employ over 5,000 people and support coconut farmers and their communities.
They are a best practice model.
If I were doing the one-day DTI event, I would highlight Axelum Resources – to translate the tech lingo into a successful real-world enterprise and for the rest to emulate, if not replicate.
The Axelum website illustrates the continuum of their product architecture, traversing the hierarchy of human needs from basic to self-actualization: “Axelum is a fully-integrated manufacturer and exporter of premium coconut products for leading domestic and international food and beverage companies, confectioneries, bakeries, private label supermarkets, grocery store chains, food service enterprises, and “nutritional” and personal care brands. The Company offers an extensive line of products, including desiccated coconut, coconut water, sweetened coconut, coconut powder, coconut milk/cream, coconut oil, and reduced-fat coconut.”
They are a departure from the typical Filipino enterprise that caters to the “bottom of the pyramid,” meaning low-quality economy products. Note that they emphasized “exporter of premium” products.
That is how to meet the 21st-century challenge of innovation and global competitiveness. And the Company’s industry-leading net-margin performance (i.e., double digits) proves its world-class caliber — the outcome of its ability to drive revenues double digits in the first place because of the superior “ecosystem” they pulled together.
In other words, Philippine enterprises — big, small, micro, or mini — must shift paradigms. It must not be to create jobs to address poverty and “inclusion” but to be a first-world economy and nation by being the epitome of innovation and global competitiveness.
DTI is just one of our economic institutions. We have other “economic managers.”
Let’s quote again from a prior posting: Beyond the role of the Philippine President to aggressively attract Western money and technology, the economic managers will have to learn “horizontal leadership” if they want to succeed in selling the idea that nation-building – or, more specifically, economic development – is their portfolio.
Recall the blog’s discussion on innovation being beyond R&D. The brand manager is in the best position to pull the different pieces together, which is why they must learn “horizontal leadership.” Why? Because the hierarchy of human needs – from physiological to self-actualization, e.g., prosperity – is the bedrock of innovation. And brand managers must be committed to thoroughly internalizing these needs because innovation is not for innovation’s sake but to respond to a human “need.” That’s why Steve Jobs proved to be a better innovator than his peers.
That brings us to a continuum: the basics of water, food, and electricity at the physiological level to prosperity reflected in the characteristics of a first-world nation. And we don’t have to reinvent the wheel: Beg for foreign money and technology – so that we replicate the journey of Singapore as articulated by Lee.
We must not only put the BOI in the crosshairs to match the Pearl River Delta Economic Zone – the center of the China economic miracle – or the Samsung-Vietnam partnership. We must also rack our brains to get Juan de la Cruz the basics of water, food, and electricity. Not because that is easy but because it is hard. Think of the Kennedy moonshot speech.
That is what our economic managers must be able to articulate: They will have to learn “horizontal leadership” if they want to succeed in selling the idea that nation-building – or, more specifically, economic development – is their portfolio. Recall that horizontal leadership is an expression of “self-government,” which is fundamental to freedom, democracy, and free enterprise.
Let’s drill that down.
Suppose the hypothesis to generate “incremental” exports of $200 billion starts with the Ang Bulacan airport initiative, including an export economic zone with TMCC as the anchor. In that case, the BOI can build on said hypothesis.
And that is where the Pearl River Delta Economic Zone and the Samsung-Vietnam partnership will come in. In other words, we don’t have to reinvent the wheel. BOI has to restate the two models down to the granular level. It means we want to recreate a benchmark that we can “touch and feel.”
There are several ways to do that. The blog has given the example of Toyota and how it recreated a benchmark by dismantling premium German cars. And my Eastern European friends did something similar. They “unbundled” the best-selling competing brand that they were able to “touch and feel” how to be the best in class.
BOI must be able to “touch and feel” the best in class, i.e., the Pearl River Delta Economic Zone and the Samsung-Vietnam partnership.
They want to have a platform to exercise “horizontal leadership.”
Translation: They must then pull together the rest of the public and private sectors that will make up the Philippine version of the best-in-class model – to edify and dialogue with them.
That is where we want to be with the Bulacan Economic Zone or the Samsung-Vietnam partnership version. And that is how to visualize it, an “ecosystem” akin to the photosynthesis phenomenon.
In other words, the model will include the basics of water and electricity, among others, but better than the typical Philippine Economic Zone, given its magnitude and scale. For example, we may be able to pursue solar energy because of economies of scale.
We can even include the Bulacan version of Axelum (with its plant in Misamis Oriental), given that Calabarzon is a major coconut producer and is less than 200 km away. And coconut is the largest agri export of the Philippines. What other agribusiness enterprises can we incorporate into the Bulacan model? And beyond TMCC, what other electronic-based companies and technologies can we lure to the Philippines?
But that means whatever past and present investment incentive programs we have created will no longer suffice. We must think out of the box.
We need an industrialization plan badly.
But we better do our homework, so we don’t turn them into dust collectors like AmBisyon, Arangkada, and the scores of industry road maps.
Are our economic managers listening? What about our legislators? And “think tanks”?
“It’s no longer just economics. We must open our eyes and focus on a bigger canvas, not just economic indicators. Still, most social, political, and other inequality indicators frustrate our efforts to build social cohesion and unite people around certain reforms.”
Gising bayan!
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