Competitive instinct

Instinctively we know what winning teams look like and what losing teams do. But when it comes to economic development is our thought process fuzzy – because of our parochial instinct? Thus are unwittingly creating oligarchy? And then seek refuge . . . in our supposed protectors (e.g., Marcos, Estrada and Arroyo) like a vicious circle – because history is only repeated but never learned? (And why Gorbachev is critical of Russia?)

And so we don’t talk of the imperative of pursuing a competitive edge in economic development? For example, in a globalized economy, competition starts with competitive capital generation. We can’t simply generate capital – we must be competitive size-wise? For instance, to raise our gross investments to 25% and start to compete with our neighbors, we need $20 B; while the JFC or Joint Foreign Chambers are looking at $75 B – clearly a competitive edge, like fighting with a WMD in our arsenal?

Global competition demands competitive products. How many export-promotion initiatives have we pursued over decades – and our exports still lag those of our neighbors? We can’t simply market indigenous products – we must market competitive and compelling indigenous products? Global competition demands world-class product development practices. We simply don’t have a product-development heritage – and thus must acquire the skill-set in order to elevate our export revenues?

Global competition demands world-class marketing. Our industry can’t simply be focused on the local market lest it be a self-fulfilling prophecy – they must invest in developing world-class marketing? Global competition demands world-class efficiency and productivity – to enhance margins for reinvestment and growth, and to develop competitive-building skill-sets. But our infrastructure at the macro and micro levels are inadequate? And corruption multiplies this competitive disadvantage – because it breeds a culture of inefficiency? And we can’t simply give ourselves false hopes by comparing our liabilities with others instead of our net worth?

Global competition demands world-class technology and expertise to attain and sustain competitive advantage. And global players – MNCs and expatriates – are the source of technology and expertise. But we’ve had a conflicted relationship with them – still, we can’t simply carry a chip on our shoulder?

The writer’s Eastern European friends have learned many of the nuances and dynamics of the above elements but seven plus years weren’t enough to make them second-nature. (Indeed we have a lofty mountain to scale?) Yet they’ve learned, for example, that while local resources were easy to tap – i.e., equipment could be fabricated, e.g., the jeepney? – they may not be globally competitive. It took beyond number-crunching before they realized the mantra: it is not costs; it is margins, i.e., technology and efficiency more than offset cost. And they acquired a state-of-the-art technology from the West. The outcome: they’re dominant in this piece of business generating far greater margins – thus the funds and compelling products to compete in the West; where before they were fixated on low-pricing as a strategy! And adding a feather to their cap, Western financial institutions have become fans – thus encouraging them to pursue growth and acquisition.

All the above are commonsensical – none is rocket science – but our parochial instinct has screened us from reality: the simple formula our neighbors have adopted, i.e., to partner with foreign investors and global players? That we do it in fits and starts as transactional and tactical initiatives – like the growing (neighborhood cottage) industries established by foreigners turned residents, among others – is in fact counterproductive: (a) SMEs are good but they must be geared for global competition; and (b) we’ve lost focus on the big bang like what the JFC or Joint Foreign Chambers were proposing? Or we seem to forget the 80-20 rule or the genius of the Great Commandments?

It is not about destiny; it is about the choices we make? And it is the same life-lesson that we teach our children? That they ought not to be like kids in a candy store – they should share what they have in abundance so that others would share what they have in abundance too? And that’s the gut of a global competitive edge? Sounds like the multiplication of the loaves and fishes?

What innovation is not?

In the West it is endearing to be critical of new products especially if doing so makes one a contrarian. We should do the same in the Philippines; but where we need to focus our efforts . . . is in understanding innovation.

There’s no perfection in this world – thus trying to give the presumptive president the perfect agenda is an exercise in futility? In innovation, the mantra is: ‘perfection is anathema to excellence’. Or why marketers are periodically out with new variants of old products – not in pursuit of perfection . . . but excellence . . . and creative destruction . . . or the next generation of products. Thus they are guided by the 80-20 rule: don’t shoot for 100%, only 20% that gives 80% of the desired outcome! And that demands a lot of discipline in thought process – especially for our culture where ‘kuro-kuro’ is a national pastime or why we can’t get off our carousel?

Down by the corner of the street where the writer lives is a pair of massive pillars meant to be the archway to a publishing giant and American icon – and the titles of their popular periodicals are still etched. The physical facility has moved to another state and in its old place is a boutique hotel. The business is audaciously dealing with the modern phenomenon called the internet: at least a dozen of their once popular magazines are now extinct – yet they keep developing new products and maintaining a healthy portfolio.

Everyone with an internet connection can access whatever periodicals one desires. Of course, there are computer viruses to deal with, phishing or spam mails, etc. When the Ford Model T came out people protested because they predicted a rise in road mishaps. And in Eastern Europe, this has indeed become reality. The once walled off region is now home to an exponentially growing motorists. And the same is happening in Vietnam and Cambodia; and obviously, China and India. (The cure: they have to develop safety consciousness; which the writer shared with his Indian friends many years ago when he saw the chaos on the road between his hotel and the company facility. And unsurprisingly, that is exactly what the EU has mandated for its new member countries.)

We can’t afford not to focus on understanding and pursuing innovation, or we shall be stuck in neutral – and unfortunately, we’re on an uphill climb so gravity will pull us down?

The writer has raised the issue of hierarchy, especially our hierarchical culture – he is a critic of hierarchy when transparency is taken for granted. The sun, as they say, is the best disinfectant. And transparency invites critical thinking. Ideas are generated when the mind is encouraged and nurtured to be dynamic, inquisitive and forward-looking. And in the 21^st century where competitiveness is underpinned by ideas, we need a truly mind-nurturing environment. (And here is where education reform can come in?)

As Catholics we don’t question the Trinity and Papal Infallibility; but there are things around us that we must question, for example: why haven’t we developed something after the jeepney; why are we economic laggards; why is politics the way to wealth when it’s meant to be a public service. Or why is there sex abuse in the church? (Disclosure: In the writer’s archdiocese, the Archbishop demonstrated how to handle this problem: ‘Bishop Lori signaled a welcomed change to his predecessor's handling of clergy sexual abuse of minors and acknowledged that abuse took place, apologized, offered counseling and offered to meet with other victims. Bishop Lori dealt with these claims in a candid and open manner which helped us in going forward with the mediation process,’ said the lawyer of the victims.)

Until we develop a dynamic, inquisitive and forward-looking mindset we will witness our continuing decline and thus our inability to provide justice to a third of us that are hungry? And to tolerate such enormous poverty is to tolerate injustice?

Global economy on the mend . . .

It’s heartening we’re again upbeat with exports rebounding.

Before the global recession, our exports were at $49 B, and went down to $37.2 B. And it appears that with the global economy on the mend, we are seeing an uptick in exports that should bring us back to where we were, i.e., a re-grow of 24%. But with some big countries still to regain their economic strides, it’s not surprising that some of us are cautious. (And, unfortunately, there is uncertainty in the Mediterranean, if not the Euro zone.)

And this is where the development of the first Philippine Investment Promotions Plan (PIPP) comes in handy and timely. It calls for “an average 16% growth every year between 2010 to 2014, higher than the 12% eyed in the Trade department’s road map for the past three years”. The Business World article is very encouraging as it continues: “streamlined efforts are especially needed now as competition among investment hosts in Southeast Asia stiffens amid the lowering of trade barriers.

"With the emergence of less costly free trade of goods and parts inside the region, investors such as multinational companies will increasingly see the Association of Southeast Asian Nations as a single market and will reposition their production, logistics and sales networks in the region depending upon pros and cons of each country," the PIPP stated. “It is therefore of paramount importance for the Philippines’ investment promotion to focus on select opportunistic sectors in which the country has competitive advantages to other ASEAN member countries.

“It identified the electronics, business process outsourcing and renewable energy industries as the top competitive sectors but added that more could be added after studies are made. Bernardo F. Angeles, Jr. -- assistant head of the technical working group -- earlier identified other industries the PIPP would focus on: agro-industry, food processing, mining, logistics, aviation, shipbuilding, and tourism.”

That is the heart and soul of the plan. How we define how investors must pitch their proposals is crucial. For example, our electronics exports are largely semi-conductors – it is imperative that investors pursue higher value-added products. (The Indonesian BOI chairman was recently on CNN talking precisely about this imperative!) The key is to produce compelling products so that they are competitive and thus find a bigger market.

The PIPP ought to be shared with the public especially our economists and the JFC (Joint Foreign Chambers) who have similarly done their homework to right our economic ship – because we have no choice but to right our economic ship! For instance, raising our exports generated via aggressive investment and competitiveness will raise our revenues far greater than increasing tax collections even by the most optimistic numbers reported.

Separately, the UPSE forum teed up poverty as an urgent issue, thus: ‘Poverty reduction in East Asia has been quite fast, and the Philippine case appears as an exception’. The good news is we recognize the imperative of aggressive investment and competitiveness. But it is silent about partnering with foreign investors as presented by the JFC – we don’t have to go it alone, nor can we afford it?

The writer has talked about a reverse thought process, i.e., starting with the end in view. Doing ground-up, linear and incremental initiatives for decades haven’t work: (a) they’re confusing development – which must be sustainable – with compassion and crony capitalism, and (b) compromising if not missing our structural problem, i.e., investment and competitiveness? Net, we will be unable to provide even such basics as water and power until we develop discipline in our thought process and focus in our execution – the challenge of Eden?

The bottom line: the test of the pudding is in the eating! But we can’t let the world leave us behind – and so failure is not an option!

Disciplined thought process

We’ve heard it before, ‘back to basics’. But the reality is big and successful enterprises never stray from the basics – because they have a very disciplined thought process!

It was ‘in one ear and out the other’ when Lee Kuan Yew told us that what we needed in order to forge ahead was discipline. The heart of discipline is in the mind, our thought process?

People tend to get ahead of themselves and before they know it, they’ve taken the wrong turn? Pictures say a thousand words and so as a consultant, the writer uses pictures to demonstrate the basic principle that a client may be taking for granted, e.g., succumbing to ‘freelancing’. He recently showed to a group of marketing managers the picture of a horse pulling a cart: the horse pulls the cart, it’s not the other way around’. (‘Of course’, they must be thinking?)

‘You want to beat the hell out of competition – then stop freelancing! Stay with the product concept – or what it means to the consumer in the first place . . . and focus on enhancing, magnifying if not upgrading its attributes, making the product more relevant, user-friendly, accessible, i.e., more becoming! And then you will have a sharper image to drive your communication and execution. Freelancing is not necessarily creative-thinking especially if it gives the obvious answers – which competition can also see. You want to keep the competitive edge – and beat the hell out of competition!’

The elections gave us a lot of hope and desire to help the country. And so there is an abundance of ideas. Hopefully the new leadership would not put the cart – it’s poverty, it’s growth, it’s employment, it’s corruption, it’s this, it’s that – before the horse.

They ought to be asking: where’s the horse – where’s the investment and the competitiveness? Manna from heaven doesn’t come every day; we need investments employed productively to produce competitive products and services that will yield the means to address poverty, generate employment and drive growth?

As one economist says, we can’t eradicate poverty – all we can do is to grow at a faster pace. But we can’t grow at adequate levels either given our meager investments nor can we eradicate corruption? Then let’s not define the agenda as such – it puts us back on our carousel, going round in circles?

When we’re talking to an architect or a builder, they will tell us exactly what it takes to build the structure we want. But first they will make sure that we’re talking about the same outcome and attributes – they will show us illustrations of the finished product.

What is the outcome that we want and what are its attributes: a developed economy – one that has enormous investments and competitiveness and thus low in poverty? And to build a developed economy we must aggressively, not passively, seek foreign investments, not only local?

The bottom line: we need a lot of discipline in our thought process? Lee Kuan Yew was not being patronizing when he talked to us about discipline; he was being a good neighbor?

A perfect storm . . .

Why we are where we are? Is it all because of us, all of us – not just corruption or political dynasties or oligarchy or whatever?

There’s no perfect country, no perfect politics, no perfect investor class, no perfect people. That being the case, we need to figure out what our “true net worth” is . . . and raise it up? In short, what counts is what we’ve got after we recognize our liabilities. And that demands a great dose of reality. We shall fail as an economy, as a nation if we take reality for granted. For instance, in our minds, have we erected a formidable wall between us and the rest of the world? Countries that walled themselves in were characterized by utter lack of investment, uncompetitive industry, crumbling infrastructure and poverty. Sounds familiar?

Should we all, together, do something, then? For example, our politicians: we don’t need any more especially after Marcos, those who won’t be able to explain their wealth? Is love of country too much to ask – what nation have we turned out to be? And ditto to our influence peddlers and propagandists?

Our Filipino investors: we need you but no one ought to own the country? Only healthy competition will create a robust, modern, competitive economy and bring prosperity? And with your influence you can get our legislators on board and give our economic managers a wider playing field and open the country up, and demonstrate your mettle – but more importantly gain some respect for the nation, i.e., make us attractive to global investors? There’s a thin line between invoking patriotism and nationalism on the one hand, and creating oligarchy on the other! We can use more foreign investments to drive our economy to competitive levels! Unfortunately, we don’t have a Gorbachev to say such a mouthful?

Our industry: we need to raise our sights and tap outside markets and outside resources to aggressively grow our revenues – i.e., we need to raise our competitiveness by stepping up innovation and product development, pursuing greater productivity and profitability? We don’t have to go it alone?

Our people: it is not job-creation per se that we need? A job that does not add economic value is a “Ponzi” scheme. It’s not the same as Roosevelt’s make-work scheme, which was meant to get an economy (with sound fundamentals) that went bust because of excesses back on its feet – to generate consumption that had ground to a halt. We have a structural problem – a major lack of investment and competitiveness – and what we need are jobs that drive our industry to be competitive. Jobs that do otherwise are akin to a running car with its gas tank leaking – it will conk out because it is not sustainable. The lessons from the former Soviet empire are recent enough to forget. And in today’s news, Greece – where a bloated bureaucracy was meant to take care of the few to the detriment of the common good? (Disclosure: the writer has friends from Greece who can give an earful; and from former Soviet satellites too.)

Our leaders: there’s no need to be patronizing. How should we react when we call importing generator sets and grains as economic initiatives in the 21^st century? It’s an indictment of the Filipino – they are reflective of an incompetent or corrupt system or both? As we learn from the private sector, the bias for competence, efficiency and productivity provides no room for corruption? Nor can we keep to transactional, tactical or populist initiatives! They’re akin to almsgiving but miss our structural problem, i.e., investment and competitiveness?

Our economists: our paradigms and models need to work. We may not have a George Soros to urge our economists to rethink these models – the point of the article, Twin peaks from The Economist, Apr 15^th 2010 re George Soros has left his mark on many economies. Can he do the same for economics?

We are where we are because unwittingly we created a perfect storm?

We can remain among the happiest?

More groups have taken it upon themselves to advance what they thought should be the economic agenda of the new president. Separately, the JFC (Joint Foreign Chambers) have offered the seven strategic industries that could generate billions in foreign direct investments and create millions of jobs over 10 years. And the backdrops to these efforts are the continuing negative assessments we are getting from international agencies: the World Bank, IMF, ADB, rating agencies, etc.

But we’re a free country and pulling these ideas together is always a challenge. We’ve lived through bad economic times many times over. We pride ourselves in being resilient. Yet, smart as we are, we have not moved the needle forward. To appreciate how much the world has gone ahead, the writer invites the rest of us to read the April 17^th issue of The Economist re A special report on innovation in emerging markets.

We may want to borrow a page from the private sector when they deal with challenges, and that is, by pulling together a “cross-functional team”. They bring analysts and decision-makers together – analysts can craft plans; and decision-makers can raise their probability of (successful) execution! Of course, in the private sector smart people can miss it too, but they go bust – there are consequences!

The efforts of the JFC are probably more consistent with the private sector model. But we need our economists on board too. Should our economists work with the private sector, starting with the JFC? For instance, given our meager GDP and thus inability to generate the requisite funds for investment – from basic infrastructure of water, food and power to raising our productive and competitive capability – we can’t confine our economic blueprints to parochial options? Every nation that has achieved economic success leveraged the bigger world – and drastically reduced poverty!

We have local enterprises that have successfully ventured into the global arena. And our economists could work with them, e.g., Jollibee, Splash, Rota, Ayala, etc. In this day and age with the world as interconnected as it is, competition can’t be taken for granted. And thus we need to think in terms of developing compelling products and services that will find buyers in the global marketplace.

We need to go beyond being contract manufacturers or contract-service providers. The carabao has to be ahead of the cart. How? We may not have an R&D or product-development heritage but the Taiwans of the world did not have it too – but they were pragmatic to work with the more advanced countries of the world to learn the ropes.

We have to dig deep into ourselves to find out how we can get out of our shell – no man is an island. Our forefathers were brave and smart but they had to learn the hard way that our bolos could not win against the cal. 45!

But it’s a free world and we can opt for the status quo – save the third of us who are hungry?

Beyond sustainable growth

With due respect to the Business World article – Economic issues for [the] next president – it is a good template but then again is it a classic output of linear and incremental thinking? This kind of thinking starts with the obvious as spelled out in the article, i.e., “finding the resources to raise investment and social spending; government interventions in imperfect and/or important markets; how do we reduce poverty and make growth more inclusive, etc”.

The mind plays tricks and starting with the obvious is like stacking “old baggage” that magnifies the barriers we face, and narrows our playing field? As we know problem-solving is brain-storming and generating options, i.e., (a) have a clean slate, widen our playing field and find the nuggets of ideas that could shine a new and brighter light on our challenge; and (b) turn the challenge on its head, start with the end in view, not with the obvious, and set the desired outcome or object.

The object is to be a developed economy – it goes beyond “restoring growth after the crisis”? Our growth before the crisis was dismal – we’re not restoring dismal growth?

The mind plays tricks: that’s why there are winners and losers. And losers could be wondering why they could be beaten when they’re as smart as the next guy? The writer has talked about his Eastern European friends because they were likewise doing linear and incremental thinking; and realized they could be blown away – by competition (i.e., MNCs). And could have walked away from manufacturing? They had all the reasons to be killed: inefficient factory, low-priced products that were selling but not generating healthy margins, cottage-industry level, not world-class, R&D, etc. And history was against them: there were scores upon scores of losers in the private sector (like market leaders becoming followers, if not extinct) as well as in economic development (like promising countries becoming economic laggards). Yet, they kept thinking like winners . . .

In our case, we keep focusing on the obvious, quoting from the article: our “key constraints [are] the culprits: a) a vulnerable fiscal situation, b) inadequate infrastructure, c) weak investment climate due largely to governance concerns”. There’s logic to our thought process but because we haven’t turned our challenge on its head, we fell into a trap thus shrinking our playing field: “Should we still look at the East Asian models, relying more on manufacturing as the big driver. Or is India a more relevant model, i.e., very focused on services, or even Caribbean, i.e., remittances and tourism? Other models?” The object is developing compelling products, it goes beyond manufacturing – “start with the end in view” . . . or we will run out of model countries to emulate? (And the characterization of India is misleading: the number of R&D centers erected in India in partnership with MNCs is mind boggling, 63; and they aspire to market the world’s cheapest car, among others! We don’t want to be like ‘no problem, Jamaica’?) How can we frame our efforts so that we generate more options instead of magnifying our constraints – and not stay with the exact, same mindset which we’ve had for decades?

‘We want to be a developed economy; developed economies are characterized by high investment levels and high competitiveness and low poverty. They aggressively attract foreign investment and have done their homework on defining strategic industries where they could attain competitive advantage, i.e., they drilled down to their core – in pursuit of innovation and compelling products. The public and the private sectors embrace foreign investment as manifested in their policies and legislations.’

The JFC (Joint Foreign Chambers) have helped us define our strategic industries – that will generate billions in foreign direct investments and create millions of jobs – and develop compelling products & services. How do we get there? By partnering with the JFC – not being an island unto ourselves, with ‘very little to no confidence’ in R&D and manufacturing?

But our albatross – a parochial instinct – keeps pulling us inward, and thus falling short?