“This facility can’t be efficient!”

The word facility can be substituted with product – or brand, office, subsidiary, company, branch, agency, bureau, department, government, country, economy, etc. – and it will still hold? The writer’s Eastern European friend is proudly talking about the group’s latest venture and how the manufacturing manager reacted to a facility (“This facility can’t be efficient!”) that they considered for acquisition but did not.

But he’s real proud because it is the third new business and is already doing comparatively much better than the previous one, already a success story by itself. There are at least two things the businesses have in common: (a) consumer packaged-goods and (b) efficiency. And efficiency has become instinctive to the people (and the organization) that it is a competitive advantage! Ergo: even a simple business could go beyond local if it is competitive! “We were victims of repressive rule. Free market and globalization opened the door for us but we needed help to understand how to leverage investment. I had to sell my dilapidated car realizing investment was the first step.” Since then they’ve experienced the power of technology, innovation, education and talent development as well as product and market development.

The friend reminds the writer that when the latter first visited, the remark that dropped their jaws was: “We need to mechanize the packing lines as a first step to raise efficiency.” The focus on margins (a clear-cut measure of efficiency) has become an obsession! And they have elevated the game . . . to driving margins via volume, value, and profitability founded on a disciplined and rigorous approach to product development and innovation. But they had to struggle: Europeans (indeed generate more ideas than Americans but the latter are ahead in commercialization) have had the sense that they’re a creative and artistic bunch, and the focus on discipline and rigor would cramp their style if not undermine their creativity. (Everyone would think “I’m a Steve Jobs?”) And so they would lapse into proudly showing off lovely new product ideas. But when tested through the rigor and discipline of product architecture modeling, for instance, it becomes obvious the idea could not travel beyond the home market – i.e., it does not deliver a compelling (human) higher value-added proposition!

Substituting facility with Philippines or Philippine economy, the title of the blog reads: “This economy can’t be efficient!” And why does it matter? Global companies are truly obsessed with efficiency – which is how they are able to raise their competitiveness, and elevate it into a competitive advantage. And nations that are able to attract foreign investments better than others have one thing in common: they are perceived as efficient economies! For example, the US – despite its economic woes – is still the nation that attracts the most in foreign investments. But we could be in better shape if we turn underdevelopment on its head – i.e., we have lots of room for growth unlike the US, which is fully developed! Thus, the US needs ‘stimulus’ money. BUT we need to focus on development, i.e., not piecemeal but building blocks toward, say, our critical basic infrastructure or vital few industries, e.g., ‘Arangkada’.

If the Philippine economy is to be efficient, we have our work cut out for us? We need the Aquino administration’s flagship PPP initiative to take-off? We need to reverse declining exports; prevent insurgents’ attacks on mining installations – i.e., edify Juan de la Cruz about the net positives of the industry; overcome delays and overpayments of major projects; be a preferred nation for major infrastructure projects – e.g., canceling projects like Laguna Lake, Ro-Ro, NAIA 3, rightly or wrongly, undermine our efforts to be perceived as an efficient economy? And we have to be unstuck from an economy driven by oligarchy and monopoly power? Power is closer to man’s animal instinct, not his intellect – as Clinton rued how a supposedly intelligent man could succumb to a Monica? And it applies to corruption too?

Clearly we have ways to go? Those who have elevated efficiency into a competitive advantage have moved the challenge down to their gut – starting in their head, dropping it to their heart and settling in their gut or to the level of their instinct? Simply put, it is above and beyond rhetoric, ideology, debate and ‘kuro-kuro’ and as importantly, way past being frozen to inaction?

Thank God it’s Friday

It’s actually a Monday morning but two news items from the Philippines carried the positive feelings that Fridays bring over to the new week, as the writer sits for his morning coffee. “The COMSTE (Congressional Commission on Science, Technology, and Engineering) is promoting a new, radical model for higher education – one that is heavily centered on R&D and innovation,” Manila Bulletin, 9th Oct. “This new model is called the innovation clusters, tripartite partnerships on R&D among the academe, private sector, and government . . . While we do have several outstanding universities, they stand out as islands of excellence in an ocean of mediocrity. We have to change that if we are to truly harness the potential of our people . . . Efforts at reducing poverty and improving governance will not result in progress unless we leapfrog development itself,” says Sen. Angara.

It appears the Agriculture road map is beginning to take shape; and the department’s budget is being raised by 60%? Earlier reports were discouraging, lagging behind the efforts of other strategic industries? “The AF 2025 February report indicated that a priority goal for rice and corn is an improvement of good governance, increased public and private investments, and technology development,” Manila Bulletin, 10th Oct. ”Fisheries is the top promising sector being eyed by AF 2025 to help lift the entire agriculture industry with the goal of making the Philippines a seafood basket and aquamarine center of the region . . . The interventions needed to achieve this include opening up of Pacific and China sea fishing area, mechanization . . ., technician training, community organization of fishers, implementation of fish cage . . ., establishment of fish processing centers in fish production sites, and construction of docking area (cold storage facilities for small fishers).”

Finally we are setting high expectations for Juan de la Cruz! We’re not just the little brown brother! We’re not just good to partake of the spoils from a cacique system via livelihood projects! We’re not just to take the condescension and insults from a lopsided economy that has descended into la-la land? The czars and the emperors were condescending – but they’re not of the 21st century? And for a nation that was to lead Asia to be a maturing, modernizing society, we can’t settle for the crumbs? How do we rectify decades that we’d rather forget? ”Efforts at reducing poverty and improving governance will not result in progress unless we leapfrog development itself . . . To help lift the entire agriculture industry [our goal is to make] the Philippines a seafood basket and aquamarine center of the region.”

Senator Angara and the Department of Agriculture need Juan de la Cruz to move the country forward? It is encouraging that “The new model [from COMSTE] is called the innovation clusters, tripartite partnerships on R&D among the academe, private sector, and government.” But beyond that, we must not be an island unto ourselves? We can’t be chanting ‘patrimony’ oblivious to the reality that our neighbors are able to leverage? And the church can’t afford to make Marx’s dig a truism, that ‘religion is the opium of the poor’? Rizal made a similar point? For instance, given the reality of ‘scarcity of resources,’ ‘to be inclusive’ is rhetoric – ‘to prioritize’ is how to make things happen? Simply put, we need to learn to say ‘no’ – so we could prioritize?

Juan de la Cruz needs to recognize that there is a world beyond patrimony and livelihood and charitable efforts? Lifting the country and helping the poor can only be sustainable in a sound economy? It is noteworthy that our think-tanks are now teeing up why we don’t seem to be committed to investment? And thus it follows we’re not predisposed to technology and innovation? As the wife would say, “we don’t have to go very far, my siblings’ jaws would drop whenever investment is on the table.” And that is despite growing up with the parable of the talents? But we’re happy to ‘live on interests’ – or LOI, off the family heirloom?

Thank God it’s Friday, and people like Senator Angara and the Department of Agriculture are forging on!

Beyond investments and competitiveness . . .

. . . And . . . corruption . . . we must challenge ourselves about our . . . problem-solving and execution, like the way ex-NEDA secretary Dr Sixto Rojas did? To paraphrase him: ‘it is not the absence or lack of consistency of economic plans that has made us economic laggards . . . we need new thinking?’ We were the gold standard in economic planning such that our neighbors would simply ‘copy and paste’ our plans?

It is a well-informed and sophisticated Filipino that foreigners see in Juan de la Cruz – and why many have made it abroad. But it won’t be surprising if Filipino expatriates say that our worldview does not necessarily match those of developed economies? For instance, Gibo Teodoro was viewed by the business and foreign communities as an ideal leader. In an interview he expressed that perhaps it was his instincts that they sensed from his message and his responses. And which he thought came from his overseas experience – where success was a pretty intense process. And in the inelegant lingo of corporate America, for example, it means ‘daily blocking and tackling.’ (How it reminds the writer of Charlie Badion!) And it is for the same reason that we believe Mar Roxas is an ideal right-hand man for President Aquino?

One columnist calls it our ‘pusong mamon?’ Our instinct is to lead with our heart – and thus ‘inclusion and compassion’ is what Juan de la Cruz is about? A Filipino scholar whose concentration was in ‘culture management’ would stress though that . . . ‘if we’re meant to lead with our heart, it would be situated where our head it, perched above our shoulders?’

Socialism is meant to be inclusive and compassionate. Yet after 8 years in the writer’s second home, he has not heard that it is what the young people want. In fairness, the older folks would prefer the ‘good old days’ when they had their share of the community’s jobs or farms or basic necessities – from bread to vegetables, etc. But as the world now knows, Deng Xiaoping went against the grain and embraced market economy?

The writer is still awed by the length and breadth of Ukraine’s wheat farms, yet the system failed. The lack of bread caused riots across the region – i.e., low-pricing may be enticing yet proved violent. Today, people wonder why the communist leadership put up an aluminum plant and a truck factory (read as inefficient!) in their town, among many other examples, when the source of raw materials and target markets were ill-defined – i.e., job creation per se was unsustainable. And Putin doesn’t seem to have learned, still banking on oil, while behaving like a modern-day czar? But has Juan de la Cruz learned his lesson? We don’t want to lionize oligarchy – i.e., livelihood efforts would characterize a cacique structure more than an egalitarian society, which is driven by sound economic fundamentals?

A market economy demands loads of problem-solving and execution, and investments and competitiveness? It is a fundamental given yet not instinctive to Juan de la Cruz? We valued a high minimum wage – except that as the ILO says, we missed to value skilled labor? (And the converse is: we value slack, precisely why our elders warned us to guard against Juan Tamad?) We valued the OFW phenomenon giving jobs to millions – except that as we now know, we missed to value industrialization? We valued patrimony – except that as we now know, we missed to value investments and competitiveness, i.e., the Asian tigers and China and India have been getting a disproportionate share of technology, innovation, education and talent development as well as product and market development?

The human ego can go haywire (Maslow) and seek higher needs instead of building up from a strong foundation? (The Soviets sought the lofty aims of an arms race while failing to build the fundamentals of its economy?) And in our case that means: a world-class airport, electricity, infrastructure or simply roads to our biggest revenue-generating tourist attractions to begin with (i.e., prioritize!), and the strategic industries spelled out in ‘Arangkada’? Arangkada is a straightforward road map to push industrialization via a vital few industries that will deliver the biggest bang (i.e., prioritize!) for the buck, i.e., $75 billion in investments and lots of jobs over a decade, and incremental GDP of >$100 billion. What do we need to get there? To remember . . . that our heart is not perched above our shoulders?

The two subsets that is PHL

Twenty years ago the writer would confidentially and dearly share with his Indian friends that the Chinese were going to leave them in the dust. ‘Have you considered that you could be too smart for your own good? The Chinese are about . . . aggressively looking forward to the future, and you don’t want to be about . . . aggressively invoking the past?’ It was not the time for the Indians to engage in ego-trips – i.e., their challenge was problem-solving and execution, and investments and competitiveness!

These were sophisticated people at home in their own enclave, e.g., like a secluded section of a luxury hotel – not accessible to outsiders, not even hotel guests. One was visiting New York and on his itinerary was a dinner in a Michelin-rated French restaurant; and more importantly, to see a daughter at Harvard. The Indians are inherently smart and their facility with numbers is as good if not better than the Chinese or Eastern Europeans. What the world calls Arabic numbers is from them – and thus their expertise in numerology. Likewise they have Gandhi, their faith, their higher education, among others – and so it is not surprising that they have so much pride about their heritage and their past? And the West respect their talents – thus numerous regional technology and R&D facilities have been built in India.

Yet, poverty was so visual that every time the writer arrived in India he had to put things in perspective. Globalization came right up their alley . . . owing to their IT capability and then some, allowing them to partake of its spoils. Still, there are two subsets that is India, not unlike the Philippines?

When our monetary authorities talk about our financial and economic stability, we need to put things in perspective? And that is, that there are two subsets that is PHL? On the one hand we’re comfortable sitting in 50 boards (given our cacique structure) shaming Jack Welch? Yet on the other, overseas employment and, more recently, BPOs are our major sources of employment; and as importantly, drive the economy. And they have alleviated the housing issue – thus, property development has been booming; and of course, industries tied to it. And as we’re making good our commitments to the international community, we’ve opened the local market to imported goods. The net effect: OFW remittances remain our economic engine – i.e., the local economy is far greater than our export revenues! Yet, we’ve now recognized that neither or even in combination – OFWs and BPOs – would make for a strong industrial base? Our biggest export, electronics, is still an input to the broader industry – i.e., we’re not into competitive finished products? And so the Aquino administration is beginning to entertain doubts about our once promising export targets?

The bottom line: even the engine that makes one of our economic subsets tick will not lift us from underdevelopment? And so long as we’re comfortable in our hierarchical structure, we’d remain predisposed to accepting a sad reality? Our real challenge is problem-solving and execution, and investments and competitiveness? But we have no track record in successfully dealing with them? The evidence: a white elephant that is NAIA 3? Or not having electricity? Or not having access roads to our biggest revenue-generating tourist attractions? And we talk about tourism being a natural strength, yet the one airline to and from Europe are unhappy because our taxes are not competitive against our neighbors? But we need to raise our tax receipts? This kind of internal conflict is common in many developing countries – i.e., being too close to the trees misses the forest?

We like ‘holistic’ – like ‘inclusion and compassion’? Eliminating the restrictive economic provisions in our Constitution may be holistic and ideal – that we must pursue, indeed! But isn’t getting a world-class airport far simpler, yet we haven’t done it? From a strategic standpoint the JFC’s ‘Arangkada’ proposal should satisfy our standard of holistic? But we must get the basic things right, first and foremost – before we sow confusion and be back to square-one? We can learn to walk before we run – e.g., raise our efficiency- and productivity-consciousness, critical to get us on the path to competitiveness, especially as the global economy remains anemic?

Ideology, sustainability and education

As we are well aware the battle over ideology is creating a lot of uncertainty in the US – notwithstanding the friendly golf game between Obama and Boehner? The Bush-Cheney ideology, rightly or wrongly, has been perceived as being at the root of decisions that plunged the world into chaos? And Christian ideologues, to the horror of many, have taken the law into their own hands?

As committed Christians, it’s not surprising that we want to live up to our ideals. And so in crafting policy initiatives, say, pushing PPP projects, we prescribe cures like job creation; or safeguarding the interests of small farmers in agro-industrial efforts. They are not bad! The problem as we know is that when we’re too close to the trees, we miss the forest? Says the Director of our Wage and Productivity Commission, “. . . Our high minimum wage (at 90 v. the 70 index of ILO) disrupts the whole economy, it doesn’t value skilled workers . . . it leaves most of the country’s technical personnel or skilled workers vulnerable to seeking better opportunities abroad,” Business Mirror, 29th Sept.

The writer remembers many months of protracted negotiations with the Chinese on a joint-venture. In hindsight, they had understood the benefits of a market economy . . . perhaps from Deng Xiaoping? As the plans took shape the Chinese confessed they needed education and time to fully comprehend competitive advantage and sustainability. Fast-forward: the venture beat a similar facility in the West in productivity – and as importantly, it took less time to get there. And the issue of job creation went away – as the partnership pursued more investments and generated greater economic impact.

The model, unsurprisingly, is being replicated in the experience of the writer’s Eastern European friends – amongst a few others the writer had witnessed before, including in Africa – who (similarly) intimated early on that they needed education and time to better understand what competitive advantage was about. We have our own experience re the shortcomings of land reform: it became a giveaway to middlemen, who ended up as the new, if not worse masters, of the small farmers? Net, it is economic viability and sustainability that we must aim for – which is what competitiveness is about? [Perplexed, given ‘scarcity of resources’ and ‘supply and demand’ especially, the Provost of UMass shares with the writer what she learned in a recent trip to Asia: People don’t relate economic sustainability to competitiveness? And the writer suggests: Harmony and serenity reflected in a Japanese garden would explain it?]

Those who lived under Soviet rule are the first to realize how liberating freedom is. Yet, education and progress don’t come automatically. And in a cacique structure like ours, those who have access to the outside world, by definition, fortify their standing; and explains why the gap between rich and poor hasn’t narrowed? It should be funny that in the 21st century we still have radicals whose views conflict with those in the mainstream? Yet it is not surprising because they see the gap between the haves and the have-nots? How could they appreciate ‘competitive advantage’ when they view the system as suspect? And given that we’re economic laggards how can we truly embrace the free market, like Deng Xiaoping did; and when parochialism has handicapped us to be confident players in a globalized economy?

Our challenge beyond education is to progress with the rest of the world – and we won’t get there if we believe that our faith is meant for us to stand still, for example? And education does not start in school. It starts in shedding backward-looking beliefs? In the same manner that economic reforms became the seeds of political reforms in many parts of the world, economic success would inject an expansive education paradigm? Parochialism, on the other hand, has narrowed our perspective and unsurprisingly, education – meant to lift Juan de la Cruz – is paying a dear price?

Now we’re talking about charter change. The bad news: (a) in a cacique structure the radicals don’t trust the elites, suspected of being behind charter change; and (b) those who want to preserve the status quo would find an excuse to undermine the efforts? Are we up to the challenge? Should we get something done in the meantime, e.g., a world-class airport, electricity, roads to our biggest revenue-generating tourist attractions? And being serious about ‘Arangkada’? Let’s focus like a laser on a few things for a change?

Branding goes beyond activity

When the writer first arrived in Eastern Europe, people animatedly talked about branding. Yet, several years later, attending the business community’s brand management awards night, it was obvious that people still mistook activity for branding. The discipline is relatively new and periodically they invite gurus from the West – and it’s big business, they can fill the National Theater to capacity.

The writer tells his Eastern European friends that he didn’t hear the word (“branding”) thrown around in the West – not in organizations that own global brands. And outsiders probably see the activity behind these brands and assume that’s what branding is about? And this is especially so in developing countries where new brands are being created all the time – yet many don’t survive and if they do, they can’t travel beyond the home country?

A brand is an investment . . . and must generate a multiplier effect that raises the value of the business. A brand is thus a ‘business proposition’ to begin with – not simply an activity. And as a business, it demands leadership and financial accountability.

We’re currently talking about branding the Philippines to create a positive image for the country, attract investments – and likewise employ it in our tourism efforts. If branding is a ‘business proposition’ to begin with, then we must look at the Philippine brand as a business proposition? And it demands leadership and financial or economic accountability, e.g., raising our GDP?

A business proposition must be sustainable. It means it must attain competitive advantage. And if indeed it does, then we would be attracting more investments! Love begets love! And which explains why the international community is promoting investments and competitiveness especially for the developing world to partake of the spoils of globalization.

Yet it is not something new. The Asian tigers and likewise China and India have recognized the imperative of a business proposition being geared to attain competitive advantage, and thus continue to attract foreign investments. And that must be the starting point of our thought process – and efforts to create a Philippine brand?

And since we have to work in partnership with foreigners, we need to recognize what a ‘win-win’ partnership is about? The JFC (Joint Foreign Chambers) has shared with us what it means. How far have we pursued their recommendations, which apparently we were in agreement with?

We can’t fall into the trap of ‘Filipino abilidad’ – which we unwittingly invoke when we are unknowingly sidestepping reality? For instance, Juan de la Cruz can’t summon Filipino abilidad if we don’t have a world-class airport and the ability to provide adequate energy at competitive rates? These are fundamental requirements to simply be in the game . . . as our neighbors are? We must accept and simply deal with reality? Who will do what, when, where and how? Isn’t it about time we get such basic things as an airport and electricity in place? Or should we be proud of our resiliency, ‘Filipino abilidad’ and faith instead? There is a time to stop talking and start doing?

To give justice to the Philippine brand, it must be a business proposition that is sustainable, geared to attain competitive advantage? Simply put, branding is about authenticity?

If Russia has its oil, we have our OFWs

Putin doesn’t say it but people believe that he thinks he is God’s gift to the Russians? So long as oil flows Russia’s coffers won’t be bare? And with our hardworking OFWs, we’re truly blessed? And are we God’s gift to mankind – given our faith? Yet as one columnist-priest says, God bless us if the inquisition is resurrected?

Those who have done it before believe that economic reform is what would push Russia forward! Does it also apply to the Philippines? But there is reform and there is reform?

The good news is President Aquino started on the right foot: “Ang daang matuwid.” Shares a friend (who lived under Soviet rule) upon seeing the fourth BMW pulls in by an open-air café: The Customs collector at the airport says it would take him one year to afford a BMW; while the one at the north border would take one month. But the one at the south border needs to take out his PC, Googles something and then opens an EXCEL file; he appears to be running some numbers and then declares: “It would take 3 years to buy BMW – you know how much their market cap is? I need to offer a generous premium.”

Beyond fighting corruption, we need structural change or reform, but that presupposes not ‘tweaks’ but a ‘re-design’ of our economic model – that has been dictated by deep-seated beliefs? To redesign we need to recognize that where we’re coming from . . . may not give us a new paradigm? And this may be our biggest hurdle – because we wrap our mindset in euphemisms: resiliency, ‘Filipino abilidad’, faith, etc.? We have to stare reality in the eye: we can’t build a world-class airport; we can’t provide adequate energy at competitive rates; we can’t bring tourists from the major cities to our strategic (i.e., biggest revenue generating) attractions; we can’t elevate gross investments and competitiveness and yet aren’t committed to ‘Arangkada’? Ergo: we must be focused on assembling and erecting the building blocks of the economy – from the elementary to the strategic – beyond reviewing GDP growth goals?

The writer’s Eastern European friends struggled to undo the belief that the only way to do business in a poor Eastern European country is to develop cheap, economy products and brands. And the writer could feel for them. Instinctively, they would scrimp, installing motion detectors so that the lights in their staircases will turn on only as needed. And their mindset when an expense is under consideration is: “It’s not necessary.”

They started as ‘doubting Thomases’ before they realized the imperative of mechanizing the packing lines in their first factory – which meant spending for equipment while getting rid of unnecessary headcount. Fast-forward: Today, with four state-of-the-art manufacturing facilities and marketing in over 20 countries, their headcount is several times more. Ergo: the object is not to create employment per se but to attain competitive advantage – which simply means ‘sustainable profitable growth’! [In defining ‘inclusive growth,’ it pays to heed the fundamentals of TQM – i.e., growth must be sustainable, like total quality, and must be built into the design and the process? Simply put, it is substance beyond form? And indeed it’s an axiom – i.e., even a global icon like P&G is currently under pressure (given operating margins lag those of peer companies) to deliver sustainable profitable growth, Financial Times, 25th Sept.]

And as the writer’s friends pull their latest expansion plans together – to directly attack Western markets – they are exuding confidence, ‘keeping it simple.’ A manager with a PhD in economics would crack the team up: “This game plan would not merit a PhD but none of our business plans would,” and she was grinning from ear to ear.

The test of the pudding is in the eating? And as Einstein would explain, “The value of education is not the learning of many facts, but the training of the mind to think”!

Between our instincts of ‘inclusion’ and ‘compassion’, it’s not easy for us to keep things simple? Unfortunately, in subordinating ‘result-orientation,’ the people are the ones paying the price, via massive poverty? And more profoundly, we’re the economic pariahs in a region that is meant to lead the world in this century?