Rethinking RP economic development

How to turnaround a failed economy

Where we are

We are in a crisis – for decades; but we’re still in denial?

We need to move from incremental to radical/crisis-mode thinking

Recognize pragmatic parameters – the playing field we are in

Developed countries’ GDP per person is over $30,000 against our $3,300, i.e., 27-30 million hungry Filipinos

As a starting point, to match a neighbor, Thailand, we need to raise our GDP per person by 2.5 X; and to get to developed country status we need to do 9.5 X

We have been driving cottage industries for decades, stuck in survival mode – see below China’s SME model as reported by The Economist, Sept 12th 2009

We thought OFWs would be our savior – competing for lower valued-added labor ignores emphasis on/requisite higher valued-added products and services

The Chinese are driving exports via small entrepreneurs but they account for 66% of patent applications, more than 80% of new products and a whopping 60% of GDP

Higher value-added products is a requisite that we must satisfy – but even our biggest industries don’t have a healthy, competitive patent portfolio

Our biggest industries have been richly rewarded by keeping their noses to our borders

They have not developed competence to compete overseas, e.g., San Miguel and Ayala

Where we want to be

Capital and labor are the pillars of an economy

They are critical resources that must be optimized, not marginalized

Industry must thus develop competence to compete beyond our shores – to optimize resources

Until we get our mindset right & committed to the above keystone, we won’t have the resolve to pursue these requisite building blocks, i.e.

Government must provide the environment to encourage industry to compete overseas – via incentives and enabling laws and regulations (for us to become globally competitive)

Government and industry must open the country for foreign investors to partner via capital & technology and provide access to bigger markets (for us to fill competitive gaps in these areas)

And given the Church has moral suasion, it should be a party to the partnership – to be able to buy-in and support economic development and address poverty, beyond the pulpit

How do we get there?

“Keep it simple” must be the guiding principle

The key to success is execution: complex cannot be executed – the world’s largest enterprises stay with fundamentals but are hard-nosed executors

We have to unlearn hierarchy – monopolists don’t develop competitiveness

The structure we fought against (& be free from) is what we precisely created with a nation of haves and have-nots – we applaud and celebrate monopoly

We have to learn to be competitive

Our culture of compassion and inclusion inhibits competitive spirits?

An idea or product can always be topped – marketers leave their egos behind; keep the mind liberated; and constantly seek better ideas; it is fundamental to product-architecture modeling or why Steve Jobs and MediaTek of Taiwan are successful – electronics can be thriving but it requires constant idea generation, as with other industries

We have to develop a problem-solving culture (beyond spinning wheels)

It distinguishes a developed from a developing country’s “kuro-kuro” culture

But it is again a cultural issue – problem-solving can mean stepping on toes

The barriers we face

We don’t have the experience to drive and sustain economic growth

We don’t have the experience to compete globally

We don’t have a track record in problem-solving

Those in leadership and industry grew up in a hierarchical culture; staying with it maintains the status quo that suits them – talk about humanness!

In the meantime we keep stepping up borrowings and accumulating debt; yet our infrastructure remains woeful – a classic double whammy!

The bottom line . . .

We are in a downward spiral unless we as a people change . . .

Do we have a saving-grace?

We are one of the least developed countries but with a long history in democracy & trade plus a steady foreign exchange source, i.e., OFW remittances

We will attract: (a) incremental (not massive) global investment, e.g., extraction, energy-related industries; (b) liquid assets that can be transient c/o financial services firms, e.g., CalPERS and © foreign companies who want to partake of the OFW bonanza (we need to ensure they make us a regional player not simply a market for them)

Unfortunately we would still yield sub-optimized outcomes (poverty remains daunting) until we change our fundamental thinking and structure – to be globally competitive

Footnotes

Optimizing resources like capital and human resources goes beyond Finance or Economics 101 – especially when creating higher value-added products

It is what is behind the success of global brands like Coke – it is valued at $69 billion; the world’s top 10 brands have an estimated value of $423 billion

But developing countries don’t appreciate this phenomenon

Turkey has developed its manufacturing sector but has not achieved what Taiwan has

Both countries benefited from Western support to establish a manufacturing base which Taiwan leveraged via the creation of brands that are now global

Optimizing capital and human resources is why global brands are able to price ordinary, but higher value-added, day-to-day products competitively

And generate healthy margins to support brand-building

Other than Taiwan, e.g., HTC & Acer, South Korea has also learned the lesson & are getting enormous economic benefit, e.g., LG and Samsung

Until Philippine industry moves away from monopolist/isolationist to global competitor, we will miss out on this economic phenomenon