Strategic industries:

The devil is in the details

It is noteworthy that the Senate is focusing on strategic industries – to support them aggressively via targeted fiscal policies.

One way to be truly strategic is to draw a simple roadmap:

What incremental GDP output do we expect from these strategic industries? Instead of abstract goals, like a 7%-10% GDP growth, we can set absolute targets like $100 billion, i.e., benchmarking against Thailand’s GDP, and reduce poverty to 10%, for example. We can then break it down as a 5-year plan, and set the incremental GDP output at $17 billion or 10% growth for year-one. (For decades we’ve been focused on the domestic economy yet haven’t articulated a clear-cut target as such; and so we talk about how much our economy has grown instead of how much it must grow! Faith alone won’t save us; it must come with repentance – and thus be prepared to be pruned for the mistakes we’ve made and re-grow ourselves?)

Assuming coconut/agri-business, jewelry, semi-conductors, garments and BPOs are our strategic industries; will they deliver 80% of the $17 billion or $14 billion incremental revenues? If not then we need to revisit the composition of our strategic industries. (The 80-20 rule – a lesson from the Two Great Commandments, and developed into an econometric model by Pareto – is not an academic exercise: it is the foundation of successful major endeavors (from the West and the East) and business models like Wal-Mart’s or dominant consumer goods companies’, i.e., they zero-in on the vital few that will deliver the desired outcome.)

What products will we produce: low-end, high-end, or mainstream? Does the industry have a good handle on the product architecture – that is, it spells out “multi-generation”, higher value-added benefits desired by consumers, so that they can invest for the future to sustain the business? Which countries are the target markets? Does the industry have the requisite consumer insights to win in these target countries? What is the size of the market and what volumes can we sell? Which countries are we competing against? Can our products win versus these countries – from a quality- and customer service-standpoint? How does our cost structure compare? Is our infrastructure and logistics competitive against them? Will our market share and revenues be sufficient to yield ideal margins – to fund aggressive marketing efforts – and profits to be sustainable?

The above sample parameters will help us figure out which of our industries are truly strategic – and facilitate the development of fiscal policies we ought to pursue via legislation, and enhance our competitiveness.

Industry groups must work with government so that together they can craft a plan that has more than an even chance to succeed – we may not be at 100% in the first go-around but would have gained from the experience and do better next time. The key is learning experience – which we don’t gain by merely repeating current practice and expecting a different outcome; which is how quality gurus define insanity.

The more transparent we define what makes an industry strategic the greater leverage media will have to monitor our efforts – and weed out crony industries that can’t present and meet the requisite parameters. As importantly, the sharper we articulate our roadmap, the more we can attract foreign capital – it’s no manna from heaven; we have to compete for capital!