‘Sufficiency economy’

Indeed we must heed the advice from two Americans (Broad and Cavanagh, who visited the country and have written books about the Philippines; Inquirer.net, Oct 13) that the vulnerabilities of our economy should worry us. Net, we cannot afford to be complacent given that our income stream is not driven by a ‘sufficiency economy’.

But the writer parts ways when they say that our economy must be ‘more rooted in local production for local consumption’. That is the conventional wisdom the West is preaching to China (and others) in order to balance trade, i.e., China’s economy remains robust because of exports while US exports took a hit and the economy suffered amid the global recession. China noted the advice by restricting credit and encouraging local consumption – but it does not mean that China will shy away from being an export powerhouse. (Other Asian countries suffered during the recession because the export market tanked. But the fundamentals of these countries are much stronger than the Philippines and thus have higher GDPs per capita, and can take bumps on the road; and Singapore, for example, is demonstrating explosive growth once again.)

Also, the writer’s definition of a sufficiency economy is much broader. And that is, beyond local production and consumption, the bigger challenge is competitiveness. The writer represented a US MNC during the period when investments were pouring heavily into China and other Asian countries. Obviously his company wanted to develop local production and encourage local consumption in the counties where they were present. But in a free market, enterprises must seek the optimum return in order to sustain profitable growth. And that means ensuring that they are globally competitive so that the investment in one country has the capacity to serve a broader market, i.e., tap regional economic/trading blocs. That is why MNCs are establishing ‘centers of competence or excellence’. Simply put, the product portfolio of an MNC could be farmed out on a specialized basis across several countries ensuring optimum return on investments.

And in his current engagement in Eastern Europe, the writer continues with the model (with people nascent to the free market) because it is fundamental to economics and business and productivity, i.e., high value-added products that generate economies of scale optimize return on investment and thus ensure sustainability. In one word, competitiveness! And it applies to the US as well. America must remain head and shoulders above the rest of the world with a constant stream of innovative products and services. It is way pass the stage of low-cost generic products – i.e., its high-cost structure while a disadvantage must serve as a motivation to constantly seek excellence, and both the US and the world will be the better for it. Edison, Gates, Jobs and their peers are respected beyond the US because of excellence in innovation – i.e., man is the true measure of himself. (Disclosure: the writer carries a US passport; and had represented the private & public sectors internationally.)

A globalized economy provides the avenue to optimize economic returns while at the same time global trade allows countries to access their needs – but they must be smart enough to always seek the optimum economic activity. For instance, China’s explosive economy requires huge amounts of raw materials that they source from Australia and Canada, among others. And both countries did not allow the ‘debt and housing bubble’ to infect their economies. Germany, on the other hand, while hit by the recession like other export-oriented countries, is today the only major European country to regain its footing – because it is a highly competitive economy. Their products are true high value-added – from premium cars to high-tech industrial products.

Net, the Philippines need to pursue a competitiveness strategy that can only be driven by drastic increases in investments in select or strategic industries that would be globally competitive. Of course, we must develop the basic infrastructure network upon which these strategic industries can be erected – and as importantly, the courage to be a world-beater by digging deep into ourselves? A nation that produced a Rizal won’t be true to itself if it prides in OFWs instead? But a cacique-like culture will celebrate it? (Disclosure: last summer was the 3^rd time where the writer and his wife heard an earful from OFWs on a cruise ship. They wonder if we get it.)