Big data & analytics and PH economic development

No need to fear such big words. There is a commonsensical and pragmatic way to handle them. The key is to understand the object of the exercise.
 

The blog is on its 9th year. And if it isn’t obvious yet, despite the slew of data those curious about the economy will confront, the blog from day-one highlighted PH levels of investments and FDIs against our exports – and our GDP – compared to our neighbors.

There are two perspectives to consider when we view information: (a) as an analyst or (b) as a leadership. Analysts want an abundance of data; leadership less so. And it boils down to the object of the exercise. Leadership must bring greater foresight given the demands of leadership, i.e., to establish the vision of the enterprise as well as the strategy to bring it about.

Nine years since the blog’s birth, what is the picture of PH investments? We’ve raised our investment levels … yet still lag in FDIs and exports. But we’re into: (a) Build, Build, Build; (b) TRAIN – to fund the former and social safety nets; and (c) we feel good about the uptick in manufacturing.

While Arangkada seems to have lost the spotlight? We believe we’re focused on Build, Build, Build because it is key to attract investment. Still, when all is said and done, we remain inward-looking. Leadership must keep an eye on the outcome, i.e., make PH a developed economy and nation. Leadership is beyond logical yet linear and incremental thinking.

And why the blog constantly speaks to the imperative – connect the dots. More to the point, we need an industry base like the 7 big industry winners in Arangkada – that will create the platform for an industrialization effort. To quote Arangkada: “The development path of each of Asia’s advanced and middle-income economies has been characterized by strong growth of the industrial sector and large shifts of workers from lower value-added agriculture and services into higher-value manufacturing and exports. This has yet to take place in the Philippines on a sufficiently large scale.”

And recall the latest UN SDGs (sustainable development goals): (a) rapid infrastructure development; (b) industrialization; and (c) innovation and competitiveness. In other words, PH leadership must keep an eye, beyond Build, Build, Build, on industrialization and innovation and competitiveness.

Let’s get back to big data and analytics. There’s a couple of principles inherent in big data and analytics that go against the grain of populism. One is the 80-20 rule and the other is the force-field theory of Kurt Lewin. We know the 80-20 rule, so let’s go to Kurt Lewin. “Successful change is achieved by either strengthening the driving forces or weakening the restraining forces … The force field analysis integrates with Lewin’s three stage theory of change as you work towards unfreezing the existing equilibrium, moving towards the desired change, and then freezing the change at the new level so that a new equilibrium exists that resists further change.”

More of the same – i.e., insanity – cannot move PH forward. But let’s get back to the 80-20 rule. And this is from an economic briefing the writer attended three years ago: The PH economy is skewed to specific regions: Luzon (from Hacienda Luisita down to Metro Manila and Calabarzon) accounts for 2/3 of the economy; but with Cebu and Davao plus Cagayan de Oro, altogether they would represent the bulk of PHL’s economy – $321.2-B as of latest estimates.

The 80-20 rule is a restatement of the laws of physics: where there is momentum and weight and mass there is energy or power. In other words, there is nothing wrong with getting 2/3 or the bulk of the economy growing like crazy. We are going against nature if we try to impede such force. Enter, Kurt Lewin. There are two things to remember: (a) to strengthen what makes the biggest regions such an economic force; (b) to weaken the restraining forces of the rest of the economy. In other words, we must figure out both sides of the equation.

Drive the growth of imperial Manila (including the rest of the Luzon region) like crazy and make the other regions robust economic forces too. And that means raising their respective contributions to the aggregate goods and services PH produces – or GDP.

It has nothing to do with federalism. [Is Du30 and family the best argument for federalism, i.e., local lords and impunity will proliferate? Raising Du30 as a model means he demonstrates transparency. He doesn’t obstruct justice, i.e., think of what’s happening to the Trump WH. He submits to the rule of law that he pledged to uphold. Sadly, our instincts of deference to hierarchy – while expecting paternalism in return – are in full display. See below re we love tyranny.]

MNCs operating in over 200 markets or countries do it all the time, that is, drive the revenues of these markets like crazy. The bigger ones will get the largest resources because they will yield the greatest returns as we know from the laws of physics. Yet, markets with smaller contributions are subject to the lens of big data & analytics – i.e., to overcome their restraining forces and thus raise their contributions.

How do they apply to PH economic development? Recall the example on how to connect the dots, i.e., it’s like playing solitaire where the deck of 52 cards equals big data; while the analytics exercise must yield the four suits – of Hearts, Spades, Diamonds and Clubs.

The PH top exports are: (1) Electrical machinery, equipment: US$25.2 billion (44.8% of total exports); (2) Machinery including computers: $7.8 billion (13.8%); (3) Wood: $2.9 billion (5.1%); (4) Optical, technical, medical apparatus: $2.5 billion (4.4%); (5) Vehicles: $1.4 billion (2.5%); (6) Ores, slag, ash: $1.3 billion (2.2%); (7) Animal/vegetable fats, oils, waxes: $1.2 billion (2.1%); (8) Fruits, nuts: $1.1 billion (2%); (9) Ships, boats: $1 billion (1.8%); (10) Gems, precious metals: $757.4 million (1.3%).

Think of the 80-20 rule. While we can develop other industries, the top exports give us a head start … We must be a globally respected if not dominant player in these industries ... How do we then pull these export drivers and the regional drivers together? Which and where must these top exports reside?

We must be globally competitive. That means an industry must reside where we have the greatest chances – given the factors demanded by the supply chain – to attain global competitiveness. That perspective will take out the blinder – our bias on the local economy – and open our eyes to the world.

These industries need a network of auxiliary industries to complete the supply chain – from raw materials to logistics and beyond. It is the first step to figure out which other regions can be part of the ecosystem. If we can get the bulk of the economy firing on all cylinders – i.e., driven by innovation and globally competitive – we will attain an inclusive economy. But we must fling “pwede na ‘yan” and “crab mentality” to comprehend what foresight brings.

The rest of the regions that can’t be part of the above supply chain can concentrate on their local economies and the Philippine market – which isn’t small. But consistent with the 80-20 rule – i.e., our economic managers can employ their fiscal tools accordingly: dispense incentives where they must and withhold when warranted. And like farm teams, once innovation and competitiveness migrates to our psyche, the excellent ones will bubble up to merit a place in the highly competitive global arena.

The bottom line: We must drive industry and exports (not livelihood, which has kept us the regional laggard) like crazy if we are to overcome poverty. It is where we must spend our waking hours not in defense of tyranny. More to the point, Du30 – like Marcos – can’t match the leadership of a Lee or Mahathir or Deng, to lead us to prosperity. Go figure. See below re people go with winners not losers. The corollary: tyrants demand sovereignty.

If we can figure out (and toss the politics) where these top industries must be located, we will likewise be equipped (not misinformed by vested and parochial interests) with a better blue print for Build, Build, Build – from energy and beyond. As well as to pursue industrialization and innovation and competitiveness.

Remember these industries must constantly move up the value chain to compete and win in the global arena. Benchmarking – i.e., 360-degree, from technology and beyond – against competition and truly understanding human needs are critical in innovation and competitiveness.

We will attract far greater FDIs if we have the building blocks of development in place, that is, we’re geared to make PH a developed economy and nation. People go with winners not losers. And we gain their respect as we advance civilization. Respect – like love – begets respect.

But we – including our economists – must commit to change course. Also, our politicians and industry and education, too. Democracy is a government of the people, by the people and for the people.

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“Now I know why Paul dared to speak of ‘the curse of the law’ (Galatians 3:13). Law reigns and discernment is unnecessary, which means there is little growth or change in such people. When you do not grow, you remain an infant.” [Faith and Science, Open to Change, Richard Rohr’s Daily Meditation, 23rd Oct 2017]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“National prosperity is created, not inherited. It does not grow out of a country’s natural endowments, its labor pool, its interest rates, or its currency’s value, as classical economics insists . . . A nation’s competitiveness depends on the capacity of its industry to innovate and upgrade.” [The Competitive Advantage of Nations, Michael E. Porter, Harvard Business Review, March–April 1990]

“Learning and innovation go hand in hand. The arrogance of success is to think that what you did yesterday will be sufficient for tomorrow.” [William Pollard, 1911-1989, physicist-priest, Manhattan Project]

 

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]