“Band-aid solutions are no longer enough”

“We are doing everything to speed up the work and improve vehicle flow. It’s difficult but necessary. Band-aid solutions are no longer enough. We need long-term measures, Mr. Ang said.” [SMC opens Alabang ramp to Skyway, Arjay L. Balinbin, BusinessWorld, 1st Dec 2019]

Let’s pause and ask: Can we internalize the import of the above statement? Of course, we believe the question is superfluous. There lies what the blog consistently raises, i.e., Pinoy instincts.

Consider: Today, there is agreement that OFW remittances and the BPO industry, the two drivers of the economy, have not moved us beyond a developing economy. Yet, we like to believe that the glass is half-full, not half-empty.

Let’s even add the combined revenues of the Top 8 listed local companies in the Forbes list, which are only a fraction of what Samsung Vietnam exported in 2017 from its cumulative investments of $17-B. Unsurprisingly, we remain the regional laggard.

Sadly, such band-aid solutions have become our go-to initiatives and are proud of it. “Beggars can’t be choosers,” is how we want to rationalize our inability to foresee – or lack of foresight.

“THE Samsung Electronics factory in Thai Nguyen, in northern Vietnam, employs more than 60,000 people. [The] company has invested a cumulative $17bn in the country.

“But Samsung is as important to Vietnam as Vietnam is to it. Its local subsidiary’s $58bn in revenue last year made it the biggest company in Vietnam, pipping PetroVietnam, the state oil company. It employs more than 100,000 people. It has helped to make Vietnam the second-biggest exporter of smartphones in the world, after China. Samsung alone accounted for almost a quarter of Vietnam’s total exports of $214bn last year.” [Why Samsung of South Korea is the most prominent firm in Vietnam: It makes most of its smartphones there, The Economist, 12th Apr 2018]

Industrialize. Industrialize. Industrialize.

Short-term thinking has already desensitized us that we accept it as a given. For example, “Think tank touts online gaming’s global potential,” Beatrice M. Laforga, BusinessWorld, 1st Dec 2019.

In other words, we can’t see beyond nurturing the following revenue streams: (1) OFW remittances; (2) BPO industry; (3) the top 8 listed local companies in the Forbes list; (4) POGOs.

On the other hand, “The Philippine Institute for Development Studies (PIDS) said [export] performance has barely improved between 1995 and 2014, citing a study published in November 2018.”

“The problem with the Philippine case is that we seem to have skipped a step. We moved from agriculture to services without even industrializing. [Although] the country’s agriculture employment share was still high at 26% in 2016, its contribution to the country’s gross domestic product is declining due to the issue of productivity.

“From 2005 to 2014, a large portion of the country's export portfolio [belonged] to integrated circuits, whose sophistication content is shallow compared to the average in the world market.

“The study found that the agriculture sector can move to produce more sophisticated goods such as woven twill and prime cuts of pork and poultry.

“[Although] production issues are plaguing the agriculture sector, we can build on the production structures of cereals, fruit mixtures, glycerol, and oils for us to produce agro-processed goods.

“[The] government can guide the shift towards industrialization, including strengthening industrial policy, as well as promoting competition, innovation, and science and technology research. [And] upgrade production capabilities by attracting investment from industrialized Asian neighbors, strengthening the link between industry and the academic community, encouraging manufacturing process innovation, and the financial sector is part of the various stages of production.” [Philippine exports’ value-added content stagnant since 1995 — PIDS, Jenina P. Ibañez, BusinessWorld, 17th Nov 2019]

Enter: The war on poverty. Sadly, our perceptive judgment is suspect at best. Band-aid solutions are no longer enough.

Let’s again pause and ask: Can we internalize the import of the above statement?

Unfortunately, Juan de la Cruz can’t turn on or dime and shift his paradigm: We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy, that at the end of the day, ours is a culture of impunity.

How should we then react to the following? “PEZA is seeking to insert grandfather exemptions in CITIRA legislation,” Jenina P. Ibañez, BusinessWorld, 28th Nov 2019.

“THE Philippine Economic Zone Authority (PEZA) said it hopes to grandfather more locators and impose a 15-year transition period in its proposals to modify the bill seeking to rationalize investor incentives.

“PEZA in a statement Thursday laid out its proposed amendments to the Corporate Income Tax and Incentives Rationalization Act (CITIRA).

“CITIRA aims to cut corporate tax incentives from 30% to 20% in 10 years and rationalize fiscal incentives, which PEZA has warned will deter investment and drive current locators away.

“PEZA had earlier sought exemption for its locators from the CITIRA bill, fearing the exit of foreign investors.”

Does CITIRA fall under the umbrella of Band-aid solutions? There is no doubt that we must rationalize fiscal incentives while lowering tax rates and still generate incremental tax revenues. 

With due respect to our economic managers, our challenge is beyond tax reform. There is wisdom in what PIDS says: “The problem with the Philippine case is that we seem to have skipped a step. We moved from agriculture to services without even industrializing.”

The Philippine pie, i.e., GDP per capita or national income, is a small one. We need a significant boost in national income – which will also raise our tax base and tax receipts – well beyond what we expect from CITIRA or our current mindset.

If those dots don’t connect, we are indeed a disaster waiting to happen.

What is our current mindset? For example, we must be proud to read “NEDA Board approves tycoons’ NAIA rehab proposal,” Beatrice M. Laforga, BusinessWorld, 29th Nov 2019.

“[The] NEDA Board’s approval of the revised list of infrastructure flagship projects showed how serious the government is in implementing the Build, Build, Build program.

“With the approval, the NAIA rehabilitation will be subjected to a Swiss challenge. Under the ‘Swiss challenge,’ companies are invited to submit counterproposals to the project, which the original proponent may then match.

“A ‘super consortium’ composed of seven conglomerates had offered to rehabilitate and expand NAIA over 15 years at a project cost of P102 billion. The conglomerates involved are Aboitiz InfraCapital, Inc.; AC Infrastructure Holdings Corp.; Alliance Global Group, Inc.; Asia's Emerging Dragon Corp.; Filinvest Development Corp.; JG Summit Holdings, Inc.; and Metro Pacific Investments Corp.

“The NAIA rehabilitation is expected to increase its capacity to handle passengers to 47 million a year in the first two years and further expand this to 65 million after four years.

“The international airport was operating beyond its 30.5-million passenger capacity with 45.3 million passengers last year, 42 million in 2017, and 39.5 million in 2016.”

Of course, that is welcome news. Sadly, it also reinforces our instincts. See above; we can’t turn on a dime.

Infrastructure development – as in Build-Build-Build and the NAIA rehabilitation and then some – is truly a must. Still, we must move beyond linear thinking to simultaneously drive industrialization, as in Arangkada.

We are the regional laggard and playing catch up. We can’t be celebrating with a half-full glass. That is why we like the war on poverty. Sadly, we keep forgetting the reality of cause-and-effect. “Philippine poverty” is the effect of underdevelopment. Even if we add the war on drugs, poverty will persist.

On the other hand, why is Vietnam, despite its lower GDP per capita than the Philippines, on track to be wealthier than Singapore, according to international institutions?

It is not rocket science. Vietnam is more productive and competitive in agriculture and aggressively pushing industrialization. Why we haven’t figured that out over decades is something we must ponder.

Our national pride must be in the right place. It must not be to nourish our instincts.

What about this other welcome news? “Manufacturing summit hoping to address growth decline,” Jenina P. Ibañez, BusinessWorld, 28th Nov 2019

That is classic, i.e., “reinventing the wheel.” For one, Arangkada is well down the road. For another, we can’t keep our inward-looking bias. Ergo: We must benchmark against our neighbors. This game we play is playing out the remaining period of the ballgame; it will ensure we’re stuck in the status quo. It is how we manifest our reliance on political patronage and oligarchy.

Gising bayan!

“Why independence, if the slaves of today will be the tyrants of tomorrow? Moreover, 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]

“You have to have a dream, whether big or small. Then plan, focus, work hard, and be very determined to achieve your goals.” [Henry Sy Sr., Chairman Emeritus and Founder, SM Group (1924 - 2019)]

“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]