Making false choices

Will we ever agree on where the Philippines is, as in a baseline, so we don’t start with making wrong choices?

How sound is the question, do we want to be a territory of America or the province of China – if we cannot stand on our own?

Take Vietnam. They are poised to overtake not just us but Singapore, too, given their explosive growth reminiscent of the Asian Tigers.

Do we even think they posed a similar question to themselves like we are doing now? It speaks volumes compared to how uncertain we are. It is not a surprise.

Vietnam’s largest enterprise, Samsung Vietnam, runs rings around our eight biggest listed companies that are on the Forbes list. And if we had a higher “Competitiveness Quotient” – or CQ as opposed to IQ – we would not take that sitting down.

In other words, Vietnam vigorously drives its economy much more than we do and why poverty haunts us.

Consider: The Vietnam War officially ended in 1975, while WWII did in 1945.

The Philippines has not been in a war for thirty years before Vietnam finally got rid of the Americans. Theirs is more recent such that their economic development started much later than ours. Yet, today they generate far more FDIs and exports.

Worse, against the rest of the neighbors, our per capita income pales in comparison – Thailand has more than twice. In contrast, Malaysia has over three times ours, and even Indonesia, with a far greater population base of 2.5 times, has a per capita income of 1.5 times.

Those facts are so damning that we ought to be ashamed that we can’t take care of our people instead of cherry-picking our pluses. For example, we have been right in harnessing monetary and fiscal policies. Net worth-wise, counting our assets and liabilities, we are the laggard.

And for the umpteenth time, thanks to our OFWs and the BPO industry that we have this windfall to cover foreign exchange needs, manage inflation and get credit rating upgrades.

Sadly, they all still make for a weak structural economic model. That is the crux of the matter. It is not rocket science.

That is where our problems start because Juan de la Cruz is yet to figure out if he is coming or going.

“The sad, never-ending story of PH utilities,” EDITORIAL, The Manila Times, 27th Feb 2020. “The most pressing need of the Philippines right now in terms of infrastructure is more electricity generating capacity and additional sources of water. We are developing power plants, but they are too few to prevent the country from rising above the unsustainable position of continually trying to catch up. Likewise, the Kaliwa Dam project, which would stabilize Metro Manila water supply for several years, is in a practical sense no nearer to be a reality than it was last year, or the year before that, or the year before that.

“Through at least three successive administrations, everyone in the Philippines, from the most casual utility customer up the ladder to the President of the Republic, has known that the country’s utility resources and infrastructure are woefully inadequate. Yet the response by those whose job descriptions include the responsibility to find or create solutions to utility shortcomings consistently is nothing more than to react, largely ineffectively, to the crises once they begin.”

Is that an element that must be part of; however, we define our baseline?

Then consider: “The Philippines continues to be among the laggards in East Asia in attracting more foreign direct investments (FDI). Data from the UN Conference on Trade and Development (UNCTAD) World Investment Report (WIR) show that our FDI inward stock, an indicator of cumulative foreign investments, was still below $90 billion in 2018 and only about 55% of that in Vietnam and Malaysia, 37% of that in Thailand.

“The only neighbors that we can ‘beat’ as having lower FDI stocks are Myanmar, Cambodia, Laos, and Brunei.” [PSA, PCC, and competition, Bienvenido S. Oplas, Jr., My Cup Of Liberty, BusinessWorld, 10th Feb 2020]

But to truly establish our baseline, we can skip bragging about the history of our credit ratings. They blind us to the structural weakness of our economic model, i.e., it is a service-consumption economy against an industrial-investment economy that our neighbors share.

“The Philippines scored its highest credit rating in history from Standard and Poor’s Global Ratings (S&P), now at BBB+ and a notch away from the A category. S&P said it upgraded the country’s credit rating on the back of consistent economic growth and prudent spending.

“What is the Philippines’ credit history? The Philippines got its first credit rating in 1993 under then-president Fidel Ramos. The BB- rating it received then was under the ‘speculative-grade,’ which meant that investing in the Philippines was very risky.

“The rating was then upgraded to BB+ during the later years of Ramos and the term of his successor, Joseph Estrada. Due to various political and economic factors under the presidency of Gloria Macapagal Arroyo, we were back to BB-.

“It was during the administration of Benigno Aquino III that the country gained traction. In just four years, the Philippines climbed four notches to BBB,  considered ‘top-notch’ or an investment-grade rating. That sent a signal to investors that doing business in the country had much potential, as the government proved that it could pay off loans.

“In April 2019, under President Rodrigo Duterte, the country climbed to BBB+, the highest credit rating ever for the Philippines.” [rappler.com, 9th May 2019]

Enter, Arangkada. If the Aquino administration did not run with this ball, how come the Duterte administration doesn’t seem to do any better?

The simple answer is we don’t have an industrial-investment heritage focused on driving national income – not tax revenues per se, but the tax base that is derived not from consumption but manufacturing, which in the 21st century presupposes innovation and global competitiveness. See above, Samsung Vietnam runs rings around our most significant enterprises.

It boils down to our parochial and insular bias. Why would Samsung choose Vietnam to be the regional hub of its technology manufacturing in the region?

Many postings ago, the blog shared how a Guangzhou enterprise with a significant share in the local market approached the writer’s old-MNC company being the global industry leader in their business to propose a partnership. “You are the number one brand globally; we are too but limited to the local market. We want to partner with you.” Unsurprisingly, this once local Guangzhou company is today the hub for this MNC’s regional manufacturing efforts.

In the Philippines, we rely on political patronage and oligarchy and don’t look outward to conquer the world. Because our success model is one of monopolies and oligopolies, aka rent-seeking. It comes from our hierarchical and paternalistic bias – and they connote entitlement, not personal responsibility. 

“Rank” has its privileges, while “paternalism” implies “hierarchy” is to dispense favor. Why do we think corruption is second nature to us?

The bottom line: We can’t imagine being more prominent than how our rank defines us. Why do we think we lag our neighbors in higher education too? We cannot overstate that the prognosis for this nation is bleak as bleak can be.

That is why the blog has discussed Arangkada for the longest time. It can be the right launching pad for us to develop an industrial-investment economic model finally. But just as the world has learned from the Asian Tigers, we must beg for Western money and technology.

Why is Arangkada a good platform? Think of why we have miserably failed with something as essential as water and electricity. Parochialism and insularity won’t make us look outward and forward. In other words, we can’t forward-think as our neighbors do.

That is why we cannot imagine an industrial-investment economy. The DTI defined our need to generate incremental exports of over $100 billion so that we can at least be like Thailand. That is a better perspective and offers a better way to address our water and electricity needs and infrastructure development in general.

In other words, we must visualize the big picture, as in an industrial ecosystem. That will open our eyes to the pursuit of a viable undertaking because an industrial ecosystem must generate enough income to make it a sustainable enterprise.

Here’s a quote from an earlier posting: “Our paradigm is that of a consumption economy. What to do? In this era of ‘rapid technology and innovation,’ there is such a thing as ‘fast-fail,’ which we know from Science 101 as ‘experimentation.’ Therefore, Silicon Valley is the center of rapid technology and innovation.

“In other words, we don’t have to cross all the t’s and dot the i’s. There is such a thing as ‘prototyping.’

“And we have an excellent example in Arangkada. There is enough thinking that went with it yet may not pass as a Ph.D. dissertation for educators to embrace. Still, there are lots in Arangkada akin to ‘big data.’ The hard part is the analytics.

“The writer, as a practitioner, always uses the Great Commandments to introduce analytics to his Eastern European friends. Forget the 613 commandments. 

“The key is not to develop 42 industry road maps like the DTI is doing but to pick one or two industries and aggressively pursue prototyping. The two that give the biggest bang for the buck will be a good starting point. 

“But that hypothesis is outside the paradigm of DTI – i.e., that is not how they frame the challenge. They work on the premise of driving efficiency and productivity.

“That comes from linear thinking, given our assumed knowledge, i.e., the factors of production. It also explains why we view poverty from the supposed wisdom of the 4Ps (or conditional cash transfer.) 

“We don’t turn the challenge on its head, that ‘poverty’ is the effect of our underdevelopment, characterized by our meager per capita income.

“We have been racking our brains to raise the productivity of farmers without first figuring out the right product, one that has a market and command the requisite margins to make the farmer’s undertaking viable. That is why Malaysia turned from rubber to palm oil.

“But even more fundamental is to define the desired outcome. For example, the DTI started on the right foot. We need an incremental $100 billion in exports like yesterday to at least be like Thailand. 

“If these industries come from Central Luzon or Cagayan de Oro or Davao, so be it. The key is to do a ‘fast-fail’ so that we learn very quickly and gain perceptive judgment to then upgrade the effort. We don’t have first to debate federalism.

“Take China. China has over a billion people. They did not debate the system of government. They acknowledged that the three regions of Guangzhou, Shanghai, and Beijing would be the epicenter of rapid economic growth because of population and existing commercial activity.”

Will we ever agree on where the Philippines is, as in a baseline, so we don’t start with making wrong choices? Does Juan de la Cruz know if he’s coming or going?

Consider: Beyond electricity and water, we keep tripping ourselves.

“After 33 years of litigation, the coconut levy funds (CLF) in the National Treasury and the sequestered stocks of San Miguel Corporation and other assets acquired from the taxes collected from coconut farmers and the coconut industry remain inaccessible to the intended beneficiaries.” [Here’s how to resolve the legislative impasse over the coconut levy funds, Dr. Emil Q. Javier, Manila Bulletin, 29th Feb 2020]

“A subsidiary of conglomerate San Miguel Corp. (SMC), SPPC owes PSALM P24.6 billion. It has refused to pay the debt and instead filed a case before the Mandaluyong Regional Trial court asserting a different formula for computing its payables to PSALM. [This came out in a public hearing at the House of Representatives.]

“SPPC’s continued non-payment will compel PSALM to contract new borrowings to liquidate NAPOCOR’s maturing obligations. We risk getting into a vicious cycle that will result in PSALM absorbing additional interests and other finance charges. That can be as much P1 billion in borrowing costs per year, which could go a long way in building new roads and modern agricultural facilities for the country’s farmers.

“Curiously, the hearing did not involve the House committee on energy even when the issues were right down its alley. And this leads back to Quezon’s quotable quote that could now be further paraphrased: ‘My loyalty to my country ends where my loyalty to my patron begins.’” [Hierarchy of loyalties, J. Albert Gamboa, Manila Bulletin, 27th Feb 2020]

Will we ever agree on where the Philippines is, as in a baseline, so we don’t start with making wrong choices?

How much deeper do we want to bring this nation down?

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]