The elephant in the room

Consider the policy brief released by the United Nations in the Philippines and reported in the BusinessWorld, 6th Aug 2021:

“The focus on industrial catch-up is motivated by the prolonged stagnation of the Philippine industry and its profound impact on the country’s labor market.

“Unlike developed countries whose workers have primarily transitioned away from agriculture to industrial and high-skilled services employment, workers in developing countries such as the Philippines have been moving out of low-productivity agriculture towards low-skilled jobs.

“The services sector account for 61% of gross domestic product and six out of 10 workers, but a third in low-paying jobs.

“Meanwhile, elements of its exports sector with a competitive advantage and the number of exporting companies have been declining, making the Philippines a ‘market of consumer goods rather than a hub for manufacturing exports.’

“The government can no longer rely on the protectionist instruments of the past and must now muster more positive, enabling measures.”

“The country can explore several paths towards economic diversification and upgrading, which includes ‘leapfrogging’ to high-productivity and aiming for more sophisticated goods by adopting high technology over the medium to long term.” [Diversification, Jobs and the COVID-19 Recovery.pdf (un.org)]

Let’s hold it right there.

What were we thinking? 

Reflect on what, who, why — whatever else — we kept blaming, except ourselves. 

And we in the Philippine elite class and the chattering classes were singing hosanna to our top companies?

It will take us several hurdles to go from “denial” to “acceptance.” And we better start rolling up our sleeves, lest we see Juan de la Cruz sink more profound in the abyss?

In other words, everything we’ve done – from the comprehensive agrarian reform to borrowing tons of money to put Juan de la Cruz’s body and soul together – didn’t cut it. 

Our problem is not poverty per se.

Can we pause and ponder?

Recall that “The failure of Philippine education is to develop the ability to think, meet new situations, and solve problems one encounters in real life.”

And the elephant in the room? 

Consider our instincts: We are parochial and insular. So, we value hierarchy and paternalism and rely on political patronage and oligarchy, a culture of impunity.

Here’s a quote from an earlier posting: “When we translate Jesus’ words in Aramaic (instead of Greek), they will read like this: ‘Get up, go ahead, do something, move, you who are hungry and thirsty for justice, for you shall be satisfied.’” [Richard Rohr's Daily Meditation, Center for Action and Contemplation, 24th Jul 2021]

“Those familiar with the blog will recall the 3C’s of the science of “hardy mindset”: (1) Challenge, (2) Commitment, (3) Control. 

“A strong mindset accepts challenges, even daunting ones. In other words, this universe is not a place for Juan Tamad or Bondying. They are not defeatists and instead embrace their commitments knowing full well that they control only themselves.”

Do we want to blame science too — when in this case, we see a convergence?

How do we explain our crab mentality?

We cannot hide behind the skirts of our faith: God helps those who help themselves, paraphrasing St. Ignatius.

Let’s get back to the UN policy brief.

For example, how do we ‘leapfrog’ to high productivity, aim for more sophisticated goods, and adopt high technology over the medium to long term?

Recall what Mahathir said to us: “You don’t have to love your former colonizer. But beg for money and technology. We are poor nations. We cannot go it alone.”

The UN brief raised the following: Targeting strategic sectors can be helpful to build an ambitious narrative for a developmental, industrial policy, but perseverance, implementation strategies, and policy learning are crucial.

In other words, the crab mentality is a no-no – as in the 50 or so industry road maps we’ve teed up. The opposite must be the case – as in Pareto, i.e., targeting strategic sectors.

Still, there is no free lunch, so perseverance and dogged implementation are crucial.

Here’s another quote from an earlier posting: “We must generate much more economic output. 

“And we need it in a hurry, like yesterday. That is why the blog has raised the imperative to raise Philippine GDP by $200 billion rapidly. That is what the IRR for CREATE and SIPP must deliver.

“Why? To leapfrog the economic output of our neighbors — which is why they were able to put poverty in the rearview mirror.”

“Question: Do we have to amend the Constitution to leverage CREATE and SIPP to (1) put us on equal footing with our neighbors; (2) attract the suitable foreign money and technology; (3) that will aggressively drive our export receipts – i.e., benchmark against Samsung Vietnam because Vietnam arrested poverty?

“That must be the debate amongst our economic managers and legislators, not to keep to a 6%-7% GDP growth rate.”

But let’s get back to the UN brief. It is well thought out and spells the targeted products and sectors if we are to leapfrog to (1) high productivity, and (2) aim for more sophisticated goods, and (3) adopt high technology over the medium to long term.

“And these products and sectors are found in the top 30 percent of exports in terms of (1) revealed comparative advantage, e.g., industrial machinery and chemicals; (2) rapid employment growth, i.e., a 4 percent annual growth per annum in the next ten years to 15 years would increase its employment share from 6 to 13 percent; (3) a clear sign of dynamism; (4) rank highly in terms of wages, their expansion will raise the pool of quality jobs.

“However, the number of establishments has been falling at a rate of 3 percent annually from 2012 to 2018. Stimulating the new entry of firms and carefully monitoring the status of firms in the industrial machinery and chemicals sectors to arrest further exit are therefore necessary ingredients in the employment dimension of industrial policy.”

In other words, our government and industry leaders must learn to be true partners and keep their eyes on the ball.

How did our neighbors do it?

“Leapfrogging is possible in the presence of certain critical conditions: (1) a forward-looking coherent vision centered on bold ambitions; (2) integrated government interventions galvanized by a lead agency with strong coordinating and monitoring powers; (3) intense policy learning to speedily correct errors; (4) autonomous, high-quality and ‘long-termist’ bureaucracy; (5) close monitoring of progress and survival of domestic firms; and (6) tight collaboration with the private sector and other stakeholders.”

But so that we don’t fall into the trap of logical yet linear thinking, let’s step back a bit. And digest the two operating systems in the brain: (1) automatic and (2) conscious, postulated by Daniel Kahneman, the Nobel Laureate.

Recall that beyond the above-targeted products and sectors, the blog repeatedly raised the Samsung smartphones and Apple AirPods.

These two brands are market leaders because they are dynamic innovators. Vietnam today is their regional manufacturing hub. These two enterprises must be in our crosshairs. And that means to engage them because they are forward- not passive-thinking.

They have a keen understanding of human needs that informs their innovation sense and capacity to translate them into [a product] architecture — consistent with Maslow’s— and innovative products.

And engaging them will give us valuable lessons and insights. In other words, we cannot give them up as a potential foreign investment.

Those familiar with the blog may remember how a small Guangzhou enterprise knocked on the doors of my old MNC-company. “We are coming to you because you are the global market leader in the industry. We want to be partners with you. We are a minor player in the industry, but with you as partners, together we can replicate what you have achieved globally in China.”

Long story short, after sealing the partnership, they were privy to the MNC’s product architecture. They presented another partnership opportunity in another major China city, which was an even much bigger venture. Of course, we grabbed it.

Different undertakings pose different challenges. They can’t be the replica of another. That’s why I am again sharing my nephew’s interview with Tatler below.

It is about the science of “thinking,” i.e., beyond logical and incremental is forward- and lateral thinking.

The UN policy brief is incisive. But how do we in the Philippines take it to the real world?

Recall the Ph.D. candidate I mentored with her dissertation. “I will only assist you if you commit to utilizing the outcome to a real-world challenge.” 

And she did. And today, she’s the global marketing director of one of the world’s most popular brands. How did she do it? She demonstrated to her company that there is a more forward- and lateral thinking model for their business — to be more dominant in the market — if they would challenge the status quo.

In other words, there is no free lunch.

As necessary, can we toss our instincts? We are parochial and insular. So, we value hierarchy and paternalism and rely on political patronage and oligarchy, a culture of impunity.

Here’s another quote from an earlier posting: “Mahathir demonstrated that the art of strategy versus the theory is: a practitioner is both strategic and tactical. He zoomed in and prioritized KL over his hometown and zoomed out to the big picture: to relentlessly drive Malaysia’s growth and development.”

Put another way, can we move away from binary and closer to relative thinking? Recall that “The failure of Philippine education is to develop the ability to think, meet new situations, and solve problems one encounters in real life.”

Then recall the nephew, “barely 30 – and those familiar with the blog may recall him; he had sought my advice but very infrequently – interviewed by Tatler:

“Lampara is currently on self-preservation mode – as are other restaurants, I'm sure. Earlier this year, we were supposed to push through with other projects, like opening different dining concepts. But the ever-changing policies and lockdowns not only lagged us but ultimately stifled our plans to pursue any significant undertakings.

“Honestly, it’s tough to look too far ahead nowadays because you get all excited and motivated to launch something new and revolutionary, then the next day, another lockdown is announced. So, we keep in our back pocket the next steps we conceptualized.

“The pandemic stirred alarming anxiety for us [as owners of Lampara], but also the rest of the team. Every decision, every move we make has to consider the ever-changing guidelines from the government. In our neighborhood, there are just a few of us establishments left. And even if you follow the guidelines [you can still end up being closed down].

“At the moment, it feels like Mad Max. Many establishments around the area have closed, either due to the pandemic or for other reasons. Ironically, parking spots are also harder to find. Road renovations are taking months to finish, and at times would commence at quite inconvenient hours. The service we provide our customers isn’t limited to what happens inside Lampara; and must include how they arrive and leave our restaurant – it’s the whole experience. Being unable to help out our customers concerning parking is something very troubling.

“We adapted to the pandemic by launching our weekly meal plan brand. It kept us afloat during lockdowns, and we’ve even had subscribers stay with the subscription the whole time. We are truly grateful to them because, without them, we would probably be closed by now. We experimented with something a bit off-brand with that one, outside Filipino Food – we incorporated different cuisines to keep it interesting. We also noticed that many Filipino restaurants are not performing well in take-out operations because of the mentality that you can cook it at home.

“We were able to explore new products and dishes, and we received offers for some collaborative projects too. The ‘tres leches’ resulted from the lockdown, which we have since adapted to our regular menu, and it has been a strong player ever before.

“It made us more creative; we were able to experiment with other techniques and cuisines that we have now integrated into our current menu. Through Lampara Lite, we explored different cuisines and developed some feasible concepts even if another lockdown takes place.”

The bottom line: Our economic managers and legislators will have to figure out how to move away from the metric of a 6%-7% GDP growth rate. We’ve had this mental model for decades and still haven’t cut it.

We must generate much more economic output. 

And we need it in a hurry, like yesterday. That is why the blog has raised the imperative to raise Philippine GDP by $200 billion rapidly. That is what the IRR for CREATE and SIPP must deliver.

Why? To leapfrog the economic output of our neighbors — which is why they were able to put poverty in the rearview mirror.

Recall the GPS model: Where are we; Where do we want to be; How do we get there.

We must free ourselves from this prolonged stagnation of the Philippine industry. Not sing hosanna to our top companies. 

We haven’t cut it!

If Philippine media doesn’t get it, who will?

Gising bayan!