There is a bigger world out there.

We’re stuck in a world defined by poverty – because we can’t shift paradigms?

No one – except ourselves – can stop us from making the Philippines a “world-class enterprise,” far above the competition.

And it boils down to us in the Philippine elite and chattering classes if we do not upend the destiny of Juan de la Cruz – as we believe it is, i.e., a regional laggard, a laughingstock of our peers, if not the world.

Can we be the catalyst for change?

“Whatever the catalyst, we can be a champion for change and use it as an opportunity to exhibit leadership.

“But change is often met with resistance. It’s difficult to abandon the comfort of routine and venture into the unknown, and learning a new system takes time.

[Recall Kurt Lewin.] “He’s a social psychologist and based his change model on the physical properties of water. He proposed that one must first “unfreeze” existing behaviors to engage in “movement” toward the desired behavior, then “refreeze” in a new shape, making the desired behavior into a habit.

“His theory of force field analysis describes two opposing forces—driving forces and restraining forces—that either motivate or hinder change. When these forces are equal against each other, there is an equilibrium or status quo. Still, change occurs when “driving forces” increase to outweigh restraining forces or restraining forces decrease below the influence of driving forces.

“Its strengths lie in its simplicity, collaborative approach, and how it addresses resistance. Everyone affected is invited to participate in the process, thereby sharing ownership of the change, allowing resistors to voice their concerns, and building trust among each other and the new system.” [“Be a champion for change by using Lewin’s 3-stage Model of Change,” rdhmag.com]

It takes a village to traverse poverty to prosperity rapidly. The change we want is to be a “world-class enterprise.” And that’s why the blog proposes that we engage in brainstorming.

The terminology – “world-class enterprise” – is to aid us in shifting paradigms.

“Middle-income economy” connotes incremental thinking, if not status quo – or mental block. 

It feeds on our instincts: We are parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

Translation: Unsurprisingly, Bongbong will be the next president. Can’t we seem to get enough of impunity?

And so, from a Lopez [ABS-CBN network], it will be a Villar? Isn’t that an old movie, from one oligarchy to another? And Juan de la Cruz wonders why we’re underdeveloped?

It’s not easy for Juan de la Cruz, yet the blog often speaks to benchmarking against best-practice models. Eventually, we want to embrace the challenge of (a) matching and then (b) overtaking a best-practice model.

“Pwede na ‘yan,” which manifests our instincts, benefits us in the Philippine elite and chattering classes – but is a disservice to Juan de la Cruz; worse, it adds insult to injury.

We can’t seem to get enough of “pwede na ‘yan,” too?

We must abandon the status quo to become a world-class enterprise. Think of winning twenty-three championships like Tim Cone. And so we want to learn from him.

Can we pause – and ponder?

There is a bigger world out there. But we won’t find it given our caste system – and why we are parochial and insular. In the meantime, the world has left us behind.

Recall when the wife and I first came to Eastern Europe, and her horror: What are we doing in this godforsaken place?

Yet, I introduced our new friends to a best-practice model, i.e., Apple.

It was easy because at the first workshop I led, I heard the lament that they were “poor Eastern Europeans,” i.e., they appeared destined to the abyss. They went to bed with Nazi Germany and the Soviet Union, the wrong partner.

Still, most wore “designer” jeans – and my observation went further; Europeans were chicer than the Americans – and carried smartphones.

“Please raise your hands if you are wearing a pair of designer jeans.” And most did – but with the simultaneous cry, “but they’re fakes.”

Raise your hands if you have a smartphone? And everyone did.

It was an apt opening to introduce Steve Jobs. They were an MSME and were a losing proposition going eight years.

Jobs was a college dropout, and Apple didn’t own any patents then. And the first one, in the name of his co-founder, Steve Wozniak, came ten years after Apple’s founding.

Yet, Apple went up against Big Blue, IBM.

“As with previous years, IBM led the pack in terms of number of patents granted in the year, 2020, at 9,130, with Apple at number 8 with 2,792 (although Jobs passed away ten years ago.) [“IBM leads US patent list for 2020 as total numbers decline 1% in the pandemic year to 352,000” | TechCrunch]

But there is a more glaring comparison, market capitalization. Apple stands at $2.754 Trillion; IBM is at $119.78 Billion.

The family lived in a neighborhood populated by Fortune 500 folks; one that became family friends came from IBM. For decades, IBM was the gold standard – “the best place to work,” the preferred employer.

I knew other IBM people too from my business network. They had to reinvent themselves to win in the personal computer business – which they eventually sold to Lenovo. They even created a separate entity, free from the IBM bureaucracy, to be as agile as Apple – to no avail.

The neighbor, who had kept his IBM stocks and options over the years, lost all of them. That was “some” wealth wiped out.

If we can’t relate to that, think of Vietnam lagging the Philippines as an economy in 2019. But they were already deep into attracting FDIs; unsurprisingly, ten years later, they overtook us. First, the Asian Tigers overtook us, then China. Who will come after Vietnam?

Do we shrug our shoulders?

With due respect to Bangko Sentral Governor Benjamin Diokno, we must not settle for “Things are looking up. But it will take five years or more to recover from that economic collapse.” [“Things are looking up,” Tony Lopez, Virtual Reality, manilastandard.net, 26th Jan 2022]

Consider: From 2009 to 2019, the Philippines delivered 6%-7% GDP growth, yet over the same period, Vietnam overtook us. And to add insult to injury, they put poverty in the rearview mirror.

Beyond poverty and jobs is prosperity. And that’s the way to shift paradigms.

We must traverse poverty to prosperity rapidly.

Whether agriculture, industry or services, we must be a world-class enterprise.

“If growth is 7 percent or higher, the economy creates an additional one million to make it two million jobs per year. Now, if only the banks could redeploy the P2.3 trillion pumped in by the Bangko Sentral into the system, then maybe the economy could create three million jobs a year.” [Lopez, op. cit.]

Did we not create over ten million jobs with the OFW phenomenon – and at dollar-denominated higher wages – yet Vietnam still overtook us?

“To expand FDIs and good jobs at home,” Gerardo P. Sicat, CROSSROADS TOWARD PHILIPPINE ECONOMIC AND SOCIAL PROGRESS, The Philippine Star, 22nd Dec 2021.

“I mean “good” jobs. I do not mean the uncertain and low-paying jobs that we find in the ever-enlarging “informal market” when job opportunities in organized businesses are not expanding enough.

“Inevitably, that issue relates to the attraction of foreign direct investments.

“Turning the tide on FDIs. Suppose the next president can change the trickle of entry of FDIs into a deluge of capital inflows to match what has happened among successful members of East Asian economies. In that case, economic recovery can move faster.

“This would mean “good” job creation will accelerate, and Filipinos who have trekked to foreign lands to find jobs can come home and have a future in their own country!

“Reversing our mentality. That means reversing our mentality about FDIs. It means putting action where political rhetoric was once cheap. Can we now, finally, walk the talk?”

We must traverse poverty to prosperity rapidly.

Whether agriculture, industry or services, we must be a world-class enterprise.

Consider: We lag Vietnam in agriculture and industry. We are ahead in services, yet our BPO sector is predominantly “call centers” – because we haven’t moved up the value chain. We are vulnerable in this one leg of the economy – which drives the Philippine economy and relies on OFW remittances and call centers.

How can monetary and fiscal interventions suffice when the three legs of the economy are wobbly? We must distinguish between drivers and enablers, between outcome and outputs.

That’s why the blog teed up our desired outcome as “To traverse poverty to prosperity rapidly. 

Our neighbors have left behind, with Juan de la Cruz paying the price, as in abject poverty. And how do we attain prosperity?

As we now know, the answer is beyond a GDP growth rate of 6%-7%, which we did from 2009 to 2019, a good 10-year run. Instead, we must seek an incremental GDP of $200 billion to leapfrog the economic output of our neighbors, including Malaysia. It is out of the playbook of the Asian Tigers, China, and most recently, Vietnam. For example, Samsung Vietnam alone delivers more revenues than our eight top companies combined.

But we must first overcome our parochial and insular instincts?

The mantra of (a) poverty alleviation and (b) job creation isn’t wrong – but too narrow, short-sighted, and don’t hit the nail in the head.

In other words, we aren’t problem-solving.

It is unsurprising because we miss the analytics – or context – when analyzing. For example, we celebrated a manufacturing uptick when the Philippine economy relies on consumption, with services generating 60% of the economy and industry at a mere 30%. A manufacturing uptick will not make a dent in that scenario. See above; Samsung Vietnam alone embarrassed our top companies.

To win in agriculture, industry, and services, we must be a world-class enterprise. And our neighbors demonstrated that over decades, e.g., Lee Kuan Yew ran Singapore like a company.

The oil companies did come to Singapore unprompted. Lee Kuan Yew convinced them that Singapore was an excellent refining and storage location in the region.

“90% of crude oil volumes flowing through the South China Sea in 2016 transited the Malacca Strait, the shortest sea route between suppliers in Africa and the Persian Gulf and markets in Asia.” [EIA website.]

Singapore does not have oil, but it can be a world-class refiner and depot for the region.

Can’t we think that way, given our inward-looking bias? Recall the story of creation and the character of this universe, i.e., dynamism and interdependence.

But let’s get back to Steve Jobs.

Because of his powerful human sense, he saw Apple beyond personal computers. He wanted “to make a dent in the universe” by creating things that would stimulate people’s creativity. Think of the 2 million apps, and counting, for Apple products.

And so, he studied the consumer-packaged goods industry. He wanted to understand how they could continually create a portfolio of products that appeal to human needs.

Who does not like music, he asked? Unsurprisingly, he figured that “music is the way to the soul.” And presto, out came the Apple iPod. Competition came out with their versions, but Apple wasn’t standing still.

They combined the cellphone with the iPod, and the Apple iPhone was born.

When we go to an Apple store, we see how extensive their product portfolio is.

We like to talk about comparative advantage. IBM had the comparative advantage because of its history and heritage, yet Apple did them in.

Vietnam has no comparative advantage in smartphones manufacturing, yet Samsung Vietnam is the regional hub.

FDIs and technology bring competitive advantage beyond comparative advantage. Of course, when it comes to extractive industries like mining, it still applies. But we’re talking about the Asian Tigers, China, and Vietnam.

FDIs and technology made their economic miracles.

Consider: My Eastern European friends had all but a mixing tank and mixed ingredients to produce beer-bottle cleaning detergents. A year later, when they lost the beer brewery as a customer, they put the detergents in small bottles to sell to stores. But it was all manual labor. And zero scale, a cottage industry, and why they were unprofitable.

Today, they have seven state-of-the-art facilities that employ robots. And it did not take forever. After eight years of unprofitable operations and shifting gears to become a world-class enterprise, they started turning a profit three years later – and haven’t looked back since.

Because of their “growth mindset,” they continually update their product portfolio consistent with the dynamism of human needs.

Eleven of their brands are beyond million-dollar businesses, with more in the pipeline. They had zero comparative advantage in all of them. Yet, they killed a brand of the most significant Western competition – because they kept benchmarking their brands against the world’s best. Unsurprisingly, the EU competition commission recognized them as a model for Europe. Recall that in the beginning, they asked, “Can we even compete against the West?”

Let’s get back to the Philippines.

Does our respect for “comparative advantage” come from our inward-looking bias? For example, we celebrated the OFW phenomenon because we didn’t have the comparative advantage in manufacturing?

And so we took it for granted that Samsung would go to Vietnam instead of designing an incentive-based tax policy that would keep Samsung in the Philippines?

We can’t stick with CREATE and SIPP alone. They are too generic. That’s why we need Jon Canto of McKinsey to help us figure out how to design incentive models to attract priority FDIs, especially those prepared to leave China.

Think of Pareto. A tax system can have generic and strategically designed pieces if we prioritize the FDIs and attract.

It starts with defining the product portfolio that will generate scale and the corresponding margins – be it agriculture, industry, or services.

But it presupposes we recognize that to thrive in this universe, we must embrace dynamism and interdependence.

Before diving into the “how-to” – or development mechanics – we must shift paradigms. For example, strategic planning presupposes strategic thinking; otherwise, it is mechanical and linear. That is why we miss the “analytics” – or the context – even when we indulge in “analysis.”

For example, we need a marketing practitioner to help us in defining our product portfolios, be it in agriculture, industry, or services. See above; Steve Jobs studied the consumer-packaged goods industry because he wanted to understand their dynamism in keeping their product portfolios sensitive to human needs.

For instance, it is not enough to say that we can’t compete in rice production in agriculture. We are a significant producer except that we’re uncompetitive. We cannot merely exit rice even if we pursue other products that generate scale and healthy margins.

We must dissect why we are uncompetitive. Our rice-production productivity is a-low 70% which correlates to the extent of our irrigation system. In other words, 70% of our farms are productive because of irrigation, especially those in the central plains of Luzon. Upland farms rely on rain and aren’t as effective.

That can focus on our efforts to be a world-class enterprise in rice, i.e., the 70% with irrigation infrastructure, principally dams. But they must consolidate for scale – and pursue farm expansion as Thailand does – and gear up to employ and leverage technology. That also means creating a world-class quasi-government enterprise that is far above the competition to pull things together — and making the Philippines’ requisite ecosystem to win in the marketplace.

What about the BPO sector? The same thing, we must be a world-class enterprise, far above the competition. But then again, what will be the portfolio of services that will bring scale and healthy margins beyond moving the value chain?

Recall that we want to traverse poverty to prosperity rapidly. And if that is the desired outcome, we want an incremental $200 billion in GDP to be the output. That should guide us to prioritize whatever industries, products, or services we pursue.

There is a bigger world out there. We’re stuck in a world defined by poverty because we can’t shift paradigms?

Gising bayan!