In one ear and out the other (II)

It’s not the first time the blog used the above title.

Let’s hold it right there.

The posting builds on an earlier one, “There is a bigger world out there.”

Consider: “The economic costs of closed minds,” Kaushik Basu, Project Syndicate, Philippine Daily Inquirer, 3rd Feb 2022.

“Barriers to foreign direct investment (FDI) in the Philippines are highly restrictive. In 2020, the Philippines ranked third-most restrictive out of the eighty-four countries in the Organization for Economic Cooperation and Development’s (OECD) foreign direct investment regulatory restrictiveness index (FDI Index).” [“Easing barriers to foreign direct investment,” Kyra Kae B. Diola, Tax Or Otherwise, BusinessWorld, 2nd Feb 2022]

Question: Are the barriers to FDI coming from the closed mind of Juan de la Cruz?

“The World Bank forecasts that global economic growth will slow to 4.1 percent in 2022, from 5.5 percent last year. The report warns that the surge in debt caused by countries trying to soften the “pandemic-induced global recession” means weak economies are now at “elevated risk” of debt distress. With debt burdens rising, supply chain bottlenecks impeding the flow of goods and services, and inflation picking up, governments are losing the capacity to provide further fiscal support.

“And energy prices, which surged in the second half of 2021, will increase further—and by more than the World Bank was projecting six months ago.

“Usually, emerging markets and developing economies grow faster than advanced economies, helped by their lower base.

“But, according to Global Economic Prospects, the prognosis for EMDEs through the end of 2023 is worse than for advanced economies because EMDEs have limited policy space to provide additional support and face a greater risk of hard landings.

“While there are exceptions, “hyper-nationalism” is usually disastrous for an economy eventually. That makes sense because strident nationalism leads to bloated egos and blurry thinking. Countries in their grip try to become self-sufficient by raising barriers to trade, capital, and ideas elsewhere.

“In a globalized world, with latest ideas and research emerging everywhere, countries that succumb to nationalist solipsism and pull down their economies’ and societies’ shutters will be anything but great.” [Basu, op. cit.]

Indeed, there is a bigger world out there, with due respect to our opinion leaders and economic managers.

But are we hopeless? Not by any stretch of the imagination.

Yet, there is no free lunch. That is the one thing we must recognize.

And it will take “some” doing.

That’s why the blog keeps giving examples: Apple over IBM, my Eastern European friends from the poorest country in Europe over the most significant industry competition from the West, Tim Cone winning twenty-three championships, among others.

But we must grow up. We can’t settle for Padre Damaso throwing candies our way. That is too juvenile, given the enormity of the challenges we face.

“Why we need a political reboot,” Andrew J. Masigan, THE CORNER ORACLE, The Philippine Star, 2nd Feb 2022.

“The unfortunate reality is that despite our rich natural resources, youthful workforce, and favorable geographic location, the Philippines’ liabilities consign it to be the region’s perennial underachiever. These liabilities are our defective political institution and low caliber of leaders.”

“Through the years, our political system – because of manipulation – serves the interest of the narrow elite, not the more significant majority, i.e., it railroads the interest of the rich and powerful while blocking and watering down vital reforms. Nothing less than a political reboot is necessary to harness our true economic potential.

“The political elite and the business elite have become identical. Here, it is common for the largest conglomerates to represent the legislature to defend and forward their interest.”

Let’s pause – and ponder.

I know what Andrew is saying. I worked for eight years with one Philippine oligarchy. They did not want me to leave. Had I stayed, the blog would not have existed.

Those in the Philippine elite and chattering classes don’t have the option I have, and I understand why we suffer from nonchalance, “In one ear and out the other.”

In other words, we are not doing Juan de la Cruz a favor by cherry-picking the positives of our predicament while missing its context. Instead, we are doing a disservice because the status quo persists – to one that appears impregnable.

Are we finally waking up?

“House approves bill creating a department of development planning on second reading,” Jaspearl Emerald G. Tan, BusinessWorld, 26th Jan 2022.

“House Bill 10625 or the Department of Economics and Development Planning Act aims to enhance the government’s planning system through a separate department. 

“Under the proposed law, NEDA will fall under the new department, to be headed by a Cabinet-level secretary who will be the country’s chief economist and serve as the President’s economic advisor.

“The establishment of the department also aims to streamline national plans, strengthen the distribution of projects, ensure continuity of plans and programs, and expand multi-sector participation.

“The measure will also create the Economic and Development Council that will oversee the policy direction on economic, social, financial, and environmental issues. The President will chair the council.”

Question: Has the Philippine Competition Commission measured up to its vision, for example? “PCC aims to be a world-class authority in promoting fair market competition to help achieve a vibrant and inclusive economy and to advance consumer welfare.”

“World-class authority” has a nice ring to it. Then consider that Samsung Vietnam, by its lonesome self, delivers far more revenues than our eight top companies combined.

Recall that my Eastern European friends, who had asked, “Can we even compete against the West,” given they were a cottage industry and a losing proposition going eight years, killed a brand of the most significant industry competition from the West. Unsurprisingly, the European Competition Commission recognized them as a model for the EU.

The blog keeps raising that strategic planning presupposes strategic thinking; otherwise, it is mechanical and linear.

That comes from distinguishing between a “growth mindset” and a “fixed mindset.”

And a growth mindset is “forward, lateral, and creative thinking.” It responds to the 4 Cs to 21st-century skills, i.e., critical thinking, creative thinking, collaboration, and communication.

Recall too the dissertation of the Ph.D. candidate I assisted. Do we know of any dissertation that has become the road map of a famous global brand?

There is reality, and there is “reality.” That “reality” is beyond human experience and a human-construct system. And why the blog never fails to mention the treatise of the late George Gorospe, SJ.

And the story of creation and character of this universe will come to mind, i.e., dynamism and interdependence.

Then think of Brexit or MAGA.

Here’s a retired Thomas Jefferson, one of the framers of the US Constitution, making the point: “[Countless] may look at constitutions with sanctimonious reverence and deem them like the ark of the covenant, too sacred to be touched. They ascribe to the men of the preceding age a wisdom more than human and suppose what they did to be beyond amendment.

“I knew that age well; I belonged to it and labored with it. It deserved well of its country. It was genuinely like the present, but without the experience of the present, and forty years of experience in government is worth a century of book-reading; and this they would say themselves, were they to rise from the dead.

“I am certainly not advocating for frequent and untried changes in laws and constitutions. Moderate imperfections are a given; once known, we accommodate ourselves to them and find practical means of correcting their ill effects.

“But I also know that laws and institutions must go hand in hand with the progress of the human mind. As that becomes more developed, more enlightened, as discoveries appear, new truths disclosed, and manners and opinions change with the change of circumstances, institutions must also advance and keep pace with the times.

“We might as well require a man to wear still the coat which fitted him when a boy, as civilized society to remain ever under the regimen of their barbarous ancestors.” [Source: “Proposals to Revise the Virginia Constitution: I. Thomas Jefferson to “Henry Tompkinson” (Samuel Kercheval), 12th Jul 1816,” Founders Online, National Archives, https://founders.archives.gov/documents/Jefferson/03-10-02-0128-0002.]

Then consider our caste system, expressed in our instincts as Pinoys: Parochial and insular. We value hierarchy and paternalism and rely on political patronage and oligarchy that ours is a culture of impunity.

In other words, we can join RCEP, but if we can’t come out with products and services that are far beyond the competition, we won’t win in either the regional or global arenas.

“Dominguez flags tax advisers’ role in raising gov’t borrowing,” Jenina P. Ibañez, BusinessWorld, 3rd Feb 2022.

“THE effective tax rate for value-added tax (VAT) in 2021 was significantly lower than the posted rate of 12%, reflecting the tax avoidance strategies provided by tax advisers, Finance Secretary Carlos G. Dominguez III said.”

With due respect to the Secretary, he is making a factual statement, yet, we have a much more significant challenge than rationalizing our tax policies.

First, we have a much meager tax base than our neighbors, i.e., Philippine GDP per person is one-third of Malaysia and half of Thailand.

Recall the three legs of the economy: services, industry, agriculture.

Except for services, we lag our neighbors in the revenues generated by these undertakings. And in services – the driver of the Philippine economy, we are vulnerable because our BPO industry is predominantly “call centers.” We haven’t moved up the value chain.

Moreover, services don’t generate the multiplier effect in employment, especially quality jobs and subindustries – for a more far-reaching employment environment – as do technology and export-driven industries. The best example is Samsung Vietnam.

And that brings us back to our tax policies. We must have world-class tax-policy making. That’s why the blog raised that CREATE and SIPP are too generic.

Until we can attract the FDIs our neighbors have been doing for decades, we can’t celebrate the feather in our cap. They aren’t world-class.

Let’s pull things together:

Recall the blog’s theme of reinforcing the photosynthesis phenomenon, being the best example of an ecosystem. Because a human undertaking that is sustainable mirrors an ecosystem.

Sadly, given our lack of experience in development – or nation-building – we rely on our logical mind that generates linear and incremental thinking, i.e., “cognitive development” is a function of experience. See above; what Jefferson says about the sacredness of a Constitution, that it must go hand in hand with the progress of the human mind.

But we in the Philippine elite and chattering classes find that offensive. We can’t be juvenile, given the enormity of our challenges. On the other hand, we know that “experience is the best teacher.” See above; it’s time we grow up.

If we want to establish the requisite ecosystem of the Philippine economy – and nation – we must acknowledge our instincts, the expression of our caste system because it is the source of our closed minds.

And the most glaring evidence is our failure – going decades – to embrace what our neighbors have, i.e., foreign money and technology.

Foreign money and technology explain why the Asian Tigers, then China, and more recently, Vietnam, have fortified the legs of their economy.

On the other hand, we continue to celebrate monetary and fiscal interventions despite their failures over a 10-year run – that enabled our economy to deliver 6%-7% growth – to match the performance of our neighbors.

Einstein called it insanity.

For example, no monetary and fiscal interventions have raised the competitiveness of Philippine agriculture. Nor industry.

Because of the OFW phenomenon, services are classic “pwede na ‘yan.” We did not pursue industrial development because of parochialism and insularity. We assumed that we did not have a competitive advantage in this sector. And rent-seeking oligarchy and political patronage hammered it on us.

And the outcome? A perfect storm – as in our being the regional laggard.

And what is the common denominator? A culture of impunity.

But is that something that comes in one ear and out the other?

There is a bigger world out there.

Gising bayan!