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Wednesday, August 24, 2005

Understanding Nation Building (Part 2)

We continue on with our analysis and discussion of the Blueprint for a Viable Philippines.


On Industrialization


Blueprint:

Pursue an industrialization strategy that is synergistically linked to the modernization of agriculture and the service sectors. From export-processing enclaves that merely exploit cheap labor, the country will shift to regional and provincial industrial clusters. Foreign direct investments will be invited to seed or stimulate the growth of such industrial clusters. The main object will be to promote the development of homegrown but globally competitive industries. The continuous upgrading of human resources and technologies to international benchmarks and the development of basic capital goods and engineering industries will make this possible. The strategy will also seek to upgrade mature or traditional domestic industries (e.g. housing, coco-chemical industry, etc) even as the country searches for niche opportunities (like electric vehicles and biotechnology, maritime, materials, software, pharmaceutical, and mass transport industries) to which it can leapfrog. The State will prohibit environmentally unsound and risky technologies. It will promote the inherent creativity of Filipinos by encouraging them to “think locally and act globally.” The key to all these is the mobilization of the State’s enormous regulatory and procurement powers to promote entrepreneurship and upgrade the technological capabilities of domestic firms.


Big Mango:

The National Economic and Development Authority reported that between January 2005 and March 2005, the Services sector is posting 6.9% growth this is compared to 6.6% posted on the during the same period last year. Translation in plain simple English, the Services sector is well off for now and as they post successive excellent quarters, they will reinvest as market forces and competition will surely demand from them.


This data may be confirmed by simply looking around at the highest performing companies in the Philippines.


It is in the agricultural and industrial sectors that the Philippines finds itself in a box. NEDA has reported that during the first quarter, agriculture performed -0.1% and industry 4.2%.


During the Estrada Administration, they have endeavored to purse to invigorate the Agricultural Sector by making it a priority of government. Alas, various political scenarios and two elections later, such a task has not yet been achieved.


Sadly, fly over Bangkok and you would see huge driers--- used to dry rice. Travel to Nueva Ecija or Dagupan and you will see our farmers drying rice on paved roads. We are a backward people indeed.


You may ask, how come government has not made driers available to farmers? Well, there are some available in our granaries but for many farmers who know, it is an added cost to them to transport to those places.


It would be far better for them to sell their harvest at low cost to middlemen--- who would invest some money and sell it at higher cost.


On one hand, when we look at the latest NEDA numbers, the fastest growing rate of inflation is food. We have a serious problem in processing food cheaply and delivering quality food at better prices to consumers.

As you can see, we have a supply chain problem.


How can you cut off the middleman? It is only when companies or organizations contract directly to the farmers as contract growers will the problem of the middleman be eliminated. Through this, new technologies and techniques may be transferred by the corporate organizations to the grassroots. This is the fastest, surest way to stimulate the agricultural sector, when businesses find money in it and ensure their own supply.


On technologies and niche opportunities

As for other technologies, for example coco-chemical industries?


History has thought us that the most successful technology or innovation isn't normally the superior product. Take for example, Microsoft Windows and IBM's OS/2 during the 1990s.


OS/2 was the technological superior of Microsoft Windows, but Windows was already entrenched into the workplace. People only knew Windows and the aggressive marketing and corporate strategy of Microsoft ensured dominance of Windows even to this day.


Technologies we develop which may be excellent ideas. Some people way want to get into it. But successful products will need to be marketed. You need to spend money to make money. Corporations in those industries must engage a marketing strategy.


There are two things, consumers will pay for: something they need or something we make them believe they need. Bottom line is that you need to educate your market. You need to do your homework. People just wont buy your product irregardless whether or not it is good or not. You have to do your work.


Do we really need for government to encourage this? Perhaps. Perhaps not.


There are some things we do need from government that they should get into: make borrowing money easier for the entrepreneur. This is the single most important thing that government has to achieve. If that is accomplished, people will be encouraged more to start their own small industries.


How can government help reduce interest rates? Balance the budget, reduce domestic and foreign debt, continue with banking and finance reforms to lower existing non-performing debt. Deliver good signals by being serious about fiscal reforms and curving corruption and get out of non-performing businesses.


It should reform how it does business by decentralizing much of its functions and transferring it to the local level. For example, massive infrastructure projects that regions or provinces need should be handled by local government. Key revenue generated by these regions should be focused on these infrastructure developments.


These are the reforms government needs to do. It is easier said than done given the current political and cultural climate but all it takes is will.


On government regulations

As for government regulations, there are times when government has to step in and regulate markets. The single and only reason why should be , to ensure fair play.


The single greatest phenomena today is the sprawling of the Internet. It is largely self regulated, though today it is akin to the wild west, it is a movement, an environment that is changing the every essence of the human race.


My point is this: there are times when governments should regulate but if it can help not to meddle, it shouldn't.

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Greg said...

When I was reading parts of the Blueprint (I haven't read everything yet), I noticed that the authors placed too much emphasis on the role of the State. It seems to me that to them, national salvation is largely dependent on government rather than on the citizenry.

To me, this is a fundamental issue because a certain economic philosophy seems to be the foundation of the document, i.e., Keynesian economics - where emphasis is on the role of the state: centralized planning, intervention, subsidies, regulation, ownership by government of the so-called "commanding heights."

I totally agree with you that the general rule should be "government should stay out" and that the exception would be "government regulation and intervention only when needed." The Blueprint seems to promote the opposite.

In other words, the philosophy that permeates the Blueprint is one that has seen better days - -where government's role loomed larged especially during post-WWII reconstruction and cold war politics.

I would have been more comfortable if the Blueprint had, as its underlying philosophy, the supremacy of markets and private initiative, i.e., where markets and private initiative have dominant roles and where goverment merely has a supportive role (Hayek/Friendman economic philosopy).

I'll read your posts and give my comments. However, I am impressed with your zeal in giving your thoughts on Philippine policy/direction. Because I also send e-mails to friends regarding my own thoughts on similar issues, I gave them a heads up regarding your blogsite. I think your site should be promoted because of your sound, well-written, and sound ideas.

cocoy said...

yes the whole thought behind blueprints seems to be central- everything.

we seem to have the same impression and idea--- that there should be market supremacy and greater private initiative.

appreciate you reading though all this, for posting and everything. thank you!

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