Tuesday, 29 June 2010

What is the ‘Business Model of Philippines Inc.’?

Written by John Mangun
Outside the Box
Business Mirror
http://www.businessmirror.com.ph/index.php?option=com_content&view=article&id=27044:what-is-the-business-model-of-philippines-inc&catid=28:opinion&Itemid=64

In 1992 the campaign of presidential candidate Bill Clinton adopted an unofficial slogan that may have succeeded in focusing the election.

Clinton campaign strategist James Carville hung a sign on the wall of Clinton’s campaign headquarters with the simple thought, “It’s the economy, stupid.” The US was in a recession, and this catchphrase overshadowed the public’s support for Bush’s handling of the Iraq war after the invasion of Kuwait.

The reason I mention this is that the Philippines may be one of the few places left on the planet where political leaders are still acting “politically” rather than “economically.”

Nearly without exception, governments around the globe are focused on their economies, with decisions made almost exclusively with the economic impact of those decisions being the prime motivator.

Even when it appears to be political, “It’s the economy, stupid.” Everything, virtually every decision is about the economy.

Here in the Philippines we are going to have to keep it all focused on the greater economic good in order to prosper. It is that simple. There must be a clear, concise and practical business model for Philippines Inc. that does everything possible to eliminate the politics and political power that does not serve economic purpose.

In the 1980s Thailand heavily subsidized its national airline carrier, not for political gain, but to make Thailand one of the cheapest travel destinations in the world. The purpose was to bring in quick and easy foreign capital. Notice there was no emphasis on foreign investment, just foreign capital. The funds from tourist spending were used first on tourism-related ventures ,thus creating more tourism. The resort area of Pattaya was a key focus of tourism spending that now attracts million of visitors and millions of dollars of foreign investment. What an impressively successful business model.

Instead of trying to please and fund every special economic-interest group in the country, the government must be focused.

People tend to forget that a decade ago China’s business model had only one item on the agenda; food self-sufficiency. Manufacturing, exports, everything else followed.

The director of the Department of Agriculture’s national rice program, Frisco Malabanan, says the entire requirement to achieve self-sufficiency in rice by 2013 might even reach P15 billion. But (from BusinessMirror) “for 2010, the budget approved for the GMA Rice Program was P3.1 billion.”

In 2090 the Philippines bought nearly P4 billion of imported rice. If the government spends only P5 billion annually through 2013, potentially we are rice self-sufficient. Which idea, importing or investing, makes better business sense? Can the government afford it? Of course. The budget deficit is P340 billion, so by increasing the deficit by an additional 2 percent, we reduce foreign-rice purchases and potentially increase rural employment and rural wealth. That is a good business model.

While we hear almost nonstop talk about good governance, when are we going to hear calls for efficient government? No one wants corrupt governance. But an “honest” government can be completely incompetent. Most articles of good governance fail to include a “competency” principle.

A $5-billion foreign investment is threatened in the mining sector. While the company adhered to all the requirements and restriction of a 15-year-old national law passed by legislators elected by all the people, signed by a president elected by all the people, local officials have decided they do not like the law and are choosing not to follow, writing their own rules.

Can you imagine a bank branch manager deciding to create his own lending rules? Or one of San Miguel’s breweries deciding on its own to change the beer recipe? These companies would soon be out of business. Yet that is the way the Philippines Inc. business model works sometimes.

The closest the government comes to formulating a business plan is the Medium-Term Philippine Development Plan. Please do not read it; your head will explode. Hundreds of pages of well-thought-out plans and programs that have virtually no chance of coming to reality. If a similar business plan were presented to any corporate CEO or president, the people preparing would be fired.

A sensible corporate plan, which is needed for the country, would detail perhaps three programs that need to and can be accomplished in the next year, three years and five years for each of the corporate divisions. For the Philippine development plan to be accomplished would require Harry Potter and his magic wand. So, therefore, nothing is fully accomplished and successful.

The heart of the Department of Agriculture’s (DA) P13-billion rice self-sufficiency program essentially does not require hundreds of pages. “The funds will be used for providing subsidies, especially to farmers who use hybrid-rice seeds and the training of extension workers. Under the Rice Master Plan drawn up by the DA, the government has targeted to produce 21.61 million metric tons of paddy rice by 2013 through the use of new rice technologies such as saline-tolerant and drought-tolerant seeds, as well as the provision of support to farmers.” In other words, give the farmers the money they need to buy better rice seed, money to dig more irrigation wells, and the support and training to make it happen.

The same sort of concise, precise and brief action plan could be a part of every government department’s agenda if the idea that “It’s the economy, stupid” becomes the unofficial national agenda.


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