Friday, March 30, 2007

From outsourcing to "innovation offshoring": is there a win-win formula for Asia and America?

Outsourcing, offshoring—we often hear these words these days. We see their manifestations in call centers, back office operations, software engineering, engineering design, and animation companies mushrooming in our midst. But “innovation offshoring”? Yeah, that’s the new trend these days.

Innovation offshoring refers to the spread of research, development, and engineering jobs through “global innovation networks” all over the Asia-Pacific Region, most notably India and China. Major players in this phenomenon are American companies that are trying to cope with increasing complexity and multi-disciplinary nature of scientific research. Apparently, these companies are attracted by the availability of cheap talent in the region.

The same trend however is creating fears among Americans that the supposed “hollowing-out” of American economy is extending into the high-tech and R&D. There are now fears about Americans eventually losing its competitiveness to Asians. There are also fears among Asians that such a trend may create a backlash in the form of “technological protectionism.” These are valid fears for both America and the region.

So what’s the real deal? Is innovation offshoring really hurting America and benefiting Asia? Or is there a win-win solution to this issue for both Asia and America? Or is it benefitting both parties. What are innovation’s offshoring’s promises and pitfalls?

Jefferson Fellowship will answer these questions soon. And I’m happy I’m one of those who were given the opportunity to participate. The sessions will conducted in Hawaii and San Jose CA in the US, Beijing and Shanghai in China, and Bangalore and Chennai in India. The fellowship will start April 29 until May 26.

So keep visiting this blog for updates. A happy weekend to all!

Monday, March 26, 2007

The looming talent crunch for knowledge process outsourcing

ASK the executives from the country’s leading knowledge process outsourcing (KPO) companies and they will tell you the Philippines will soon suffer a serious talent crunch.

Give it three or four years, said one KPO executive, and we will feel the pain of that talent scarcity, unless the universities, educational system, industry and the government could sit down together and develop a modus vivendi to address the challenge.

Too bad because KPO is where the future of the country’s fast-growing business process outsourcing (BPO) lies. And its continuing growth would determine the extent to which the country could hold on to its talents, many of whom are being
pirated for jobs in Singapore, the United States, London, the Bahamas, and even the Gulf states.

KPO is Integreon Managed Solutions—owned by the Ayala family—doing market research, risk analysis, business plans for global investment companies, legal firms and investment houses. KPO is Thomsom Philippines doing bond and equity research, perception studies, loans and project finance and facilitating investment deals and providing financial analysis to Fortune 500 companies. And it’s about Deutsche Knowledge Services providing high-end accounting and financial services for Deutsche Bank Group Worldwide.

It is a high value-added form of
outsourcing that employs high-end skills, expertise and judgment. We are talking here about hot-shot MBAs, software engineers, accountants, management engineering experts and mathematicians doing a lot of think work.

This is in contrast to most BPOs where workers simply follow detailed processes and procedures determined by firms and companies in the United States.

Right now industry sources say there are probably around 5,000 people engaged in KPO. But this number is rising. Thomson Philippines’s staff, for instance, is expected to grow by 10 percent this year. Integreon is set to open a 250-seat KPO in Makati. And there’s another KPO that is hiring people at the rate of 50 talents a month.

Many more are hiring. The problem is that talents these days are getting scarce. It’s a roadblock the country should remove if KPO is to attain its full potential. The scarcity of talents is due to several reasons.

First, there is an ongoing war for talent these days. The country’s labor market has totally
globalized such that it’s a lot easier for other countries to lure talents off the Philippine soil. These days, an accountant with four years experience and good knowledge of SAP, one of the leading business software that competes with Oracle, could command as much as a seven-digit salary. The Singaporeans, however, are willing to pay double that amount.

What makes it hard to keep them here is that such talents are being sought by headhunters for the big accounting firms like Deloitte Touche Tohmatsu, Ersnt and Young, KPMG and Price Waterhouse. These four are willing to pay top dollar including family relocation to places like New York, London, the Bahamas and other financial centers of the world. And it’s so easy for local talents to leave because they are usually just in their mid-twenties, many of whom are unmarried and therefore excited by the high adventure of working in the world’s financial centers and global cities.

Second, the country’s
educational institutions are increasingly lagging behind the requirements of the business community. For instance, KPOs are in dire need of people with specific skills in enterprise resource planning, process mapping engineering, financial markets, process control, international financial reporting system, Oracle, SAP, and the Sarbanes-Oxley financial and accounting disclosure system.

Yet most accounting graduates are simply taught the generic accounting principles and skills that are increasingly becoming obsolete. The same is true in many other technical professions like engineering.

And the third reason is that some educational institutions are resisting change and innovation being proposed by the industry. They are just too risk-averse to invest in new curricula, facilities and equipment.

One KPO executive, for instance, noted that the state schools like the University of the Philippines are suspicious of the industry’s efforts to introduce reforms in the curriculum, as its Board of Regents feel such changes would constitute “violation of academic freedom.”

In fact, many schools, even until now, think that the problem of KPOs as well as BPOs in general are the private sector’s problem and not of the university system, whose mission is to provide “holistic” and general education to the young.

Of course, universities like Ateneo and La Salle are supposedly responding to the industry’s needs, but these two universities alone cannot redress the talent scarcity. The entire educational system must pull in weight if only to maximize the economy’s gains and spread the benefits of job opportunities fostered by outsourcing.

It’s no exaggeration to say that the future of this country is at stake in the timely redressing of this problem. As it is, we’ve missed so many boats and we can’t afford to miss the opportunity to be a major KPO player in the world.

We missed the opportunity in agrarian revolution by dilly-dallying with the implementation of the agrarian reform law that created uncertainties, thus driving away potential investments in farms. We missed an export-led revolution in the ’80s and the ’90s, catalyzed by flows of Japanese and Taiwanese investments, by shielding the manufacturing sector with dirigiste policies.

And now, we could miss the services revolution if we dilly-dally with our response to the growing opportunities offered by outsourcing.

We always think India whenever we hear the word “outsourcing.” The truth is that Ireland pioneered in outsourcing and sophisticated financial services long before India did, and is now among the countries with the highest per capita incomes ($48,604), next only to Luxembourg ($80,000), Norway ($64,000), Iceland ($52,000), and Switzerland ($50,000).

Some economists are smirking about a services-driven growth, but India followed the same path and has grown at 7 percent to 10 percent a year in the last decade.

Now, the Philippines has a crack at a similar chance and one wonders why policymakers and the educational system are not moving heaven and earth to ensure that our initial success in outsourcing is sustained.

Of course, we don’t have to abandon our farms and factories; we just have to put in place certain initiatives like upgrading the education system to make the services sector competitive. These same policies can actually enhance the global competitiveness of the rest of the economy.

Right now, policymakers in both public and private sectors are content to say the BPO and KPO sectors are growing at 50 percent a year. Had we taken care of the problems in the educational system, these sectors, according to industry experts, could have been growing by 100 percent to 200 percent, thus cutting the rate of joblessness.
(An earlier version of this was prepared as editorial for BusinessMirror, 27 March 2007)

Jun Gapud, Clausewitz and Toffler: Globalization reunites friends across borders

Tonight I got another email from an old friend who is now based in America. His email really touched my mind and heart.

Dave: Greetings from Jun Gapud. I stumbled into your blog having no clue that it was from a person I knew a long time ago in my days at APRAAP. But when I found myself agreeing strongly with all your views (globalists think alike, I guess), I decided to click on your profile and behold, it was a blast from the past. I distinctly remember our conversations about Von Clausewitz and Toffler. Thomas Friedman was not in the picture then but now its almost required reading, of course, for those who wish to grasp the inevitability of Globalization. That is my approach on explaining our "interesting times", with much frustration, to people I know both here in America and back home in the Philippines. I don’t even argue its merits and dislocations. Globalization is as inevitable as Global Warming (climate change) and it will drastically change our lives, agree with it or not. Preparation is the key and the ironic thing is that the Filipino culture -- a unique fusion of East and West -- gives us a competitve edge to embrace and exploit all these changes. Filipinos don't know what strength they have. Or is it that the fear of change is as universal as the love for cellphones and Starbucks?I see that you are now a prominent writer [how I wish!] and I congratulate you on your success. Your post on meeting Marge again was a classic.---Jun

What can I say? The world is indeed getting smaller by the day and I’m just too happy to know that friends could still remember me and our discussions back then. Yeah, globalization really brings people together as borders become meaningless.

Thursday, March 22, 2007

A winter of discontent for our weathermen and what can we do about it

FIRST, it was doctors becoming nurses to take jobs abroad. Then, pilots, geologists, mining engineers and information technology professionals seeking greener pastures beyond the borders. Now, weather forecasters are also leaving the country in search of a better—pardon the pun—climate.

Now, this one should really hurt because weather forecasters provide a very essential—nay strategic—public good: that of providing weather data and forecasts. A lot of life-and-death decisions are made both by the private and the public sector based on these data and forecasts. Information about typhoons, storms and floods save thousands of lives.

They also help producers, government planners and private business minimize the negative impact of natural disasters. Weather and climate data help soldiers and cops in the fight against terrorists and communists. They help exporters, importers, logistics firms and shipping companies plan the movement of goods and services. And of course, these services are getting important by the day as we suffer, with the rest of the world, the effects of climate change.

The literature on global warming says that increasingly, weather and climate all over the world will be less predictable. That spells danger for the country, and only a good weather-forecasting capability can help us cope with these changes.

But since our weather forecasters are being lured by talent poachers abroad, it’s crucial to confront this problem squarely now. The solution is simple but the country’s policymakers, both from the public and private sectors, need to have a change in mindset, a paradigm shift.

At the outset, it’s clear that our weather forecasters need more material rewards for their skills and we may have to give it to them. Since this country pretends to be a democracy where individual pursuit of happiness is paramount, no one should even think about physically preventing them from leaving. That is their right. But before anyone in our midst accuses them of greed, “materialism” and “lack of patriotism,” let’s put this problem in broader context.

The problem of weather forecasters leaving the country simply reflects Philippine society’s lack of appreciation of scientific talent and science in general. Many scientists work in government agencies providing services and promoting national development. Strategic activities like defense, weather forecasting, research and development, crop protection, plant breeding, biotechnology are only among the few examples. They are a special people who push the frontiers of knowledge.

They are special because they are among the brightest in our midst; people who spend long hours in laboratories and workshops to generate information, knowledge, and technologies that are vital to development and progress; and their supply is normally scarce. They are virtual gems, treasured in many countries in the world.

Not in the Philippines. For long, policymakers have been treating scientists like ordinary people with ordinary needs. Take note how the salary-standardization program has prevented them from getting wages substantially higher than those of janitors and security guards. Most agencies they are working for are poorly funded.

The budget of the Department of Science and Technology, for instance, has practically stayed the same in the last several years. That is why we find many scientists in these agencies doing excruciatingly demoralizing administrative and armchair “research.”

No wonder, most of them dream of moving abroad, temporarily or permanently, so they can really do what they love: honest-to-goodness scientific research and some dignity of being a “scientist.” It is sad to note that in just one DOST agency, at least 40 of its scientists and researches have gone abroad or have joined private companies last year.

But can a poor country like the Philippines really match the offers abroad? Where can it get the money?

Local decision makers keep raising this issue, but they entirely miss the concept of “purchasing-power parity.” A dollar can actually buy more goods and services here than it could in places like Singapore and the US because of differences in living standards.

So if government policymakers want to raise the weather forecasters’ pay, they don’t really have to match the offers abroad dollar-for-dollar. All they have to do is to figure out that parity or the minimum levels by which our weather forecasters and scientists could feel some dignity while serving their country well.

That means, they can spend long hours in the laboratory without fretting over a leaking roof at home, the next tuition installment for their children or the health insurance of their family. Or about having to catch the MRT because, for all the long years of service, they can’t even afford a second-hand car.

For meteorologists, for instance, we should immediately put together a training program, or even a scholarship program, for aspiring scientists. This can be done pretty easily—granted policymakers take immediate action—since we could actually train forecasters from many applied science disciplines. Many forecasters actually came from engineering. This training program should be a continuing process so those who leave for greener pastures can easily be replaced.

Let’s face it; we are in the age of globalization, where national borders are meaningless. There’s an ongoing war for talent all over the world, particularly in the Asia-Pacific Region, and scientists are rational beings who respond to economic incentives. That’s a fact of life in a world that is—to use Thomas Friedman’s term—getting flatter by the day.

Certainly, the question of where to get the money is a valid, albeit a minor question. The more relevant question is: Do we badly need them? If the answer is yes, then we have already solved the problem. If we think we really need them here, we will mobilize resources for them. We will put our money where our heart is. There are actually lots of unproductive expenditures in the government from where to draw those resources.

On a broader front, there is really a need for a greater appreciation of our scientists. These people are globally mobile, often interacting with peers worldwide through seminars and fellowships. Hence, many of them know how miserable their standards of living are compared to their counterparts in, say the Asia-Pacific Region. Thus, they are the most vulnerable to recruitment by foreign companies that not only offer generous pay but also access to topnotch research facilities, tools and working environment.

If we can attend well to our scientists’ needs, we will send market signals to our bright students in science high schools that hard sciences actually pay materially. Then we can attract more of them to the science profession and ease the scarcity of scientists and technical people. If young kids see that science is cool, we will stop hearing complaints about
“brain drain” and skills shortage. Right now, many of these science high-school graduates are taking nursing, mostly egged on by families looking to get dollars abroad. But this need not go on forever. (Note: The original version of this piece was written as editorial for BusinessMirror, 23 March 2007)

Wednesday, March 21, 2007

Gloria Arroyo is no Margaret Thatcher

Economics are the method; the object is to change the soul.—Margaret Thatcher, British prime minister, 1979-1990

IS President Arroyo a Margaret Thatcher? That’s what she hopes she’s turning out to be, as she herself stated in an interview with Bloomberg published in this paper Wednesday. “She [Thatcher] was an icon, the Iron Lady, very strong, very focused, and fasten-your-seatbelts-and-never-mind-the-air-pockets. I’m very similar to that as far as my focus on the economy is concerned,” she said.

If her fight to raise the VAT from 10 percent to 12 percent is the only gauge, then her resolute decision to go all the way despite strong opposition until it was passed was certainly Thatcherite. In her disdain for direct income taxes, Thatcher indeed raised the VAT to 15 percent and had to summon her iron will to battle popular opposition.

But the comparison ends there. For most of her reign so far, the President’s actions have really been pure Arroyoite, a mishmash of survivalist politics and flip-flopping economic policy management.

In short, President Arroyo is no Prime Minister Thatcher, although one actually hopes she is so she could push for crucial reforms that the country needs to move forward.

Thatcher came to power in Britain in the late ’70s in a world that thought the best ways to solve society’s problems was government intervention. Does society need better schools, improved health care, greater farm productivity and dynamic factories? The answer is simple: impose higher taxes, increase government spending and allocate more public money for state-owned corporations.

Thatcher and her economic advisers thought that approach was bankrupt. So she imposed drastic measures that reduced the role of government in the economy through privatization of losing and inefficient state-owned enterprises, market-oriented policies to enhance the efficiency and competitiveness of the British economy, and the promotion of entrepreneurship, to promote what she calls a “moral society.”

“We want a society where people are free to make choices, to make mistakes, to be generous and compassionate. This is what we mean by a moral society; not a society where the state is responsible for everything, and no one is responsible for the state,” Thatcher said.

And the reforms she doggedly implemented, many of them quite successfully, incurred the ire of vested interests in British society that resisted change, including labor unions, local government executives, bureaucrats, fat cats in state-owned enterprises. Thatcher persevered until 1990, when, realizing she no longer had broad support in the parliament after committing the mistakes of isolating her very own support base, resigned.

Nevertheless, the British economy these days has firmer foundations, courtesy of her legacy that is being pursued by future prime ministers, including Tony Blair who belongs to the Labor Party.

In contrast, President Arroyo came to power in 2001 at a time of increasing acceptance of market-oriented policies. Many of those policies were well in place since the time of President Corazon Aquino and were strengthened during the Ramos and Estrada administrations. When President Arroyo came to power, the issue therefore was how to sustain the momentum of reforms.

And—surprise! surprise!—Arroyo actually reversed some of these essentially Thatcherite policies.

Of course, one should grant her achievement in terms of raising the VAT rates that supposedly explains the improvement in government finances. But, on second thought, that itself is not necessarily Thatcherite. Thatcher reduced income and corporate income taxes to stimulate entrepreneurship and recovered revenue collections lost by raising the VAT.

In contrast, Arroyo raised the VAT while at the same time raising corporate income taxes to 35 percent, thus making the Philippines a country with the highest corporate income tax rates in Asia. This high corporate income tax could be one of the reasons we can’t seem to attract foreign direct investments as much as our neighbors in the Asia-Pacific.

A few months ago, President Arroyo issued Executive Order 558 allowing government nonfinancial institutions and government-owned and -controlled corporations to once again engage in direct lending. After the Edsa Revolution, the government economic policymakers did away with this credit policy, and the new policy was institutionalized during the Estrada administration. Before this, government bureaucrats didn’t know anything about credit provision, hence, most of the money for this purpose ended up lost to graft and corruption. Some of those who got the loans simply collected the money without paying their loans.

Private organizations, including the Makati Business Club, the Management Association of the Philippines and the Rural Bankers Association of the Philippines called EO 558 a “setback of monumental proportions” but Malacañang simply ignored them, thus raising fears about the government using public money for the coming mid-term elections.

On January 27, the government issued Executive Order 500-A restricting the operations of budget airlines from the rest of Asia, thus constraining the growth potentials of the Diosdado Macapagal International Airport. The government apparently caved in to pressure from some local airlines experiencing competitive pressures from these budget airlines.

And soon, those who will build houses and repair their homes will be hit by higher prices of steel products as the government has committed to raise the tariff of steel products from 3 percent to 7 percent as a way to protect the National Steel Corp.

And of course, the entire Philippine economy continues to suffer from a lack of competitiveness as the government continues to hold on to the one-port, one-operator rule, thus ensuring the continuing monopolies in port operations and shipping industries. Now, the government is bent on privatizing North Harbor and it seems the Philippine Ports Authority is bent on giving it away to a monopoly.

Of course, it was the President herself who turned her back on the fiscal rationalization bill that should have reformed the grant of fiscal incentives in the Philippines. Each year, the country loses P300 billion in forgone revenues, but Malacañang has simply lost its resolve to plug the huge hole that’s draining government coffers.

The list of policy flip-flops is endless and we fear that we might yet wake up one day realizing that the policy reforms achieved after the 1986 Edsa Revolution are gone. The irony is that we are losing these gains under a president who claims to idolize Margaret Thatcher.
(Note: I wrote this piece yesterday as editorial for BusinessMirror, 22 March 2007).

Tuesday, March 20, 2007

Blogging is "prosuming": a review of Alvin Toffler's Revolutionary Wealth"

Do you sometimes feel that institutions (education, the courts, labor unions, Church, politics, marriage, and the economy) in our midst are unraveling and can’t seem to cope with society’s emerging problems? Do you wonder whether or not power relationships among people and within organizations are changing? Do you increasingly feel stressed out by the bewildering speed of change in the workplace and in society as a whole? Do you increasingly feel that uncertain about the economic prospects of your country?

If many are asking these questions, it’s because—according to futurist Alvin Toffler in his book Revolutionary Wealth: How it will be created and it will change our lives—our relationship to “deep fundamentals” like time, space, and knowledge are rapidly transforming, thanks to the accelerating revolution in information technology. And while there are emerging challenges, the same transformation under way are actually ushering a new way of creating wealth that could potentially alter our lives for the better.

Because of the information revolution, economic transactions are getting faster and some are desynchronizing. For instance, new financial instruments are emerging to the consternation of bureaucrats who discover that existing laws are inadequate as basis for regulations. Textbooks are increasingly becoming obsolete with the emergence of new knowledge and information that are published daily in the Internet. The spatial dimensions of economic activities are also changing with wealth creation increasingly shifting towards the Asia-Pacific Region. Because of breakthroughs in digitalization, it’s easier to shift economic activities to low-cost locations and that’s creating lots of insecurities in the West. Wealth itself is increasingly determined by knowledge and innovation but knowledge itself and tools to generate it are transforming fast.

This sounds unsettling for people who long for stability and progress. But Toffler says mankind’s march to prosperity is set to continue and accelerate through the phenomenon he calls “prosuming.” Increasingly, people are creating their own products and consuming them.

Examples of presuming include parenting, blogging, designing open source software, caring for the sick for free, volunteering for worthy causes, among others, and a lot other activities that are currently not reflected in the money economy. Prosuming is set to explode to generate “revolutionary wealth,” especially as presuming enters the money economy. To those who are skeptical comes his reminder that the billions created by Napster, YouTube and Google started as hobbies by kids who were just trying to enjoy themselves.

This book could sometimes be a difficult read especially because one needs to recall certain ideas he introduced in his earlier works. It is necessarily difficult to present ideas that are supposed to usher us towards the future. Thus Toffler tends to cite so many examples and keep on repeating the outline of the book and keep us on track with the flow of his ideas. But overall, I recommend this book for anyone who wants to divine the future. I feel I’m a totally different person after reading it. You will see trends and events differently after reading this one.

Monday, March 19, 2007

The death of the Philippine political party system

ARE political parties still relevant? Do they represent the “interest” of the people? What do Filipinos think of turncoats?

Last week, Konrad Adenauer Stiftung, the Center for Asia-Pacific Studies and the Ateneo School of Government released a study answering this question. The results simply confirmed what has been a common observation—that majority of Filipinos think that political parties have nothing to do with their lives.

This is unfortunate because if we want to put stability in the country’s political process—one that should ultimately result in a predictable and investment-friendly political economy—strengthening the party system in the Philippines is the only route.

The survey says that 67 percent of Filipinos think “no political party truly promotes [the people’s] welfare.” Only one-third of the respondents say they will join or stay within the party if there is opportunity to learn more about politics. Asked to name politicians when specific parties were mentioned, 75 percent of the respondents didn’t know any.

Thirty-one percent say parties have “no noble leaders,” 28 percent say no party does things that benefit citizens, 29 percent believe none has realistic party platform, 31 percent say no party recruits candidates who are truly qualified.

The list of complaints is endless. In fact, about half of the respondents don’t give a damn about turncoats. That feeling is understandable given the fact that most people think political parties are irrelevant anyway.

But why are people so critical of political parties these days? The usual explanation points to their elitist origins. Since the dawn of political parties in the Philippines, the electoral system has always been elite-based, with factions from the same ruling class alternating in holding power without any improvement in the lives of ordinary people. Sounds valid, but two major factors also account for the destruction of the party system.

First is the declaration of martial law in 1972 that abolished the elite-based two-party system (Liberal versus Nacionalista) and replaced it with the “dominant-party system” composed of one big ruling party (Kilusang Bagong Lipunan) and a small patch of opposition groups whose leaders were brutalized and killed to prevent them from emerging as real competitors to the dominant party.

Opposition groups in the days of Marcos’s “constitutional authoritarianism” were allowed, but the State made sure they didn’t have the slightest chance of capturing power. Since the late ’70s, alternative power centers like mass movements emerged. However, since these groups were not organized for electoral struggles but for direct seizure of power through mass and insurrectionary actions, the leaders who emerged from its ranks didn’t have the savvy and mindset for electoral politics. That really deprived the Philippines of credible politicians after the Edsa Revolution, thus weakening even more the people’s perception of electoral politics.

The second factor is the major error committed by the post-Edsa Revolution reformers. President Corazon Aquino has always stressed that in her time she “restored democratic institutions.” But whether she recognizes it or not, the view of many analysts is that she actually helped destroy the party system: by ignoring the system for nomination of candidates in the Laban ng Demokratikong Pilipino, when she anointed General Fidel Ramos, who formed his own party of convenience, Lakas ng Tao.

Aquino’s action was simply a culmination of a campaign by Edsa 1 reformers against the trapo, or traditional politicians. Traditional politicians were vilified as ugly, graying and corrupt—almost like dirty old men and women—who gain and maintain power through patronage, bribery and electoral fraud.

The problem was the same movement, contemptuous of party politics, failed to define what the alternative to the trapo was. Thus, when Aquino discarded Ramon Mitra—a man whose trademark gray beard and bush jackets gave him both the aura of an haciendero and an old patriarch, the usual suspect in the Philippine political zarzuela—the alternative to the trapo meant anybody who doesn’t come from the parties of yore.

Unwittingly, that perception about trapo applied to political stalwarts like Jovito Salonga, Teofisto Guingona Jr. and Aquilino Pimentel Jr. who could have been great statesmen. The party system went downhill since then, especially since insurrectionary action and direct seizure of power through coup d’état got enshrined in our consciousness as an “alternative mode” of changing government.

The concept of “traditional politicians” was faulty from the very start. In reality, all politics, especially electoral politics, are traditional. A reformer or visionary may either use “issue-oriented” or personality-oriented campaign strategy, but in the end that person may have to capture power in order to implement whatever agenda she/he has. Once in power, the same person must hold on to that power through a political machinery which is either a party or a mass movement. The post-Edsa reformers missed out on this aspect of politics and we are suffering politically because of that.

With the discrediting of the party system, which in the popular consciousness is associated with the traditional politics, naturally people looked for “nontraditional leaders.” Certainly, Joseph Estrada, forming his own Partido ng Masang Pilipino, was a “nontraditional” leader whose stature and popularity sprang from his good-guy roles in films.

When Estrada got into problems, the middle class poured out into the streets and took a “nontraditional” political action, an insurrection backed by some top brass in the military, to oust him—and we’ve never stopped paying for the seemingly small, but fundamental legal omissions, of those who played a part in Edsa 2. They put into power then-Vice President Gloria Macapagal-Arroyo, who by any measure, was also a “nontraditional” politician, having risen from government bureaucracy.

Mrs. Arroyo, who abandoned her father’s party, the Liberals, when she ran for her first Senate seat, later set up her own party Kampi—a curious situation downplayed in the current senatorial campaign where the administration party is called “Team Unity.”

Is there a way out of this trend? The survey says that a third of Filipinos will either join or stay with a party so they could learn about politics. That’s more than 10 million voters willing to join parties—a good recruitment base for parties willing to reestablish links with the grassroots. Of course, they may have to tailor their message well to capture the people’s imagination.

The medium, they say, is the message; that means parties themselves must formulate their ideology clearly, discipline their ranks (by not recruiting scoundrels and criminals, for instance), and maintain vigilance on the issues that emerge each day. They must reinvent themselves to get reconnected with the people.

But do parties have the motivation to do all these? If not, then we have a tragedy in our midst playing day in and day out without any hope of ending.
(Written as editorial for BusinessMirror, 20 March 2007)

Sunday, March 18, 2007

No free lunch? Think again

Sometimes people could just get lucky. I went to lunch with a former boss, Ping Galang (now editor of Entrepreneur magazine) last Friday expecting the usual chat about the latest issues and stuff about business and economic journalism. He is richer so normally he finds it his honor to pay the bill. [Hahah!] But this time, the lunch came with a gift, a book entitled “Why economies grow: the forces that shape prosperity and how to get them working again” written by Jeff Madrick, former editor of BusinessWeek and now a columnist for New York Times.

No such thing as a free lunch? Not always true. haha!

Interesting book this is. It’s all about what really drives economic growth and prosperity and what policies are necessary to kick it off especially after the world’s earlier disappointment with the bubble and “new economy.” Sounds boring, isn’t it? But I was surprised to find it’s actually very readable. Well, it’s written by a journalist who knows how to deliver the message without compromising depth of content.

Just finished reading James Lee Burke’s “The Last Car to Elysian Fields,” a fiction. It means I’ll have this new book for my non-fiction stuff this week.

Life is beautiful and sometimes beauty comes free! Thank you, sir!

Wednesday, March 14, 2007

Want to address corruption? Cut that sleazy nexus!

IS the Philippines really the most corrupt country in Asia? The PERC says so based on the perception of more than 1,400 expatriates doing business in the country. Perceptions are not necessarily accurate, but foreign investors base their investment decisions on that, so the issue can’t be ignored.

Can we really address corruption? Yes, with the right diagnoses. There are many explanations (e.g., lack of visionary leaders, lack of patriotism, the failure of institutions like the church and educational system to instill the right values), but the most credible explanations seem linked to the high cost of running for public office. Someone eyeing the presidency or even a seat in Congress needs billions to run a credible campaign.

Where would a politician get that kind of money? An incumbent faces temptations to steal from public coffers or squeeze the private sector to build up that cash. Those out of power would naturally solicit funds from those willing—as an investment—to place their bets on a probable winner. Once in power, the winners will repay the “investors”—with monopoly privileges, “fiscal incentives,” special safeguard duties for industries threatened by competing imports, and sweetheart deals.

Campaign finance reform and similar measures should address this problem. But it begs the question why, despite the high financial barriers to public office, many are still willing to kill and be killed just to get elected. It’s because the prize is even higher. There are overwhelming economic incentives for capturing public office. That is why it attracts criminals, thieves, robbers, murderers and all those dark creatures who sold their souls to the devil.

If we don’t address this deeper problem (of public office being so materially tantalizing because avenues for graft are many and easy), campaign finance reform alone won’t improve the situation—because then, simply lowering the cost of political campaigns is like giving even more scoundrels cheap tickets to a lucrative office.

At the heart of the corruption problem is the way wealth is created here. There are two major ways of creating wealth. The first is through “profit seeking,” where an entrepreneur or investor engages in the production and delivery of goods and services, and derives profits from the business in an environment of competition and fair play. Profits are made through innovation, foresight and application of knowledge while one contributes to society’s progress.

The second, the dominant mode in the Philippines, is rent-seeking which, according to political economist Anne Krueger, means deriving uncompensated value from society through the manipulation of the economic environment either through influencing government policies, rules and regulations, or just plain graft and corruption.

Rent-seekers in this context are those who accumulate wealth simply through access to political power, manipulating it to yield “infant industry” protection, high tariff walls against competitors, monopoly privileges, special import privileges, fiscal incentives (tax holidays), and access to government budget allocation for public procurement activities. Elected politicians and bureaucrats at all levels get their share of the booty simply by facilitating those sleazy transactions.

While these people get rich, the economy suffers as the kind of business and economic transactions that they perform, while squeezing value from society through extra-economic means, contribute nothing productive to its development. Instead of spending money on research and development, innovative technologies, and the training of manpower, they would rather buy the bureaucracy to get things done.

So we have in our midst an alliance of groups profiting from the nexus between wealth creation and the political system. Since the Spanish times, the powers that be designed the State and its related institutions to strengthen this rotten nexus. In turn, it has been attracting all sorts of rogues.

Consider the so-called fiscal rationalization law. Until now, Congress has failed to pass that owing to strong opposition from vested interests, politicians and bureaucrats. Why? It’s because the public actually foregoes the collection of at least P300 billion in taxes from favored companies. Will bureaucrats give away that kind of money without getting something in return?

It’s in this context why, despite all the criticisms, those in power would rather keep that tangle of regulations. Imagine having to secure 11 signatures just to get a business permit? Yes, those regulations are exactly intended to extract “rents,” or uncompensated value from society.

What are the solutions? First, maximize whatever resource we have to speed up growth. With an expanding pie, people don’t have to fight like stray dogs thrown a few scraps of meat. Remember Harvard economist Benjamin Friedman: There are positive moral consequences to economic growth; people tend to get virtuous as the economic pie expands.

But corruption per se could be a limiting factor to growth; hence, the real need to cut that sleazy nexus between wealth creation and the political process.

A first step could be putting in place a Freedom of Information Act (FOIA) so everyone has access to documents that government men forge with private contractors and service providers. We don’t have such a law; that is why even Neda, according to its former chief Cielito Habito, has no access to important contracts, even though the Neda Board’s Investment Coordination Committee theoretically has first pass over big, crucial projects.

If we had a FOIA in place, Neda, or whatever relevant agency, could have scrutinized more thoroughly those notorious IPP contracts in the Ramos administration.

Another reform: simplify business registration procedures (some states in the US require only one signature) and take away from Congress the power to grant franchises and transfer this to a transparent body. The idea is to maintain an open economy by lessening barriers to entry and exit as much as possible.

Meanwhile, maintaining low and neutral tariff rates across commodities will spare importers from having to “negotiate” with people at Customs for a favorable tariff line.

Another option: replace fiscal incentives with a low corporate tax, say 15 percent to 20 percent (as Hong Kong and Ireland did). That way, several state agencies can be collapsed into one investments promotion body, saving billions in salaries and wages.
Right now, with the high corporate tax of 35 percent, companies are tempted to “negotiate” with the Board of Investments for fiscal incentives and the Bureau of Internal Revenue for allowing them to “cook” the books.

There are many ways to cut this nexus. The idea behind these reforms is to remove the “economic motive” in people’s decision to run for public office. When there is no money to be captured in politics, the Devil’s acolytes will lose interest in public service—which then becomes attractive only to people with the heart and skills for true public service. (Wrote this as Editorial for the BusinessMirror, March 15, 2007)

Monday, March 12, 2007

The Philippines and labor migration: a country in denial?

THIS country is in denial and its “modern-day heroes” are the victims of this mental dishonesty.

Each year, overseas Filipino workers send home more than $14 billion, thus propping up the Philippine economy. They have been doing this for more than three decades, and there’s a surfeit of literature to show that sending them there was a deliberate move to shore up the Republic.

In fact, the late foreign affairs secretary Blas F. Ople, who was described, in his role as the labor minister under Marcos, as the architect of the labor export policy—was paid tribute just last Monday when the President inaugurated the National Reintegration Center for OFWs at the Blas F. Ople Development Center in Intramuros. For all the criticism later heaped on the “indiscriminate” sending of workers abroad, the labor export policy had actually served the country well when Mr. Ople first thought it up in the ’70s, as it provided the country a source of good jobs for its skilled workers and foreign exchange at a time when it was needed.

And yet, surprise of surprises—it turns out now that the State denies that the Philippines is promoting overseas employment as a means to sustain economic growth.

Since the days of the Marcos dictatorship, the state has constructed an elaborate mesh of laws, bureaucracies, regulations, procedures and promotions programs for those who seek jobs abroad. And yet Republic Act 8042, better known as the Migrant Workers and Overseas Act of 1995, says “the State does not promote overseas employment as a means to sustain economic growth and achieve national development.”

Even more surprises: our own intellectuals are in denial. These days, an old terminology is being resuscitated and blamed by some practitioners of the Dismal Science as the cause of the country’s failure to industrialize. The surging flow of dollars to the economy, these people say, is causing the “Dutch Disease”—referring to the rapid appreciation of the peso, rendering the local industrial and agricultural sectors less competitive.

The “disease” arose from the Dutch experience in the ’60s following the discovery of oil in the North Sea. The surge of dollar revenues from oil flooded the Dutch economy, causing a rapid rise of its currency, and the collapse of many of its industries that couldn’t compete with cheaper imports. Naturally, many were jobless.

Now, some analysts are using the Dutch experience to allude to the local context. Do these people seriously want to project OFWs as a negative factor since their dollars sent here are causing the appreciation of the peso, squeezing the exporters profits and preventing industrialization?

It gets worse: some wonder if the country would have been better off without the OFWs. In a recent conference on international labor migration, one of these Dismal Science practitioners speculated that had not a single Pinoy left the country for an overseas job, we could have achieved a “real revolution” that could have ushered in “real reforms” like “real land reform” and better debt management.

Sure. Easy to say that now, when our leaders can boast about being able to pay foreign debts in advance, and the central bank cites an unprecedented level of 4.7 months’ worth of imports in the GIR. Or when OFW money is propping up every single sunshine industry in town and reviving traditional, dying sectors.

Meanwhile, not to be outdone, sociologists recently coined the term “the culture of migration” to describe the tendency of some families to base career decisions on the dynamics of supply and demand for jobs in the global marketplace.

Yet this much is clear: many of those who left the country felt “the system” has failed them. Rather than be a baggage to society, they decided to be part of the solution in the only way they know how: work their butts off in foreign lands and send money back home. For a long time, “experts” kept saying their remittances stabilize the economy. And yet they are still being blamed for causing “Dutch Disease!”

It’s this attitude of “denial” lately that must account for policy recommendations like taxing the OFW remittances and exacting a levy on countries that hire our nurses, as if we are the only ones “exporting” manpower. It’s a policy recommendation that will surely kill the goose that lays the golden eggs.

Seriously, will the Philippines really be better off without the OFWs? Are they really causing a Dutch disease in these parts? Is the “culture of migration” bad? Let’s answer these points one by one.

First, those who believe the country may have been better off without OFW remittances should know that the only group that ever really had the capability to mount a “real revolution” are the communists. History and experience in similar countries show past Marxist uprisings to be dismal economic failures, not to mention the violence engendered: i.e, of the revolution eating its own children. Our neighbors Malaysia and Indonesia, which had bad experiences in communist insurgencies in the ’50s and ’60s, would likely shun the idea of having a “Marxist state” in the neighborhood, and may be tempted to support movements for either secession or Islamic revolution à la Afghanistan. These "intellectuals" should be careful what they wish for.

Second, are OFW monies causing Dutch disease? Certainly, the rapid rise of remittances boosts the peso, in turn squeezing exporters’ profits. But a deeper look shows the rising peso is directly related to poor infrastructure, high energy cost and the crisis of confidence owing to lack of political stability. There are not enough investors so fewer people need the dollars. It’s really as simple as that. The OFW phenomenon is partly a consequence of lack of competitiveness and not the other way around.

Finally, a “culture of migration” is not necessarily bad. Contrary to popular belief that OFWs just waste their money on conspicuous consumption, recent empirical studies say they actually invest their money in houses and lots, farms, health and education. If you doubt, listen to the Bangko Sentral guys, who’ve been describing them as increasingly “finance-savvy,” or the PSE and the Treasury, which hold road shows for equity picks and retail bonds.

If indeed, OFWs are causing Dutch disease, certainly we could always tell them to park their dollars abroad. Of course, they will send most of their dollars because their families need the money for the children’s education and health—services their government has underprovided. But if they indeed stopped sending, that would also create problems for the financial system.

Another option is to raise the savings rate to lessen the pressures for exchange appreciation. But raising the savings rate would also mean we may have to introduce more competition in the banking sector. Do our leaders have the balls to institute reforms in the banking system?

The ultimate solution really is for the country’s leaders to boost competitiveness of the manufacturing sector. There is no secret to this. Tried-and-tested solutions include investments in efficiency-enhancing infrastructure, reforms and investments in education, and a stable political system.

But then, these things seem hard. Far easier, it seems, to focus on pat analyses, like blaming the OFWs, the only sector that ever really did something concretely good for the economy. (Note: I wrote this piece as editorial for the BusinessMirror, 12 March 2007)

Sunday, March 11, 2007

Announcing the Spring 2007 Jefferson Fellows!

Speaking about peaks of human experiences. Yes, friends I was chosen as one of the participants of the Spring 2007 Jefferson Fellowship by the East West Center, University of Hawaii. We will be spending a week at the East-West Center in Hawaii, then another week at the Silicon Valley after which we will fly to China (Shanghai and Beijing) and India (Bangalore and Chennai). All the participants of that program are listed alphabetically below.
The Jefferson Fellows

Spring 2007
April 29–May 26

Norman Bell
Editor, Silicon Valley/San Jose Business Journal
San Jose, California, USA

Norman Bell is editor of the Silicon Valley/San Jose Business Journal, a weekly newspaper serving the business community in and around America’s 10th largest city. The newspaper, read by decision makers in Silicon Valley, has a news staff of 14 and a circulation of about 12,000.

Prior to joining the Business Journal in 2004, Mr. Bell had a lengthy career in managing daily newspapers, serving as the top editor at the News-Tribune in Tacoma, WA, (1986–91) and the Trentonian in Trenton, NJ, (1999) and as managing editor of the Albuquerque Tribune (1981–85) and the five-paper ANG group based in Oakland, CA, (2000–2004). He also has served as assistant managing editor at the Press-Enterprise in Riverside, CA, and Citizen-Journal in Columbus, Ohio, and metro editor at the Detroit News. For three years (1992–94), he taught journalism as the McMahan Centennial Professor of News Communication at the University of Oklahoma.

His newspapers have won a variety of awards including Casey medals, Associated Press Managing Editors public service honors and a James Madison award from SPJ for efforts on behalf of open records. A project of his design on euthanasia legislation was a Pulitzer finalist. He served two terms as president of the New Mexico Associated Press Managing Editors group.

Mr. Bell holds a master’s degree in American studies from Union University in Schenectady, NY, and a bachelor of commerce degree from McGill University in Montreal, Quebec, Canada. He also has attended professional programs at the American Press Institute and the Poynter Institute.

Chen Pi-Fen
Senior Reporter, Commercial Times
Taipei, Taiwan

Chen Pi-Fen, also known as Cristina, has been working as a journalist with the Commercial Times for fourteen years. The Commercial Times Co., Ltd., established in 1978, is a major member of the China Times Inc., Ltd., one of the largest domestic news groups in Taiwan. The Commercial Times is a Chinese language business daily widely read and respected by Taiwan’s investors and entrepreneurs as a professional source of financial news and market analysis.

Starting as a general reporter, Ms. Chen quickly worked her way up to become a first tier reporter and team leader in daily news. She currently serves as Section Convener of the Banking and Finance News Department and coordinator in different sections with the editorial desk. She has covered economic issues and events throughout Asia and continues to observe macroeconomic change, technology development, industry supply chains, government policies, and the Asian regional market.

She won the Pan-Asian Journalism Award of Citibank in 1993 for her story “The Greater China Policy from Multinational Corporations,” and has secured interviews with political and economic leaders such as Malaysian Prime Minister Mahathir Mohamad and more than twenty winners of the Nobel Prize in Economics.

Ms. Chen also contributes to academic research as a Ph.D student in the College of International Studies in Tamkang University in Taiwan and as a research partner in the Taiwan Institute of Economic Research. She holds a master’s degree in economic society and media from Tamkang University, and participated in a journalism course at Columbia University in the United States in 1993.

Emma Connors
Senior Information Technology Writer, Australian Financial Review
Sydney, Australia

Emma Connors is the senior information technology (IT) writer at the Australian Financial Review (AFR), a business daily, owned by Fairfax Media covering corporate, economic and government news. Ms. Connors writes for the daily news pages and contributes features to the weekend edition. The AFR also publishes two monthly magazines and Ms. Connors usually juggles contributions to those publications with news writing.

Ms. Connors has been at the newspaper for almost 10 years. Before she joined the paper, she was editor of a monthly magazine, MIS Australia. Early in her career, she spent a couple of years working in London on trade publications and worked for a wine magazine in Sydney.

Last year Ms. Connors shared the Sun Microsystems features prize for IT Journalism. In 1999 she won the Eureka Prize for print journalism, for a feature story she wrote on how people who have grown up with computers think differently from those who have not. The Eureka prizes are prestigious among the science and engineering community in Australia.

Ms. Connors has a bachelor of arts in print journalism from Charles Sturt University.

Maria Henson
Deputy Editorial Page Editor, The Sacramento Bee
Sacramento, California

Maria Henson is the deputy editorial page editor for The Sacramento Bee, based in California’s capital city. She is the number two editor in the editorial department, overseeing the editorial writers, the editorial cartoonist, the public affairs columnist, the op-ed page, letters to the editor and the Sunday Forum section. One of the state’s largest metropolitan newspapers, The Sacramento Bee is prominent in its coverage of politics and state government. The newspaper’s daily circulation is 278,000 and on Sunday 330,000.

Ms. Henson came to The Sacramento Bee in June 2004 from her job as assistant managing editor for enterprise at the Austin American-Statesman in Texas, where she directed investigative and explanatory projects, headed the newsroom training efforts and oversaw the Sunday paper. She has worked as a writer at newspapers in Arkansas, Florida, Kentucky and North Carolina and has served as the Arkansas Gazette’s Washington correspondent covering Congress and federal agencies. In 2000, she went to Amherst, Mass., for one week to teach Indonesian journalists and, in 2001, traveled to Indonesia to continue the training for two weeks. Having covered Bill Clinton when he was Arkansas governor, Ms. Henson accepted an invitation in 1993 to speak in Athens, Greece, about the 1992 U.S. presidential election to European political consultants. The next year, she was a featured speaker at Taegu University in South Korea discussing U.S. press issues.

She has won a range of local, state and national journalism awards during her career. In 1992, she won the Pulitzer Prize for editorial writing for a series about how the justice system in Kentucky failed battered women and their children. Her series led the state legislature to pass every piece of reform legislation proposed to address domestic violence that year. In 1993-94 she was a Nieman Fellow at Harvard University. In 2005, the series she edited about Yosemite National Park in California won the Pulitzer Prize for editorial writing. She has been a Pulitzer Prize juror for four terms and has served on the selection committee for Nieman Fellows. Her hope is one day to publish a children’s story she wrote that was inspired by a news account after the 2004 Indian Ocean tsunami.

Ms. Henson received her bachelor’s degree in English with a minor in art history from Wake Forest University in Winston-Salem, North Carolina, in 1982.

Lee Jeahun
Staff Writer, Online News Department, The Kukmin Daily
Seoul, Korea

Lee Jeahun is a staff writer covering economic and political issues for the online news department of The Kukmin Daily. In addition to his economic and political coverage, he posts newsflash reports based on the reports of other staff writers on the Kukmin Daily website. Founded in 1988 by Yoido Full Gospel Church, The Kukmin Daily is published from Monday through Saturday. With around two hundred staff writers, The Kukmin Daily, based in Seoul, covers everything from international and domestic news to features and styles, and uniquely, includes a religious section. The paper takes the U.S.-based Christian Science Monitor as its role model.

Mr. Lee joined the online news team in April 2006. The online news department was set up in April 2004 and provides news content for The Kukmin Daily multimedia website ( Prior to this, he worked with the political news and sports departments. While with the political news team, Mr. Lee covered the Ministry of Foreign Affairs and Trade and Ministry of Unification. He accompanied then Minister Chung Dongyoung (September 2005) to Pyongyang, North Korea to cover the 16th South-North Korea Ministerial-level Talks. In 2001, he was sent to the Pakistan-Afghanistan border city of Peshawar to cover the U.S. war on terrorism. He wrote a story about the death of fellow journalist, Aziz Haidari, a Reuter’s photographer who was shot to death by assumed Taliban insurgents.

In 2006 and 2001, Mr. Lee was awarded an in-company “exclusive report prize” for his coverage. In 2001, he was invited to Taipei by the Taipei Mission in Korea to learn more about and discuss cross-strait relations.
Mr. Lee graduated from Korea University in 1998 and holds a B.A. in Chinese language and literature. Mr. Lee maintains a strong interest in Chinese studies and the Sino-U.S. relationship. From 1994 to 1995 he took a four month language course at Beijing International Studies University and traveled extensively in China.

Liu Kunzhe
Reporter for International Desk, China Youth Daily
Beijing, China

Liu Kunzhe is a reporter for the international news desk of China Youth Daily. She is responsible for reporting diplomatic and foreign affairs, but has a strong personal interest in hi-tech innovation and climate change. China Youth Daily is one of the most influential newspapers in China, with a broad readership among the young educated urban middle class in the country. The newspaper’s daily circulation is approximately 500,000 copies, and it ranks number two among China’s national daily newspapers.

Ms. Liu came to China Youth Daily (CYD) in July 2001 after graduating from the Beijing Broadcasting Institute. Apart from being a professional reporter and editor at CYD, she also has been an intern-correspondent in the Berlin office of the Financial Times Deutschland from May to July 2006, and an intern-editor for the new program of China Central TV from January to April 2001.

Ms. Liu has won numerous awards. These include: Asia-Pacific Fellowship 2006, organized by the International Journalists’ Program of Germany; 14th China Journalism Prize (two prizes respectively in Newspaper Unit and in News Editing Unit); “Monthly Best Article Prize” from CYD for her interview with Mr. Romano Prodi, the President of the European Commission of EU; “Monthly Best Article Prize” from CYD for her serial reports on “the 2003 Conference of the Third World Academy of Science” which also won high acclaim from Lu Yongxiang, the President of the China Academy of Science.

She received her master’s degree in mass communication and international relations from the Beijing Broadcasting Institute (2001) and her bachelor’s degree in foreign affairs management from Qingdao University (1998). In addition, she received a certificate in environmental reporting from the International Institute for Journalism, Berlin, Germany (2004).

David L. Llorito
Research Head, BusinessMirror
Manila, Philippines

David Llorito has worked for almost two decades in socioeconomic research; economic and business journalism; communications/information dissemination; social assessment; and policy analysis and advocacy in agricultural, environmental, and urban policy issues. Mr. Llorito assumed his post as head of the research section of the Philippine Business Daily Mirror Publishing, Inc. in October 2005. He supervises the firm’s daily research operations, writes editorials and features, and prepares special reports on trends in the Philippine political economy for the company’s daily business newspaper called BusinessMirror. He also writes for Asia Times, an online magazine based in Hong Kong, on economic issues including business process outsourcing, mining and labor migration.

He was previously engaged as writer, researcher and consultant by several organizations including media outfits like Today Independent Daily News and Manila Times Publishing Corporation as well as research and consultancy firms like Louise Berger International and the Ateneo Center for Social Policy and Public Affairs. In 2005, Mr. Llorito was a fellow of the US State Department’s International Visitors Program (IVP) for Leadership in Print Journalism where he had the chance to interact with executives and editors of leading U.S. media organizations.

Recent awards include: 2006 Jaime V. Ongpin Awards for Excellence in Journalism (Explanatory Category); 2006 Australian Ambassador’s Choice Awards for his articles on globalization and how it’s transforming labor-management relations; the Jose Burgos Awards for Biotechnology Journalism (finalist, best feature category) for his stories on biofuels; and the 2005 Jaime V. Ongpin Awards for Excellence in Investigative Journalism (top ten finalist) for his exposes on land titling scams.

Mr. Llorito has a master’s degree in urban and regional planning from the University of the Philippines and a bachelor of arts in political science from the Mindanao State University in Marawi City in Southern Philippines.

Mara Lee
Associate Producer, NPR Continuous News Desk
Washington, DC

Mara Lee is an associate producer with the continuous news desk at National Public Radio (NPR), a producer and distributor of news, talk, and entertainment programming. A not-for-profit membership organization, NPR serves an audience of 26 million Americans each week in partnership with more than 800 independently operated public radio stations. The website,, includes original online content as well as audio streaming and 10 years of archived audio.

Before joining NPR in February 2007, Ms. Lee worked as a Washington correspondent for the Evansville, Indiana, Courier & Press, in the Scripps Howard bureau. In that job, she covered the races of two Republican incumbents who were defeated in the November 2006 election, part of a wave of defeats that led to the Democratic takeover of Congress. She also covered the then-head of the Senate Foreign Relations Committee, Senator Dick Lugar.

From 1996 to 2005, Ms. Lee worked in Ohio, first at Mansfield, Ohio’s News Journal, and for the last six years, at the Dayton Daily News. In Dayton, she began covering economics as part of the U.S. Census beat. She also did a two-day series in 2004 about white-collar offshoring in Ohio workplaces. That series, “Dayton to Delhi; Outsourcing: Jobs in Jeopardy?” won awards at the state and national levels. The Cleveland Press Club named it as best business writing in the state that year. It was also a finalist for the Livingston Awards, a national contest recognizing journalists younger than 35 from TV, radio and print. She also has received awards for breaking news and for feature writing from the Associated Press and Society for Professional Journalists. Economic issues are prominent in Ohio politics, as the state continues to be battered by manufacturing declines, and it trails many states on the coasts in attracting investment and jobs. Before going to Ohio, she worked at a trade magazine, Washington Technology, and at newspapers in Alabama, Virginia and North Carolina.

Ms. Lee has a B.S. in journalism from the University of North Carolina-Chapel Hill, 1993. Past professional training has included the Paul Miller Fellowship for Washington reporters, and a Knight Center fellowship about urban and suburban issues.

Long Nguyen Dang Vu
Journalist and News/Feature Editor, The Vietnam Investment Review
Hanoi, Vietnam

Long Nguyen Dang Vu is a journalist and news/feature editor for the Vietnam Investment Review (VIR) which publishes six issues per week with a single issue circulation of 120,000 copies. VIR is printed in two versions, English and Vietnamese.

Before, moving to VIR seven years ago, Mr. Long worked as a full-time journalist for the Vietnam Business Forum and the Vietnam Economic Times. In addition to his work at VIR, Mr. Long also assists with editing a commercial and economic program titled: “The Market 24 Hours” for Vietnam’s national television broadcasting station and contributes stories to the London headquartered online newspaper, In his more than 10 years working as journalist, Mr. Long has written thousands of stories and articles related to both social and economic issues which have been printed in dozens of domestic and foreign newspapers.

Mr. Long received scholarships to attend an economic and financial reporting course in Berlin organized by the International Institute for Journalism based in Germany and the 4th World Conference of Science Journalists in Montreal organized by the World Federation of Science Journalists and the Canadian Science Writers’ Association. In addition, he has participated in many short term workshops and courses related to economic journalism in many countries world-wide.

Mr. Long has a degree in English translation and interpretation from the Hanoi University of Foreign Studies, and has received certificates in Business and Financial Economic Reporting and Online Advance Business and Economic Reporting granted by the International Institute for Journalism in Berlin.

Economics Editor, The Times of India
New Delhi, India

Sidhartha is Economics Editor in The Times of India, responsible for tracking and analyzing developments on economic policy and in the world of business. The Times of India is India’s largest English language newspaper and is part of Bennett Coleman & Co Ltd, the largest media house, with significant presence in the print media through publications like The Economic Times, Navbharat Times and Femina, besides interests in television and radio stations.

Sidhartha joined The Times of India in January 2006 from Business Standard, a leading financial daily, after an eight year stint. Starting in the weekend section of Business Standard in 1998, writing features on business, personal finance and motoring, over the years, he has tracked various sectors ranging from telecommunications, energy, trade, finance and micro and macro-economic policy.

He graduated in economics from Delhi University’s Ramjas College in 1997, and went on to complete a post-graduate diploma course in print journalism from the Indian Institute of Mass Communication, New Delhi.

Alfred Siew
Technology Correspondent, The Straits Times

Alfred Siew is a correspondent with The Straits Times, the largest daily newspaper in Singapore, covering the technology beat for the daily newspaper, as well as the weekly infocomm magazine called Digital Life. He writes news stories, features, commentaries and product reviews for both the main section of The Straits Times and Digital Life. Besides writing, he also supervises and leads packages for in-depth reports. He has been with the Singapore Press Holdings, which publishes The Straits Times, for close to eight years.

Technology issues that Mr. Siew currently covers include: new media, and how young users are changing the rules for the Internet; technology and government, and how initiatives from the public sector can move or slow down adoption of technology and open/clamp up markets; the benefits of technology adoption; and the latest mobile devices, and how consumer habits are changing with every new gizmo that hits the shelves.

Mr. Siew has won several awards, most recently for his coverage of the Internet outage on Boxing Day 2006 that affected most parts of East Asia resulting from an earthquake off the Taiwan coast that cut off several undersea telecom cables.

Mr. Siew graduated in 1999 with a bachelor of communications studies with honours from the Nanyang Technological University in Singapore. While in school, he ran a business called Mediagate Communications that hosted and designed websites for small and medium businesses. The company was born in August 1996, and closed shop in June 1999, just as the craze hit fever pitch.

Teramoto Seiji
Staff Writer, Department of Economy, Chunichi Shimbun
Nagoya, Japan

Teramoto Seiji has worked for Chunichi Shimbun as a staff writer for almost 20 years. Chunichi Shimbun, one of the biggest Japanese daily newspapers is based in Nagoya, close to the headquarters of Toyota. The combined circulation is more 5 million. It also has over 10 overseas branch offices, including Washington D.C, New York, London, Paris, Berlin, Moscow, Cairo, Bangkok, Manila, Beijing, Shanghai, Seoul.

Mr. Teramoto currently is responsible for covering the automobile industry, especially Toyota, as a chief writer in the department of economy. Prior to this, he was a correspondent and a deputy of the New York branch office from 2002 to 2005. In New York, he primarily wrote articles about the U.S economy and United Nations, but he also covered political issues including post 9/11 policy shifts and the beginning of the Iraq War. Mr. Teramoto started his career with the Chunichi Shimbun in April, 1988. After working at the Fukui branch office, he began to work in the department of economy in 1990 and covered manufacturing companies, retail business and the energy industry. His first exposure to the United States was a four week journalist program sponsored by the U.S. State Department in 1997. In 1998, he studied at West Virginia University for one year with financial support from Chunichi Shimbun.

Mr. Teramoto graduated from Kanazawa University, one of Japan’s National Universities, with a bachelor’s degree in economics.

Saturday, March 10, 2007

Composite LEI: let the good times roll!

Will the Philippine economy maintain its growth momentum? Well, the composite leading economic indicator (LEI) which serves as an early warning system for the economy released recently by the National Statistical Coordination Board (NSCB) says yes.

"The composite leading economic indicator (LEI) moves up in the first quarter of
2007, rising to 0.170 from 0.107 in the last quarter of 2006. Of the
eleven indicators that make up the composite LEI, four contributed positively to
the LEI for the first quarter of 2007. The positive contributors – beginning
with the largest positive contributor – were stock price index, exchange rate,
money supply and new businesses. The negative contributors - beginning with the
largest negative contributor – were tourist arrivals, electric energy
consumption, hotel occupancy, wholesale price index, merchandise imports,
consumer price index, and terms of trade. Positive contributors accounted for
72.1 percent of total contribution, outweighing negative contributors at 27.9
percent share."

What does it mean to have rising LEI? NSCB explains:

"The LEIS involves the study of the behavior of indicators that consistently move upward or downward before the actual expansion or contraction of overall economic activity. The system is based on an empirical observation that the cycles of many economic data series are related to the cycles of total business activity, i.e. they expand in general when business is growing and contract when business is shrinking. The LEIS was institutionalized to provide advance information on the direction of the country’s economic activity/performance in the short run."

Encouraging signs for the economy so far. Last week, the
Philippine Institute for Development Studies (PIDS), a government think tank, predicted a 5.8 percent GDP growth rate for the Philippine economy in 2007. Let the good times roll!

Wednesday, March 07, 2007

Just keep on ranting, you hear?!

Hmmn, it seems like my blog do get some attention sometimes. Today, Philippine Daily Inquirer columnist Manuel Quezon cited the editorial I wrote for BusinessMirror which I archived in my blog Philippines Without Borders about to whose credit the country’s economic performance should go. I argued the government doesn’t deserve it because all along the party in power has simply been too busy putting out political fires. Neither should the Opposition denigrate the gains of the economy for they are real gains achieved by the private sector, overseas Filipino workers, and the local entrepreneur.

Quezon said:
And I’d like to know what the administration and opposition have to say about
David Llorito’s belief that the administration has been too busy playing “whack-a-mole,” that is, stamping out scandals of its own making, to really attend to what it claims it has been doing all along -- forgoing politics and focusing on the economy. As
Llorito puts it, “We could have achieved some more, probably on a par with our
fast-growing neighbors, if only the government had been really attentive to the
pulse of the economy.”

By way of proving his point, Llorito wrote that as far as the administration claim of an improved economy, “these are real gains, alright, but in truth Malacañang has little to do with it at all. A look at the national income accounts shows the country’s growth was largely driven by consumption financed by remittances, the rapid growth of cyberservices and the recovery in the export sector. The dynamics of these growth drivers have nothing to do with Palace occupants.”
Moral lesson? To all bloggers out there, just keep on ranting. You might yet get an ear or two and, who knows, you may even change the world for the better. Or worse.

Dangers from the emerging multipolar world

A wide, wild world
An Editorial I wrote for BusinessMirror, Posted March 8, 2007

ANALYSTS attributed last week’s global stock market plunge to two major factors, namely the fall in China’s stock market after the Chinese government announced a crackdown on stock price manipulators and the recent negative data coming from the United States.

What many analysts did not focus on so much is that the event may signal that we are now in a “post-US” world that could prove to be full of uncertainties.

We used to say that when America sneezes, the rest of the world catches cold. These days, following last week’s stock market plunge, analysts are wondering whether or not the country will catch fever.

Concerns over the prospects of the economy saw the government and private sector analysts trying to spin the issue down. Our fundamentals, they say, are sound. The local economy, they say, won’t be hurt because only the rich play in the stock market. Our main drivers of growth are dollar remittances by overseas Filipinos. Recovery, they say, is going to be immediate.

Theirs is strange behavior because in reality no one knows how the markets globally would behave. Trading in the stock market is all about greed and no rocket scientist has yet figured out how to ride and predict the behavior of this unruly tiger.

The current scene is a sea change from a period when all an analyst would do to divine the country’s prospects is by just looking at America’s economic vitals. Is America’s consumer-confidence high? Are Americans building more houses? Are they buying more cars and gadgets? Is the American economy generating more jobs? These were the common questions asked. If the numbers look good, we were then also supposed to feel good, as it would mean rising purchases of our exports.

Now analysts are increasingly watching the moves of policymakers in China. And rightly so because, combined with Hong Kong, China these days accounts for 18 percent of the country’s merchandise exports. Many of our business elite are doing business there and local economic managers are hoping that by hitching our fortunes to the Chinese star, we might just grow out of our own misery. So overall, it’s a nice development since, with diversifying markets and global linkages, we could develop greater capability to deal with external shocks.

Indeed, China is currently the main driver of global economic growth. This trend is part of the ever-increasing spatial shift in wealth creation toward the Asia-Pacific region. Recent statistics show that the combined output of “emerging economies” now account for about half of the global output. “Emerging economies” here are actually mostly about China, India, Korea, Singapore, Russia. That means we are right smack in the vortex of these wealth-creating powerhouses. If we could play our cards well, we might yet achieve the higher growth levels and prosperity that we all desire. Or so they say.

With this spatial shift in wealth creation towards the Asia-Pacific necessarily comes a shift of political power as well. Observers wary of American dominance in global affairs are therefore happy that this trend may yet usher in a “multipolar world.” Certainly, a diversifying global market, coupled with the shift towards multipolar international relations, should sound like an ideal state for a globalizing world order. And yet, it’s in this situation that we are starting to raise our doubts about the future.

Why? Because of two things. First, it means that there wouldn’t be anyone to lead the global economy toward a meaningful conclusion of the Doha Round of Trade negotiations. There’s no doubt that expansion of global trade in the last two decades came as a result of the opening of markets with the signing of the Uruguay Round agreement. That agreement, which ushered in the World Trade Organization, brought wealth to the Asia-Pacific through greater flows of investments, trade in goods and services, and technology. Initially, the Europeans blocked the Uruguay Round but the leadership of America under Bill Clinton broke the deadlock. Specifically, European intransigence gave way to compromise when Bill Clinton pushed hard for free trade within the region through the Asia Pacific Economic Cooperation (Apec).

But the gains from the Uruguay Round agreement proved inadequate to address poverty in many nations; hence the Doha round emerged. But with President George W. Bush preoccupied with the “war on terror” and the continuing flurry of bad news in Iraq and Afghanistan, America has been distracted from playing a leading role in the negotiations.

Its war on terror and America’s worsening twin deficits have lowered its prestige and ability to exert positive influence. Without such leadership, it’s possible the world will descend into the chaos of regional trade blocs that distort the flow of trade.

And second, given the continuing flow of investments and the transfer of jobs to Asia-Pacific, some demagogic politicians in the West might yet resort to protectionist policies that will harm the global economy. Given the fact that close to 60 percent of the country’s GDP is accounted for by the globalized sectors, among the first to be hit by such policies would be the Philippines.

This is a very dark scenario, of course, but possible—given the fact that no one among the current global players and emerging ones has what it takes to lead the world toward a more liberal trading order. Not Europe, which is not capable of generating consensus on the reform of its own Common Agricultural Policy. It’s too fixated on its own navel to be an economic global leader. Not Japan, which is scrambling to address its own problems, including the graying of its population. Not China, whose main preoccupation is grabbing every available natural resource to fuel its own frenetic growth.

And certainly not Putin’s Russia. Because of rising prices of natural gas and oil, Russia has been experiencing rapid economic growth and accumulated quite a stash of cash to bully its neighbors. It certainly has gained a lot of economic clout but it’s the kind that sends shivers down people’s spines.

Consider this: Russia’s rise to power and influence came largely from the turbulence generated by uncertainties in the oil-producing region, specifically the Persian Gulf and the Middle East. Apparently, it doesn’t seem to have any economic incentive for a geographically stable Middle East.

A safer multipolar world? We should think again and figure out how to put up the Philippine economy’s defenses

Monday, March 05, 2007

The "new economy" in our midst

BEST new BPO locator of the year: Dell Philippines. Best midsized BPO company of the year: Leverage Systems Technologies. Most innovative BPO of the year: Transprocure Corp. Fastest-growing BPO company of the year: Teletech. Best BPO employer of the year: Convergys Philippines. And the BPO company of the year: Accenture.

People might be wondering if the brave new world of the “new economy,” a buzzword that has been associated with the information revolution, has reached our shores. We say “yes,” and the companies mentioned above are among the best in our midst, at least for the year 2007.

On Thursday evening the Canadian Chamber of Commerce—in partnership with the Business Processing Association Philippines (BPAP) and other organizations, including this paper—gave out several awards in recognition of their contributions to the economy.

The awards are rightly helping the public become more aware of their contributions because right now this segment of the Philippine economy is giving lots of excitement and promise to young entrepreneurs and workers. It has even started to create a positive impact on other sectors of the economy, including real estate, wholesale and retail, and even food and beverage manufacturing.

Nowhere is its impact more visible than in the property sector. Following the Asian financial crisis, office vacancy rates in the country’s urban centers like Makati and Ortigas went as high as 50 percent. As the “new economy” crept in, office vacancies went down so fast that even property developers were caught nearly napping.

These days, vacancies in prime and grade A office—those really nice and carefully designed office spaces with accreditation from the Philippine Economic Zone Authority—are all of just over 1 percent. That explains the frenetic construction in Makati, as well as in Fort Bonifacio. It’s likely that construction activities will really move faster this year.

If the predictions of its drumbeaters prove true, we are going to see this segment of the economy employing close to a million workers and generating more than $12 billion worth of services exports. At that size, the industry, property consultants say, would require close to 3-million square meters of office spaces. Hence, developers have to rush because if they fail to supply the spaces required by the BPO, the industry might suffer office-space shortages.

Right now, existing supply of offices plus those in the pipeline until 2010 would total 1.6-million square meters. That would mean a shortage of about 1.4-million square meters. It’s a kind of problem this country should be happy to have.

A million workers for the industry might seem too ambitious, but if one looks at the profile of these industries, there are reasons to be optimistic. They are highly labor-intensive. Teletech, for instance, has more than 10,000 employees. Convergys has 11,000. Many others are employing close to these numbers, and the list of companies keeps growing.

We mentioned the winning companies above to highlight how far the Philippines has gone in terms of developing its capabilities in these emerging knowledge-driven industries. The winners came from varied sectors, including software development, procurement-transaction processing, customer care, global management consulting, legal support and publishing, among many other activities. The judges, we have learned, really had a hard time determining the winners, an indication that what we have here in the Philippines are highly competitive and dynamic global players.

It should not be a surprise because way back in 2000, when the Department of Trade and Industry started plotting out measures to attract call centers, there was practically no BPO to speak of, except maybe some animation companies that have been here in the Philippine since the ’80s. Now, estimates from the BPAP indicate that the industry employs about 250,000 people and earns more than $3 billion a year. In 2007, assuming the same frenetic growth it has achieved in the last five years, the industry might yet generate US$4.9 billion.

The term “new economy” emerged in the ’90s as a way to describe the economies of advanced countries that underwent transformation from being industry-led to services-led, driven by information technology. Enthusiasts then thought that with extensive use of information technology, economies would enjoy steady growth and low unemployment. Others came even to declare that the business cycles of boom and bust had ended and that economies, having found Shangri-la, will prosper forever.

That proved illusory with the bubble in 1995-2000 that saw many technology stocks crashing down to terra firma when it burst. The global recession that followed discredited the “new-economy” prophets. Nevertheless, the term new economy continues to gain currency as global companies took to heart its doctrine that companies should “focus on their core competencies” and outsource the rest through the use of information technology.

In the new economy, profits are supposed to come from company intangibles like brands, intellectual properties, technical capabilities and reputation. Routine functions like back-office operations, manufacturing, and customer care could be outsourced elsewhere, preferably in low-cost locations in the developing countries.

That’s how we came to have all these outsourcing companies in our midst. And their presence is expanding rapidly. It’s new metamorphosis is the knowledge-process outsourcing (KPO) where local MBAs, engineers, and economists perform analytics like risk analysis for global corporations and organizations. And if we continue to play our cards well, we might yet end up duplicating India’s success in this business.

Playing our cards right means that the country should maintain its competitiveness in this sector. There’s no doubt that the private sector is mobilizing their resources to meet the challenge. The Ayalas, for instance, are investing billions putting up the buildings needed by the BPO. The conglomerate is also investing heavily in the industry, especially in KPO. There are indications that Rockwell Land of the Lopezes is also moving in the same direction.

The only kinks so far are in the public sector, where efforts to restore the importance of English in the classrooms through legislation has not been moving. We still haven’t heard of any major initiative to reform and upgrade the country’s education system. We have yet to see how the government is improving the country’s capability in the sciences and mathematics. Malacañang, as well as our educators in the private sector, therefore, should look at these issues as soon as possible, so we could sustain the momentum in embracing the new economy.