Perception decides

I flew to Singapore last week to brief a group of businessmen on what’s happening in the Philippines, and what to expect. I was competing against analysts from other countries doing the same. So how would I convince these businessmen to no longer ignore the Philippines, as they have been doing until now?

It’s not an easy task. The personalistic nature of the Philippines, which is so lovely, goes too far when it enters into business in this modern world. The perception by foreigners is that it’s a waste of time and money to bid for competitive projects if a well-connected Filipino is competing against you. Or you must tie up with him, which is not necessarily the corporate strategy you desire. So better to go elsewhere. And the investment figures show this is what has been happening.

Can P-Noy change this? Yes, he can. But not by exonerating his friends when they screw up. If independent investigation finds them guilty, then they are, and simple delicadeza would lead them to resign in deference to the presidency and the people. Well, foreigners see this favored treatment in one area and worry it will spill over into theirs, so why risk it?

Add to this little actual, demonstrable change beyond promise and what do I sell? Well actually I do have something, I have an irrefutable fact: Despite the negatives, multi-national corporations operating here do well. The proof of the pudding is in the eating, and the pudding tastes good. Some 75 percent of my clients averaged a 25 percent growth in sales while close to 50 percent recorded an average profit increase of 33 percent last year. You can’t sniff at that, that’s a good story. Add to that an honest President and a competent Cabinet and I had a good story to tell.

So I told it, and elicited some serious interest. But in our briefing we were also required to list some of the key constraints to investing. In the Philippines they included: In politics, personal interest taking precedence over the national good; uncontrolled population growth; weak educational system; graft and corruption, inadequate infrastructure; a judiciary in need of major improvement and weak governance.

In the briefing by our associate in Thailand, he listed the key constraints there as: Politics that is unable to keep up with economic and social change, endemic corruption, weak governance, political instability, inadequately educated workforce, inadequate supply of infrastructure, restrictive labor regulations.

In Indonesia the concerns were: that the political parties have not evolved from interest group patronage, corruption, inadequate infrastructure, an educational system that doesn’t meet business needs.

In India, the concerns of executives trying to operate there were: corruption, crony capitalism, failing governance, judicial intervention, inadequate infrastructure, dysfunctional politics.

Do you see a pattern here? We all suffer the same problems, so why is the Philippines getting so much less investment? Just look at the numbers: Over the past six years the Philippines struggled to attract $11.9 billion in foreign investment. Vietnam, a country fast overtaking the Philippines, got over double that at $29.8 billion. Indonesia was three times at $36.3 billion, and Thailand, four times at $48.2 billion.

So I ask the question again: The problems of working in each of these countries are much the same, so why is the Philippines so far, far behind in attracting interest? If I were P-Noy, I’d be asking that question as the top question I’d demand an answer to. I suggest he put some bright people in a room, close the door, pass food and drink (red wine works for me) around and don’t let them out until they have the answer.

Given the reality that the Philippines is no worse than the others in the constraints imposed on business, is it just a matter of degree? For instance, infrastructure is inadequate everywhere, but worse here than over there. We’ve spent less than half (as a percentage of GDP) what the other countries have over the past 20 years. And it shows, fly into the worst airport in Asia and you know it immediately. Or is it perception?

I suggest perception is a major reason, but then another question arises, why is perception so poor? Once you’ve got an answer to that, then the question must be answered: How do you correct it?

I have some ideas, but I want to bounce them off others first. What I do know is it’s going to cost government some money. Money that will be well spent, because it will result in far more coming in.

Mr. Aquino hasn’t put much focus on business yet; it’s about time he did —if he’s serious about breaking the poverty trap. He must dialogue with businessmen, not give a 20-minute speech, five or six questions of doubtful import, then leave. It has to be a two-way street. A year will have soon gone by and the business community has not once met him in any meaningful way. The Singapore Straits Times headline last Sunday said it all: JOB CREATION IS WHAT MATTERS MOST: PM. The Prime Minister added: “The first responsibility of any government must be to ensure good jobs, whether for the present or future generations of workers.” This in a country we all envy for the jobs it has created. And still Lee Hsien Loong is not satisfied.

Well P-Noy hasn’t made it his first responsibility. It’s time you did, Mr. President. Children dying at five of malnutrition because dad or mum doesn’t have a job isn’t acceptable. And you’ve said you don’t accept it, yet you’re doing little to fix it where it counts—with business.

One area of opportunity that surfaced for the Philippines was one where everyone had a problem: poor education. There is a dire, and growing shortage of educated young people business can hire. The Philippines could be a source of those people—if they swiftly bring education back to the pre-eminent level it used to have. Better if it could attract businesses into the Philippines to make use of those educated people. Look at how well business process outsourcing companies have done because there was a pool of talent. But that pool is drying up. Urgent, dedicated attention is needed to a school system that works.

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The President doesn’t seem to have understood what holiday economics is. It is not what Arroyo made it—one side or the other of a weekend decided arbitrarily at the last minute. It is this second part that is wrong. Moving holidays to the nearest Friday or Monday makes great sense PROVIDED it is announced before the year begins as to what dates holidays will be for the year. It can even be announced for the next five years. National holidays are known, the world calendar is known, we can say now what the dates will be. Long weekends are great to have, wonderful refreshers a one-day in the middle of the week just doesn’t give. Moving to the Friday or Monday has no negative impact on business. Peter Wallace, Manila Standard Today