Thursday, January 31, 2008

Performance measure of a global economy

I just phoned my son in Singapore and asked him how much money we have in our unit investment trust fund and he says, "it is as it was a year ago today. It moved up and down and now it is on an even keel."

Should I be happy or sad? Should I take my money out of the bank and invest it somewhere else? Should I put it in some business idea I am entertaining right now? Or should I just splurge in travel or shopping spree?

Last Monday, the guest speaker at the Rotary Club of Mandaluyong North regular meeting was Rey Angeles, author of two must-read books, The Peso Exchange Rate: Why Are We So Poor? and the newly released The Philippine Economy: Do Our Leaders Have A Clue?. There was a lively discussion considering that the members are entrepreneurs, bankers and one judge.

Rey says that before the onset of globalization, it was alright for economists to measure economic performance principally with one yardstick - Gross Domestic Product. And it might have been alright then to consider just interest rate adjustments and control of inflation rate as the principal policy instrument. "In the age of the global economy, however, these are not enough, for the customers of a country are no longer its citizens, but the rest of the world. Globalization later debunked the validity of INWARD-looking policies of the USA and showed the wisdom of the economic policy framers of Japan, Korea, Taiwan, and now China."

"Ironically, the USA has always been the greatest advocate of globalization, the reduction of tariffs, the opening up of markets, and the free movement of capital across continents.

"In the now global economy, the real measure of performance is Current Account Balance--the difference between inflow of dollar earnings of an economy and the outflow of its dollar expenditures in its business with the rest of the world.

"Briefly, the major components of the current account balance are net trade balance (exports of good and services less imports of goods and services) and net factor income (inward remittances of labor income and investment income of a country's citizens abroad less outward remittances of foreigners of their income earned in the country).

"In practical terms, the current account balance measures the earning capacity in US dollars of an economy with respect to the rest of the world and it also shows the economy's lack of earning capacity or competitive advantage with respect to the world.

"If the balance is consistently positive, meaning consistently in surplus, then it has competitive advantage with the rest of the world. If the balance is consistently negative, meaning always in deficit, then the economy lacks competitive advantage with respect to the world."

My initial question nags me: What should I do with my hard-earned savings to make it last until my judgment day?

Rey continues, "In the end, the underlying earning asset of our economy is not the performance of its financial markets or the income on savings accumulated for centuries and placed in capital markets. These are mere mirrors of the performance of the real underlying assets-- its working people, their entrepreneurial expertise, their level of production of goods and services and the competitive value of their exports that serve the real needs of the people of the rest of the world."

Rey finally concluded that we need strong sound economic fundamentals and that we use the proper measure of our economic performance. One move should be to let the peso seek its own level. A strong peso will hurt our economy in the long run. On the positive side, now is the time for our manufacturing sector to buy machineries and other capital assets when the dollar is down. The dollar will not stay down all the time.

As to my money in the bank, let it stay there until I am determined (soon!) to go into a business that could be exported to earn dollars. As Rey said, "our economic growth comes from serving customers all over the world, not just your own relatives and neighbors.";

Friday, January 18, 2008

Entrepreneurs: think big and global or die soon

I got two quick reactions from our readers advocating entrepreneurship.

One is from Norman Madrid, an economist in New York City, and with the Export & Prosper Investment Club. Norman forwards these interesting ideas:

a.. Filipinos are refreshingly energetic and entrepreneurial.

b.. In the past decade foreign direct investment inflows of $20 billion to $40 billion have been flowing to four neighboring "Asian Tiger" economies--SK, HK, Singapore, Taiwan--that have a smaller combined land area and population than in the Philippines. That has meant that these economies had abundant inflows of machines, technologies and global brains to help them succeed at world competition. Thus, their export earnings in 2007 came to $1.5 trillion. But, in the Philippines, inflows have amounted to only less than 5% as high usually. Hence, our exports have also been down deep in the abyss--only 5% as high as among the Tigers in 2007 and previous years, only $0.07 trillion ($74 billion) in 2007 despite the remittances of OFWs that are included in that figure. Lacking dollar earnings for decades, the nation could not import enough machines to employ the people in full or productively. GDP was only $140 billion in 2007, against $1,300 billion among the four Tigers, or eight times as high, despite their smaller combined populations. Wow--that is nearly a $1,200 billion shortfall, a $1.2 trillion problem. Unemployment was 10 times as high as among the Tigers usually when disguised joblessness is taken into account. Productivity was usually less than $4,500 per fully-employed worker, against $30,000 to $70,000 among the Tigers.

c.. In short, the entrepreneurship all around Manila is so local, is so globally blind, that I almost believe that Manilenos think that if they stepped out one inch to the world outside, then they would fall into an abyss.

d.. After all, the Philippines is only 0.3% as large as the world economy. Why not focus on-- may I repeat the refrain?-- developing companies and groups of investors to win foreign investor allies with whom to win the world at export wars, and earn the big dollars to import the big machines and technologies of the world so needed for Philippine factory and infrastructure building, and also needed for the creation of great jobs and laboratories and the enrichment and empowerment of the Filipino people?

e.. why aren't they uniting and forming investment groups that use 99.7% of their entrepreneurial energies at attracting foreign investment allies and conquering world export markets with them and their capital and technologies and products, and with our low wages and enthusiasm, creativity, efficiency and initiatives? As we work with these foreigners, we will acquire all their technologies, attitudes, knowledge. We will be looking at global opportunities while standing on the shoulders of imperialism; and we become global imperials ourselves as the Teutons, Vandals, Goths and Huns did after Rome first decimated them.

f.. After all the strategy of focusing on the world, which is usually summarized in three words: Export or Die! --now has a 45 year history and it has been proven sound. Actually it has a 2,000 year history. Rome used it. So did Elizabeth 1. So did 19th Century America.

g.. With that Plan, Hong Kong, which was poorer than the Philippines in 1965, became richer than Japan only 30 years later, in 1995. And, China, using the above strategy starting in the 1980s, has zoomed in the world in the next 25 years. Some 65% of its exports are produced by foreigners.

I am also impressed with some of the words of wisdom Norman shared: So much to do, so little time to do it. Fortune favors the brave! Why support young artists when the more interesting are those who smash the world's doors on their own? If you want something, go get it. The greatest risk in life is taking none. Eat lunch, or be lunch.

Keep your Christmas lights on!


Thursday, January 10, 2008

Entrepreneurial opportunities in Manila

I walked the streets of Manila this week and I found many promising opportunities for business waiting to be tapped.

Walking through the sidewalks, streets and malls of Divisoria last December and it was like passing a squeezer. So many kinds of shoppers and an equal number of all sorts of vendors, hawkers, salespersons, kargadors, shoplifters, pickpockets and plain istambay inching their way, tiptoeing, standing alongside jeepneys, private vehicles, tricycles, karitons, and others. There was no vacant space left; every nook and cranny was taken.

Everything was so interesting. Everybody wants to get ahead, yet the most you could do is take one half-step at a time. Everybody seems hopeful and happy. The buyers, perhaps, are looking forward to a wide variety of goods at bargain prices and the sellers are expecting to sell big volumes.

Last Monday, then again briefly on Tuesday, I went back there. Somehow, the place seems gloomy. It didn't seem like Divisoria without the tens of thousands of sidewalk and itinerant retailers along main and side streets. There were still some along C.M. Recto, but the jeepneys could now pass unhampered. Passing through the alleys of 168, Divisoria Mall and Taborra was like walking in the park, you could even play bowling there. I am now wondering what type of "job" or "business" those displaced retailers and hired salespersons are engaged in. Where are they now selling their goods? What are their sources of livelihood presently?

From the coaches of LRT Line 1, I noticed that Carriedo is clear of street vendors but it is so filled with people walking or standing by the sidewalks. I decided to get off at the train station. So I walked around Plaza Miranda and the streets of Carriedo, Villalobos, R. Hidalgo, Evangelista and all the streets intersecting Cariedo, Evangelista and Avenida Rizal on the day before the Feast of the Black Nazarene. Mayor Lim made Avenida open to motorists again. The Quiapo area is ever bustling and crammed with all sorts of goods-for-sale in stores, on carts, on bilaos and on anything that could easily be folded and carried when the roving traders run from the policeman. There are even massage services (for neck, shoulders, head, foot) along the sidewalks of the plaza next to those selling condo units and gold jewelry.

One unique thing they are selling in Quiapo is prosperity candles that come with instructions on how they are to be lighted, when and where. Each candle symbolizes various aspects of life for the believers; e.g. red is for life; blue, for peace; yellow, good spirit; violet, material wealth; green, money; pink, health; and white or orange, brightness. Nobody could tell me who made the distinctions, but I was admonished just to buy the candles and believe like millions do.

Finally, I went to Kamuning Market, firstly to have my gown re-sewn to my new svelte size (after painstaking healthy eating and exercising). I was told to wait so I went around the market. I was pleasantly surprised to discover so many tailoring and dress shops inside the market. When you think of market, you think of meat and poultry, vegetables, seafoods, and all products related to food and cooking. Not Kamuning—you could find the some of the best tailors and dressmakers there and all products and services related to garments, including textiles and curtain materials.

Best of all, I always go to Kamuning Market to savor the very tasty palabok and pancit bihon of Aling Norma.

Now, for those who are thinking of going into business or perking up their current business, there is a lot of insights you could get from walking the streets of Manila. It is like taking the pulse and temperature of Manila buyers. What are they buying? Where are they buying? How are they buying? When are they buying?

I am telling you, you could make (or buy) anything (yes, anything!) and sell them—people are buying! We have become a certified consumer society and people think and feel that the peso has gained in buying power and so they are spending. Just get out there and start your business. Keep the Christmas lights on.


Thursday, January 3, 2008

New Year's wishes for corporate social responsibility

From the airplane up there, Manila was an attractive sight with all the Christmas lights glowing, blinking, dancing. It was even brighter than Singapore because their Christmas lights were concentrated only along Orchard and Scotts Roads. We should declare a year-round Christmas celebration!

Even our Baranggay 596 which is usually dim and even dark in the interior parts was awash with gorgeous lights along the streets on individual resident's house fa├žade. But starting January 2nd, most lights have gone dead and it looks like an old, tired community again.

Instead of simply packing some plastic toys and junk food in a grocery bag and giving them away to "poor" children or some patients in a public hospital, companies could do more. Anyways, their employees who do this "job" aren't really into it. So, I am knocking on business' social conscience and I have this wish list of significant contributions towards peaceful and happy communities.

  • Sponsor more values and skills training programs for our police officers and firefighters. Let us share with them our corporate expertise on management and customer service. Let us show them we care so they would also care for us. Well-informed law enforcers make happy and conscientious peacekeepers.
  • Adopt a street. Do everything to make your street clean, safe and good-looking in cooperation with those who live or do business along them. Especially, give back sidewalks to pedestrians.
  • Pay appropriate taxes and sponsor prayer meetings that these taxes will be spent by our political leaders properly.
  • Help our museums build mobile museums. People don't bother to go to museums, much more pay the entrance. The last time some professionals I know have been to a museum was during their elementary school-sponsored field trip or more recently when they had Balikbayan relatives or friends who are on culture trip.
  • Donate books to our local public libraries. In Manila, we have the Kamaynilaan in City Hall and its many satellite libraries all over the city. They look like museums because their buildings and books are mostly old, dilapidated ones. My short stint at Kamaynilaan was one rewarding part of my life—I've read some really old, rare volumes there.
  • Sponsor reading sessions for children in your community.
  • As part of your employee training, make them do a walking tour of Manila, particularly the Walled City and a boat ride along the Pasig River. I assure you, there are no foul odors there. It's like looking at Metro Manila from a different view, truly educational and wakes up your sense of citizenship.
  • Sponsor cultural shows like folk singing, folk dancing, Balagtasan and sarsuelas in your community. People would rather buy food than pay to watch such shows. Let's propagate our cultural traditions.
  • Declare a total smoking ban and make your business premises smoke-free. Don't even allocate a "cancer" section in any area of your building or parking lot.
  • Make it a rule for your employees to take care of their individual carbon emission. For example, impose a punishment for those who make loud noises in the workplace or those who own cars that emit foul smoke and odor. The December issue of Reader's Digest has an interesting article on how noisy our environment has become and how we are all becoming deaf.
  • Sponsor a "garage" sale among your employees and make them sell their unused, slightly used, still useful things. Some people's garbage is another one's treasure. Some unsold ones could be donated to charitable organizations who could use them, e.g. Pro-Life, etc. Let us promote recycling.
  • Rock the boat. Declare a day or week when you turn upside down your business ideas, concepts, traditions, practices –give them a strong, bold shake. Don't be surprised to find some bright ideas in its nooks and crannies. Let us promote creativity and innovation.

These will do for now. Actually many companies already do a number of these kind of projects. However, I hope that once they do it, they make it a regular life-long commitment and not just one time during Christmas.

Happy New Year. Keep your Christmas lights on.