Fix the Product Before You Sell It

Fix the Product Before You Sell It image

Text: Tito F. Hermoso / Photos: | posted September 28, 2011 17:41

Its the business environment, stupid!

Success! Another successful foreign trade mission! Gazillions more in trade and investments. But will the benefits of the gazillions and even the actual gazillions ever materialize? At least in the next 5 years? Promises are cheap on the ground.

Its been done before. For the past 40 years, Government has since been peddling the country as a "great" place to do business. But beneath the dramatic satellite TV images, slick ad copy, the marketing fluff and the PR hype, the product, essentially the Philippine business environment, hasn't changed. It still sucks.

You can have the best advertising minds come up with the best campaigns, sold and executed by flag-hugging believers 24/7, consistently for 40 years and still, the product - the business environment - is a dud. How can you sell something that's all form but no substance?

In the past, some of the few investors that did bite got burned. Our infrastructure landscape is littered with them. And when that happens, they are not the only ones you drive away. You drive away other interested investors. Will they come back, ever? Why should they? The Philippines as a business proposer is a white man that speaks with forked tongue. What we promise, on word of honor one day, won't stick when the going gets tough or when another branch of government changes its mind and often times, its people. For the past 40 years our country has gained the ill repute of being consistent in conducting business inconsistently. We never run out of excuses: the legislature, the people, the judiciary, the weather, the debt problem, the clergy, the oligarchy, the oligopolist, etc. etc. No surprises that we continue to be the laggard of East ASEAN.

Its not just a matter of a confusing business environment. The population keeps growing and the infrastructure keeps lagging. Solution? Cut the population. Divert the spending in teaching Filipinos to cull their ranks. In the meantime, the job shortage grows as investments in business fail to catch up.

Perhaps, that was why there was so much hope in the PPP. Accepted that it will take time to add even more refinement to the BOT statutes, but in the meantime, the rest of the more pro-active departments of government were chasing alleged tax cheats and plunderers, scything and inadvertedly causing collateral damage: confidence in doing business here.

The populist pleasing ochlocracy (mob rule) and the allegedly pro-business legislature continue to question global market price hikes, price hikes that have been held in abeyance due to bonafide price movement lags. Scoring "brownie" points for the 6 O'clock TV news rather than making sense to encourage business to have confidence seems to be the priority. It was rather rich that when government finally decided to end a huge national subsidy on Manila train riders, the legislators, some of them who claim to be pro-business, wanted to block the overdue fare hike. Meantime, the ranks of the unemployed, ripe to join the ranks of the bitter anti-business activists multiply.

We shouldn't blame the Mad Men, drum beaters, marketing whizzes that have come and gone. No matter how brilliant their campaigns are for tourism and foreign investment, we have a very weak product to sell, a product that has been consistently lacking and unfriendly to business.

It actually doesn't matter if the government's style is Nanny State like Singapore or Laissez Faire like Hong Kong. What matters is to just stick to a style, legislate, stay the course and tweak the law from time to time, without contradicting its founding tenets. Singapore has done it ever since they were severed from Malaya in 1965. Hong Kong has transitioned from Crown colony to SAR without any major changes in the way it deals with business.

Once and for all, we should have a cohesive Philippine product; a coordinated and cohesive legal platform that is business friendly which protect environment and human rights. Once we set this, we should be open to benefit from what Globalization has done for the only growing sector in today's atrophying global economy: the Emerging markets.

For the automotive industry, we should make up our minds if we want to support a truly indigenous CBU exporting car industry and stay a bit player in the global car components industry or vise versa? There's no saying we cannot be good at both exporting CBU's and parts, as Thailand has shown. Its all in the way the guidelines are crafted.

For infrastructure, we don't want to reach the point of desperation like we did in the early 90s whereby we had to bite the bullet and commit to onerous contractual obligations just so we can stave total energy melt down. The National budget will never be enough to fund mega railway, nautical highway ro-ro ports, airports, toll expressways and dams so we really need to encourage the private sector to take up the slack. The success in privatizing the power grid, water utilities and toll expressways has shown the way.

Our infrastructure is essentially under capitalized. Which also reflects the state of urban public transportation. Contrast this to provincial public bus businesses which are profitable because they are properly capitalized and have no competition from state-owned privately operated railways. We should insist on well capitalized corporations or cooperatives instead of a myriad of buccaneer/mom-pop operations if we want to have a handle on public transport. We should be open to franchise even foreign multinationals to run holistic and integrated public transport for our cities and towns.

Needless to say, Foreign trade missions are, in the end, good. It makes good business sense for the local tycoons to come along so they can pursue their own partnerships and size-up the foreign investors if they will be a threat to their dominance in the domestic market. But if we seek foreign investment we better make sure we offer them a level playing field. We too don't want to be victims of discrimination or "hometown" mentality when we go abroad.

Remember "Field of Dreams"? Build it and they will come. In 1961 Singapore's Economics Board built a platform that welcomed global investments in manufacturing. While neighboring Malaysia went the other way insisted on priority ownership for the "Bumiputra", the "Sons of the Earth" who had little capital. Though Malaysia has progressed, it didn't progress as fast as Singapore. Today, Singapore continues to be the most business friendly environment in the world. Global companies invest here without insecurity as Singapore has finely detailed laws which puts a premium on fairness and transparency.

Build it and they will come? Indeed, they will come, but we have to build it, and build it right the first time so that succeeding elected governments won't tinker with it. Why fix it if it ain't broke. Done right, word of mouth alone will let the world know that we mean business. When that time comes, these foreign trade missions will become ministerial and there will be no need to headline the gazillions of investments we garnered. Because by then, with or without foreign trade missions, investments in the gazillions should have become a continuous uninterrupted flow. Yes, and there will be no need for these high flying foreign trade missions.