Hearing him makes me recall a tech icon –  Steve Jobs of Apple.  Steve Jobs is obsessed with just one thing – to create the most awesome product that is different yet simple.  Of course, if you are a business person – you know that creating great products is just part of the equation.  You also have to consider market research, price, production, the bottom line, your stock price,  and also hiring right.  But Jobs is just focused on one – creating an awesome product. It is as if you get the product right, and people are awed, the rest – profitability, market share, customer loyalty will just follow.

So far, the president has put in his stake on this – he is making a big bet to put more money to conditional cash transfers to eliminate poverty.  He has also delayed vital government projects to make sure that there is no corrupt deals.  This has been costly- by delaying government expenditures which was more than 20 percent lower than equivalent period last year, it has probably slowed GDP growth by a full point or so, and was one of the culprits in the  2011first half’s less than impressive 4.8% growth.

I am not so sure if corruption is such a big factor that it was really the single cause of our being a basket case, and thus be such an obsessive issue, but we hope for the sake of the country that he could be right – that it is so compelling that getting this one thing right could get other things in tow, and could finally propel us to where we want to be.  There seems to be no question that he will spend  his next five years on fighting corruption, and we hope that for all our sake that “Kung walang corrupt, walang mahirap” is really on the spot. Just a single magnificent obsession just might do what thousands of smart men failed to do.

You understand that the long term cost of doing such is that the children becomes fat, unhealthy, undisciplined, and refuses to eat wholesome food.  Their teeth will rot, and their education ignored. Worse, you know you cannot push them too hard to work or study ( things that are good for them) , because they will tell ‘ lolo’ about it, the lolo who seem to have endless supplies of candies and soda, and who never says its bad for you.   In the eyes of the child, he is his knight on shining armor.

Such can be your dilemma in managing corporations and being a leader.  There are interim leaders who don’t subscribe to long term thinking, but in short term popularity.  I feel the tragedy of Philippines politics as it was developed, together with our culture, has spawned a lot of leaders that are like the well meaning grandparents –  They don’t do much when there is work to do ( but you like them, because they don’t ask much from you either, unlike your parents!) , but do come by occasionally to show that they care by donating to fiestas, giving a small stipend if somebody dies in the family, shakes your hands,  and brings in your favorite stars during elections. And predictably, they continue to get our votes.

Evidently, the grandparents know what they are doing may not be good for the children, but they are with them only for a few hours.  And doing what they do – and seeing the delighted smiles, grateful kisses, and compliant silence of the kids is more than enough rewards for them.  For politicians, it is enough to get your vote.  Unfortunately, it is also more than enough to screw up a kids thinking as well.

The Philippines situation can be partly caused by well intentioned politicians who act like so.  And you cannot blame them. We know people are suffering, and yet unlike other countries, we are conditioned not to push them too hard.  We are asked to help in little ways.  Knowing we cannot help street children have a decent education or a regular nutritious meal, we do our good deeds by visiting them once every Christmas and giving them a school bag, and a party – ice cream, fried chicken, and candies, as our way of showing we care.

We tell them to study hard, but they know it really does not matter.  The earliest they will see you again is probably next Christmas, or in the case of politicians, next elections.  But once in a while, in their mind, is better than nothing.

We businessmen are as guilty as politicians doing this. Very few actually ask their constituents to sacrifice, or work hard or do something for our country other than the slap in the wrist ‘vote wisely’ or euphemistically, ‘vote me’.   It is easy to do something for your country – just vote for me during elections! They make you believe that they can do something about your situation without you having to ‘grow’ up or ‘shape’ up, and we all play our parts most convincingly.

Other countries in Asia grow because the leaders are stern enough to ask their citizens to work hard and ‘sacrifice’ for the prosperity of tomorrow.  But we know no leader can do that and win elections in the Philippines.

Pork barrel is legislation that lavishes money on small projects, most of them of which can be considered not really an investment for the future. It is similar to candies or something the lolo gives.  Not nutrition, just dessert.

Lolo never asked the kids to ‘grow’ up.  They are happy if they will be children forever.  They know the kids will stop idolizing or visiting once they grow up. Our politicians also wished the same, because as long as they are children, you only need candies and toys to get them smiling.  And we all go to hell together happily in a road paved with good ‘intentions’ for each other.

The pillar of the economy is undoubtedly on the quality of the manpower the country has produced, and the ability of the economy to grow will continue to be mainly anchored on the employability and competitiveness of its people.

Every resource should therefore be focused on continuing to equip the populace to get better education. The Philippines is quite behind in this – According to the United Nations Human development Index, the Philippines spent 3.1% of GDP for education in 2009 and this percentage was the 104th highest among the countries. This is in contrast to Malaysia which spent 8.1%, Thailand 5.2%, and India 4.1%.

However, there is more than meets the eye. Not only is the percentage lower, but mere comparison misses out the fact that though most countries spends 4 to 6% of GDP on education, their demographics reveal that the percentage of population below 15 years old ( the school age) is roughly at 20%, while for the Philippines, it is nearer 35%.

Thus, by most counts, the Philippines is not only underspending by over half, it also has to contend that it has to spread this to almost twice the number of children, and therefore by simple math, we are probably spending way less than what most countries are spending on this aspect.

Statistically, while there are over 44,000 public elementary schools in the country with over 20 million children, it is also glaring that over half of these schools do not even have a single computer.

However, the other glaring omission is not only that the quality could be improved but the quantity is also wanting.

One of the things that I believed contributed to the underachievement of the Philippines is the fact that the Philippines is one of only two or three countries that have a 10 year primary education, while most countries have twelve. After the country gained independence, a law was passed which mandates only 6 years of elementary education and 4 years high school education. Apparently, at that time, the intention was laudable – having children graduate earlier meant that they could go to work earlier, and be less of a burden to their family. But in today’s age, where education and competence is the prime ticket to success and better living, the Philippines is really hard put to compete with our citizens having 2 years less education.

The recent Bologna accord which establishes the standards for European education and recognition of each others degrees, and the Washington Accords which establishes the standards for American education explicitly mandates 12 years. It is said that if the Philippines does not rectify its system, it will risk having its graduates of universities not recognized by the other countries.

It is a change we need to make, and it will be painful. We took it easy for so many years, and had a shortcut, but apparently, this party, like others, have to last. The adjustment is necessary for us to be competitive and acceptable to all countries, as well as more important in growing our economy.

I would reckon a few hundred years of repetition has deliver that strongly, and unfortunately the way our society has developed, it has indeed reinforced to the average Juan that it is true.  He looks around, and indeed they see that in our society, most of the people that have progressed are those with the right compadre,  or sponsor.

If you witness the great hoopla and importance we place on elections, you will note so many people so zealously trying to look for saviors, which many of the candidates are also too willing to be the pretenders.  In more progressive countries, elections are less of an event.  People know that officials are just human, and most things will be alright irregardless of who sits in power, as long as they are vigilant, and keeps them honest, and not to do something too stupid.

The most popular show here is Wowowee, where the contestants take turn telling their tales of woe, in the hope of attracting donations or charity. Every politician will tell you that almost on a daily basis, he receives legions of requests for help and doleouts.

Unfortunately, the people making the promises are not only too human, but clearly unable to fulfill such, and moreover have really a different selfish agenda in mind.  The last 50 years of the Philippines plays like a refrain that never goes away-  leaders and institutions failing the trust.

That is not only in the Philippines. Across the world, almost every major credible person or institution have also not come up to expectations – be it General Motors, Wall Street, Goldman Sachs, the Catholic Church, Tiger Woods, Bill Clinton, the European Union, Toyota,  or even Obama.

The Filipinos should be told to trust themselves, and rely on their own efforts to better themselves. IN many Asian countries, leaders connect with followers, and tell them to work hard and sacrifice.  In here, because of such culture of dependency, the leaders who ask for sacrifice typically don’t get reelected, and therefore the most the potential candidate will be able to do is to pretend they have solutions, and get the vote.

I read a story about the Chinese farmer, and the proverbs that they spawned over the centuries, “ No food without blood and sweat.”, “ Don’t depend on heaven for food, but on your own two hands carrying the load.”, and “ If a man works hard, the land will not be lazy”.

Or specially the last one, “ No one who can rise before dawn three hundred sixty days a year fails to make his family rich.”

I am afraid of human saviors because we have not seen any the last 50 years here, and the most promising ones have invariably been the most disappointment.  Moreover, if you look at 20^th century history, the biggest damage have been by purported very popular saviors – Hitler, Stalin, Mao, Kim Il Sung, Pol Pot , etc.

Let us stop waiting for  a savior, but rely on ourselves.  The future of the Philippines is not on any one person, but in all of us.

In the 21st century economy where wealth and market value of companies is defined in terms of intellectual property and human capital owned, the protection of intellectual property and patents like in drugs, software, film, engineering inventions, design, and music has been touted as a very important factor in enabling companies and individuals to encourage them to invest in new research and innovations, and critical for countries to improve their standard of living and income.

“Who would want to write a book, compose a song, create film, and develop software if anybody can just copy the without paying licenses or royalties?”  and indeed, I agree.  The person who made the investments in innovation and creation need to be properly compensated.

However, we can relate this question to another perpetual question on why the Philippines is poor – and I believe it is because its intellectual property rights has not been protected, and has been stolen in the billions, and ironically, we are happy and proud about it.

Consider this. Between 1980 and 2010 (today), the Philippines increased its population by over 50 million by producing and raising over 60 million babies ( over 10 million people died during this period).  In the last 3 decades, we just had too many people, and the bulk of everybody’s income, and the government’s budget has simply been going to feed and educate and provide the basic needs of these people such that we have none leftover to invest in infrastructure and other endeavors, as well as so called finer things in life.

Now consider that over 10 million of our people have moved overseas to find work or to look for greener pastures because we could not provide them decent jobs or the standard of living that they deserved.

The typical person who moves out is age 25, above average education, with above average abilities.  Now, let us do a little bit of math.

Most of these countries are gaining these bonanza – they get certified nurses, professionals, programmers, welders, therapists,  without having to pay for the cost of raising or educating them on their first 25 years.  The moment that they land, they start contributing to the economy with ready skills – and of course, the Philippines receive nothing in compensation, and is happy with the remittances that they sent, and perpetually crows about the billions we receive each year.

Let’s say that on average, each of this person are earning USD24,000 a year in their country of choice.  He probably pays about USD4,000 in taxes benefitting his host country, and he probably spends the other USD 19,000 helping that country’s economy either by paying for rent, gas, food, and the like.  He saves about USD 2,000 which he sends back to support some of his relatives behind. ( which should be about it – if our overseas workers are sending approximately 18 billion dollars back home, and there are 10 million of them, then it stands to reason that each sends an average of close to USD2,000 per year).

However, think that they don’t pay taxes to the Philippines government, so that is our taxes lost.  And think that mostly, OFWs send the most money during their first few years of overseas work.  This is the time when their siblings or children need to finish education, and therefore needs the money.  But after a few years, they will stop when their siblings can fend on their own, their parents have passed away, or they have been able to earn enough to get them to move overseas with them.

If the Philippines move forward, and improve our standard of living, and income, and have better quality of life, some of them will come back, and that will be our gain.  But the longer we delay our own development, the more people we will lose to the foreign country forever.

How much did Philippines Inc., invest in raising the over 10 million people abroad?  For 25 years, just consider that it is USD1,000 a year.  That would be an investment of USD25,000 per person till he is 25, and if you are looking at 10 million OFWs, then that is a USD250 billion investment.  In business parlance, you make an investment to lose money on their first 25 years, so that they will pay back on their next 35 years – which should be the peak of their working and earning power.  Did we get paid for doing this by the foreign governments who are absorbing our people?  None, nada, and we even thank them for it.

In the businesss world, the fastest growing and most profitable companies gain their edge by their ability to attract and retain talent and human capital which forms part of their intellectual property.  Ditto for countries.  It is no secret that many countries like Singapore, Hong Kong, United States, Australia, Canada and others have made it their policy to continue to be competitive by being able to draw the best immigrants from developing countries.  The United States, for instance, benefits a lot because most students who go there for advanced studies gets offered to stay, and ends up working for America Inc., And yet, we are making a policy to send out our own best people out!

Let us try to do the math another way. Let us supposed that these 10 million have chosen to stay in the Philippines because we have the environment to attract investments which gives jobs.  Not as good paying as overseas, but many would choose to stay if the difference is not as yawning big as it is now.  And we can probably save millions of families from being broken up.  Again, most of these would probably be our top quartile in terms of talent and abilities.  Let us say that they end up earning USD 5,000 per year.  Multiply that by 10 million, and assuming each pays 20% of their salary in taxes.

That’s 50 billion dollars in additional national income  per year, and that’s an additional 40 billion dollars that is most likely spent here for food, education and the like.  And that’s 10 billion of income taxes to the government, SSS, and Philhealth contributions, and another 6 billion in Value added taxes because the whole amount was spent here.

It is not only more, but is more likely to grow every year, unlike the remittances which if we stop sending OFWs abroad could well be diminishing.

Let us provide investment opportunities so that the people who need jobs can get it here.  And that will enable us to benefit from our intellectual property and human capital.  The nurses will take care of our people, and the entrepreneurs will create businesses that will hire our people as well.  There is no future for this country if year in and year out, we lose our best people.

The United States economy is the richest, and stressful economy because it fosters competition.  Many people complain about it but there is no other way.  Oh there is.  There is always the short cut way of asking government to choose sides, and choose the winner. Indeed, this is playing out in all areas of the world.  But everytime the winner wins because of government regulation rather than free competition, we all lose. We end up with products that are more costly, or less than the best.

Every week, four hundred thousand Americans lose their jobs, and another 600,000 change or leave their jobs voluntarily.  ON the other hand, about a million or so  find new jobs. How stressed is that?

This is the 21^st century malady. Competition brings out the best in us.  Unfortunately in an effort to get winners, there will be losers. Can you imagine if the Olympics, or the American idol  ( or the Philippine elections for that matter) was rigged, and not the best wins?  Would you still be interested to watch it?

We have to welcome change, and maybe what separates the winner is the willingness to change, and to accept change.

In a recent survey of executives from the United states and Europe, businessmen were asked: “ What is the opposite of change?  The Americans mostly answer: stagnation.  The European answer: stability.

What’s your take?  I guess our ability to change, and to continue to compete will determine how high we will be able to go.

The reality is that business is not that easy. The failure rate of new businesses within the first five years varies from around 40 to 80 percent.  In most areas, competition is now so fierce, that a business that pays back the investment within 4 to 5 years is already considered a gem of a find.  A business may only have superior returns if it has already established a reputation, or it has a sort of monopolistic market share or brand name.

I am not kidding that it seems that every year I run the business, I seem to issue a bigger amount going to various government agencies than what I see growing in my money account. Let us take a dive.

Assume that an entrepreneur invests 50 million pesos to set up a facility in a locality.  Let us say that the business generates sales of 70 million and earns 5 million pesos every year.

Of this, let us say that the various business taxes, income tax, permits, real property assessments, doc stamps, VAT , regulatory fees, and others total to 2 million. That means the entrepreneur makes a net of 3 million and 2 million goes to the government.

However, let us say that the business also hires 100 people, the average of which gets P10,000 per month or P130,000 per year. That is 13 million pesos per year in payroll.

For a person earning P130,000 annually and is single, he can be assessed close to P10,000 in income taxes, as well as P15,000 annually in Social security, Philhealth, and Pag-ibig contributions.  That is P25,000 per person or 2.5 million for 100 workers annually.

So in short, the government benefits yearly in the tune of P2 million in company taxes, plus another P2.5 million in taxes of personnel and payroll taxes, plus a potential of over 50 million in local purchases of the firm, it can be safely said that the government is as much a beneficiary of the business than its investors.

He said, “ we used to advise China that it would be a great benefit to China to attract foreign businesses to set up shop in China to export and earn dollars.  Now we are revising our thinking.  We think that any foreign business that set up shop in China, whether to sell locally or for export will benefit China”.

After all, what country has been found to grow poorer because too many businesses, foreign and local, set up shop there?  The more businesses and competition, the more the consumer benefits, and for the government, the more taxes.

What is the distinction between a Filipino and a foreign company?  It used to be that we don’t like foreign companies because they will send back the money that they earned, thus effectively denying us the impact of their profits while the local is supposedly here to stick with the community through thick and thin.  But now any company, can send money around the world, and can effectively salt profits abroad.

What matters is businesses provide jobs, introduce technology and expertise, treat workers decently, practice green, and pay taxes.  As Deng Xiao Ping, former premier of China said famously, “ Don’t care whether the cat is black or white, as long as it catches mice.”

And look at our airlines, our telecom companies, our retail, and hotel industries today.  Are we not all better off because more are here?  Competition brings out the best in us, and the efficiency and better products, especially the lower prices benefits all.

Regulate if we must.  Deny if you need to.  But the default should be – the more the better!

The rise in labor costs had the predictable effect of reducing job creation while increasing the incentives for businesses to automate.  In 2005, the French Assembly watered down that law.

Our attempt at holiday economics seems to be based on the same principles that there are a fixed number of hours to be worked, and by declaring more holidays, businesses would hire more people.

It was also envisioned that more holidays means more people can go out and spend. This was patterned after Japan.  The Japanese, however, were overworked and had very high savings.  A holiday would afford them rest, and would afford them to go out and spend, helping the economy. The problem is that the Filipinos don’t really have that much savings to spend on the first place.

This is the same as trying to benefit the worker by raising minimum wage.  However, services like products follow the law of supply and demand -when prices are expensive, you buy less.  When wages rise, businesses will hire less people.  This attempt to subvert the law of supply and demand creates an insider/outsider problem. If you have work, you are better off, but if you are an outsider, ( no job), it actually lessens your chances of getting hired.

Declaring more holidays does not benefit the businesses nor the worker. You don’t grow the economy by working less.  You grow it by increasing your productivity and working more.

If low wages were the sole barometer of where companies want to invest, they would all be going to Africa.  When NAFTA ( North American free Trade Agreement) was signed which allows Mexico free access to the United States market, it was predicted that the Americans would lose their jobs to the Mexicans, who are willing to work at minimum 5 or 6 times less salary.  But that has not happened. If the American worker is more educated, and skilled, and as a result can produce units or value 10 times more, then he can still be a more valid alternative.

The reason why China is so strong, is that while its wages have doubled since 2000, its productivity have risen almost fourfold. In contrast, productivity of the Filipino workers was noted to have risen only 2.3 percent in the 1995 -2000 timeframe, and by a marginal 0.9 percent in 2000-2005.

Take, for instance, two firms, firm A and firm B, with the same level of output. Firm A however utilizes lesser input than firm B. Thus, firm A is more productive. With lesser usage of input, it is expected that firm A will have a lower cost of production and can charge a lower price for its products. Consequently, it is likely to have a larger market share and higher revenues.

Improving productivity through skills training and education is essential in attaining global competitiveness with the end goal of achieving sustained economic growth.