June 11, 2008

THE PROBLEM WITH GAPS IN LEADERSHIP CONTINUITY


I had the privilege of touring the two major shipping ports in Ningbo, as well private time with the government ministers and company leaders that conceived and developed the Chinese port expansion plan of the early 90’s. Impressive is the best word to describe it. This government has a vision for the shipping hubs of the 21st century and it will surpass and dwarf ports like Singapore and HK (considered the worlds best).

In our 20-person shuttle bus, there was unanimous praise in the Chinese as well as a sense of foreboding and disappointment that our respective governments have been unable to compete as effectively. It was culturally amusing and slightly stereotypical to watch the Kazaks grunt in approval, the Koreans bow in amazement, and the Filipinos click their tongues while shaking their heads in stunned, clicking silence—quite the symphony! This was no group of slugs either; my shuttle mates included the former Prime minister of Kazakhstan, the former Prime Minister of South Korea, Minister Long Tong Yu, and a handful of leading shipping/logistics/port operators in the industry. How has China managed to develop and surge forward at such a rate? $$$! But also a strong, sustained drive towards a long-term vision, set forth by the government and defended by each successive leading body.

My beautiful country of the Philippines has an almost perfect model of how NOT to progress through “leadership continuity.” Projects are not centrally planned since we seem to choose to develop our country based on the whims of our presidents. This is NOT OK. In this model how do you develop the correct infrastructure? Zoning? Create the right atmosphere for foreign investment and provide/guarantee them with a reasonable payback period? How do ensure that projects that affect the nation are done in the best capacity of the country? The answer is you cannot. Which is why we have a patchwork of ports, roads, airports. Practically primordial infrastructure, which keeps our costs up, productivity/efficiency low and makes us uncompetitive in a world that has become increasingly competitive.

Let us take our airport system as a good example (since it has been in the news lately). Originally, when they were planning the expansion of the existing NAIA Terminal 1, they had several criterions to fill. Aside from being able to handle the capacity for several decades, it needed to be modern and people friendly. Passengers would have been able to come in from an international flight check-in at the terminal of entry for any domestic flight, and promptly walk over to the domestic terminal via bridge way. These were to be connected by a central transit hub where private vehicles, trains, and buses would convene. Interestingly, the MRT train line would run all the way to Clark, linking another air hub to the major NAIA terminal.

Of course, what we ended up with was a white elephant of a terminal 3 and the new domestic terminal entirely in the hands of PAL. In retrospect, I think the only two hubs ERAP gave thought to was the International Financial Hub of Equitable PCI (check this) and the International Entertainment Hub of Airforce One (not accurate chronologically, but you get the point!). The handling of GMA further exacerbated all of this. This project came together near the end of FVR's term, so in two presidential terms and 10 years of our lives, we have lost and near buried what would have been a boon to our economy. Disgusting.

Touching back on my previous entry discussing Nuvali or Clark, there is a distinct opportunity for us to fix our international image and give The Philippines a competitive edge. Anybody that looks at a map can see why we can still be a strong player in the region. Our location is suitable for all Central and South East Asian destinations. We have a wide berth of seafaring water on each end and can certainly provide a more attractive shipping route to China than Singapore, Malaysia and even HK (though depending from where). This is really just for transshipments, as our local economy will not create the demand that foreign companies are willing to invest in.

Clark and Subic have now been connected; there is plenty of room for growth in our major Freeport zones. There does exist infrastructure around the deep waters of Subic that can be expanded and the surrounding area has plenty of room for growth. I know of several groups, ICTSI being one of them that currently operates and can continue to develop our port capacities. We should take from the HK/Singaporean model and allow foreign firms like Maersk and MOL to handle their own port operations. With them come jobs, professionalism, and a glimmer of hope to foreigners that the Philippines is still a good location to park capital.

A greater frequency of inbound shipments lowers overall shipping rates, while opening up trade. The best part is, Subic and Clark are a destination in their own right, which means that we can develop a whole other city for the country, one of equal value to the CBD and its neighboring Nuvali. The Philippines can have the traditional port and airport (Subic/Clark) and the future information port (Nuvali). Great combination. Let us not forget that old logistics dream of cutting a swath of land through Quezon province connecting the Pacific in an almost straight line to Manila Bay. The possibilities of turning Luzon into a major Asian hub are tremendous and quite feasible, a dream for my generation perhaps! Logistics runs in my blood, and developing the Philippines geographic endowments is something I have always wanted to do. We can be so much more in this field.

We need central planning, political will, and a design that can make plenty of $$$ for foreign and local investors brave enough to invest large sums in the Philippines regardless of our present track record. Can it be done? I think it can.

6 comments:

Anonymous said...

Dear JJS,
Good job on this piece by the way, i can see how much you love our country. I do agree with your opinion and i think we sorely need people like you in our generation. I find myself having innane conversations with people from the private sectors and government wanting to make more money but never really having enough foresight. So it's refreshing to find someone who has the prudence to actually think of the future, aside from their usually sunday golf games! You say logistics is in your blood well mine is in the automotive industry, and with the rising oil prices i find myself thinking of how to make innovative gas saving technology availble to the mass market. It's a challenge that i am willing to take on. But on a sad note the pending move of UPS out of our country is really going to hit hard and the hardest would be the local work force. I am disheartened to hear that they are cutting down their workforce from 300 to 70. Thats 230 jobs! how are you guys in logistics taking it?
Sourpuss

Anonymous said...

Dear JJS,
As i was going through this piece of yours again, i was reminded of the time back when i was in college and was sent to Australia for a short exchange program. I was reminded of the same priciples Dr.Western of Curtin University who was trying to drill into our collective alcohol filled heads at 8am in the morning,how the flow of transition from one government to the other should be handled delicately and should not be left to the volatility of the "people's choice", he also said that the only reason why Western style democracy worked was because people made educated choices and because they have a more evolved education system. Sounds simple enough doesn't it?But in a country were votes are sold for a sack of rice, and sometimes less (i'v seen it happen when i campaigned in 2001)how can one aliviate this problem of ignorance when the people in government are trying their darndest to keep the voting population un-educated?I'v been trying to figure out a long term project to augment whatever existing innovative programs we have right now.

Anonymous said...

P.S This is Sourpuss

The Jolly Jetsetter said...

Dear Sourpuss
With regard to UPS it was an inevitable and in many ways, unfortunate. Fed Ex and UPS moved into Clark and Subic when they were their most promising. The Philippines was geographically situated, the political situation was clearing and it looked to be a long road of prosperity, Clark and Subic had excellent facilities and plenty of room for expansion, and Asia was fast entering the age of the "tiger." Sadly, I think we have gone backwards since then. Our infrastructure has not changed much, the political situation worsened, and the emergence of China, which seems to be doing everything correctly in terms of logistics development is rapidly catching up and beating many Asian ports and hubs.

In logistics, you make money by lowering your costs. China's government is offering state of the art infrastructure AND the domestic and international volume as the cherry on the cake.

Might the Philippines have had a chance to keep Fed Ex, UPS and other multinationals of this sort? I think with the right steps put in place, we might have been able to delay several more years. The behemoth that is China is an inevitable.

The Jolly Jetsetter said...

Dear Sourpuss
In regard to your comment on western style democracy. Lets just say that its a long discussion at another time. If there is one thing that keeps me passionate about change and never ceases to aggravate me to move faster, its the situation of our country specifically with regard to education and politics!

Anonymous said...

Dear JJS,
Sadly i know what your saying is right, even if people from the private sector were able to put in several delaying messures to keep those MNC's in our shores it wouldn't have been enough to keep them in the long run. With China having a strong willed government to back up it's medium and long term goals how can the Philippine private business sector compete? Even if logistically speaking the Philippines is very blessed being strategically placed, 6 out 11 people in the world live 3hours away from the Philippines,but still very unfortunate to have such a "spineless" government. Sometimes i want to trow in the towel and give up, but then again i am still in love with this country,indiosyncrasies and all...
So what say you about the future of the Philippine logistics industry? I am curious to hear how you plan to handle such a blow to the industry that you so obviously love. What kind of innovations do you have up your sleeves? I can see from your piece that you are an "agent of change" you might be the cathartic element that will put the BOOM in KABOOM?!
Sourpuss