Creating wealth in a new environment

(Speech delivered during the general membership meeting of the Financial Executives Institute of the Philippines

(FINEX) at the Grand Ballroom of the Hotel Inter-Continental Manila on Jan. 24, 2006)

The theme suggested by FINEX for the year is indeed most timely and relevant given the state of our economy. There is a compelling need to create additional wealth in the new environment that is created by the globalization process.

Globalization is sweeping the whole world at a great and unstoppable speed. It is like a glass with water. The pessimist complains that the glass is half-empty while the optimist sees that it is half-full.

Our collective goal is to define and implement a constructive response to the challenge of a borderless global environment so that in the process we create new and additional wealth to realize our full potential as a nation.

Wealth creation is an idea whose time has come with an illuminating finality. The perennial burden of poverty as graphically portrayed by an intractable unemployment problem has become the highest form of social injustice.

Various attempts have been made to address the problem. Such overused phrases as poverty alleviation, employment generation, pump priming and jump starting the economy, and people empowerment, among others, have been uttered too often like a meaningless mantra. The problem to this very day is in search of real solutions.

A key indicator of the negative track record in helping the socially disadvantaged become productive is the history of the rate of unemployment and underemployment for the past five years. From a level of 3,653,000 unemployed Filipinos recorded in 2001, the notch went up further to 4,149,000 in 2005. While there were 5,006,000 underemployed in 2001, the number increased to 6,788,000 last year.

It is significant to note that for the 2005 unemployment figures 48.8 percent came from those in the 15 to 24 age bracket. The productive capacity of this youth sector remains unutilized.

In spite of their good intention, those who propose that more jobs should be created to absorb those without gainful work are resorting to a simplistic approach. As the famous commentator of contemporary events, Alvin Toffler, pointed out — joblessness is not reduced simply by increasing the number of jobs. The problem is not merely numbers. Skills must match the jobs available.

What is really required is a paradigm shift. Our focus should be on the whole process of creating wealth under a new set of conditions and parameters.

Let us start by redefining what is being emphasized in our understanding of wealth. We need to look at wealth as more than the totality of financial and natural resources. Wealth is really people — people with skills, with hopes and dreams, with capabilities waiting to be tapped and enhanced and with vast potentials that constitute the inexhaustible treasure of any nation.

Indeed, people are the greatest resource of any organization. The quality of the people determines the future of any country. Japan and Germany, defeated powers in World War II were able to rise from the ashes of devastation because the Japanese and the Germans in the postwar period had the knowledge and the will to rebuild and move on.

South Korea today is a total departure from the ruins caused by the Korean War because the South Koreans in their shared memories and aspirations were driven to succeed. Singapore, a tiny city state which depends on its water supply from its neighbor has only its people to rely on for its impressive development.

In the corporate world, such global players as IBM, Microsoft, Intel, Nokia, Toyota, and Samsung, to mention a few are what they are today primarily because of the kind of people they have.

People are the natural creators of wealth. Knowledge is the power that enables people to generate more wealth.

With this basic truth, there is a very good reason to reorient our development roadmap from too much focus on physical infrastructure to people development. Policy makers and economic managers should look at people more as co-creators of wealth rather than as recipients of government aid.

A people-oriented leadership, be it in government or business, treats people with due respect and not with condescension. It has the humility to accept that it is not the fountain of wisdom and that it has too much to learn even from ordinary people.

Consequently, there must likewise be a shift in the matrix of economic performance indicators from a growth in Gross Domestic Product to improvement in the extent and level of people empowerment through upward changes in literacy, nutrition, health care, and family income.

All these necessary and positive elements in a proposed paradigm shift are made possible through a people-centered governance that encourages initiative, creativity and entrepreneurship.

We can hopefully see the emergence of a critical mass of wealth creators. To help us achieve this goal, we should, as Bill Gates suggests emphatically, use Information Technology as a strategic resource. And I wish to add that an entrepreneurial mindset is necessary to produce more wealth.

If we take full advantage of the whole range of benefits provided by the knowledge revolution, we can multiply the number of outsourcing business enterprises now operating in the Philippines. And if we improve the level of computer literacy nationwide and if we help our outbound workers to start preparing for knowledge work by way of gaining new skills in computer application as demanded by global employers, then there will be tremendous value added to normal work outputs.

In fact, global connectivity through the Internet and Third Generation mobile telecommunications systems virtually makes any point on our planet that can be reached by satellite signals a work station. This is a tremendous opportunity for young Filipinos who have expertise in providing IT-based services. An IT entrepreneur specializing in computer graphics and based in Marbel, South Cotabato can sell his creative concepts directly to their users as far away geographically as Vancouver in British Columbia, Canada. No place is that distant anymore. IT has made the world one global village.

To develop a new breed of wealth creators, we need an educational base that conforms to world-class standards in terms of faculty credentials, teaching facilities and R & D efforts. Unfortunately, even our best tertiary schools lag behind the leading educational institutions in Japan, South Korea, Taiwan, Singapore and India. This is an area of great concern to us.

We need not argue anymore that investing in people is the best policy any government can pursue. When we put more money in upgrading our educational system, we are effectively investing in the country’s future.

The whole process of creating wealth, to be sustainable and far-reaching, demands a radical change in the content and direction of our educational system. Likewise it requires a substantial refocusing of our cultural perspective from the general goal of being gainfully employed to the vision of being wealth-expanding entrepreneurs.

We need to redefine the Filipino dream. We must now prepare the groundwork for an unprecedented revolution in our outlook as a people. While it is necessary for many jobless Filipinos to be employed, it is most desirable for many more to be the ones who create jobs themselves. Only by being entrepreneurs can we be job creators and effective producers of wealth.

Unfortunately, the popular Filipino dream is to find work abroad as an employee in the US, Canada, Europe, the Middle East, Hong Kong, Singapore, Saipan or any other place in need of domestic helpers, caregivers, nurses, and other service providers. The lack of local employment opportunities is driving hundreds of thousands of Filipinos to try their luck in foreign lands.

Surely, the dollar remittances of Filipino OCWs are a primary factor in buoying up our economy. This is the good side. But the downside is the impact on families where children grow up without the physical presence of fathers or mothers as role models. We cannot quantify the social cost and its implications.

Rather, the Filipino dream should be a successful Filipino family living and working together in its own enterprise, and in the process providing work for others. To fulfill this dream on the widest scale possible, an entrepreneurial revolution is necessary so that additional wealth will not only be created but distributed and multiplied as well.

All sectors are stakeholders in realizing this dream. Government, business, educational institutions, religious organizations, professional societies, media, civic groups and families have a shared mission in making the entrepreneurial revolution.

It is only when the entrepreneurial spirit becomes too pervasive as a national psyche through entrepreneurism-oriented curricular offerings, government support at the grassroots level in broadening the base of self employed, public recognition and appreciation of role models, and the multiplication of the number of families that encourage their children to start and manage enterprises of their own can there be a national entrepreneurial culture.

We do not become a nation of entrepreneurs overnight. The journey to our dream may be long and winding. But we have to start somewhere soon.