Apologia Those of you who have perused the 20 Pearls I've generated over the past year and a half have no doubt detected the occasional hint of frustration or even burnout (for the latter phenomenon, check out Ex-pat Angst, written on a certain rainy and alienated Sunday afternoon if I remember correctly). Such emotions reflect my own battles to establish myself as an independent management consultant and businessman in a sometimes unforgiving economic and cultural environment. While there are certainly advantages to being a Yankee in the Philippines, it takes grit, cultural sensitivity, infinite politeness, and the patience of Job before the foreign entrepreneur is ushered into the inner sanctum of Bigtime Success. Too many stereotypes of the foreigner out to make a quick buck, stereotypes solidly based in the colonial experience and the reality that many foreigners come and go here without integrating into or particularly understanding the culture. A goodly proportion of such characters end up beating a retreat with their tails between their legs after a year or two of failing to land contracts or being outsharked by savvy locals who know an easy mark when they see one. After all, there is one born every day, if not every minute. Indeed, I have sometimes felt like Davy Crockett rasslin' that bear in the wilderness. Fortunately, strong hillbilly genes give me at least a fair shot at eventually emerging on top of the heap, grinning like Fess Parker, wearing my coonskin cap, and whistling all the way to the bank. Some of my portrayals of the less glamorous side of Manila (e.g. Eva from Cebu, Bloodsport in Manila) and somewhat critical political commentary (Cronies and Booty Capitalism and Two Years With Erap come to mind) may have left some readers with the impression that this country is too weird or difficult to even think about doing business in. If so, my sincere apologies to J.P. Rizal, Ramon Magsaysay, and the EDSA Revolution. Besides, thanks to well-intentioned and on-target advice from certain knowledgeable business associates, I have steered clear of political commentary the last few months. Better to leave the Erap-bashing to the local pundits. Storm Clouds Given the current situation in the Philippines, it's all too easy to be hypercritical. The Manila press corps seems to always be in a feeding frenzy, and the last few days have featured explosive allegations (jueteng-gate) that will add fuel to the (perhaps) pyre of the administration. The Mindanao mess, the plummeting peso, and the general political instability have everybody worried, me included. You'd have to surf the web and monitor every minute's CNN and BBC broadcasts for a week to find a single positive story about the Republic of the Philippines. Herewith, a belated effort to highlight a few of the more positive aspects of this country. The endeavor is worthwhile and has the added benefit of being contrarian in the face of the herd instinct. Natural Silver Linings This train of thought originated a few weeks ago while sitting poolside at a Subic Bay resort during a brief break from an intensive marketing workshop. Although the facilities were nothing to get excited about (what do you expect from a converted industrial strength Officers' Quarters?), the hilltop setting featured peace and serenity (most welcome compared to the Manila grind) and incredible natural beauty, with chattering bats hanging in the trees and monkeys scampering about under signs reading "Don't Feed the Monkeys, They Bite". As I sat there enjoying the gentle breeze and the view of Subic Bay International Airport (the hub for Fed Ex in Asia) and one of the world's great natural harbors down below, I thought about the incredible natural beauty of this island nation. While serious vacationing (or any vacationing, to be honest) must await a bit more affluence, I have had the chance to enjoy Cebu's stunning sunsets, the blissful forested serenity of the National Center for the Arts at Mount Makiling, and the wonders of Borocay, featuring some of the most beautiful white sand beaches in the world, crystal clear, warm, shallow waters, swaying palm trees, and colorful fruits and flowers. The snorkeling and scuba diving around the archipelago are well-known, and international surf bums often compete here for relatively small purses just to groove on the beauty of the place. Social Silver Linings I also reflected on the wondrous hospitality of the Filipino people. Guests are treated like kings, giving new meaning to the phrase "mi casa es su casa" (see Filipino Business Norms for some insights into the Filipino way of being). I myself have been welcomed into the local business community and accepted as a peer in 50-year old professional associations that have seldom seen an active ex-pat member. While it is true that the famous Filipino smile sometimes masks suspicion (especially of a foreigner of unknown provenance), it doesn't take long to break the ice. As long as you're willing to put some effort into understanding the culture and deal fairly with people, it's a great place to do business. (There are those sharks, of course, but is it any worse than Seoul, Mexico City, or Los Angeles (my own point of reference)? I think not.) Economic Silver Linings One of the wonders of globalization is that a great deal of today's business can now be conducted over the web. Tasks that were previously accomplished at a centralized location like San Francisco or Tokyo can now be done virtually anywhere. The World-Wide-Web creates an unprecedented flexibility in business arrangements that allows companies to outsource such things as human resources, customer service, accounting, translation and transcription, and applications programming. Geographical proximity is no longer a key criterion. Thanks to the Internet, multinational companies now contract such IT-enabled work to locations scattered around the globe. And what are their locational criteria? They look for an optimal blend of a talented, English speaking work force, good technological infrastructure, and favorable political climate. In short, somewhere like the Philippines. Realizing this, many major international firms have relocated their customer service, applications programming, and other back office operations to the Philippines in recent years. The Philippines has a virtually unlimited pool of talented, well-trained, and motivated workers. The country's English-speaking software engineers, computer programmers, and marketing and customer service representatives are unmatched in Asia, with the possible exception of India. Among the areas in which such workers are now active are developing and writing applications software, developing data networking solutions, designing web pages and e-commerce applications, human resources functions, and accounting and sales support. According to Hong Kong's Political and Economic Risk Consultancy (PERC), the Philippines is the only Southeast Asian nation besides Singapore with a labor force with the potential to move beyond a manufacturing focus to a higher value-added level. PERC ranks the Philippines as 4th in Asia on quality of labor force (trailing only Japan, Taiwan, and Singapore). Andersen Consulting has centralized much of its customer service and applications programming function at its Manila office to take advantage of the unique resources available in the Philippines. When Andersen evaluated its options, the criteria were pretty simple. First, the ideal site would have hard working and motivated employees who spoke good English. Second, the workers would have to possess the latest computer skills. And third, the site would had to have reasonable labor costs. While Andersen could have located its back office operation in the United States, Hong Kong, Singapore, India, or anywhere else, the decision represented a cost-effective, bottom-line business solution. It was also a win-win proposition. Andersen benefited by obtaining quality programming skills at reasonable cost, while the Philippines benefited through job creation and yet another boost to its growing reputation as Asia's "IT services hub". (The latter is a phrase concocted by the IT Promotions and E-Commerce Committee, a public-private sector group advising the RP Government on internet policies on which I sit). Another good example is that of America Online. Over 600 Filipinos now answer AOL's customer e-mails on a 24/7 basis from specially equipped telecommunications facilities at Clark Special Economic Zone. They answer over 10,000 technical and billing inquiries each day, making up 80% of the company's customer e-mail. These AOL employees are four-year college graduates holding degrees in computer science, accounting, and business. AOL executives have been thrilled with the quality of their local workers, who have proven to be both hard working and extremely loyal. AOL is planning to expand its operations in the Philippines even further. Political Clouds and (maybe?) Silver Linings Despite the current brouhaha and weak political leadership, the Filipino democratic system remains one of the most stable and vibrant in Asia. The EDSA Revolution has vaccinated the country against any repetition of martial law - Marcos will not be reincarnated. Although the next few months may get pretty ugly, the reforms initiated during the Ramos' administration (see Globalization Part 1 and Globalization Part 2) emphasizing deregulation, liberalization, and reform in key sectors should provide some continuity. These policies, which have for the most part been retained under Estrada, create a favorable economic and political environment for international business. Among the key structural reforms have been: Traditionally protected industries like telecommunications, transport, and oil have been deregulated and opened up to competition. The Foreign Investment Act (FIA) has liberalized the entry of foreign investment. Sound monetary policies such as decontrol of interest rates, relaxed rules on branch banking, and the lifting of moratoriums on the opening of new commercial banks. The Philippine government also has numerous policies designed to attract foreign investment. The Economic Mobilization Group (EMG) provides centralized support for international investors and export processing zones (EPZ's) offer concessionary tax rates for foreign investors. The former American bases at Clark and Subic Bay are important EPZ's, while the Philippine Economic Zone Authority is active in supporting and attracting foreign investment. The recently passed E-Commerce bill creates an even more supportive environment for IT-enabled services (although, to make another reference to the clouds, Senator Ramon Magsaysay, Jr., author of that bill, has just resigned from the President's party). The Department of Trade and Industry (DTI) provides assistance to foreign investors in various ways. Secretary of Trade and Industry Mar Roxas, grandson of the first President of the Republic of the Philippines, places particular emphasis on the IT sector and is leading the way in creating alliances with multinational firms who want to take advantage of the Philippines' unique advantages. The Bottom Line Longer term - and we're talking after the current political situation resolves itself one way or the other - it is possible and perhaps even probable that the Silver Linings will prevail. There's no denying the challenges are daunting. The Philippines has been trying to pull itself up by the bootstraps for so long, and has fallen down so often, that it's hard to bet the farm on a positive outcome. The long-term burdens of structural inequality, poverty, rapid population growth (largely due to the Catholic Church's adamant opposition to anything resembling an enlightened approach to family planning and reproductive health), and - last but not least - cronyism should not be underestimated. Nevertheless, the Filipino people have always shown incredible inner strength and resilience in the face of adversity (see Eva from Cebu and Leavin' on a Jet Plane), and they are about to do so again. The hard-earned lessons of the EDSA Revolution may, with luck, help the political and social system resolve the current mess in better shape than the daily onslaught of critical commentary would lead you to believe. I do not currently have a crystal ball, and am just as nervous as the next businessmen about what's going down in Manila. Heck, I have half a dozen proposals floating around this town that I badly need to reel in, and this mess is going to make it that much harder to transform them into signed contracts, not to mention cashable checks. However, being an inveterate positive thinker and having thrown in my lot with my adoptive country, I refuse to take the easy way out by joining the nattering nabobs of negativism. I'll just hunker down with the rest of the business community here, do what I can to help, and be ready to hit the ground running when the storm finally clears.

...from Clarence Henderson's Pearl of the Orient Seas

Clarence has had over 20 years of consulting experience in New York, Los Angeles, and the Philippines. He brings to the forum many years of experience in the Philippines and his monthly column integrates the experience of working in the Philippines with business tips earned the hard way! You can learn more about Clarence by clicking on his photo.

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