Philippines As Emerging Market 157.0

Let us stop flagellating ourselves with negative news
From 2005, Goldman Sachs identified the Philippines as one of eleven countries “that could potentially have a BRIC-like impact in rivalling the G7.”

More recently, in September 2009, the FTSE Global Equity Index Series classified the Philippines as one of seventeen secondary emerging countries with regards to equities and stock markets.

As the 12th largest market in terms of population, the Philippines does have the potential to be bigger in our world. First, we do have to change the way we look at our country to one of many opportunities especially for projects that enlarge the pie.

Goldman’s BRIC. The BRIC countries are Brazil, Russia, India and China were identified by Goldman Sachs in 2003 as large countries with big potential. The ten other countries in the GS N-11 list are Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Turkey and Vietnam. All these countries are also large; economic performance, mixed; though big potential, indeed.

FTSE’s N-11. The FTSE Index, a very credible joint venture between the Financial Times and the London Stock Exchange, has created a list of emerging markets given above based on the performance of equities and stock markets below. The secondary merging markets listed above are again it is a mixed bag. Still, if others see us as going somewhere, we ought to take the gauntlet and act promptly.

Emergin’ Implications. Dr. Suman Bery, Director-General of India’s National Council of Applied Economic Research and a member of the Prime Minister’s economic advisory council, in today’s issue (1/11/10) of the Business Standard notes the implications of being seen as an emerging market overseas while, internally, still conscious of the poverty and backwardness in the country.

This dual view, for me, can result to a form of inferiority complex that can inhibit many, except the strongest among us, from moving forward.

In the area of health, India has leaders in Apollo Hospital for tele-medicine and Aravind, for eye care. In the previous Post 156, we pointed out VNL, an innovator in low- and solar-powered telephone base stations. The Nano of Tata Motors is another example of latecomer country innovations designed to serve the need of the local market at an affordable price.

Dr. Bery’s insight on the dual reality of emerging market innovation n a substrate of poverty and backwardness also applies to the Philippines as I have repeatedly highlighted in SYNTHESiST.

Disruptive Innovation for Emerging Markets. Being immersed in the subject matter at the global level and seeing successful local case studies, I have adapted a model for innovation for emerging markets like the Philippines.

The model put’s together Lundvall’s national innovation system with Christensen’s disruptive innovation. In emerging markets, firm level success like Shemberg’s in carrageenan where a new ingredient, e407a, was created in Europe and the Philippines the world leader can become the basis for industry policy.

By definition, emerging market’s are at the fringe and so are ideally positioned to develop disruptive innovation, in the classic Christensen definition, at the global scale. From technology development perspective, there are minimal legacy systems.

In the Philippines, the waiting list for land lines in 1995 was as long as three years in some areas in Manila. Now, there are 2-3 times more mobile phone than land lines in the country that are digital and a prepaid SIM can be had off the shelf. And we are a leader in applications like texting and remittance.

If we put this together with the number of poor people and the institution of micro-credit, it is no wonder that the Philippines is a world leader in mobile phone banking for micro-finance. The potential economic benefits of formalizing micro-businesses and expanding the credit multiplier at lower financing all over the country is huge.

India’s lead in low-cost tele-medicine and eye care are, likewise, driven by the market at the bottom of the pyramid and the lack of qualified workforce in healthcare in many areas.

Without legacy systems, improving on bad infrastructure via IT-enabling can yield very high bang for each peso.

In the model above, we make the following list of possible opportunities:

STI-Learning and IT-enabling opportunities::

• In Post 50 on May 4, 2009, I suggested an IT-enabled ,private sector led redesign via systems integration of the national logistics system.
• Research on improving value capture in health and care and in ship manning by anticipating future directions of the industry (Prahalad’s Competing for the future).

DUI-Learning pportunities:

• Expanding use of geothermal and hydroelectric energy.
• Expanding development of affordable drugs from generics and indigenous, natural sources.

We agree with Dr. Bery, that “deeper intellectual engagement, of the sort that takes place routinely between think tanks and universities in the advanced countries” is needed to encourage exchanges between emerging markets themselves,

The new domain of emerging markets innovation is more focused on the diffusion end of technology where Schumpeterian combinations like IT-enabling and social (management) innovations are the norm. Among themselves, emerging market countries like India and the Philippines have much to learn from each other.

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