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12.22.2006

A good year for Philippine Funds!

From the Philippines: First Metro Save and Learn Equity Fund has a year to date earnings of 66.31%. It means that if you invested $1M at the start of 2006, your money has grown to $1.6631M on this day.---- WOW!!!!!!

Other top performers include Philequity Fund, ATR- Kim Eng Equity Opportunity Fund, GSIS Kinabukasan Fund, Philam, Sunlife, etc. This Mutual Funds made more than 30% each this year. For the complete list, please refer to this link .

To all those who made a killing this year, please use those earnings wisely. May I remind you that helping the less fortunate, especially during this time of diversity, is a form of wise spending.

To all those who suddenly became interested in investing, may I remind you that "Today's sweetheart may not necessarily be tomorrow's darling". For a refresher or introductory course on Philippine Mutual Funds, please check Mutual Funds 101.

Merry merry christmas!

12.13.2006

The Importance Of Accurate Data

Despite claims that the Philippine economy is improving, credible allegations saying the opposite abound. An example, is Former Economic Planning Secretary and UP professor Cielito Habito’s pronouncement that more people are actually getting hungry.


In today’s newspaper, a government consultant mentioned that the administration is dependent upon secondary data in figuring out the true state of the economy. If that is the case, it is possible that the country’s GNP/GDP shows an increase, simply because more transactions are now being reported by the banks.

"Francois Renard, an EU expert in trade statistics gathering, told the BusinessMirror that his observations show the Philippines is having an “undercoverage” of transactions and contributions of the different key service industries.

“What you have now is just a rough estimation,” Renard said at the sidelines of the EU-funded training on Manual Statistics of International Trade in Services in
Makati."



11.29.2006

Fluctuating Forex

Spybiz reports that the Philippine government has actively been buying US currency in order to prevent the decline of the dollar. This is being done in order to protect the dollar earning exporters who are bound to "lose heavily".

I agree with the article's rebuttal that the falling value of the US dollar will result to lower commodity prices, since a big number of household products in the country are imported.

It is not very wise for manufacturers to pay for raw materials "at sight". Besides, most regular importers pay their suppliers at a future date, normally, after having converted the raw materials into finished products. Therefore, the importers are not bound to lose that much (if they lose at all) from forex drops, come payment time. The only "crash" will take place on the profit portion of the export price.

Let's give the consumers some breathing space, especially this christmas.

"Let the market Dictate!" - Adam Smith

Related Topics: Fundamental Economics: The value of a currency

11.24.2006

Funny: Role of Government

A strong proponent (M.Friedman) of the minimal role of government lists National Defense, administering Peace and Order & Social Justice and the provision of Public Infrastructures (Roads) as the only functions of the administration.

I know of some economists who even advocate the outsourcing of National Defense and Public Safety. At this point, this blog will not dive into the midst of the debate but rather illustrate a creative way in providing a Public Safety service.








11.17.2006

RIP: Milton Friedman (1912-2006)

Many thanks to the CAT for the heads up.

==========

"That government governs best which governs least."

As an economist, this author pays tribute to Milton Friedman, a Nobel Laureate (1976) and one of the greatest minds of this century. Very much a free market economist, he advocated the minimum role of governments (in the economy) and greater reliance in individual responsibility.

He passed away in San Francisco at the age of 94.

11.13.2006

RP industries not ready to compete — PCCI study

A study of 24 sectors within the services, agricultural, and non-agricultural industries showed that the country is largely unprepared to compete in the global market..

11.10.2006

Competitive Advantage of the Philippines II

Despite being a newcomer in the global BPO industry, the Philippines have steadily increased its foothold as a top outsourcing destination.


Rest of Asia ready to grab BPO jobs from India, RP--study
INQ7.net, Agence France-Presse
Last updated 08:44pm (Mla time) 11/05/2006

THE PHILIPPINES and India have to boost their overall competitiveness, as Asian countries gear up to get their share of the global offshore outsourcing pie, a recent global study showed.

These top two outsourcing destinations will eventually compete with China, and other Asia Pacific countries that have similarly positioned themselves as outsourcing destinations, the latest Offshore City Competitiveness Report of market research firm neoIT showed.

The study noted that companies have "moved beyond India" and the Philippines into not so well-known cities in the world since companies want to create a "global footprint."

China and Eastern European countries are starting to attract offshore outsourcing deals because of specific language skills required.

China is particularly keen on toppling India in the "services globalization arena," the study added.

Meanwhile, Malaysia, Thailand, Vietnam, Sri Lanka, and Pakistan are emerging as alternative outsourcing destinations in the Asia Pacific region.

Companies outsourcing their non-core business processes are now looking for multiple locations that cater to specific requirements, the study said.

Manila is currently known for its strengths in English voice-based customer care services, which mainly caters to North American-based companies. It is also an ideal destination for back-office processing activities, such as payroll and accounting, the study said.

Manila has been a global services hub of many multinational companies, and has a "good talent supply" from universities, the study added.

The neoIT study identified two categories used to identify outsourcing destinations: generic and enterprise-specific factors. The generic factors include cost, human capital, infrastructure, risks, and environment. The enterprise-specific factors, on the other hand, include language compatibility, physical proximity (of offshore facility to the company), socio-economic affinity, and the availability of sector-specific expertise. The supply of middle managers and attrition rates are also considered.

Taking into account these categories, the study concluded that the National Capital Region of Delhi is the "most suitable location." This was, the study noted, despite the eroding cost advantage and supply constraints of these cities.

"A lot has been said about India's eroding cost advantage and supply constraints," senior neoIT consultant Sabyasachi Satyaprasad said Saturday.

"But the fact remains that in terms of talent supply and cost arbitrage, India is still the leader," said Satyaprasad, whose company is headquartered in San Ramon, California, with offices in India and the Philippines.

Industry analysts closely watch profit-margin trends of Indian outsourcing companies for signs their competitive edge is eroding.

But Satyaprasad said in an interview with Agence France-Presse that there was no sign of that happening and Indian outsourcing giants like Infosys, Wipro and Tata Consultancy Services routinely report profits that beat market expectations.

New Delhi, Bangalore, Hyderabad, Mumbai, Pune, Chennai and Kolkata were the seven most favored sites worldwide to locate offshore, said the report, assembled from feedback from over 60 clients.

The study also included Manila as among the top 10 cities in the world for offshore outsourcing jobs. Other cities identified were Ho Chi Minh and Shanghai.

Government Borrowing & Commitment Fees Again

The Philippine Daily Inquirer reports today, that the Philippine government is set to borrow $250 Million from the WB. If the commitment fees paid, as of the year 2002, was invested in mutual funds that gained an average of 40% per year (PhilEquity), it would have been close to saving the Filipino from this particular loan. Now, if all the other commitment fees paid on 2003~ present will be taken into consideration...

Let us take note that the US$ is going through a devaluation. However, it is very well capable of rapid recovery and increase (by leaps and bounds). If that happens, the interest payments for the $250M loan, as well as future Peso devaluations can easily defeat the gains made this year.

While not meaning to sound so angry about the whole thing (I am not), let us remember that the present minimum wage is Php275 and the exchange rate is PhP49=US$1.00. If we will simply distribute $250 Million to the populace, it would be enough to feed 123,737 Filipino families, for one year.

11.09.2006

IMF auditors to inspect RP's econ figures

And the economists are not at all worried...

RP budget system lacks transparency

The newspapers are saying something which most Filipinos already know. The other day, I asked an economist for information regarding the total amount of commitment fees that the Philippine government has paid its lenders. I was told that the thick 2007 national budget only has one page alloted to foreign debts. No mention was ever given regarding commitment fees....

THERE is not much accountability and transparency on the Philippine government’s budget process which, with the limited accessibility, holds back stakeholder participation in the efficient allocation and use of public funds, a new study from the US-based Center on Budget and Policy Priorities (CBPP) on Wednesday revealed.
in addition....
“The level of transparency is strongly influenced by the willingness of the government to be accountable to citizens…transparency is possible in both developed and developing countries,” Datinguinoo commented.
Furthermore..
Datinguinoo, meanwhile, commented transparency and accountability, not only in the budget process but in other governance aspects as well, would be boosted if the legislature passes the Right to Information bill and provides broader access to government information.

Arvind Kejriwal, this year’s Ramon Magsaysay Award for Emergent Leadership awardee, earlier stressed the need for a law strengthening the Filipinos’ constitutionally-mandated right to information as a tool for empowerment and stemming corruption in government. “I encourage Filipinos to [demand] from government to have a law… and stop corruption by pushing for greater accountability among government employees,” he said.

Economics is what economists do

John Maynard Keynes, one of the most prominent figures in modern economics, has this to say;

"Another definition is Economics is what Economists do. John Maynard Keynes described what he thought economists do in Essays in Biography in 1933. An economist, he wrote, must

possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher-in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms off the general, and touch abstract and concrete in the same flight of thought. He must study the present in light of the past for purposes of the future. No part of man's nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician."

11.06.2006

Government Borrowing & Commitment Fees

It has been mentioned that in the annual budget, national governments compute for the level of expenditures (farm to market roads, hospitals, schools, etc..) that will be needed to finance a growing population. To be able to finance the planned spending, ways on how to raise the needed money (taxes, tariffs, etc.), are included and put into action.

In instances when the projected income fails to equal the needed amount, governments have naturally resorted to borrowing (both domestic and foreign loans).

ON FOREIGN LOANS

In the past, the Philippine government borrowed a lot from institutions such as the IMF, WB & ADB, as well as ODA (Official Development Assistance) loans.

To date, debt servicing remains a big slice in the country’s national budget. Despite this, the country has a poor record in the actual usage of such loans due to delays in the implementation of the programs (which the loans were earmarked for). This naturally contributed to the failure of some sectors (in the economy) to receive the benefits of the delayed programs. What makes it worse is a little known fact that the government is slapped with Commitment Fees for the late availment of the loan funds. As of 2002, the commitment fees paid by the Philippine government to the ADB and WB has already reached US$40 Million. The amount (at present day costs) would be enough to feed 20,000 families for a year.

For a heavily indebted country, a wasted $40M (only for ADB & WB), is not funny at all. The figure for the two agencies must have reached a bigger number, by now. If we will compute the total figure for all the loan institutions, the end figure will surely be gigantic.

As of last Saturday, the government reports of instituting methods that will minimize, if not eliminate delays that will lead to the payment of commitment fees. The news simply means that the commitment fees still live on. So much for professional economists…

To be continued.....

Economics

Economics is generally defined as the study of the optimal allocation of scarce resources, in order to satisfy the unlimited human wants. Among other matters, it deals with issues such as production, distribution and consumption, in order to maximize the people’s satisfaction.

In a small scale (Microeconomics), the discipline covers the individual, household and companies. A household concern will be the distribution of the family income in an attempt to satisfy the needs and wants of the family. A typical household concern is whether to prioritize the repair of a potentially damaged roof, the purchase of new electronic appliances or pay for the down payment of a new car.

In a larger scale, the field covers organizational activities such as the strategic planning and operations, when companies plan and implement policies that will minimize cost and maximize the employees’ compensation package as well as shareholder profits. Examples include the implementation of management programs such as Kaizen, TQM, and most recently, the use of robots as a cheap and more efficient substitute to human labor.

In a much larger scale (Macroeconomics), the discipline covers the aggregate (governments, entire economy). An example is the national budget wherein, governments compute for the level of expenditures (example: farm to market roads, hospitals, schools, etc..) that will be needed to finance a growing population. To be able to finance the planned spending, ways on how to raise the needed money (example: taxes, tariffs, etc.), is put into action.

11.03.2006

Germany: No Bailout for Debt-Ridden Capital

The German constitutional court rejected attempts to force the federal government to pay Berlin's debts.

I will discuss the economic significance of this in one of my next posts.

10.31.2006

From Adam Smith

Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole public revenue, is in most countries employed in maintaining unproductive hands... Such people, as they themselves produce nothing, are all maintained by the produce of other men's labour... Those unproductive hands, who should be maintained by a part only of the spare revenue of the people, may consume so great a share of their whole revenue, and thereby oblige so great a number to encroach upon their capitals, upon the funds destined for the maintenance of productive labour, that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment.

-- The Wealth of Nations, Book II, Chapter III

10.27.2006

Fundamental Economics: Minting Currencies

One of the factors to be considered when minting coins is the material value of the currency which should not exceed the assessment that it represents.

For example, the price of the metal that composes a dollar coin should not be way above $1. The reason being is that “enterprising minds” can easily be tempted to gather all the dollar coins, melt it and sell the metal for its higher value.

Here are recent stories regarding coins that are being smuggled and recycled into other forms:

IExpress

Scotsman

Other factors that should be considered include the possible alternative uses of the coin. In the 80’s, the Philippines circulated small aluminum like 5 & 25 centavo coins that quickly disappeared from circulation. An economics professor said that fisher folks found the coins a cheap substitute to “Fishnet Floaters”, which cost a lot more.

The link (below) tells a story about coins being smuggled and used as tokens in gaming machines.

Manila Standard

A few years ago, and probably until now, Philippine coins were also being smuggled to South Korea and used as a cheap (and illegal) substitute to Korean coins when purchasing products in vending machines and when using public telephones.

10.19.2006

Land Reform: Land of Bondage Land of the Free

One of the most moving speeches that I've read. During grade school, this was the most often recited elocution piece in my school. Here it is, the text of Raul Manglapus' Land of Bondage, Land of the Free.

Land of Bondage, Land of the Free
By Raul Manglapus

And yet, ladies and gentlemen, the tao is constitutionally free! No wonder, then, that the tao being a slave has acquired the habits of a slave.

No wonder that after three centuries in chains, without freedom, without hope, he should lose the erect and fearless posture of a freeman, and become the bent, misshapen, indolent, vicious, pitiful thing that he is!

Who dares accuse him now? Who dares rise up in judgement against this man, reduced to this subhuman level by three centuries of oppession?

Ladies and gentlemen the tao does not come here tonight to be judged -- but to judge!

Hear then his accusation and his sentence:

I indict the Spanish encomendero for inventing taxes impossible to pay!

I indict the usurer for saddling me with debts impossible to bear!

I indict the irresponsible radical leaders who undermine with insidious eloquence the confidence of my kind in our government!

I indict the haciendero for seizing my lands with subtle trickery and reducing me to peonage!

I indict him for sacrificing the honest efforts of an honest government on the altar of his illimitable greed!

You accuse me of ignorance. But I am ignorant because my master finds it profitable to keep me ignorant. Free me from bondage, and I shall prove you false!

You accuse me of indolence. But I am indolent not because I have no will, but because I have no hope.

Why should I labor if the fruits of my labor go to extinguish and inextinguishable debt! Free me from bondage, and I will prove you false!

Give me land. Land to own. Land unbeholden to any tyrant. Land that will be free. Give me land for I am starving. Give me land that my children will not die.

Sell it to me. Sell it to me at a fair price as one free man sells to another. And not as a usurer sells to a slave.

I am poor. But I will pay it! I will work and work until I fall with weariness for my privilege and my right to be free!

But if you will not grant me this last request. This ultimate demand, then build a wall around your homes... build it high!... build it strong!... place a sentry on every parapet... for I who have been silent these three hundred years, will come in the night when you are feasting, with my cry and my bolo at your door...

And may God have mercy on your soul!

10.17.2006

Fundamental Economics: The value of a currency

For the past several months, the Philippine currency (peso) has been increasing in value against the US Dollar. A year ago, the peso was at 55.977 (3 Oct 2005). It fluctuated several times but the trend was a continuous climb. Today, the Peso seems to be standing on solid ground, as it refuses to yield beyond 50.

How does one determine the value of a currency? Here is an explanation.

The short and long-term movements in the exchange rate, like any price, are caused by changes in market demand and supply conditions.

When the demand for a currency (pesos) is high relative to supply, the Peso goes up in value (an appreciation). The reverse is true when the market supply of pesos exceeds the demand. (A depreciation).

At this point, the economy has a more than the usual level of dollars. Therefore, the Philippines need not exchange Pesos with US Dollars. As a result, the value of the Philippine currency has stabilized/ increased, over the past several months. This is in sharp contrast to the continuous decline, which most Filipinos have gotten accustomed with, for the past several years.

DEMAND FOR PESOS: The surge in demand for Philippine currency comes from the following:

  • Philippine goods and services, including the Overseas Foreign Worker's (OFW’s), are exported overseas, creating an inflow of currency into to the country which needs to be turned into pesos. Por ejemplo, OFW's need to convert their dollars into pesos so they can use it to buy food, television sets, refrigerators and other items in the market.
  • Inflow of Foreign investment.
  • When Market speculators buy huge volumes of Philippine currency, in anticipation of an increase in its value (the intention is to sell it for a profit, at a later time).
  • Official buying of the currency by the country’s central bank.

SUPPLY OF PESOS: Pesos is sold/ exchanged on when

  • Goods and services are imported (pesos are exchanged for dollars to pay for importations or when filipinos go overseas on holiday)
  • Speculators sell pesos for another currency
  • Investment capital flows out of the Philippines.
  • Central banks go into the market and sell pesos to buy other foreign currencies.

-------------------------------------
Related Topic: Fluctuating Forex

10.12.2006

NOKOR NUKE TEST: Economic Repercussions 2

Will the US or another country, invade North Korea?

They will probably not..

In a similar incident, a few years ago, Bush declared (to Nokor) that they are capable of winning wars in two different fronts.

However, if they do, and are able to conquer NOKOR, the country will be theirs, including its starving population, possible insurgency, etc..

One only needs to look at Iraq and Afghanistan.

"To the victor goes, the spoils of war!"


NOKOR NUKE TEST: Economic Repercussions

North Korea's announcement of having successfully conducted a nuclear detonation has resulted to angry reactions from various world leaders.

At this point, the US, China and other countries strongly condemned NOKOR for such action, Japan barred all NOKOR vessels from its ports and has stopped all importations from North Korea. Other countries will possibly implement similar actions.

What are the tensions possible effects to other countries?

Let us start with the direct effects:

  • Japan is said to import US$133 Million/year worth of clams and mushrooms. A sudden end to the deal will most probably result to hunger for millions of North Korean farmers.
  • Korean vessels that are already on its way to Japan will be unable to dock and its cargo (most probably agricultural products) will rot. In addition, the vessels will be unable to bring back precious cargo and/or proceed to the next port of destination. The direct cost to the vessels will be monstrous
  • Other ocean vessels will avoid the area (Sea of Japan and the Yellow Sea) in order to avoid getting caught in the middle of a possible military conflict. This will also result to increases in the cost for millions of tons of vital economic goods.
  • The movement of goods intended for and coming from the neighboring countries (South Korea, China, Japan and Russia- Far East Port) will be directly affected and the recipient of the said countries’ export will experience delays in the arrival of raw materials. It will further lead to immediate delays in production for factories located as far as the United States, Europe and the rest of Asia.

Indirectly, the results include widespread speculations in the prices of petroleum, precious metals, steel products, electronics and telecoms, chemicals, etc..

The Competitive Advantage of the Philippines

As India gets too costly, BPOs turn to Philippines

"HIGH salary and transfer rates in India are making that country less appealing to business process outsourcing (BPO) firms --a trend the Philippines can take advantage of by accelerating information technology (IT) training among students, an executive of a US firm said Monday.

Jim Sanderson, vice president and chairman of applications developer Lawson Software, said India could readily provide large companies with 10,000 people or more with its big number of IT professionals but its BPO costs were rising 15 percent, compared with relatively stable costs in the Philippines.

“We see that small to medium sized companies looking to hire a few hundred to a few thousand professionals with three to five years’ experience have a better environment in the Philippines,” Sanders told the Inquirer.

He also noted that the attrition rate in India is about 30 percent, compared with 10 percent or so in the Philippines.

“A new Indian IT person expects to be promoted within six months and (to get) a 20-percent raise in six months, then another 20 percent on his first year, and so on,” Sanders said. “If he doesn’t get it, he will go to another company. Being a software developer, rather than being a project-related company, we [at Lawson Software] can’t have that kind of attrition.”

Sanderson said his company is optimistic that its investment in Filipino technology workers will result in a long-term partnership with the local workforce.

The potentials and skills of the workers were what drew them to the Philippines, preferring it over other countries in the region, he said.

read the entire article

10.05.2006

Government Intervention

Got this from Whiskey & Gunpowder:

"It’s a broadly accepted principle that government interference in the private production of resources creates economic consequences. The extent of the interference usually dictates the severity of the consequences. The Soviet Union was notorious for its hopelessly inept price and quota system that led to rationing and shortages. Central planning commissions dictating supply, capital investment, and demand is clearly a fool’s errand in an infinitely complex modern industrialized economy.

How about the establishment of a pure free market to determine energy prices? A “pure” free market cannot exist as long as energy prices are measured in an elastic paper currency. But leaving this complication aside, history teaches that the freer the market, the more efficiently and quickly supply can be developed to satisfy demand."

10.04.2006

PHILANTHROPY BEING VERY FASHIONABLE

In a recent article written by Manny V. Pangilinan (MVP), it was pointed out that Philanthropy has never been so fashionable for the rich and famous to engage in. To cite a few, he mentioned Bill Gates (US $31B) and Warren Buffet’s (US $37B) recent donations, which were followed by a number of prominent leaders.

MVP further noted that, Philanthropy has become very business-like, organized and professionally managed undertakings.

Talking about his company’s own thrust to help people, he wrote:
“We recognize that business-especially in a developing economy like the Philippines- can and should play a unique part in enhancing welfare. Indeed, because of its size and influence, business has the capacity to transform societies- by creating new needs, raising new hopes, inspiring new dreams. That is precisely what establishes the ground for corporate social responsibility”

A big majority will applaud the above statement. However, some of our great thinkers will probably disagree. Another school of thought would say; “Leave the people alone. Let Darwin do his work. Let the fittest survive. Leave the weak to die.”

I’ve just written about and described two opposing viewpoints.

Please tell us what you think..

9.27.2006

Global Competitiveness Reports

With so many "Great Minds" running around and proclaiming "Expert Opinions", it is unavoidable for the public to get confused. A good example is the Global Competitiveness Index, with the Philippines, as a case in point.

Despite the recent climb of its currency (Peso), the increasing Forex reserves of its Central Bank and the successful restructuring of its foreign debts, the Philippines went down to #126 (from 121) in the 2006 annual global competitiveness rank, according to a study conducted by the World Bank.

In contrast, two similar studies (released earlier) showed gains. Reports published by the World Competitiveness Center (WCC) and the World Economic Forum(WEF) both showed upgrades by a few steps. WCC reported the Philippines to have climbed from from #51 to #49, while WEF's study showed an ascend from #73 to #71.

The contrasting reports, therefore leads to a number of questions, including:
- Which study is the most reliable?; and,
- How are the Global Competitiveness Ranks determined?

To be able to find the answers, all three studies mentioned will have to be scrutinized.

En este momento, kindly enlighten us.. What do you think?

9.25.2006

Oil Prices

This should be a very good piece of info for import dependent economies. Oil prices are down by US$17/ barrel.

Of course, Oil exporting countries are not very happy with this news. However, prices have been steadily rising, the past several months and most of the world has been praying for its halt, at the very least. Just a couple of years ago, the price of Crude Oil was about half of the current level.

Where is the price of Crude Oil headed? Some predict some increases in the short term but what really scares me is the calculation that the real value of Oil is about thrice its worth today.

What do you think?

What drives an entrepreneur

Excerpts from an article written by Ed Morato, one of the most respected professors at the Asian Institute of Management:

"The Global Entrepreneurship Monitoring (GEM) Report (2001) cited a strong correlation between entrepreneurial activity and economic growth as revealed by their studies on 29 countries. For the Philippines, this was validated by the writer's time series analysis (1970-2001) showing the correlation between the establishment of new enterprises and gross domestic product (GDP).

From the 21-year data base, the researcher discerned a revealing pattern. The dramatic growth in new enterprises coincided with periods of high political and social stability (i.e. the first seven years of martial law, the first three years of President Cory Aquino's government and the entire six years of President Fidel Ramos). The abrupt entrepreneurship falls coincided with periods of high political and social instability (i.e. the waning years of President Ferdinand Marcos when he was reportedly sick, the last three years of Aquino following the military coups and power crisis, and the years of President Joseph Estrada).

The researcher concluded that political and social stability is the necessary condition that would create an attractive economic environment for entrepreneurship."

In conclusion, he wrote;

"From the 59 specific factors, the researcher concluded that seven general factors influence entrepreneurship significantly. These are the following:

1. Macroenvironmental factors: Political, economic and social
2. Cost of doing business: Includes logistics and transport costs, utilities, credit, taxes, incentives, informal and extra-legal costs
3. Cost of producing products and delivering services: Includes raw materials, supplies, semi-processed goods, cost of servicing customers, professional services, labor costs, overhead expenses, rent, etc.
4. Market opportunities: Actual and potential demand and supply conditions, market and customer characteristics, needs and wants, market structure and environment, market trends
5. Industry clusters: The concentration of competing and complementary enterprises within an area
6. Ancillary and Related Industries: Industries and enterprises that comprise the supply and market chains of a major industry grouping
7. The Entrepreneurs: The characteristics, traits, personal conditions, background, talents, skills, education, training and history of the entrepreneurs themselves

The survey yielded a major conclusion: Entrepreneurs, first and foremost, look at themselves, their personal capital and their capacity to run an enterprise before venturing into business.

At the same time, they are very sensitive to the investment signals sent by the macro environment. If the investment climate looks favorable, they muster the confidence to invest.

Next, they assess the basics of producing their products or services, which are driven by the two major costs--raw materials and labor costs--and by the cost of doing business--led by infrastructures and utilities. Then, they evaluate the industry cluster conditions, focusing on the availability of capital, raw materials and natural resources."

Along with this, entrepreneurs examine the related, ancillary and support services they can avail of. Finally the entrepreneurs discern the attractiveness of the market opportunities presenting themselves in terms of their profit and growth potentials.

Read the entire article here

Effective Leadership

Today, John Maxwell writes:

Leadership is Influence

"I couldn't have said it any better. You don't need a title to be a leader in life. And the simple fact of having a title won't make you a leader.

"I've found that everyone has the opportunity to lead, every day. It doesn't matter what your position is, or how long you've worked at your job, whether you help to run your family, a PTA committee, or a Fortune 1000 company. Anyone at any level can learn to be a leader and help to shape or influence the world around them.

"Do you shape your life and career?

"Do you inspire or influence others?

"Do you work to achieve specific goals by working with or coordinating the efforts of others?

"If you answered "yes" to any of these questions whether you realize it or not, you are a leader.

"Leadership expert John Maxwell describes leadership as positive influence. That is the most simple and elegant definition of leadership I know.

"In my experience, people lead for different reasons. The one thing they do have in common is passion -- passion for life and for what they do.


Furthermore, he noted;


How Does a Leader Act?

"What are the key characteristics of titled and untitled leaders?

They:

Believe they can positively shape their lives and careers.
Lead through their relationships with people, as opposed to their control over people.
Collaborate rather than control.
Persuade others to contribute, rather than order them to.
Get others to follow them out of respect and commitment rather than fear and compliance.

Read the entire article here

9.15.2006

A BIT ABOUT ROAD SAFETY, TAXES AND PUBLIC GOODS

The road was a bit slippery, last Sunday morning, and I saw a motorcycle cop, sans a crash helmet, leisurely driving his bike on a highway. Please take note of the salient words of my previous sentence. It was a SUNDAY, on a HIGHWAY (speedway), the road was SLIPPERY and he WAS NOT WEARING A CRASH HELMET. In addition, the cop swerved his bike from the leftmost lane towards the opposite side, as if he was the only soul in that part of the planet.

To add a few more observations, his upper garment looked like a sweater, embroidered with the name of his unit. I wonder if it was an official Police officer’s uniform.

In relation to my discourse for today, let me start by saying that ordinary citizen’s pay taxes through direct means, like income taxes, and indirect methods, through the purchase of cigarettes and other taxed commodities. The income tax is quite easy to figure out but what about the purchase of cigarettes? Well, cigarettes are heavily taxed and whenever consumers buy it, they are, in effect, shouldering the tax being levied by the government.

The Taxes collected by the government are used to pay for public goods (and services) that the society enjoys. Classic examples of public goods include traffic lights, public schools, public highways and national defense. In relation to this topic, relevant examples of public goods/services would be the Highway Patrol and Public Safety.

Therefore, it is quite accurate to say that government employees (Cops) are being paid by the taxpayers to “Serve & Protect”.

In last Sunday’s incident, the cop did something contrary to the character that he was being paid to perform. Instead of being a role model and an enforcer of road safety, he intentionally endangered himself and posed as a hazard to the neighborhood.

The cop, at that instant, was providing the community with a “Public Bad”. I had the urge to refer to it as a government failure but unfortunately, economics has a different definition.