No Free Lunch

Going beyond ‘gaya-gaya’

/ 05:12 AM December 22, 2017

Are Filipino entrepreneurs too gaya-gaya, or more of imitators rather than innovators? Time and again I’ve heard it said that this is what’s wrong with Pinoys in business, hence with Philippine business in general. Rather than seek to break new ground, we are too often content with imitating and replicating other businesses already seen as successful.

Competition is always good in principle. But in our economic history, many an industry folded because too many new entering competitors tried to gain market share by downgrading quality in order to cut costs and price out existing players, instead of striving to offer a superior product. The nata de coco craze in the early 1990s was a case in point. When word got around then that the Japanese were snapping up the product like crazy, producers spread like wildfire in our coconut areas. At the height of the boom, rumors spread that some producers were using toxic chemicals like formalin to speed up the natural chemical process that produced the gelatinous substance from coconut water, and to prolong shelf life. Demand from Japan crashed almost overnight, all but killing the zooming export industry. It was later learned that Japanese buyers had shifted to Thailand as favored source of the prized commodity.


One might see the nata de coco story as a case of innovation gone wrong, where the wrong kind of innovation was misused and ultimately led to an industry’s downfall. But done the right way, research and innovation informed by sound science are the stuff of industrial growth and development. They were the driving force behind the past three industrial revolutions, and are driving the Fourth Industrial Revolution now said to be upon us. The industrial takeoff that happened in Japan in the 1960s, and later in Taiwan, South Korea and China, began with imitation and copying of western technologies, adapted to Asian tastes and requirements. I still recall the term “adaptive technology” from my early development economics readings, characterizing the kind of innovation that kick-started industrial growth in Asia’s industrial giants of today.

In the 1990s, I was toured in the factory of a local manufacturer of electronic circuit boards for export. There I was shown a very expensive piece of imported equipment that automatically plugged electronic chips onto a circuit board at very high speed—an early industrial robot. I was told of how the company’s brilliant Filipino engineers had successfully reverse-engineered the machine and managed to create a second one, doubling productivity while saving the company millions of pesos. This showed me even then that Filipino scientists and engineers have what it takes to keep up with, and possibly even get ahead of, the global technological world. But that was also a time when, for various reasons, our economy “leapfrogged” from one dominated by agriculture to one dominated by services, essentially bypassing the stage of industrialization that characterized the evolution of most developed economies.


Many reasons have been offered for why we missed achieving greater industrialization earlier, and instead jumped on to domination by services—a state into which other highly industrialized economies traditionally “graduated.” But a major factor cited by analysts even then had been inadequate public and private investment in science and technology research and development (R&D). The oft-cited target has long been 1 percent of gross domestic product (GDP) for spending on R&D. Data from 2015 show our gross expenditures on R&D to be only 0.14 percent of our GDP, against 0.39 percent for Thailand, 1.13 for Malaysia, and 2 for Singapore. The same data show that we have 372 R&D personnel per 1 million of population, against 1,509 in Vietnam, 1,367 in Thailand, 3,583 in Malaysia, and 8,492 in Singapore. I recently cited how 559 passed the chemistry board examination last year out of 1,019 takers, whereas 3,747 out of 6,344 examinees successfully hurdled the bar exam—a ratio of nearly seven new lawyers for every new chemist.

If we are to achieve a dynamic, innovation-driven economy, I know it won’t be lawyers who would get us there.

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TAGS: Filipino entrepreneurs, innovators, Philippine Business
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