Suraj Moraje, the CEO of Quess Corp, is a tenured professional with more than 20 years of global business experience. A former senior partner of McKinsey and managing partner of its office in the Philippines, he played an instrumental role in establishing the firm’s Technology, Media & Telecommunications Practice work in Africa. Moraje recently talked with McKinsey about what sets the Philippine economy apart from the rest of the world and how the country can maintain its success by using current global trends. This conversation is part of the broader Philippines Growth Dialogues interview anthology, which explores the opportunities and challenges to future-proof the country's next horizon of growth and innovation. An edited version of the discussion follows.
McKinsey: What do you think is a distinctly Philippine mark in the country’s economy?
Suraj Moraje: There are three things about the Philippine economy that make it quite special. One is the preponderance of family-owned businesses. It’s a huge strength because family-owned businesses can take a much longer-term view on the investments they make. If the Philippines was to develop a longer-term strategy on where it wants to play, compared to many other economies, the ability to actually deliver on that strategy would be high. And we’ve seen it—for example, in how we got the business-process-outsourcing sector going all those years ago, with a little bit of focus and investments from the businesses.
[The preponderance of family-owned businesses in the Philippines is] a huge strength because family-owned businesses can take a much longer-term view on the investments they make.
The second thing that I have always found very quirky about the Philippine economy is the strength of the consumer. I mean, it’s a well-known fact that 70 percent of the GDP is driven by consumption. But beyond that, Filipino consumers are very, very innovative. They’re happy to try new things, but the exposure of Filipino consumers to the global economy makes them quite cutting edge in their tastes and preferences. And it provides consumer companies—specifically food companies—an edge. I think food companies that do well in the Philippines can do well anywhere in the world.
The third thing is the concentration of the economy in one city: 60, 70 percent of our GDP is in one city. That allows us to experiment a lot faster because if you introduce your product, you can reach a large share of the spend quite quickly, and you can do many things faster than in other countries.
Economic-development plan 2.0
McKinsey: What continue to be areas of stagnation? And what can be done to uplift the Philippines?
Suraj Moraje: There are three things that the Philippines should focus on. One thing I do feel starkly in the Philippines is that our banking infrastructure needs to accelerate. When I say “banking infrastructure,” I mean the ability to do instantaneous payments, to tie customers to formal IDs, and to have common know-your-customer services across financial institutions. The acceleration of the Philippines’ banking structure will allow much greater access to credit and take out a lot of the transaction costs of the economy.
The acceleration of the Philippines’ banking structure will allow much greater access to credit and take out a lot of the transaction costs of the economy.
The second thing that would be important for the Philippines is to develop a consolidated, national economic-development plan. And by that, I mean answering questions: “Which sectors do we believe this country can be globally competitive in? For each of those sectors, which parts of the country do we want to grow those sectors in?”
I think regionalization is a great idea, especially since we have a lot of large islands that possibly are not being put to the best economic use today. So can we make an economic-development plan in line with those trends and in line with these geographies to give our industry, our talent, some visibility into where you want to go in the next 20 years. I think that will drive much more purposeful investments.
The third thing is the formalization and skill development of our labor base. I do think that we run the risk of falling behind on adoption of technology on skills because such a large part of the base is in the informal sector, where they are not getting enough access to training and development. This tends to fall in the area of community action.
We need to define the sectors of importance, be they agriculture, elements of manufacturing, or—not forgetting that we have large service industries—retail or banking. We need to define the skills we need to build on and then set up the relevant vocational universities. In some countries in the world, governments subsidize the delivery of education through vocational universities. So have that dialogue and say, “What is it we want to develop, and how do we accelerate it?” I think, to some extent, labor reform will be important, as well.
Technological leapfrogging to stay ahead
McKinsey: What new trends are surfacing globally, and how can the Philippines leverage them?
Suraj Moraje: There are three trends the Philippines should look closely at. One is the trend of technology. Everyone’s talking about automation and data, but figuring out what technology means for us as a country and how we’re going to use technology are going to be critical. How do we use technology in speeding up infrastructure rollouts and bringing down the cost of infrastructure? How do we use technology in bringing down transaction costs and friction costs in the economy?
The second thing is thinking about how we build out the consumer and food sector in a more purposeful way. The consumer sector in Asia is growing as urbanization accelerates and incomes go up. There’s just much more consumption. And thinking through how we as a country take advantage of consumerization in the neighborhood—and more globally—is important. That will then help us figure out what kinds of agriculture we want to promote and what kinds of supply chains and free-trade agreements we need. I think it will help us inform some of those things.
The third thing: as you know, we’re seeing globalization as we’ve known it being disrupted in quite a significant way over the last couple of years. And we need to think, what is the Philippines’s position in all of this? What could be the Philippines’s role in a disruptive global supply chain, where goods are coming from a broader set of countries and where maybe more goods are moving nearshore rather than offshore? Where do we want to play in that game?
What could be the Philippines’s role in a disruptive global supply chain ….Where do we want to play in that game?
Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.