the Philippines

Transcription

the Philippines

PHILIPPINES USAT.qxd
15/4/08
ECONOMY
17:41
Página 1
REAL ESTATE
Page 02
2007 MARKED BEST
ECONOMIC YEAR IN
THREE DECADES
TOURISM
Page 04
THE PHILIPPINES’
FRESHEST SECTOR
BRANCHES OUT
THE
FINANCE Page 11
Page 07
SETTING OUT THE
PHILIPPINES’ STALL AS
A TOP DESTINATION
THE FINANCIAL HEART
OF THE ASIA-PACIFIC
REGION
Thursday, May 01, 2008
PHILIPPINES
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A MESSAGE FROM THE PRESIDENT
‘Creating a new
Philippines’
President Gloria
Macapagal-Arroyo
has placed the
Philippines on the
path to permanent
economic growth and
stability
The huge growth of Metro Manila has been spurred by economic reform and increased foreign direct investment
The economic smile
of Asia Pacific
The Philippines is catching the tiger economies on its way to First World status
Spread over an archipelago of more
than 7,000 islands in the South West
Pacific, the Philippines was just a
few short years ago saddled with
anaemic economic growth and political instability that led to the impeachment of President Joseph
Estrada, and his eventual overthrow.
Vice President Gloria MacapagalArroyo was sworn in as his replacement in January 2001 and
elected to the Presidency in 2004.
She has since shown her ability to
turn the country around and her reforms have spurred the fastest economic growth in three decades,
along with falling inflation, rising
employment and increased foreign
direct investment.
Philippine companies in the
banking, real estate and energy sectors have rung up record profits as
the president, her ministers, legislators and the country’s central bank
have all contributed to the country’s
rapid recovery and to the ongoing
improvement in living standards
for Filipinos.
The economy expanded by 7.3%
in 2007, boosted by falling interest
rates, a real estate boom and an increase in remittances from Overseas Filipino Workers (OFWs). It is
expected to grow at between 6.37% this year, as a result of the eco-
nomic slowdown in the U.S.
Tax reforms carried out in 2005
and 2006 have boosted government
revenue and permitted spending
on education, infrastructure and
healthcare to rise. Forecasts predicting a balanced budget this year
are being revised due to the threat
of global recession and decreased
agricultural production at home
due to climate change. President
Macapagal-Arroyo has said that
‘WE ARE CONTINUING
THE PACE OF PROGRESS
WHICH HAS MADE OUR
ECONOMY SO STRONG
WITH NEW MATURITY
TO MOVE FORWARD’
the Philippines is well-positioned
to weather a global economic slowdown, as a result of its total economic overhaul.
“Seven years ago, nobody
thought we could do it, but we have
and we are continuing the pace of
progress that has made our economy so strong,” she said. “This new
maturity in our economy has
brought a new confidence that
forms the foundation of sustained
economic growth moving forward.”
The country’s businessmen are
just as bullish about the economy
as the president. Real estate com-
panies such as Filinvest Land and
Robinsons Land expect continued
demand for new housing and are
investing accordingly. Banks including Banco de Oro and
Metrobank expect to profit from
mortgages and other lending associated with the building boom. The
president and the legislative branch
are working closely together to pass
much-needed reforms intended to
make the country’s government
and private sector more efficient
and competitive.
The Philippines has also improved its international situation.
It has friendly relations with its
neighbors and is attracting more
foreign direct investment from
globally leading companies including Hanjin of Korea, Marubeni
and Tokyo Electric of Japan and
Texas Instruments of the U.S.
Foreign companies are attracted
by the Philippines’ English-speaking workforce, low wage costs, and
for U.S. companies, by the historical and cultural ties between the
two countries. The country has other advantages as well, says Willy C.
Gaa, the Philippines’ ambassador
to the U.S.
“We likewise have a solid legal infrastructure that makes our legal
system predictable and reliable for
businessmen,” he explained. “Despite the excellent quality and high
productivity of the Filipino workforce, the Philippine wage structure is competitive vis-a-vis wage
rates in the region.”
The country maintains strong
diplomatic ties with the U.S., its
biggest trading partner. They cooperate on security and military
matters, and the Philippines has
been an important partner in the
U.S.-led fight against terrorism.
The presence of a large community of Filipinos in the U.S. also
helps cement relations between the
countries. OFWs in the U.S. send
home 60% of all remittances, helping their families and friends save,
buy homes and invest in new businesses. Filipinos are the secondlargest Asian-American group,
numbering some 4 million.
The Philippines, meanwhile, is
becoming increasingly popular with
U.S. tourists. Last year around
400,000 Americans visited the
Philippines to enjoy its jungles,
mountains and beaches. The government has embarked on a program to attract even more this year
to top destinations including Boracay beach, which has consistently been voted one of the world’s top
5 beaches.
Over the last seven years,
my Administration and
the people of this country have aimed high and
have met the challenge of
economic and fiscal reform. Seven years ago,
raising revenues, expanding the taxpayer
base, strengthening the
peso and attracting foreign investment were
our biggest challenges.
To some, our goals of balancing the budget, lowering debt
levels and raising employment
seemed ambitious at best. Seven
years down the road, I am proud
to say that our unwavering commitment to instilling the necessary reforms to move our nation
forward has allowed us to make important progress on all these fronts.
Today, the Philippines is on a
path to permanent economic
growth and stability. We have created 7 million new jobs in seven
years and have achieved 27 consecutive quarters of economic
growth. In fact, our economy,
which rose 7.3 percent in 2007, is
experiencing its fastest growth in
more than a decade. Business and
investor confidence is on the rise,
the peso appreciated more than
18 percent in 2007, making it one
of the world’s best performing currencies, and our stock market has
reached historic heights. For the
first time in a generation, our budget is under control, we are lowering our deficit and raising
unprecedented amounts of revenue. And most importantly, the
world is taking notice of the new
Philippines that we are working
hard to create.
The Philippines remains a competitive location for a wide range
of manufacturing and high valueadded services. We offer a strategic location in a fast-growing
region, our workforce is well-educated, productive and Englishspeaking and we are cutting red
tape to simplify the requirements
for investment.
Our strengths are working to
sustain our competitiveness for
foreign investment, which grew
five-fold from 2003 to 2006 alone
and continued to rise at a doubledigit rate in 2007. This surge of investments has been anchored by
billion-dollar plus investments by
several major international companies, including Texas Instruments, Hanjin Shipping and
PRESIDENTIAL PROFILE
Gloria Macapagal-Arroyo became
President of the Philippines in January, 2001, stepping into the breach
left by the ousting of Joseph Estrada from office by popular demand.
The former economics professor
and Vice President was herself
elected to a six-year term in June,
2004 and has led the Philippines
through a series of reforms that
helped the country’s economy
grow at its fastest pace in 31 years
during 2007.
“Economic growth was 7.3%, a
million new jobs were created, un-
employment is down, poverty is
down, the stock market is up and
the peso is at its highest level in 8
years,” she asserted recently. “Investment from abroad is pouring
in, we are recognized globally as
a top outsourcing destination and
our billion dollar investment club
is growing to include some of the
biggest companies from all over
the world.”
Mrs. Macapagal-Arroyo has overseen several reforms including the
overhaul of the country’s tax system, which is expected to allow
the government to balance its budget in 2008 after years of deficits.
Her economic management has
garnered praise from organizations such as the International
Monetary Fund, which said the
reform of the value-added tax was
“generally progressive and well targeted,” and from people including
Bill Clinton, who said she has made
“tough decisions” that have helped
turn the economy around.
She has focused on improving the
Philippines’ education system and
expanding the transportation infrastructure as part of a plan to
help the country’s poorest people
and make the economy more productive and competitive.
President Macapagal-Arroyo, the
daughter of former President Diosdado Macapagal, first entered government in 1987, when
then-president Corazon Aquino
asked her to work at the Department of Trade and Industry.
In 1992 she was elected to the Sen-
GLORIA MACAPAGAL-ARROYO
President Republic of the Philippines
President Arroyo’s reforms have
seen the Philippine economy soar
and foreign investment in Filipino
companies surge
Progress against the odds
President Arroyo has
overcome many obstacles to
achieve the Philippines’
highest economic growth rate
in 31 years
Marubeni and Tokyo Electric,
among others. Significant new investments are being made across
the board in a number of industries.
Our efforts to focus on developing a number of key priority sectors, including mining, technology,
energy, tourism, business process
outsourcing and infrastructure,
are also creating significant investment opportunities for both
domestic and international investors alike.
We are now focused on further
raising our competitiveness to sustain this momentum. For the first
time in decades, less of our revenue is being used to service debt
and more resources are being directed towards investment in human and physical infrastructure
including education, healthcare
and training as well as new bridges,
roads and ports. This reflects our
program to consolidate the gains
in new revenue by investing billions
of pesos back into our country.
This will, in turn, attract more foreign investment and create more
jobs, ultimately improving the lives
of all our people.
I take great pride in the discipline
of my Administration to focus on
the economy and our overall economic health. Our country is performing at an all-time high in every
aspect and there is no better time
for investors to take advantage of
the many opportunities created
by our strengthening economy. I
also firmly believe we are in a
stronger position than ever to instil permanent economic change
in our country and to work together to ensure we achieve longterm prosperity for many
generations to come.
ate, where she served until 1998.
That year she ran for and won the
position of Vice President, defeating Joseph Estrada’s candidate
for the position. Estrada invited
her to join his cabinet and she held
the position of Secretary of Social
Welfare and Development until
she resigned and joined the opposition. She then replaced him
when the Supreme Court declared
he had vacated the presidency.
She successfully faced down protestors who stormed the Presi-
dential Palace four months after assuming the presidency, and
fended off an alleged coup attempt at the beginning of 2006.
She declared a state of emergency, had the suspected leaders of the rebellion arrested and
then lifted the state of emergency within two weeks, returning the country’s democracy
to a normal state.
Since then she has acted to ease
tensions with her political opposition and with armed Communist rebels operating in the
south of the country. She issued
a pardon for Estrada in October 2007 on the advice of her
Justice Department, after having signed an amnesty for the
rebels a month earlier.
Our World Insert is produced by United World. USA TODAY did not participate in its preparation and is not responsible for its content
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Página 2
THE PHILIPPINES
Facts and figures
I LOCATION:
southeastern Asia, archipelago between
the Philippine Sea and the South China
Sea, east of Vietnam
I CLIMATE:
tropical marine; northeast monsoon
(November to April); southwest monsoon
(May to October)
I POPULATION:
91,077,287 (July 2007 est.)
I GDP - REAL GROWTH RATE:
7.3% (2007 est.)
I GDP - COMPOSITION BY SECTOR:
agriculture: 14.1%
industry: 31.3%
services: 54.6% (2007 est.)
I LABOR FORCE:
36.22 million (2007 est.)
I LABOR FORCE - BY OCCUPATION:
agriculture: 35%
industry: 15%
services: 50% (2007 est.)
I BUDGET:
revenues: $23.96 billion
expenditures: $25.24 billion (2007 est.)
I EXPORTS - PARTNERS:
US 18.3%, Japan 16.5%, Netherlands
10.1%, China 9.8%, Hong Kong 7.8%,
Singapore 7.3%, Malaysia 5.6%,
Taiwan 4.3% (2006)
Source: The CIA World Factbook
UNITED WORLD WISHES
TO THANK
Ismael Guerrero Cruz, Peter
Raymond C. Lee of IGC
Securities Inc., Holaina Oblifias
and Mae Estaniel Oblifias of
Carlines, for their help in the
realization of this report.
UNITED WORLD PROJECT
TEAM IN THE PHILIPPINES
CHIEF EDITOR:
Julien Drolon
PROJECT DIRECTOR:
Gemma Gutiérrez
PROJECT COORDINATOR:
Lorraine O’Hagan
A more extensive version
of this report is available at
www.unitedworld-usa.com
Poised to jump to
prosperity
The Philippines is steadily moving its economy forward
The Philippines, whose economic
growth has in the past lagged behind neighbors such as Thailand
and Malaysia, is now knocking on
the door of the club of the Asian
‘tiger’ economies. The economy
expanded by 7.3% in 2007, and will
probably grow by about 6.3-7% this
year, according to President Gloria
Macapagal-Arroyo.
Last year “was the best year for
the Philippine economy in 31 years,”
she said. “As a result of our total
economic overhaul, we are well positioned to weather a global economic slowdown.”
In recent years, the Philippine
government has overhauled its tax
system, boosting revenue and allowing increased spending on education and transportation projects,
which are in turn making the economy more efficient. That “surge” in
spending will also help spur growth
this year and in the future, and insulate the economy from the slowdown in the U.S., President
Macapagal-Arroyo states.
Investment in infrastructure, education and healthcare remain the
government’s priority, according to
Secretary of Budget and Management Rolando G. Andaya, Jr., and
spending in those three areas will
increase in 2008 by 24.7 billion pesos, 8.4 billion pesos and 4.2 billion
pesos respectively.
The increase in tax revenue has
also allowed the government to
trim its budget deficit and will help
to eliminate the deficit this year,
freeing up more local funds for investment projects, says Margarito
Teves, Secretary of Finance.
“We have achieved the lowest
fiscal deficit in ten years and are
raising an unprecedented amount
of revenues,” explains Mr. Teves.
“We have demonstrated, particularly in the past two years, that we
are able to control spending, improve tax collection and contain
our deficit and we will continue to
exercise fiscal discipline to ensure
we balance the budget this year.”
Economic growth in 2007 was
spread across many different sectors. Construction and spending
on housing boomed as the inflation
rate dropped to 2.8% for the year,
from an annual increase of 7.6% as
recently as 2005, permitting the
country’s central bank to cut interest rates and reducing borrowing costs.
MARGARITO B. TEVES
Secretary ot Finance
The country is also attracting
more and more investment from
foreign companies. The total
amount of approved foreign direct
investment in the Philippines increased almost six-fold in the fourth
quarter of last year, to 102.6 billion
pesos, from 17.3 billion pesos in
the same period a year earlier. Net
foreign direct investment rose in
2007 to $2.93 billion.
“Last year, we saw the emergence
of big ticket, high value investments
worth billions of dollars across the
country as a result of renewed investor confidence,” says Trade and
Industry Secretary Peter B. Favila.
“In 2008, we will continue to pursue higher quality investments and
exports that further boost growth
and development and general employment.”
The labor of Overseas Filipino
Workers (OFWs) is the country’s
biggest export, and their remit-
tances represented about 10% of
gross domestic product last year.
The value of exports including copper and other metals is also rising
as commodities prices around the
world increase. The total value of
Philippine exports grew 6.1% in
2007 from a year earlier.
The increase in remittances from
OFWs has also put more money into residents’ hands and helped fuel demand for new housing. OFWs
sent back $14.4 billion to their families in 2007, an increase of 13.2%
from the previous year.
Many families in the Philippines
depend on money sent home by
their loved ones , but the country’s
Social Security System (SSS) is expanding to provide pensions and
other assistance to more and more
people.
More than 27 million Filipinos
now benefit from their membership
in the SSS, and 1.2 million receive
pension payments for disability or
retirement, says Corazon de La Paz,
President and Chief Executive Officer of Social Security System. The
SSS serves as an example to other
countries trying to set up similar
plans, she adds.
“Officials from developing countries often visit the SSS and try to
learn many of our programs, particularly how we have become successful in implementing them,” she
explained. “The Filipinos are well
known in this part of the world for
providing good instruction and a
good example.”
The country has also been good
at following the example set by
neighboring countries that have
moved millions of their citizens
from poverty to prosperity within
a few decades. The Philippines is
now poised to make that jump.
“We are at a tipping point, and
I am confident that the Philippines
will tip forward, not backward, in
pursuit of reaching the status of
First World nation within a generation,” President Macapagal-Arroyo asserts.
Distributed by USA TODAY
FINANCE
New management for
the Central Bank
Lower inflation rates, the
rising value of the peso and
improved corporate
governance are
strengthening the economy.
Amando M. Tentangco, Jr., Governor of the central bank of the
Philippines, has achieved some
notable successes since taking
over as head of Bangko Sentral ng
Pilipinas (BSP), as the institution
is known. He has helped bring
down inflation, encouraged banks
to clean up their balance sheets,
and overseen the adoption of the
Basel II set of bank regulations.
The consumer price index increased by 2.8% last year, down
from 6.2% in 2006 and 7.6% in
2005. The BSP has helped by setting its benchmark interest rate at
a level that helps control price
pressure, and by ensuring that the
amount of money in circulation
doesn’t increase too quickly.
“What has helped us to reduce
the rate of inflation and to keep
it low and stable is our focus on
achieving our inflation target under the inflation-targeting framework that we adopted a few years
back,” Mr. Tentangco explains.
The rise of the peso against
the dollar, which makes imports
from the U.S. more expensive,
has also helped keep prices under control by reducing demand
for foreign products, though the
recent rise in the price of oil
pushed the inflation rate for February up to 5.4% as the cost of
fuel increased.
Tetangco and the BSP are
working on making the country’s banks more stable, partly
through encouraging them to
improve their asset quality. Commercial banks reduced the average ratio of non-performing
loans to 5.3% at the end of August 2007, from a peak of 18% in
2001.
“We have also improved corporate governance and we have
adopted the consolidated supervision approach,” Mr. Tentangco
says. “This way we can see not
only the performance of the bank
itself in a group, but including the
subsidiaries and affiliates included in that group we can see how
this can possibly affect the performance of the bank.”
The adoption of the Basel II
agreement in July 2007 means that,
among other things, banks have
to meet a series of capital ratios intended to ensure they maintain a
level of liquid assets appropriate
to their exposure to risk.
In practice in the Philippines
this has meant requiring banks
to improve their risk-management skills and make the neces-
AMANDO M. TETANGCO, JR.
Governor of the Central Bank
sary changes to their liquidity
ratios. The central bank has also been training its employees to
better supervise the bank system based on the Basel II rules.
Efforts by BSP to encourage
consolidation in the banking industry are ongoing. Last year saw
the merger of Banco de Oro Universal Bank with Equitable PCI
Bank to create Banco de Oro
Unibank Inc., the country’s second-biggest bank by assets. Other banks are also reportedly in
talks to combine, and bigger
banks would be better able to
compete at home and abroad,
Mr. Tentangco says.
“We would like to see greater
consolidation taking place in
the banking system. There is
still more room for further confidence, so we will have bigger
and more stable financial institutions.”
NATIONAL BUDGET
ENERGY
Social development tops
budget appropriations
A new industry is born in the
face of global warming
Education, transportation
and infrastructure will all
benefit greatly from
additional tax revenues.
With so many reasons to
develop alternative energy
sources, the Government is
making big plans.
After years of running deficits, the
Philippine government is targeting
a balanced budget this year, at the
same time increasing spending on
both education and transportation
infrastructure, thanks mostly to reforms to value-added tax which
were carried out during 2005 and
2006.
President Gloria Macapagal-Arroyo wants to show Filipinos that
the extra money they’re paying in
taxes is being put to good use, and
will help improve their lives and
those of their children by preparing them better for work and by
making the economy more efficient
on a world scale.
“The message we are trying to
send to the people is this: we need
to be more competitive in the global economy,” says Rolando G. Andaya,
Jr., Secretary of Budget and Management. “To do this we need to be
better educated, be healthier and socially prepared, we need more infrastructure to attract more investors
and improve the overall state of economic activities in the country.”
Part of the 176.5 billion pesos the
government plans to spend on education this year will be used to hire
10,000 new teachers, buy 35.5 million new textbooks, set up 920 computer laboratories and build 10,472
classrooms.
Funding for scholarships will benefit 67,665 students and about 1 billion pesos will be used for more
training for science, mathematics
and English teachers. The budget
also includes increased funding to
help 3.5 million underprivileged
pre-school and elementary school
students through the expanded
Food for School program.
Improving the country’s transportation system will also bring
benefits to families and companies
alike, making it easier for children
to get to school, for farmers and
fisherman to get their merchandise
to markets and for businesses to
move their products around the
country.
The price of a barrel of oil broke
through the $100 barrier earlier
this year, providing countries like
the Philippines – which is dependent on imported oil for most of
its energy needs – with yet another
reason to invest in alternate energy sources. President Gloria Macapagal-Arroyo foresaw the
need to reduce the country’s energy dependence
and started to invest accordingly years ago.
“Energy security also demands the development
of indigenous and renewable sources, including domestic oil and gas,
geothermal, solar, wind,
wave and biofuels,” the
president said at an energy conference in February.
“We have made gains in
energy independence,
with domestic sources
having grown 43% since
our administration started in 2001, which now accounts for 60% of our
needs.”
The government’s emphasis on renewable energies helped pave the way
for the construction of a
bioethanol plant in Ormoc, in the
province of Leyte. The plant, built
and run by Praj Industries of India, was scheduled to begin production in March of this year and
uses molasses as its raw material.
Another bioethanol plant in Negros Occidental, south of Manila,
is expected to start production in
December, and coconut oil is used
as the raw material for biofuels
produced in plants in Quezon City
and Lucena City. Windmills currently supply almost all the energy needs of a town in the Ilocos
region.
Still more renewable energy
plants will come on line in the next
few years, including the Sibulan
hydro-electric plant in Mindanao,
which will be finished next year, a
Secretary Andaya’s bold budgeting will benefit Filipinos in every aspect of public life
Spending by the Department of
Public Works and Highways and
by the Department of Transportation and Communications
was increased by 50% in 2008. This
money will be used to build and improve roads and highways around
the country, extend the railway system in Metro Manila and build
new ports and airports. One roadbuilding program is intended
specifically to improve roads between farm areas and markets.
Filipinos will directly benefit
from a series of new Doppler
weather radar facilities that will be
built around the country to give
‘THE 2008 BUDGET IS
A CATALOG OF
REIMBURSEMENTS FOR
OUR PEOPLE’S
SACRIFICES - THEIR
TAXES’
earlier warning about storms that
can endanger lives and crops, and
the electricity network will be extended to the country’s rural
barangays.
The government has also implemented a program dividing the country into a series of “super regions”
intended to make the most efficient
use of government resources to increase economic development and
promote private investment.
The idea of the regions is to
group together contiguous areas
and look at their development on
a broader scale, according to Mr.
Andaya. One of the advantages of
that approach is that it permits a
more efficient use of government
resources by grouping together investments across agencies while
attract private investment to the
various regions.
“These super regions offer
boundless opportunities to spread
and multiply development across
the entire country,” says President
Macapagal-Arroyo. Much of the
increase in spending comes from
the VAT reforms, which added 100
billion pesos in tax revenue in 2006.
“People find it difficult to accept
the need for new taxes,” explains
Mr. Andaya. “With the 2008 budget, the people will better appreciate their contribution through
payment of new taxes, as the budget represents social payback. The
2008 budget is a catalog of reimbursements for our people’s sacrifices, their taxes. More
infrastructures and increased social services through education
and health spending are being
made available by the additional
funds from these new taxes. ”
The government has also benefited from lower finance costs, as
the rise of the peso against the dollar has reduced interest payments
on debt. Reforms to the budgeting
and spending process in recent
years have made it more efficient
and transparent, and have also
freed up more funding for important programs.
geothermal plant in the same region that will be completed in 2010
and another geothermal plant in
Visayas that will also be finished in
2010.
The Philippines has abundant
geothermal capacity in fields in
South Luzon, the Bicol region, central Visayas and in some Mindanaoan provinces. Solar energy
also has great potential in the
Philippines, which is already host
to the largest solar power plant in
ANGELO TOMAS REYES
Secretary of Energy
the developing world at Cagayan
de Oro.
The country’s energy plans are
attracting the interest of foreign
investors. Abengoa SA and Bionor
Transformacíon, both of Spain, are
looking at farmland to produce
crops to convert into biofuels.
Meanwhile, investors from Japan
and India have expressed interest
in building a chain of compressed
natural gas (CNG) stations to fuel cars and buses, and a CNG
pipeline.
Cutting the country’s energy bill
isn’t the only reason the Philippines is interested in alternative
energies. The country has a very
direct interest in reducing carbon
emissions because, as an island nation, global warming is a direct
threat to survival.
“While Florida may lose some
coastline, we may lose a nation,”
President Macapagal-Arroyo has
said. “Every nation, developed or
developing, must assume the mantle of leadership and work to address the challenge of climate
change.”
The government has launched
a plan, called Green Philippines, intended to make the
country’s environmental
and economic policies
more compatible with reducing dependence on foreign energy, producing
more alternative and renewable energy and making the country more
energy efficient.
The push for efficiency
is illustrated by the government’s goal of phasing
out incandescent lights by
2010, and by extending the
use of CNG to hundreds
of the country’s buses, and
not just the dozens that use
the fuel now.
The government has
embarked on advertising
campaigns to encourage
greater energy efficiency
through voluntary adoption of stricter use standards, and is collaborating with
the private sector to help implement them.
The Department of Energy is
providing technical assistance to
companies to identify, implement
and evaluate new methods of reducing energy use and is spurring
the expansion of appliance and
building energy standards.
According to Secretary Angelo
Reyes, his department will continue “Increasing our capital spending, further reducing our interest
payments to limit the burden on
future generations and reallocating savings from interest payments
to high priority areas such as infrastructure, while ensuring that
funds for important investments
are released on a timely basis.”
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Página 3
THE PHILIPPINES
3
A talent for making
dreams a reality
A lifetime in business: Henry Sy, Sr. built SMIC from
scratch. This year it celebrates 50 years of success
Manila, 1945. As the Second
World War drew in the Pacific
theater drew to a close, chaos
reigned across the city. For Henry Sy, Sr., the immediate aftermath of the most destructive war
ever waged struck close to home.
Hit by shrapnel while selling in
the market, the war also saw the
demise of his father’s two sari-sari
(convenience) stores - one was
razed to the ground, the other
looted. It was enough to persuade
his father to return to his native
China, and presented the young
Henry Sy with a conundrum – to
follow, or to stay and build up
the business anew amid the debris of post-war Manila.
Deciding upon the latter, Henry Sy applied himself to the ebb
and flow of the market with the
same enthusiasm that he had
shown for hard work in his father’s stores. Noticing a dearth of
footwear in Manila, the enterprising Mr Sy began selling shoes
imported by American soldiers
posted to Manila. By 1948, the
newly married Henry Sy had
opened his first shoe shop on
Echaque Street in the Quiapo
neighborhood of the capital. It
was the beginning of a journey
that would see Mr Sy become
one of the most successful businessmen in the Philippines. From
humble beginnings as a shoeless
immigrant 12-year old arriving
in Manila after an arduous journey from Jinjiang in China, Mr
Sy today is the chairman and
founder of SM Investments Corporation, one of the largest and
best-known conglomerates in
the Philippines.
His daughter and the group’s
vice-chairperson, Teresita SyCoson, sums up how Mr Sy was
able to build what has become
known as the SM Empire: “My father is a symbol of determination, guts and grounded
optimism. his story is an inspiration to everyone who believes
in hard work and perseverance.
Success to him is dreaming big
and working hard to make those
dreams reality. We were able to
implement procedures to make
the dream of a man reality, from
a one-store affair in 1958 to the
many establishments that we
now have. Over the years we have
grown more than a thousandfold. We have come a long way.”
The holding company of SM
Group, SM Investments Corporation operates four core business arms; retail, shopping malls,
banking and finance and property. As of end 2007, SM Investment Corporation reported a net
income of P12 billion, a 14 % increase over 2006. This translates
to a 25% increase in recurring income after taking out the effects
of extraordinary items. Group
profits gained strength with the
performance of retail which grew
30% to P3.3 billion, and the property group which, taking off from
a low base, grew 88% to P1.1 billion. Group revenues peaked at
P122.5 billion, up 38% for the
year. Its strong cashflow and lowdebt position will enable it to finance its planned capital
expenditure for 2008. Of the
P27.4 billion planned for the year,
P15.6 billion will be lavished on
property development, P6 billion on malls, P3.8 billion on
banks, and P2 billion on retail.
“My dad has been working on
retail for a long time, so he knows
the customers and he knows
what to sell them,” explains Ms
Sy-Coson, “He also knows how
to achieve the right tenant mix.
He wanted to come up with
something that would showcase
the pride of Filipinos, while also
being profitable. That is what he
has achieved. Our malls are
places where both tourists and locals like to go. It is the pride of
the Filipino.”
The SM Mall of Asia is an example of this. The largest shopping complex in the Philippines
and the 3rd-largest in the world
in terms of gross floor area, Henry Sy Sr. has described it as “the
greatest project of my life”. Standing in the SM Bay City at Pasay,
the mall opened in 2006 and
among its diverse offer is an
Olympic-sized ice skating rink.
Aesthetically alluring and spacious, the mall is hugely popular
with Manillans of all ages. Of
course, in order to keep pace with
the changing world, SM Investments Corporation has to remain
flexible and keep its finger on the
economic pulse of the Philippines. As Ms Sy-Coson explains:
“The Philippines is a unique
place for investment. You have to
know how to navigate in this
country. There are a lot of businesses available but many people see it from the top down, not
from eye level. When you see
things at eye-level, there are a lot
of opportunities and that is how
we grow. We are not afraid to invest here because this country
will always exist. The consumers
will always be here. There is a
strong market in this country.
“Aside from this, our country is
TERESITA T. SY-COSON, Vice-Chairman of SMIC
very transparent. We share the
good news and the bad news, and
because we are proficient in english it is easy for the international media to pick up on it.
Unfortunately, what sells is the
bad news and therefore the media focus on that. But the situation
here is not so bad.
“If you look at the map, you will
see that we are in the center of
Asia with an archipelago made up
of 7,107 thousand islands; governance is different compared to
other countries that are connected to a continent. The key to succeeding here is to look at
opportunities from an entrepreneurial point of view. You have to
allow room for flexibility.”
Inbrief
SM retail:
‘We’ve got it
all for you’
I The SM retail business is a large
network of department stores,
supermarkets and hypermarkets. It
sells everything from shoes, clothes
and accessories to meat and poultry.
SM embodies its slogan: ‘we’ve got it
all for you’.
The largest
mall operator in
The Philippines
I SM Prime Holdings is the
Philippines’ largest mall operator.
Publicly listed since 1994, it now
owns and runs world class malls all
over the country, providing millions
of meters of floor area for a fully
integrated shopping, dining, and
entertainment experience. In all, SM
Prime Holdings operates 3.9 million
square meters of floor space.
Banco de Oro
acquires PCI Bank
in the largest
merger in
Philippine history
I While integrating PCI Bank,
Banco de Oro siezed the opportunity
to sustain growth and profitability.
The merger is part of a long-term
goal to become one of the largest
names in the Philippine banking
industry. SM also owns ChinaBank,
the first privately owned local
commercial bank in the Philippines.
SM Development
Corporation housing for all
I SM Development Corporation’s
ability to provide affordable yet
high quality housing units proved to
be a welcome offer to Filipinos
seeking the security and peace of
mind of owning their homes. SM
also owns Highlands Prime, Inc., a
leading high-end residential
developer within Tagaytay
Highlands, an exclusive
mountainside resort and residential
complex located in lush rainforests
just 60 km from Metro Manila.
TOURISM
Bordering on paradise: SM Group pioneers unique resort
Last February, Henry Sy, Sr.
led a group of distinguished
personalities who received
the tourism awards from the
Rotary Club of Manila in
conjunction with the National
Association of Independent
Travel Agencies. Mr Sy was
recognized for his sustained
investments in tourism in the
Philippines
Tourism in the Philippines is
big business. Over the last three
years visitor numbers to the archipelago have grown at an average
14 percent per year, double the
rise anticipated by the World
Tourism Organization. The Philippines has become one of the most
popular destinations in the Asia
Pacific region - itself the fastest
growing tourism market in the
world. Clearly, opportunities
abound in this fertile arena, and
SM Investments Corporation is
well placed to capitalize.
“Our foray into the tourism sec-
tor was planned way back in the
1980s and 20 years later we are
still working on it,” explains Ms
Sy-Coson. “My father started investing in hotels like the Taal Vista
Hotel, which was bidded out by
the government in the late 80s.
Tourism is something that my father saw in Spain. It has made a
big difference in Spain, as they
had a relatively poor economy
back then. Being a Filipino, he was
hoping that the same thing could
happen here. He was waiting for
the time when the Phillipines
would become a tourism-based
economy. He wanted to invest in
it. He wanted to attract more people to this country. He saw all the
things the country could offer and
believed that it could become
great.”
The Philippines’ department of
tourism has targeted a total of 5
million visitors a year by 2010, so
Henry Sy Sr.’s business vision has
come into sharp focus. A kaleidoscope of islands provides the
Philippines with a diverse tourism
offer and a wealth of natural beauty unrivalled in the region. It is on
the sand that Mr Sy intends to
build his castle, but unlike the
parable there is little scope of it being thwarted by nature. Hamilo
Coast, SM Group’s landmark
1,700-hectare purchase on a tropical island with unobstructed
views of the South China Sea, is
an ecotourism venture unprecedented in the Philippines and the
flagship project of SM Group’s
strategy to tap into the country’s
waxing tourism industry. Acquired in the late 1980s, SM is
now poised to make its vision reality.
SM Group’s maiden project at
Hamilo Coast is the 40-hectare
Pico del Loro Cove. Set in the
shadow of the eponymous mountain, Pico del Loro Cove combines
the best elements of a luxury
lifestyle with the area’s outstanding natural scenery. The resort is
partly powered by alternative en-
ergy sources and there is an emphasis on the recycling of energy
and water resources. Construction at the resort is low-impact,
with condominium buildings of
four- to six-storeys only to minimize the ancillary effects on local
flora and fauna. Indeed, such is
the proximity that many residences back on to the verdant primary forest.
“The natural beauty of the
Philippines can stand among the
world’s best tourist destinations,”
asserts Henry Sy, Sr. “We are setting a new standard in prime
tourism development. We have
meticulously planned for this project to become one of the country’s most prestigious tourist
destinations. By applying international standards in all aspects
Hamilo Coast is a 1,700 tranche of pristine beach and primary forest. SM Group’s maiden project, Pico del Loro Cove, (above) boasts its own 2 kilometer beach and stunning views
of development, we aim to introduce the best that Filipino culture
and tradition can offer.”
Located in the northwest of the
province of Batangas, Hamilo
Coast is a mere two-and-half
hours from Metro Manila, providing ease of access for international visitors as well as Manillans.
It is the first step on the group’s
path to achieving Mr. Sy’s aspiration of international recognition
for the myriad charms of his
adopted homeland.
“Promoting tourism is the most
important economic job this
country has,” he explains. “It is
through tourism that we can compete in the global marketplace.”
Teresita Sy-Coson agrees, and
says the potential for tourism in the
Philippines is practically limitless.
“We don’t know how far we could
go in terms of tourism, but we do
believe that there is an opportunity here. The day that most Filipinos
realize that it is very important, it
could be a very lucrative business.”
4
15/4/08
18:39
Página 4
THE PHILIPPINES
REAL ESTATE
Filinvest
branches
out to
tourism
With several projects in
the pipeline, the company
is successfully diversifying
its real estate portfolio
Filinvest builds condominiums, offices and hotels in addition to residential developments
High growth across the board
Filinvest helps the Filipino dream of owning a home to come true
Filinvest Land Inc., one of the
biggest real-estate companies in the
Philippines, had a banner year in
2007, with sales growing 35% compared with 2006. The Manila-based
company saw sales increase in all
of its business areas, says Joseph M.
Yap, Filinvest's President and Chief
Executive Officer.
“The growth is across the different segments of the industry,” he
says. “It’s not purely one area but
all the different areas and different
product lines.”
One of the main drivers for
growth last year was strong demand for housing fuelled by remittances from Overseas Filipino
Workers (OFWs), which increased
13.2% over 2006 to $14.4 billion.
One of the first things the OFWs
want to buy with their money is a
house back home for their families, Mr. Yap explains.
Interest rates in the Philippines
have also declined, making credit
less expensive, and loan terms have
improved. Borrowers can now get
mortgages for 20 and 25 years, and
can also get fixed-rate loans, none
of which were available in the past.
The government offers 30-year
mortgages to low-income families
at 6% interest, spurring demand for
inexpensive homes.
The combination of remittances
and lower interest rates has helped
release pent-up demand for homes
in a country that hasn't had the kind
of government-sponsored programs that have eased housing
crunches in other Asian nations.
Filinvest wants to help more Filipinos own their homes, Mr. Yap asserts. “We build the Filipino dream”
is Filinvest's motto and business
philosophy.
“Every Filipino dreams about
owning his own home, and that is
really the vision that drives us,” Mr.
Yap says. “We want to provide the
ability to own a home to as many
Filipinos as we can. That is why it
is our philosophy to offer as wide
and diversified a portfolio as we
can, instead of just concentrating on one segment and is
also why our focus is from
the lowest end of the market.”
The country's increasing
popularity as a destination
for tourists and for business
process outsourcing (BPO)
has also contributed to Filinvest's recent successes.
The company has tourist
development projects in
various parts of the country,
including on the island of Cebu and in the Davao City area
in the south.
One of those projects, on Cebu, offers an innovative product
called a condotel, which is the combination of a condominium and a
hotel. Buyers own the units and can
occupy them or put them in the
rental pool for the management to
rent out as hotel rooms, turning
them into income-earning investments.
Filinvest, which also has hous-
ing developments spread throughout the country, launched 17 new
projects in 2007 and has even more
ambitious plans for this year, when
it expects to launch another 18 to
20 projects, according to Mr. Yap.
At the business end, Filinvest is
offering solutions to BPO clients,
who have been occupying vacant
office space in high-rise buildings
in the center of Manila, but are now
starting to move to less expensive,
low-rise properties in other areas.
“In terms of economics, it really
makes sense for them to be in the
lower rise buildings,” Mr. Yap explains. “We have a 10-hectare complex where we have so far put up
10 buildings for BPO. There we
have different international clients:
HSBC, Convergys, and, more recently, Genpact from India.”
The ability to offer a wide range
of products, including residential,
tourism, offices and retail, to diverse types of clients is one of Filinvest's main competitive
advantages. The geographic range
also helps. It's much easier for a
company to just offer products in
the Manila area, but many clients
are interested in other parts of the
country, Mr. Yap says.
The company's financial stabiliJOSEPH M. YAP
President and Chief Executive Officer,
Filinvest
ty is another advantage. Filinvest
pays its contractors and lenders on
time, and has never defaulted on a
loan, even during the last financial
crisis in the Philippines. That helps
the company borrow more cheaply, and the trust of its subcontractors helps reduce costs as well.
Another part of Filinvest's strategy is to engage in joint ventures,
frequently with financial investors.
Parent company Filinvest Development Corp. has a long history
with partners including Westinghouse Credit and Chase Manhattan Bank. Filinvest Land has also
taken advantage of partnerships,
joining up with Africa Israel Investments and The Government
of Singapore Investment Corporation Pte Ltd.
The various different facets of
Filinvest's strategy have all come
together to create a dynamic
company that is benefiting both
its investors and regular Filipinos
by offering quality homes and
other products at accessible
prices, all while earning a nice
profit.
“We are proud of contributing
to the economy by providing
people with housing,” Mr. Yap
says. “We’ve been in the business
for 40 years as a group. We provide housing for more than a 100
thousand families in the Philippines and we are proud of that.”
The Philippines moved up 5 positions in the World Economic
Forum's most recent Travel &
Tourism Competitiveness Report, reflecting the island nation's growing popularity as a
tourist destination. Filinvest is
taking advantage of that growth
with several projects in tourist
areas, including on the island of
Cebu and in Davao City on Mindanao island.
On Cebu, Filinvest's Grand
Cenia Condotel project offers a
condominium/hotel combination, permitting buyers to own
a unit in the complex that they
can occupy when they choose,
and which can be put into the
complex's rental pool for others
to use, transforming it into an investment property.
The project has been a success, attracting both Filipino and
foreign buyers, says Filinvest
President and Chief Executive
Officer Joseph M. Yap. “We have
sold half of the floors already,
within just three months. Most
of the investors come from all
over the Philippines.”
Another tourist project is the
Bali-themed Kembali Coast
leisure residential project on
Samal Island, a short boat ride
from Davao City, the largest city
on the southern island of Mindanao. Filinvest collaborated
with the family owning a 50hectare piece of land with a 1.8
kilometer (1.1 miles) beachfront.
The residential development
has homes on and near the
beach, and has been a roaring
success, according to Mr. Yap.
Phase 1 of the project sold out
within 3 months of its opening
and Phase 2, which is now open,
has also been very popular with
buyers.
BUSINESS PROCESS OUTSOURCING
Exploding industry backed by a good plan
Most successful achievements
in life start with a good plan.
Offshoring & Outsourcing
Philippines: Roadmap 2010 is
one such plan
The first report to come out of the
Business Processing Association of
the Philippines (BPAP), headed by
Chief Executive Officer Oscar Sañez,
Roadmap 2010 has all the elements
of a good plan: extensive research:
it takes a long look at the state of the
offshoring and outsourcing industry, globally and in the Philippines;
keen and objective analysis: it examines the factors that contribute
to the industry’s growth as well as
those that may eventually inhibit it;
solidly drawn conclusions: after carrying out its research, BPAP is convinced that the Philippines can
continue to excel in the industry. Finally, it clearly outlines the steps to
be followed in order to achieve the
plan’s objective – capturing 10% of
the global market share of offshoring
and outsourcing (O&O) by 2010.
Still a relatively young and fastgrowing industry, BPAP has estimated that global BPO
encompasses an addressable market of some $450 billion. The early
pioneer in the industry, India,
tapped into the global markets by
using its large base of skilled professionals. Now, other countries are
following its lead. Meanwhile, end
customers are searching for multiple country locations, allowing them
to leverage complementary country strengths, gain access to a larger and more sustainable overall
talent pool, and reduce risk through
diversification. This has, in the past
few years, contributed to outstanding growth in the industry for
the Philippines.
Along with India and China, the
Philippines is one of the top global
competitors. Total BPO revenues
in the country grew from $1.5 billion in 2004 to $3.3 billion in 2006,
with 235,000 full-time employees
at the end of that year. The Philippines boasts a large pool of Eng-
lish-speaking university graduates
with a deserved reputation for excellence in communication skills, interpersonal warmth, customer
service orientation, problem solving abilities, and cultural affinity
with western markets and customs.
Beyond this, the Philippines offers
an operational cost advantage and
world class telecommunications
networks. These factors, along with
some tempting financial incentives
that include highly competitive investment packages for information
technology and IT-enabled services
investors, have lured many of the
largest multinational participants
in the BPO market to the country,
including Accenture, Convergys,
and Dell, many of whom are planning to expand their presence even
further.
Basing its projections on the
Philippines’ previous record of
success, the attractiveness of its
resources and the excess global
demand for BPO resources, BPAP
believes it is entirely feasible for the
Philippines to increase its share
of the global BPO market to 10%.
This will represent some $13 billion in revenues and direct employment of close to a million
people by the end of 2010. It was
only a matter of drawing up a good
plan, which, in 2006, a group of
stakeholders in the Philippines
came together to do.
The preface to Offshoring & Outsourcing Philippines: Roadmap
2010 reads: “Two important areas
of work were needed. The first was
a strategic plan for the industry, a
blueprint if you will, which would
define what our goals should be and
what we would need to do in order
to achieve these. The second, just
as important as the first, was a gameplan to set up the organization to
lead and execute this work. The
first part of the work was named
Roadmap 2010 and set out milestones that would need to be
achieved by the year 2010. The second part of the work was named
Team 2010 and focused on the cre-
ation of a full-time group of professionals to lead all of the initiatives
set out in the Roadmap 2010 document.”
The rest is history, or rather, is
history in the making. BPAP now
represents over 100 industry players and 100 vendors, the industry
is growing at a rate of 40% per year
in the country, and the Philippines
OSCAR SAÑEZ, Chief Executive Officer of BPAP
has recently been awarded the title of Best Offshoring Destination
in London. The fastest growing
sector? Not call centers as one
would believe, but, in fact, medical
transcription. The sector generated $75 million in revenues for the
Philippines last year, mostly from
business coming out of the U.S,
where there is a growing demand
for transcription of medical reports, discharge summaries, chart
notes and hospital reports. BPAP
CEO, and head of Team 2010, Mr.
Sañez believes the diversification
of the industry will grow to take in
more high-value services such as
engineering. A major contributor
to the successful animated Disney
movie Lilo and Stitch, The Philippines is already involved in animation outsourcing and is also
currently developing some of the
new X-Box games. As Mr. Sañez
concludes, “This is just about being organized and putting a strategic plan behind an industry that
has a strong engine for growth.”
15/4/08
17:42
Página 5
THE PHILIPPINES
5
A fully diversified real estate company
New infrastructure and licenses to
build economic zones are allowing
Robinsons Land to expand
Real estate in the Philippines
has been booming in recent
years, and Robinsons Land Corporation, one of the country's
leading companies in the industry, has been there to take
advantage of the expansion
through its diversified activities
in many different market niches within the sector.
Demand for retail, residential, office and tourism spaces
is being fed from many different
sources, with the Philippine government helping out in very important ways, says Frederick D.
Go, Robinsons' President and
Chief Executive Officer.
“The involvement of the government in real estate is influential in many ways,” he explains.
“For example, through the Philippine Economic Zone Authority,
government is able to grant the
licenses to build economic zones,
which are the areas where business process outsourcing (BPO)
companies prefer to put their offices.”
The government has also provided tax incentives for developers and has been building the
transport and other types of infrastructure necessary for housing developments, office parks,
hotels, shopping malls and other real estate ventures.
The government has a plan to
build 35 new airports around
the country, which will help the
real estate industry in several
ways. The facilities will open up
new areas of the country to businesses, tourists and retirees
seeking inexpensive or exotic
locales. The plan is also a strong
indicator of the government's
committment to expanding the
country's infrastructure, Mr. Go
says.
Robinsons has five business
units for office space, shopping
malls, condominiums, housing
and land development and hotels, making it one of the country's few fully diversified real
estate companies. The company is preparing to grow in all
those areas as the economic expansion continues.
The shopping mall division
develops many different types
of properties, from strip malls,
to small community shopping
centers, to huge malls, always
trying to be responsive to what
the local community needs.
The condominiums unit is
one of the three biggest such developers in the country, with 23
buildings spread around Metro
Manila and on the island of Cebu in the southern part of the
country. The condos are mostly marketed to middle-class and
upper middle-class clients.
The hotels unit manages lodgings in Manila and on Cebu, including the Crowne Plaza
Galleria Manila, Holiday Inn Galleria Manila and Cebu Midtown
Hotel, and is the fifth biggest hotel chain in the Philippines.
The office buildings division
has five buildings that are already open, and a sixth building
where space is currently being
leased, managing a total of
120,000 square meters. The land
development unit has operations all over the country.
Robinsons is currently team-
Robinsons Galleria, flagship mall of Robinsons Land Corporation, is a landmark along Quezon City’s busiest intersection, EDSA and Ortigas Avenue
ing up with Federal Land Inc.,
the property arm of Metropolitan Bank and Trust, to develop
a two-hectare property in Mandaluyong City in Metro Manila into a residential complex
called The Links.
The project is for a five-tower complex, located near existFREDERICK D.
GO, President
and CEO of
Robinsons Land,
asserts that the
involvement of
the government
in real estate
has streamlined
the industry.
The Philippine
Economic Zone
Authority has
the ability to
grant licences
for economic
zones
ing commercial, business and
residential developments, and
is aimed at a wide range of income brackets. The Links is intended to meet the residential
needs of mid-level to senior executives as well as young couples
and families.
The two companies are collaborating “because our properties are adjacent to each other,
which makes the development
very logical and practical,” Mr.
Go explains. “RLC has the Cybergate Complex, which is now
a popular business and commercial corridor along EDSA
because it houses a shopping
mall, 3 residential towers and 3
Cybergate Centers.”
Federal Land is contributing
property behind that complex,
as well as their experience, while
Robinsons is adding their known
and trusted brand name and
their expertise in property development. Robinsons has almost 15 other partnerships with
wealthy families around the
country, and is always open to
more collaborations.
Another important project
for Robinsons is in Fort Bonifacio, also in Metro Manila, where
work will begin this year at a
prominent intersection. Robinsons will develop the property
into its most high-end residen-
‘WHEN YOU START A
BUSINESS, IT IS BEST TO
START FROM A
CUSTOMER POINT OF
VIEW, TO KNOW THE
FUNDAMENTALS’
tial condo project in the country, according to Mr. Go.
The combination of the company's many activities, combined with the current real
estate boom in the Philippines,
boosted profits by 42% in the
fiscal year ending September 30,
2007, to 2.4 billion pesos ($58
million), while revenue increased 29% to 9 billion pesos.
The shopping mall unit was
the biggest contributor, adding
3.5 billion pesos to sales, an increase of 7.8% over the same period a year earlier.
Robinsons has grown rapidly
in the past decade, and Mr. Go
has ambitious plans for the company in the future. Robinsons
has a return on equity of 13%, the
highest among its peers, and Mr.
Go wants to improve that performance and make as many of
the company's units as possible
the leader in their fields.
The basis of Robinsons' success, and the foundation for the
company's success in the future,
is preparation, knowing the market and getting the details right,
according to Mr. Go.
“I really do the groundwork,”
he said. “Usually, when you want
to start a business, the best way
is to start from a customer point
of view. You need to know the
fundamentals. When you get
that right and when you get to
the top, you have a very strong
foundation.”
6
15/4/08
18:42
Página 6
THE PHILIPPINES
Putting people first
is the key to innovation
Vista Land and Lifescapes Inc. is an integrated residential homebuilder
that serves the entire demographic spectrum of the Philippines
Vista Land and Lifescapes Inc., is
the leading homebuilder in the
Philippines, comprising four of
the country’s real estate sector’s
leading lights. The holding group
of MB Villar Group, Vista Land
combines the strengths and expertise of Brittany Corporation,
Camella Homes, Crown Asia and
Communities Philippines, a spectrum of housing innovation as
broad as any on the planet. With
the widest geographical reach
across the 7,107 islands of the
Philippines, Vista Land also covers every aspect of pricing and accessibility. Brittany Corporation
is the group’s key component for
the high-end market, while the
middle-income bracket is catered
to by Crown Asia. Affordable and
low-cost housing is the remit of
Camella Homes, and Communities Philippines takes the three
brands to the wider archipelago –
part of Vista Land Group’s expansion strategy and a source of
major pride for the company. That
revenues are split evenly between
the four component companies
is testament to the strength of the
group as a whole.
“We’ve been in the business for
about 30 years and we offer products in all business segments. We
probably have the widest range in
the industry, with houses and condominium units ranging from
P400 thousand to P45 million. In
terms of geographic diversification, we operate in about 13
provinces and are rapidly expanding to others. Thus, in terms
of income segments served and
geographic reach, we are probably the most diverse residential
developer in the Philippines.”
This diversity has translated to
a large increase on the bottom
‘IN TERMS OF
GEOGRAPHICAL REACH
WE ARE PROBABLY THE
MOST DIVERSE
RESIDENTIAL DEVELOPER
IN THE PHILIPPINES’
line. A buoyant national real estate market unaffected by the
threat of global recession and the
credit crunch sweeping The US
has provided the platform for
growth, with increased sales on
the ground providing the stimulus.
“We did expect strong revenues
because of the large increase in
sales take up during the previous
year. We had a very good idea of
what our official revenues would
be in a year to a year-and-a-half.
The housing sector has been
growing considerably and we, in
particular, have been growing exceptionally fast. In fact, we expect
substantial growth in 2008.”
In July 2007 Vista Land &
Lifescapes Inc. launched the largest
public offering in the history of the
Philippines. 2.12 billion shares were
made available, raising $545 million. The primary and secondary
share offering was oversubscribed
five-fold, partly as a result of Vista
Land’s hugely successful roadshow,
which drummed up unprecedented levels of interest from foreign investors.
The injection of capital enabled the group to press ahead
with 40 new projects across the
country. It is anticipated that
these in turn will generate P53
billion in sales over the next few
years. Vista Land has a prime
land bank of 1,749 hectares, 80
percent of which is located in
Mega Manila. Several projects
are planned outside of the metropolis however, with the group
keen to take advantage of a growing provincial market. Luzon
province will be the group’s main
focus, with other developments
planned in Cebu and Davao. The
Vista Land plans to have a significant presence in 18 provinces in the Archipelago
by the end of 2008, and it is likely that this number will be closer to 20
first of these projects to reach
fruition is the Emerald Avenue
condominium project in Ortigas, Pasig City - a joint venture
with cosmetics group Splash
Corporation.
“Splash Corporation is one of
our joint venture partners. We
have had, throughout our history, numerous partners because
of our extensive experience in
residential development. In housing, we are unmatched. People
believe in our expertise. We are
open to partnerships. We believe
that we are strong partners because of our strong brands, our
experience in real estate development that spans decades and
our large marketing network for
real estate in the country. We can
offer our partners very large sales
in the projects.”
Of course, in a country of extreme biodiversity the need to balance development with the
environment is great. Although it
is a signatory on the International Timber Agreement of 1994,
unauthorised logging is still a problem in the Philippines. In Luzon
province, one of Vista Land’s main
areas of interest, independent estimates state that only 24 percent
of the primary forest remains. Luzon is home to some 70 Philippine Eagles. The second-largest
eagle in the world and the national
emblem of the country is critically endangered. It is statistics like
these that have given rise to increased awareness on the part of
developers of the precarious equilibrium between the progress of
a nation and the regression of nature.
“We started to focus on green
projects with the Avant project at
the Fort. It is a condominium project in Fort Bonifacio that applies
the principles of green architecture. We also have a leisure development in Tagaytay called
Crosswinds that has a lot of pine
trees, creating a pine sanctuary
an hour away from Manila. We
see this as a growing concern for
many of our homebuyers, especially in the Brittany segment. The
Brittany segment caters to very
high-income buyers who have
very discerning tastes. The environmental aspect to them is an
issue. We expect to have more developments in the future that are
related to green themes. The fact
that we build the most and the
best residential developments in
the country makes me happy. We
take great pride in the design of
our houses and our condominium
units. While we exert considerable effort in strategy and finance,
at the end of the day, we sell quality products to our customers. Ultimately, we want to provide them
with beautiful homes that they
can be proud of. The fact that we
do that on a recurring basis brings
us a sense of pride.”
INTERVIEW
‘We have the widest
marketing network’
Manuel Paolo Villar, Director of
Corporate Planning of Vista Land
& Lifescapes Inc., now the Philippines’ largest home builder following the merger of four of its
leading and most innovative property development companies,
speaks here on the booming
Philippine property market.
What is the most significant
segment of Vista Land’s real
estate portfolio?
Our core business is housing.
We built three of the most popular and preferred brands in the industry—Camella, Crown Asia and
Brittany. Camella Homes is, arguably, the most popular and the
most preferred brand in housing
in the country. We have been
building Camella homes for almost three decades, so it is a strong
brand, and represents the greatest awareness and the highest preference in homebuyer surveys.
What are the company’s
main competitive advantages?
First off, we are the dominant
player in the housing market. Because of that, we have unmatched
expertise. We have a product for
every income segment. We are also geographically diverse. Because
we are present in many provinces,
Filipinos overseas who want property in the provinces can easily
come to us.
Secondly, we have the widest
marketing network in the country. We have over 10 thousand accredited agents in the Philippines.
Thirdly, we have considerable
management depth. Many of our
executive officers have extensive
operating experience in the industry. Those combined factors
make it easy for us to exploit the
growth potential of the property
sector.
have our Daanghari Growth Hub.
We have close to 400 hectares allotted for it. The Daanghari Highway is a major thoroughfare that
connects the cities of Southern
Metro Manila. It has been developing very quickly, and it is only
20 kilometers away from the
Makati Central Business District
(CBD), and just minutes away
from the prime commercial developments of Alabang Muntinlupa. We are selling all of our brands
there. We see it as a home for both
residential enclaves and commercial development, and we are
quite excited about it.
Another project that we are
quite enthusiastic about is our
Lakefront City Central. It is located in Sucat, which is close to
both the Makati CBD as well as
the international airport. The area
comprises about 60 hectares. Its
proximity to the CBD as well as
its size means we can again place
both residential enclaves and
commercial developments there.
It borders the South Superhighway, which is the major highway
that connects the South to Metro
Manila.
By the end of 2008, we aim
to be present in at least 18
provinces. However that is a conservative target. In reality we will
probably reach over 20 provincial locations.
What percentage of your
sales comes from Filipinos residing in the U.S.?
We sell a lot of our products to
Filipinos living overseas. They account for about 60 percent of our
sales. Less than 10 percent of these,
however, are from the U.S. Among
these, a significant portion is sold
to high-income retirees. Thankfully we haven’t been that affected by the subprime crisis.
Last July, the company successfully raised $545 million
in the country’s biggest public offering to date. What was
the main reason behind Vista
Land’s decision to go public?
We chose to re-enter the capital markets again primarily because we were at the stage where
we saw a lot of growth potential,
and we were in a unique position
to capitalize on this potential in the
Philippine property sector. Prior
to the offering, one of the major
constraints we had was capital.
We were growing so fast, we needed more capital for further growth.
Therefore the primary reason behind the offering was to exploit
the many growth opportunities
in our sector.
Vista Land & Lifescapes
Inc. hopes to launch projects this year worth as
much as P50 billion. What
is your target for the end
of 2008 with regards to
your geographical expansion?
We are launching over 40
projects through 2008. This is
significantly more than the 28
we launched in 2007. First off, we
Inbrief
Brittany
I Brittany Corporation is a leading provider
of luxury residences in exclusive masterplanned communities. A study performed by
PSRC Research International in 2006
comparing the five leading high-end
developers in the country acknowledged
Brittany as the most innovative.
Known for exclusive developments such as
Portofino, Georgia Club and Crosswinds,
Brittany homes start at P9 million and are the
number one choice for Filipinos living abroad.
Setting the trend in the real estate industry in
terms of masterplanning, property design,
features and amenities, Brittany provides
property owners with a complete set of
services for acquiring their dream home in a
gated subdivision with 24-hour security.
Additionally, Brittany’s warranty is unmatched
in the industry.
The company has also recently ventured
into the luxury high-rise and condominium
segment and now has three developments in
centrally located areas of Manila.
Camella
I Through the years, Camella Homes has
grown to become the largest housing
developer in the country. Its master plan for
success is simple: for every house it builds, it
envisions a Filipino family, for every
subdivision it creates, it sees a Filipino
Community.
Masterfully planned residential projects
provide the perfect environment for raising
not just kids, but entire communities.
Camella Homes’ roots as a housing
developer date back to the early seventies
with the first development project
undertaken by founder Manny B. Villar Jr.
Vital to its continuing leadership and
industry is a dynamic and highly responsive
marketing network of independent
contractors and brokers. Maintaining
relationships with over 100 general and
specialist contractors and over 400
independent brokers who serve 16,000
agents, Camella helps potential homebuyers
find the house of their dreams.
Communities Philippines
I The expert in turning the countryside into
a landscape of sought-after communities,
Communities Philippines offers the quality
homes of Crown Asia and Camella across the
countryside. The national property developer
with the widest reach, Communities
Philippines’ upgraded line of residential
community projects has expanded over the
past six years to include a solid nationwide
presence. The company’s sales network is the
largest in the industry, encompassing
international offices and marketing
subsidiaries with more than 3,000 accredited
brokers and approximately 20,000 property
consultants.
Communities Philippines specializes in
master-planned communities featuring first
class amenities. Using the expertise and
designs of Camella Homes and Crown Asia,
Communities Philippines offers housing in
regional areas that are on par in terms of
quality with residential developments in
greater Manila.
Crown Asia
I Voted by the readers of Reader’s Digest
as one of the most trusted brands in the
Philippine property sector for 2006 and
2007, Crown Asia has pioneered the
development of large scale themed projects
catering to the middle market. Offering
homes prices between P3.5 million and
P9million, primarily in the greater Manila
region, Crown Asia has been leading the
way in creating a higher standard of living
for families for more than 10 years.
Each Crown Asia home features stylish
architecture and contemporary design in a
modern and secure community. The
company has built thousands of homes on
more than 20 signature projects that have
become the standard for land development
in the country today. The first to introduce
the concept of affordable luxury to a
discriminating market in a fiercely
competitive industry, properties in Crown
Asia’s master-planned residential
communities sell in record time.
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18:43
Página 7
THE PHILIPPINES
7
Where the beaches are only the start
of an unforgettable vacation
A sprawling archipelagic nation of
7,107 islands, the Philippines is a
dream destination for a number of
reasons, not least of which is its unrivalled allure for watersports enthusiasts. Boasting rich marine
biodiversity that due to the unique
geographic nuances of the country
is unmatched anywhere on earth,
the Philippines has been described
by the Professional Association of
Diving Instructors as ‘one of the
world’s most desirable dive scuba
diving locations, with a tropical climate and such huge range of dive
sites that it rarely disappoints.’
The perfect destination for beginners and advanced divers alike,
the Philippines offers highly developed islands such as Boracay and
Bohol as well as the opportunity
for accomplished divers to charter
boats and venture into unchartered
waters in search of unique experiences. Coron in Palawan is a case
in point. Sunken warships from the
Second World War provide the focal point of the one of the most
popular wreck diving sites on the
planet, while the island and beaches of the Bacuit Archipelago play
host to one of the most spectacular seascapes in the world. Eagle
Point Resort on the tip of the Calunpang peninsula in the province of
Batangas benefits from its proximity to these tourist magnets, and
also from a localized example of
the country’s marine bounty. ‘A
British marine biology research
team registered 287 species of coral
on our resort reef alone,’ enthuses
General Manager Ramon J.
Quisumbing.
On the surface, water breeds
waves, and there are few places in
the world where beginners and expert surfers alike can ply their trade.
The topographical layout of the
Philippines makes some of these
sites more problematic to access
than in Hawaii or Australia, but reward the more intrepid with a diversity of waves. La Union is rapidly
becoming the Sunset Beach of the
Philippines. Located in the town
of San Juan, it has been described
by Tim Goetsch and Christian Ong,
founders of the Liquid Body Surf
Co based at the Normis Beach Resort, as ‘the paradise for surfers in
the Philippines.’ Seasoned pros may
prefer to head to the northeast coast
of Mindanao and the island of Siargao, where the waves match the
scale of more renowned sites worldwide.
Away from the adrenalincharged surf spots, the island of Boracay is a haven that offers
something for everyone, and is
home to the world famous White
Beach. Voted the world’s best beach
by the Australian Sun Herald and
Harper’s, Boracay offers an 8 mile
stretch of powder white sand caressed by crystalline waters teeming with marine life. Interconnected
by scenic sand paths, the island’s
amenities are closely linked and
everything is within walking distance. Among other famous resort
destinations on Boracay, the Mandarin Island Hotel is one of the most
popular, similar in its refined atmosphere to the El Nido Resort on
Palawan.
Situated on the northwestern tip
of Panay, in the western Visayas region, Boracay’s unique microclimate is perfect for wind sports. The
island plays host to the Fun-board
Cup, windsurfing's annual international event, and the World
Beach Volleyball Tournament will
be held there in September.
PHOTO: CARLO CLAUDIO
The Philippines tourism offer is
second-to-none, from idyllic
surf-groomed beaches to secluded
coves perfect for diving
The Philippines’ 7,107 islands contain a diversity of flora, fauna and topographical diversity unmatched anywhere in the world. Coupled with idyllic beaches, crystalline waters and unspoiled
primary forest, the archipelago is staking its claim as a top destination in the Asia Pacific region
CEBU PROVINCE
The Philippines’ Garden of Eden
The Province of Cebu in the center of the
Philippine archipelago is the perfect
example of how to market a natural gem
and combine industrial, economic and
social development in a low-impact way.
As the tourism gateway to the Philippines,
its national importance makes it attractive
to investors, and its natural beauty
likewise to tourists
Located at the geographic center of the
Philippine archipelago, Cebu is the country’s
leading province in terms of trade, it has the
fastest growing economy at 20% higher than the
national average and it is the tourism gateway to
the central and southern Philippines, accounting
for 35% of the Philippines’ annual visitor
numbers.
Voted the 7th best island destination in the Indian Ocean-Asia region by Conde Nast Traveler
in 2007, Cebu’s 5,000 square kilometers is home
to a vast range of the Philippines’ 8,120 species of
flowering plants and a sweeping vista of the coun-
try’s unique fauna. It’s eastern and western shores
are dissected by a mountainous spine that reaches 1,000 meters in height and from where verdant
forests cascade toward white sand beaches and
serene coves.
Cebu’s tourism attractions are multitudinous,
from cutting a swathe through densely vegetated
mountain trails to lazing on its pristine beaches or
diving in some of the planet’s most crystalline waters, Cebu has something to offer everyone. As Governor Gwendolyn Fiel Garcia points out, “I see
Cebu as a province proud of its rich heritage, confident in its ability to seize this opportunity of a lifetime with which it has been presented, and an
island with its sights set on the brightest of futures
that it has inherited as its birthright.”
With 3,000 rooms planned over the next 2 years,
Cebu represents an investment potential of hundreds of millions of dollars and demonstrates the
island’s capacity to maintain its status as the Philippines’ foremost tourism destination, and its potential to challenge the most popular destinations
in the ASEAN region in years to come.
GWENDOLYN FIEL GARCIA
Governor of Cebu Province
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10
15/4/08
18:45
Página 10
THE PHILIPPINES
CASHING IN ON CASH HEADED BACK HOME
Ready for the big build
Filipinos abroad
choose iRemit
Philippine-based TKC Steel is a growing regional powerhouse that, if
chairman Ben C. Tiu has anything to do with it, will soon be a major source
of the steel anchoring China’s infrastructure expansion
The remittance company
launched an IPO in 2007
and will be investing
between $2 and $3 million
in the U.S. this year
This is the right moment for TKC
Steel. Named after chairman Ben
C. Tiu’s late father, industrialist Tiu
Ka Cho, the Philippine-based steel
manufacturer is now owner of the
50-hectare Zhangzhou Stronghold
Steelworks Limited, located just
15 minutes away from Xiamen City
in the southern Chinese province
of Fujian. With plans to use local
iron ore to manufacture steel pipes
in the first-ever integrated mills in
the Philippines for export to the
Chinese market, TKC Steel, which
listed on the Manila stock exchange
last year, can’t lose. It is set to benefit from a growing economy at
home while its entrance into the
Chinese market, the world’s largest
steel consumer, coincides with an
unprecedented drive to modernize in that country.
Formerly SQL Wizard until an
agreement with Star Equities Incorporated (SEI) last year in which
SEI became a major shareholder
with 240 million shares, TKC Steel
boasts the largest billet manufacturing capacity in the Philippines,
and will soon be the first steel company in the country with a blast
furnace facility, enabling roundthe-clock operation as the furnace
is continually fed with iron ore.
TKC uses local iron in the production of its billets, a market segment with a sizeable gap between
measured demand and installed
production capacity in the Philippines.
“TKC is made up of two parts,
one in China and the other here in
the Philippines. We already have
two mills. One is located north of
Manila, creating billet from scrap,
and the other is in Iligan,” explains
Mr. Tiu. “The operations of the local mills will complement the seamless pipe plant that we are now
building in Xiamen, China, which
will have a capacity of around
200,000 tons. So the long product
mill and the blast furnace will provide us with the round billets to fit
Ben C. Tiu,
Chairman of
TKC Steel,
asserts that
Philippine steel
is benefiting
from the
buoyant market
at home coupled
with the rush
for
industrialization
currently
sweeping the
People’s
Republic of
China
the Chinese factory.
“My raw material will come from
the Philippines. China doesn’t have
enough iron ore. The Philippines
has iron ore, and we have our own
iron mine with enough deposits
for the next 20 to 30 years, based
on a million-ton capacity. Right
now, we are running it at 300,000
tons per year to see what happens.
We are also converting the existing equipment to take in liquid
metal, to lower the cost.”
TKC will begin shipping ore to
China this spring, says Mr. Tiu,
adding that when the project is fully up and running by the end of
this year, the company should have
a $150 cost advantage over any other steel mill in the world. TKC’s
operating companies are located
in special economic zones, with
access to port facilities, and have
stable and relatively inexpensive
power supply. Since the iron ore
used in TKC’s steel comes from
the Philippines and as such is considered a Philippine product, the
company is also eligible for tariff
free export to Indonesia, where it
has an oil pipe manufacturing facility. Since TKC has its own 5,000
and 7,000 ton vessels, it is still cost
effective to produce billets in the
Philippines, export them to China
for further processing, then send
this product on to Indonesia for
the oil industry there.
Mr. Tiu states, “It’s a small plant
in the Philippines that is going to
be catering to a niche segment of
the market – round and square billets. The square billets would be
for the Philippines, and the round
billets would be for China. Also,
the distance from our Philippine
mill in Iligan to Xiamen is the same
distance as Tianjin to Xiamen.”
TKC Steel is part of the JTKC
Group of companies that has it origins in a small hardware store that
John Tiu Ka Cho opened in downtown Manila in 1947. Union Hardware, which specialized in lock sets
and tools, had made such a name
for itself that by the early 1950s,
Tiu Ka Cho was able to build one
of the first nail factories in the
Philippines, the Manila Steel Manufacturing Company. In the 1960s,
the group expanded to include
Goodwill Steel and Wire Company and Goodyear Steel Pipe Corporation, which eventually formed
the cornerstone of JTKC’s steel operations. Today, these include TKC
Steel and its subsidiaries, Treasure
Steel Corporation in the Philippines and Zhangzhou Stronghold
in China.
With a firmly established base in
steel, JTKC expanded into other
industries at the end of the 1960s
– namely chemicals and plastic –
through Philippine Calcium Industries, Winston Industrial Corporation and Winsteel Industrial
Corporation. By the mid-1970s,
the rapidly expanding group was
venturing into real estate when its
Dakota Mansion serviced apartments were opened. These were
followed shortly by Mabini Mansion and Boulevard Mansion in
Manila, and Amorsolo Mansion
in Makati. In 1990, the group’s real estate division acquired its benchmark property – the historic
Gilarmi Apartments along Manila’s famous Ayala Avenue.
More recently, JTKC launched
its Discovery brand, opening the
Discovery Suites in Ortigas, Discovery Country Suites in Tagaytay
and Discovery Shores in Boracay.
Up next is a renovation of the
benchmark Ayala Avenue property, where the group has plans to
construct a 62-storey Discovery
Premium project.
Last year, JTKC took its diversification one step further with Sterling Bank of Asia. Opened in
February 2007, the bank was
launched with the aim of offering
the Philippines a new service standard through the creation of a
strong sales and customer-oriented culture. The move follows
JTKC’s establishment of i-Remit
in 2001, which has since grown to
become the largest non-bank Filipino-owned independent remittance company in the country.
The tide of global migration is
today at historic levels and only
expected to continue to increase
in strength. Just as it represents
a newly significant demographic force so are the remittances
that accompany this trend taking
on new weight in the global economy. The money being sent home
from the millions ofworkers
worldwide who reside outside
their country of birth is today an
undisputable factor in the national GDP of many countries,
and this has not been overlooked
by the world’s banking industry.
The Philippines is no exception to this trend. iRemit, established by JTKC Group in 2001,
has grown to become the largest
non-bank Filipino-owned independent remittance company in
the country.
“In 2001, when I was the chairman of a company called iVantage, we took over PhilCom
Money Services Inc, which was
the sole agent of Western Union
at the time,” says director Ben C.
Tiu. “I proposed that we shift to
a remittance company because it
was evident that the OFW (Overseas Filipino Workers) remittance
market was growing. At that time,
most of the remittances were still
being brought in underground,
such as by asking friends to carry money home to the Philippines, but money was getting lost.
We found a non-bank niche other than Western Union. We started iRemit and it grew from there.”
Part and parcel of iRemit’s success has been the quality of its
products and services. Offering
OFWs a fast, convenient and reliable remittance channel, iRemit
also boasts some of the lowest
costs. Instead of the transfer fees
common with remittances,
iRemit charges a standard fee
similar to that found in normal
banks, except with iRemit, fees
are transferred within 24 hours
while in the banking industry a
three-day wait is common. iRemit
also pioneered the top-up feature on the Visa Debit Card for
OFWs, who can enter any iRemit
office worldwide and refill their
card.
“We have created a lot of products that have become a standard part of the industry,” says
Mr. Tiu. “We wanted to give a
more inexpensive niche service
in the quickest time, and we did
this with a co-branded Visa Debit Card with Standard Chartered,
which can be used through the
ATM system or through a Point
Of Save. We then issued a similar number of another card with
Chinatrust. Initially we issued
these under a batch basis, now we
do it online.”
Since its inception in 2001, iRemit has grown to become the largest remittance company in the Philippines and plans new branches in the U.S., its biggest market
www.tkcsteel.com
For world-class quality steel pipes and billets, TKC Steel.
15/4/08
18:14
Página 11
THE PHILIPPINES
11
“I believe our best
years are ahead of us”
Citibank is the largest foreign bank in the Philippines and leads the
field in terms of assets, revenues, number of clients and branches
For more than 100 years, Citibank
has been serving the financial needs
and aspirations of consumers, companies and institutions in the Philippines.
It opened its first branch back in
1902, in a leased stable room along
Calle Rosario in Binondo, Manila.
Despite such humble surroundings, the bank drew customers and
it proved to the beginning of a long
and fruitful association between
Citibank and the Philippines.
Today, Citibank is the country's
largest foreign commercial bank,
and a permanent fixture in the nation's top ten financial institutions.
As well as having the largest customer base of any foreign bank in
the country, Citibank also leads the
field in terms of assets, revenues,
and number of branches. Citibank’s
acquisition in 2005 of a thrift bank
allowed it to increase its footprint
six-fold overnight.
As the first bank in the Philippines to offer wealth management
services, Citibank tapped into the
rich vein of newly wealthy Filipinos
who emerged as a result of the
country’s economic boom in the
early to mid-1990s. Through its
Citigold Wealth Management
Banking proposition, Citibank has
cornered the lion’s share of the market, gaining plaudits for its use of
sectorial experts who aid clients
to pick their way through the reams
of market information available
and to make the best possible choices. Citigold has been awarded in the
Reader’s Digest Asia Trusted Brand
Poll for two consecutive years.
Citibank's status as the preferred
financial partner extends beyond
retail banking into the credit segment. With more than a dozen
credit card products in its portfolio, Citibank presents consumers
with a wide range of lifestyle choices, and is the acknowledged leader
MARK JONES,
Country Business Manager,
Citibank Philippines
‘IN EVERYTHING WE DO,
WE ARE LETTING THE
CUSTOMER BE THE
DRIVER OF THE BUSINESS’
in market share, sales and receivables.
Through thrift banking arm
Citibank Savings, Citi is also making its presence felt in consumer finance, with non-collateralized
personal loans that can be approved
and released in a matter of hours.
Country Business Manager
Mark Jones took on the helm for
the local consumer business in 2006
and from day one has focused on
the customer experience. "Citibank
is a great franchise globally, but in
the Philippines we are enormous.
Two out of every five credit cards
are likely to be Citibank's, and we
intend to keep that market share,
if not grow it. We can only do so if
we stay one step ahead of the customer," Mr. Jones declared.
One facet of Citibank’s stratagem is to expand its already leading share of the credit market, still
virtually untapped in terms of the
number of cardholders in the
Philippines as compared to other
countries. Citibank currently has
1.2 million cardholders - the largest
customer base in the country and
representative of a 30 percent increase over a 12-month period.
Overall, the industry grew by 7.8
percent in 2006.
“We can see that the Philippines
is moving along the same path as
some of our neighbors in Asia. We
have been working hard over the
last couple of years trying to expand
the pool of people who are eligible
for credit cards by working with the
Central Bank on matters like the
credit bureau, so it would be easier for consumers to access credit.
“In everything we do, we are letting the customer be the driver of
the business,” explained Mr. Jones.
“When we acquired a thrift bank,
our offices grew from 6 to 42, giving us presence in new strategic
areas. Now we have got those
branches working in terms of the
mass market, so we are growing
our deposits. In fact, we have almost tripled our deposits since we
bought the bank. What we want to
do now is to expand our offering
to small business activities.”
Employing thousands of local
staff, Citibank prides itself on its
commitment to in-house training
and employee development. Indeed, the institution is known as
the ‘University of Banking’ in the
Philippines, supplying as it does
most of the chief executives at the
other top banks in the country.
Trust and mutual respect also
play a large part in the achievements of Citibank in the Philippines. Nearly a century of
cooperative business has made
Citibank one of the strongest
brands in the country, and the institution’s commitment to social
activities and development pro-
jects has earned the respect and
affection of the populace.
With Citibank’s extraordinary
size, resources and technology advantage, more than ever, it has the
enormous flexibility of providing
the widest array of innovative tailored solutions to cater to each of
its client’s needs. There is certainly much to look forward to in
Citibank’s next century in the
Philippines.
Mr. Jones said: "The last hundred years may appear unbeatable, but we will continue to
improve ourselves and commit to
serving the Philippines for the next
century. I believe our best years
are ahead of us.”
Citibank’s 105-year association with the Philippines has earned the bank the respect it
requires to thrive, from its customers and through its philanthropic efforts
CITIZENSHIP
Redefining customer relations
Citibank’s many and varied
community programs across
the Philippines go beyond
the norms of social
corporate responsibility
Citigroup, Citibank’s parent company, has more than 200 million
account holders across 100 countries worldwide, but the relationship between Citibank and
the local population is nowhere
more keenly felt than in the Philippines. 105 years of fellowship is
bound to breed familiarity, but
in the case of Citibank, the bond
with Filipinos goes deeper.
Citibank has supported a wide
range of community projects –
setting up computer laboratories
in public schools, donating school
buildings in distant provinces,
supporting pediatric cancer patients as well as aiding in the treatment of children with cleft palates,
building homes for transient families and planting trees to reforest a critical watershed. In all
these activities, Citibank teams
up with reputable non-government organizations and institutions that have long track records
of serving the community.
Citibank’s long association with
the Philippines stretches back for
more than a century and encompasses both the business and
social aspects of one of the most
successful country/corporate
partnerships in Asia
Of its many endeavors,
Citibank has been particularly
praised for its efforts in increasing financial literacy in the country. It has launched credit
education campaigns using the
Internet, producing related literature and embarking on corporate road shows. The bank is also
advocating the urgency of finan-
cial planning, and addresses a
wide range of income segments,
not necessarily its customers.
Through its many financial education programs, Citibank is talking to micro entrepreneurs,
working women, young urban
professionals, young families as
well as business owners.
According to Mark Jones,
Country Business Manager of
Citibank Philippines, "We are
not just giving our audiences
information to plan their financial future, but we are equipping them with the right tools
that will buy them financial freedom, and with that comes the
independence to make the best
lifestyle choices for themselves
and their families"
Log on to www.citibank.com.ph
for more information on
Citibank Philippines
SOCIAL SECURITY SYSTEM
Back in the black: social security
turnaround good news for all
A dependable social
insurance program plays an
important role in the
dispensation of social justice,
and the turnaround
experienced by the
Philippine SSS over the past
few years is not only good
news for them but a lesson
for us all
How will we look after ourselves
when we are old? This question has
in the past decade wrought many a
furrowed brow as national pension
funds worldwide began issuing pessimistic predictions of their ability
to pay out to future generations. As
part of the introduction of the Philippine Social Security System (SSS)
website asserts, “The concept of social security evolved from an age-old
search of man for protection against
poverty, which breeds grave social
ills that not only threaten his survival
but also erode his sense of human
dignity.” However, what happens if
our social security systems fail us?
What if we lose this last recourse?
This is the question that many of us
have been grappling with throughout the past decade.
Obviously, the best answer would
be for national pension funds to become healthy again. The introduction on the Philippines’ website
continues, “It therefore becomes the
duty of the state to operate a mechanism that would provide such protection to its people,” and it is in this
statement that perhaps the first step
towards erasing this global worry is
to be found – a solid commitment
on the part of national governments.
This is something the Philippines
has, and combined with some wily
maneuvering from SSS President
and CEO Corazon de la Paz-Bernardo, its social security system has over
the past few years managed to turn
itself from a loss-making institution
into a profit maker and a regional
model. It is an institution that many
governments around the world are
watching.
Since Ms. De la Paz-Bernardo began at SSS in 2001, its membership
has grown by more than five million
people, it has improved collections
by 15%, managed to encourage many
members to up their contributions,
implemented a range of new technologies, designed an array of new
and innovative programs for Overseas Filipino Workers (OFWs), sold
off assets and, most importantly,
pulled itself out of the red and back
into the black.
Hardly surprising, then, that the
organization’s head, Ms. De la PazBernardo, was unanimously reelected as president of the
International Social Security Association last year for another threeyear term. She comments, “When
I came into the SSS in 2001, we went
through a difficult period of facing
a shortened actuarial life. While
things have vastly improved since
then and our actuarial life has length-
CORAZON DE LA PAZ-BERNARDO
President and CEO of SSS
ened to where we can breathe a little easier, we still look for other ways
of improving the longevity of the
fund life. You see, with the idea of
fund perpetuity comes the concept
of members’ confidence. Many
members refuse to pay their premiums if they know that our fund
life is drastically short. That was the
situation we found ourselves in back
then, when the 1999 actuarial evaluation indicated that we only had 12
to 15 years before the fund life would
dry up, basically because we were
paying out more benefits than we
were collecting. Fortunately, we were
able to reverse that, and we are doing much better now because of the
many reforms that we have instituted.”
Among the most effective of these,
Ms. De la Paz-Bernardo lists an increase in contribution rates, which
have been upped twice over the past
few years. In March 2003, the 8.4%
contribution rate was increased to
9.4%, for the first time in 24 years.
In 2007, this rate was upped again
to 10.4%. The SSS has also increased
its maximum salary base while refining credited years of service aimed
at bringing members’ actual contributions closer to their due benefits.
In addition, the organization made
a number of operational enhancements in order to increase collection
and income while reducing expenses
and rationalizing benefits. These include the implementation of a nationwide branch teller system and
other payment avenues for members, the hiring and deployment of
account officers, the implementation
of cost-control measures, and the
rationalization of benefit payments
through confirmation of pensioners
and more stringent eligibility requirements.
Finally, according to the SSS CEO,
prudent investments have formed
a crucial part of the organization’s
turnaround. It has invested in some
of the top companies in the country including PLDT, Ayala,
Metrobank, San Miguel, and Meralco. She says, “These are big names
in the private sector, which give us
assurance that our money will be
looked after. They have to be safe
havens for our funds. We also have
real properties in some of the best
locations in the country. It is a really stable organization and hopefully we can nurture it better.”
The SSS has also designed a
new flexi-fund program for
OFWs, which encourages additional savings at a time when their
earning capacity is high. In order to facilitate the OFW contributions, SSS is now in talks
with remittance company iRemit
(which already allows payments
through its overseas branches)
and Ventaja International Corporation to enable OFWs to make
contributions with an electronic banking card, while the possibility of online transactions is in
the pipeline.
12
19/6/08
12:09
Página 12
THE PHILIPPINES
Leading the banking sector
at home and abroad
After successfully navigating consolidation, Metrobank targets the diaspora
Metrobank, the leading bank in
the Philippines, had its biggestever profit in 2007, helped by the
rapid growth of the country's economy. With the Philippine bank
sector headed for another period
of consolidation, Metrobank's
record profit and number one status leave it in an excellent position to continue to expand and
stay ahead of the competition.
The Philippine central bank has
been encouraging the country's
banks to consolidate in order to
strengthen their capital bases and
increase international competitiveness. Last year saw the merger of Banco de Oro and Equitable
PCI Bank. A merger between
Philippine National Bank and Allied Bank Corp. may be on the
cards. Throughout this consolidation, Metrobank has been able
to maintain its leadership, in great
part due to the bank’s innovation
and efficiency.
Leading the Philippine banking
sector in terms of assets, with current total assets of 706.9 billion
pesos ($17.2 billion), Metropolitan Bank and Trust Co. is also the
country’s largest financial institution with regard to loan portfolio
and deposits. It boasts the secondlargest branch network in the
country (544 branches at the end
of the fourth quarter), and has the
third largest network of automated teller machines.
“Metrobank is well positioned
to take advantage of the expected
development in the key growth
areas in the domestic front as well
as the overseas remittance market
given its strong franchise and global distribution network,'' says President Arthur Ty.
Moreover, Metrobank's large
capital base makes it an ideal partner for Philippine companies seeking financing. Its investment arm,
First Metro Investment Corporation, has the expertise and experience in project finance, capital
markets, and securities and de-
ARTHUR TY, President of Metrobank
rivatives trading to successfully
manage large deals and more advanced operations.
The bank's size and extensive
network of branches and teller
machines is an important competitive advantage. The ability to
provide nationwide coverage in
The Philippines, an archipelago
of 4,000 inhabited islands, is vital to attracting new business and
keeping ahead of competitors.
Thirty-seven international
branches and offices in 21 countries offer the bank’s services to
approximately eight million Fil-
ipinos in the diaspora. Overseas
Filipino Workers (OFWs) have
long been an important source of
income for their families back
home, and remittances are increasing each year.
OFWs sent more than $14 billion back to the Philippines in 2007,
according to the Philippine central
bank, an amount equal to about
10 percent of gross domestic product and an increase of 13.2 percent
over the previous year.
Metrobank has captured about
25 percent of the remittance business with a range of innovative
services designed to facilitate
money transfers and make funds
more quickly available to beneficiaries back home. One such product is its new Metrobank World
Cash Card, which functions as
both an ATM card and a means
through which remittance beneficiaries can access their money
24-7 through more than 4,000 terminals around the country.
In addition, Metrobank operates four remittance subsidiaries
in the U.S., the most important
origin of remittances headed for
the Phillipines. Metrobank offices
are located in California, where a
second office has just been opened
in San Francisco, and in New York,
Chicago and Hawaii. The bank also operates a branch in Guam.
In total, Metrobank has an international network of eight foreign branches, 26 remittance
offices, 40 remittance tie-ups and
more than a thousand correspondent banks across the globe,
with a presence in the U.S. and
Canada, the Middle East, Taiwan,
Shanghai, Japan, Korea, Hong
Kong, Singapore, Italy, the UK,
Spain and Austria.
Fees from services, along with
increasing business back home
thanks to the 7.3 percent GDP
growth in 2007, helped boost the
company's earnings by 27.5 percent last year, to 7.04 billion pesos.
Net interest income was up 12.3
percent over 2006, and non-interest income, including commissions and fees, grew 7.1
percent. Operating income increased 10.1 percent to 37.1 billion
pesos.
Efforts to attract lower-cost deposits, thereby cutting interest
costs, are also paying off. The
bank's interest expense declined
14.6 percent during 2007, while
consolidated net loans grew by 5.2
percent as lending to businesses
across all sectors and to consumers
for homes and cars expanded significantly.
FIRST METRO INVESTMENT CORPORATION
After a record year,
new projects loom
With the experience necessary
to handle the big deals,First
Metro is taking advantage of
rising exports to China and
large-scale project finance
First Metro Investment Corp.,
Metrobank's investment banking
arm, had a record year for profit
in 2007, just like its parent. The
booming Philippine economy
spurred demand in debt markets
and equity markets alike, and
helped drum up business for First
Metro's three strategic units: its
investment banking group, treasury group and investment advisory group.
“The increase in economic
activity, particularly in the capital markets, is a very important
factor,” states First Metro's President, Francisco Sebastian. “In
2007, both barrels of the capital markets were doing well.”
FRANCISCO SEBASTIAN,
President of First Metro Investment
Corporation
result of increased economic
growth in the Philippines.
“There is growth in the country and there is a need for new investment instruments to develop,”
Sebastian states. “There is now
FIRST METRO’S NET PROFIT an impetus for funds to go into
ROSE BY 33 PERCENT LAST higher yielding assets, and stocks
could be part of that.”
YEAR, BOOSTED BY A
The downturn in the U.S. econBOOMING PHILIPPINE
omy is unlikely to slow growth in
ECONOMY
the Philippines for long, SebastFirst Metro's net profit increased ian adds, because China's econ33 percent from 2006 to 1.4 billion omy is growing fast enough to
pesos ($34 million), return on eq- pick up the slack. In the past 10
uity reached 17 percent and total years, Philippine exports to the
resources rose 14.5 percent to 44.8 U.S. dropped from 35 percent of
billion pesos.
the total to 17 percent, while sales
The bank's activities last year to China increased from 5 percent
included issuing PhP5 billion pe- to 20 percent.
sos of ADB triple A peso-denomThe investment bank is lookinated bonds, one of the first local ing to expand its business in othcurrency issues by a foreign com- er areas as well. It is currently
pany, and participating in one of working on a power project in
2007´s most successful retail trea- the Visayas-Cebu region, and is
sury bonds (rTBs) offerings. The also helping put together financBureau of Treasury sold ing for projects including the
PhP77.65B, the largest fundraising Masinloc and Calaca coal-fired
of the government to date.
power plants.
Although First Metro also parFirst Metro's status as a subticipated in several other IPOs sidiary of Metrobank, the Philiplast year, the pace of new offerings pines’ biggest bank by assets, gives
might slow in the first half of 2008 it the financial heft to take part in
due to market volatility and slug- big projects. The parent compagish growth in the U.S., accord- ny's more than 700 branches in
ing to Mr. Sebastian. Things the Philippines also provides First
should speed up in the second Metro with a network through
half of 2008, however, as an in- which it can more easily sell the
crease in activity is expected as a bonds and shares being issued.
15/4/08
18:13
Página 13
THE PHILIPPINES
13
From niche to an
international pitch
Banco de Oro has branched out and now offers a full
package of services to consumer and commercial clients
Banco de Oro Unibank, Inc., the
Philippine bank that was created
from the merger last year of Banco
de Oro Universal Bank with Equitable PCI Bank, is already moving
forward and improving its financial and competitive position. In
February, Fitch Ratings raised its
outlook for the bank to `stable' and
praised the bank's “very competent
and driven management.”
BDO, as the new company is
known, had assets of 621.3 billion
pesos ($15.3 billion) in the fourth
quarter of last year, making it the
Philippines' second-biggest bank in
terms of assets. It has the country's
third-largest branch network, with
670 offices and more than 1,200 automated teller machines spread
throughout the archipelago.
The merger that formed the new
bank was organized by Ms. Teresita Sy-Coson, the Vice-Chairperson
of SM Investments Corporation,
which is the owner of BDO. Ms. SyCoson is also Chairperson of BDO.
She first proposed the merger in
2003, and persevered despite doubts
and resistance from within EPCIB.
Banco de Oro, which last year
was named Best Bank in the Philippines by Euromoney magazine, has
a well thought out plan for growth
and is ready to carry out its mission
to provide its clients with the best
service possible, Ms. Sy-Coson said.
The goal is to use the merger to increase efficiency and profitability, to
improve its already outstanding customer service and to outperform
the industry's growth rates.
“As of today, we know where we
are going,” said Ms. Sy-Coson, the
daughter of SM Investments
founder Henry Sy. “We don’t have
to be number 1 or 2. We just want
to be the most efficient bank. We
would like to go the extra mile for
our customers.” The banks that
formed BDO have a long tradition
of making the extra effort to help its
clients. Before the merger Banco de
Oro was already established as a
universal bank, offering a full range
of services to businesses and individuals, while Equitable PCI specialized in commercial banking,
trust and remittances. The consolidation of the two banks' operations
is expected to be finished by the
middle of the year, said bank President Nestor V. Tan.
BDO has already improved its
information technology to permit
it to handle a higher volume of transactions and had combined its two
networks of automated teller machines as early as March, 2007. The
product lines of the two merged
banks are currently being combined
under the BDO brand, and their
various units and affiliates, in the
Philippines and abroad, are undergoing a rationalization to take advantage of the synergies offered by
combining the two groups.
“The BDO-EPCI merger substantially enhanced and expanded
the combined Bank’s operational
scale and distribution platform,” Mr.
Tan said. “From being a niche player, BDO is now a full-service entity offering a complete array of
products and services. From traditional branch banking and business
lending and consumer lending to the
non-traditional investment banking,
bancassurance, leasing and cash
management.”
The new bank's clients are already benefiting from the emphasis on service. BDO, which is based
in Mandaluyong City, next to the
Philippine capital, Manila, has
broadened its opening hours to give
its customers greater access. The
consolidation of the branch network is also focusing on redeploying branches into fast-growing areas
outside Metro Manila to further
increase access and to take advantage of the opportunities offered in
those locations.
Confidence in the bank's plans
to expand got a boost late last year
when BDO sold 10 billion pesos of
unsecured subordinated debt in
November. The initial size of the
sale was set at 5 billion pesos, but
when demand for the notes exceeded 15 billion pesos, the issue
amount was doubled. The money
will be used to strengthen the bank's
capital base and ensure it has the capacity to fund its continuing plans
for expansion in coming years.
“We will continue to expand organically into new markets and
strengthen our product offerings
as necessary,” said Nestor Tan. “We
have just recently completed the
acquisition of the local operations
of the American Express bank,” - a
3-branch network and a credit card
business - “to expand our private
banking and credit card operations.”
This year BDO has said it plans
to issue another 15 billion pesos of
subordinated debt in various tranches. Part of the proceeds from the
sale of the first tranche of 5 billion
pesos will be used to refinance an
existing issue, and some will be used
to increase its consumer loan portfolio and improve its capital adequacy ratio, which stood at 15.3%
in the fourth quarter.
In 2007, the first year the group
presented its consolidated earnings,
the bank earned a net profit of 6.5
billion pesos, an increase of 2 percent from 2006. The increase was
Nestor V. Tan, President, Banco de Oro
less than the bank had earlier indicated, due mainly to costs related
to the merger. Nevertheless, the figures showed the bank is doing a solid job of growing its business. Net
interest income, a measure of profitability, increased 11% to 21.4 billion pesos, helped by a better mix
of loans and deposits. Gross customer loans increased 15%, aided by
strong demand for consumer loans,
which have a higher margin.
Ms. Sy-Coson's successful effort
to combine the two banks also inspired a wave of fresh merger activity
in the Philippine banking industry.
“They say we shook the banking industry so other banks started consolidating as well. It was a catalyst
for more mergers.”
Inbrief
A merger of two
financial powers
I BDO is the product of the merger
of Banco de Oro Universal Bank and
Equitable PCI Bank, a combination
that made it the second-biggest bank
in the Philippines,with assets of 621.3
billion pesos ($15.3 billion) in the
fourth quarter, giving it a market
share of 12.9%. BDO has 670
branches and more than 1,200
automated teller machines around the
country to serve its clients, which
includes a full range of commercial,
consumer, trust management and
remittance services users. It's the
country's number 1 bank in trust
accounts, managing 274.1 billion
pesos and it has the Philippines'
second-biggest loan portfolio at 304.9
billion pesos.
Consumer credit
drives BDO’s growth
I BDO's net income rose 2% to 6.5
billion pesos ($160 million) in 2007
from the previous year, boosted by
growing demand for loans and by
more revenue from remittances and
other services. Net interest income
increased 11% to 21.4 billion pesos.
Gross customer loans grew 15% amid
strong demand for consumer credit,
while commissions and fees rose 14%
to 9.6 billion pesos with help from
credit card, remittance and trust
management services. Total deposits
declined 5% to 445.4 billion pesos as
part of an effort to trim high-cost
funding and improve interest margins.
A decline in treasury and other income
reduced non-interest income by 4 % to
16.9 billion pesos.
International
recognition
I The bank has won numerous awards
in recognition of its superior bank
services and management talent. In
2007 it was named the Philippines' Best
Bank by London-based Euromoney
magazine, and its BDO Capital &
Investment Corp. unit was the Best
Investment Bank and Best Bond House
in the Philippines according to Alpha
Southeast Asia Magazine. BDO was
named among the best managed
companies in the Philippines and Best in
Corporate Governance by FinanceAsia
and before the merger that formed the
current bank, Banco de Oro was named
Best Managed Company in the
Philippines in 2006 and 2005 by
Asiamoney.
OVERSEAS FOREIGN WORKERS
Bringing banking to the diaspora creates bilateral opportunity
By offering attractive services
to overseas workers, BDO has
strengthened at home
Overseas Filipino Workers (OFWs)
have long been an important source
of income for their families at home.
Hard-working emigrants sent a
record $14.4 billion back to their
loved ones in the Philippines in
2007, an increase of 13.2% from the
previous year and $100 million
more than the Philippine central
bank's target.
Over 1 million Filipinos found
jobs abroad last year, an increase of
1% from 2006. The money that
they and their compatriots already
overseas send back is equal to about
10% of GDP and helps fuel economic growth by spurring consumption and investment. In 2007,
their remittances also helped the
peso up against the dollar by 19%.
BDO has long been a provider
of remittance services to the millions of Filipino nurses, teachers
and other professionals working
abroad, and has in recent years increased its efforts to offer them other important financial services. The
bank now targets Filipinos abroad
for consumer loans, credit cards,
mortgages and auto loans, and also offers them savings and investment products, all services that had
previously been difficult or impossible for emigrants to access.
“The bank goes beyond providing the traditional remittance services,” said Nestor Tan, President of
BDO. “Through a bankwide initiative, BDO offers a wide array of
services conveniently available for
OFWs and their beneficiaries.
These products have been configured to address the constraints most
OFWs experience in banking from
a distance.”
The bank makes a huge effort to
ease access to its services to all its
clients, and has designed various
policies and products specifically
for OFWs and their families. BDO
has lengthened its office hours to
improve access to its services for all
its clients. Most branches are open
up to 6 p.m. during the week, and
some offices in shopping malls are
open until 7 p.m. on weekends. By
offering payment services through
the SM Forex counters owned by
BDO's parent company, clients have
access to their money 7 days a week.
BDO also helps clients in remote
areas of the country through agreements with several Philippine rural banks including Producers Rural
Bank, Rang-ay Bank and Zambales
Rural Bank, increasing the area covered by its remittance services.
Through its Asenso Kabayan
program, BDO offers remittance
beneficiaries in the Philippines innovative products including cash
cards that can be used at over 3,000
automated teller machines to withdraw payments, effectively giving
clients round-the-clock access to
their money. Other benefits include
cashless shopping at malls owned
by SM and recharging prepaid cell
phone cards. The program offers
OFWs products including insur-
ance, college savings plans and even
a service to pay their bills in the
Philippines from abroad. In addition to offering OFWs financial services that had previously been
difficult or impossible for them to
find, the bank's efforts to help ex-
tends to areas with large concentrations of OFWs. “By providing
ease of access to the Bank’s various
products and services, more Filipinos abroad look at BDO beyond
just remittances,” he said. “They are
now able to invest in real estate,
start their own businesses and build
up their savings for the future.”
BDO has remittance offices in U.S.
cities with large Filipino communitees such as Los Angeles, San
Francisco and Chicago, and is increasing its presence in other parts
of the U.S. through a network of
agents elsewhere in California and
Illinois, as well as in Alaska, Nevada, Washington State, Florida, New
Jersey and Arizona. The bank also
has plans to extend the network
even more, through partnerships
and acquisitions, Mr. Tan explained.
BDO's energetic efforts to help
OFWs have helped boost the bank's
bottom line. In 2007 the remittance
business grew 15% from the previous year in terms of transactions
and U.S. dollar volume. Net income
from the business increased 12%.
“Although competition has become
more intense, BDO has managed
to stay ahead by positioning itself as
a one-stop shop bank that offers
convenience and reliability to its
clients,” Mr. Tan said.
14
15/4/08
18:14
Página 14
THE PHILIPPINES
Commitment to value
wins customers
Jollibee. Solid management turned a pair of ice cream
parlors into a multi-million dollar fast food chain
Having beat behemoth American corporations at home, Jollibee is now planning to take them on in their own backyard
Value is a word Tony Tan Caktiong,
CEO of Jollibee Foods Corporation,
uses frequently when discussing his
organization. Value, he claims, has
transformed a handful of ice cream
parlors into a leading fast-food chain.
Value has placed Jollibee ahead of
McDonalds in the Philippine fastfood sector. Lastly, value is what will
generate substantial success in Jollibees’ overseas endeavors.
2008 marks a special year for Jollibee Foods Corporation; the corporation is celebrating its 30-year
anniversary. The organization’s spectacular trajectory in just over three
decades, from a couple of ice cream
parlors to over 1,000 domestic and
international restaurants, has confirmed the organization’s commitment to value and has
impressed the international investment community.
Superior leadership is the
real driving force behind the
company’s success. The directors of Jollibee began with
a commitment to excellence
and over the years watched as
it propelled sales, attracted investors, and converted their company into a legitimate fast-food
chain. Later Jollibee established itself as the Philippine’s leading fast
food chain and braced for stiff
competition from the major international fast-food corporations.
Jollibee’s leaders developed a
strategy that would distinguish their
today it boasts 15 Jollibee, 12 Chowking and 20 Red Ribbon restaurants.
In 2007, the company expanded outside California for the first time to
open a Jollibee in Las Vegas.
Mr. Tan was pragmatic in his expectations for the undertakings: “In
the U.S. market, we felt that we could
not compete with McDonalds in
terms of marketing and branding.
Therefore we targeted a niche market. We targeted the Filipinos.”
The international expansion has
coincided with another profit-generating initiative – the acquisition of
international companies – in emerging markets. After purchasing
Chowking, Greenwich Pizza and
Red Ribbon Bakeshop between 2000
and 2005, Jollibee acquired
Delifrance in 2006. “We’re always
on the lookout for any acquisition,
if it is a good one,” Mr. Tan revealed.
Equally as important as its push
in the U.S., Jollibee recently announced it is going after yet another of the world’s hottest markets.
“Three or four years ago, we acquired a brand called Yonghe King.
It’s a Chinese fast food chain. Right
now, it only consists of 100 stores;
we are attempting to expand that.”
Mr. Tan is confident that he and the
directors of Jollibee will be able to
apply the strategies and knowledge
that established Jollibee as one of
the top companies in the Philippines
to the Chinese chains. “We can create value out of them.”
trademark bee from the well-established competition. “When McDonald’s entered the Philippine
market, they promoted and marketed heavily. While they followed
the American or global version, we
differentiated ourselves very strongly against them with our unique
taste,” explains Mr. Tan.
Jollibee capitalized on its knowledge of local markets and its solid
reputation to maintain its foothold
against the behemoth American
corporation. “We have the competitive advantage of our value,” Mr.
Tan stated. “We realized that if we
wanted to compete in the industry,
we had to at least match whatever
the global leader had. Our goal
was to narrow the gap, and so we
improved everything—store
design, training, etc.”
The strategy has largely paid
off. The company has posted
spectacular profits over the last
decade and satiated its
shareholders. Determined to
further their
success, Jollibee started targeting
Filipino
communities across
the globe,
notably in
the United
States where
Tony Tan
Caktiong receives
World Entrepreneur of
the Year Award from
Ernst & Young, 2004
JOLLIBEE FOUNDATION
Passing on the
secrets of success
‘Our objective is to work
with Filipinos so that they
reach their highest potential
the same way Jollibee did’
As one of the foremost Filipino
corporations in operation today, Jollibee Foods Corporation has made a strong
commitment to giving back to
those who helped to contribute
to its success.
Jollibee Foods Corporation
founded its own non-profit organization, the Jollibee Foundation, to fulfill its promise to
the citizens of the Philippines.
Since it’s inauguration in
2004, the foundation has undertaken a wide variety of projects: from the Sa Aklat Sisikat
reading program, to the Nurture the Future communitybased feeding program, to the
Values Program for the Department of Education.
Also underway are educational programs to help develop citizens into good and
responsible business leaders.
The Citizen Responsive Governance project harnesses potential leadership, encourages
teamwork, and promotes citizen
participation in improving the
lives of the people of the Nueva Vizcaya region, with the aim
of fostering a willingness to work
together to develop a common
vision and strategy amongst
leaders from various sectors.
Many participants are applying
their newly acquired skills close
to home. Half of the first group
of Jollibee Foundation scholars
to graduate from the Don Bosco
Technical Skills College is currently employed by Jollibee.
“Our objective is to work with
Filipinos so that they reach their
highest potential, the same way
Jollibee did. We call this ‘jollifying’- sharing the innovation, values, expertise, and tools that have
made the company what it is today and passing it on to the people Jollibee Foods Corporation
most ascribes its very success to:
the everyday Filipino,” says Tony
Tan Caktiong, CEO of Jollibee
Foods Corporation.
15/4/08
19:20
Página 15
THE PHILIPPINES
Presiding with a passion for
productivity and progress
PROFILE
The spirited drive to
succeed accelerates
The Senate’s push for new legislation with speed and efficiency has filtered
through to a dynamic environment to do business and spur entrepreneurship
Strong determination
enabled one of the nation’s
most successful businessmen
to follow his political calling
and apply equal vigor to
making a social difference
Manny Villar, the President of
the Senate of the Philippines, is
a busy man and has been for
some time. He started working
as a child helping his mother sell
shrimp at Manila's Divisoria market. He worked hard enough to
pay his way through college at
the University of the Philippines,
where he earned a master's degree in business.
After finishing university, he
held jobs as an accountant, a seafood distributor, a financial analyst and a sand and gravel seller
before starting a new career in
home construction and sales – a
job that made him one of the
wealthiest men in the country.
In 1992 he turned to politics, and
after ten years in the country's
congress, he was elected to the
Senate in 2001.
After assuming the presidency of the 24-seat upper chamber
in 2006, he has been helping the
Senate churn out legislation,
while at the same time concentrating on one of its other responsibilities, investigation.
“Since I became president of
the Senate, the number of bills we
have passed in the Senate is four
times its average,” he said. “For the
first time the Senate has been
very productive. It’s always been
said that you either investigate or
pass bills. I showed that both
could be done.”
Mr. Villar sees the Senate as a
tool to help the economy, and the
new legislation is partly intended
to help the country's economic
expansion continue, he said.
The economy grew 7.3% last
year after a surge in business
process outsourcing created new
jobs at home and remittances from
overseas Filipino workers rose to
a record $14.4 billion, fueling a real estate boom and fattening profit at lending institutions. Demand
from China and other parts of Asia
Manny Villar may now be one
of the Philippines' most successful politicians, but before
that he was one of the island
country's most successful businessmen. The busy entrepreneur famously started out
helping his mother sell seafood,
and from there rose to become
a home-construction tycoon
and one of the country's richest
men before turning to politics.
“I come from a family of nine,
I grew up helping my mother
sell shrimp in the market,” he
said. “That is how we financed
my schooling.”
Mr. Villar continued to work
at the market while studying at
the University of the Philippines,
where he earned a bachelor's
degree and a master's degree in
business administration. His first
job out of school was as an accountant, but left that position
after his entrepreneurial spirit,
and his years of experience in
the market, drove him to start a
business delivering seafood to
restaurants.
He then decided to return to
the financial world, this time at
the Private Development Corporation of the Philippines. His
job there was as a financial analyst, helping to oversee the distribution of loans from the
World Bank. Despite the attractive interest rates offered,
there were few takers for the
funding.
He decided to quit the job and
applied for one of the loans himself, which he combined with
his savings to buy a truck and
start a sand and gravel delivery
company. Business went so well
that by the end of a year he was
able to buy another truck, and
he saw the opportunity that
would change his life.
“I thought the houses being
built by developers at the time
which people aspire to be on their
own and independent, where people aim to start with the intention
of expanding their businesses.”
Mr. Villar is now looking ahead
to how he can continue his efforts to help the country, and has
set himself another challenge. The
hard-working, self-made businessman and politician, who over
the years has won accolades including Top Ten Outstanding
Young Men Award and the Most
Outstanding UP Alumnus award,
plans to run for President of the
Philippines in 2010.
The pro-active Senate has passed four times its average number of bills since 2006
for commodities spurred growth
in the mining industry, and the
country's increasing popularity as
a tourist destination also added
to the economic expansion.
Exports, especially to China,
will play an important part in the
economy in the future, though
that shouldn't lead the country to
‘WE HAVE TO LOOK AT
HOW WE CAN INCREASE
TRADE WITH BOTH THE
U.S. AND WITH CHINA;
ONE SHOULD NOT BE IN
LIEU OF THE OTHER’
ignore other export markets, Mr.
Villar said. The U.S. has traditionally been the Philippines'
biggest trading partner, and that
relationship can be improved to
both countries' benefit.
“We also have to look at how we
can increase trade with the U.S.
while increasing trade with China,” according to Mr. Villar. “One
should not be done in lieu of the
other. It should be done in addition to the other. I would like for
us to increase our exports to become more competitive.”
With the economy growing so
strongly, the government now
needs to try to help spread the
benefits to the poorer parts of
the population, Mr. Villar
maintains. His background
and education in business
have helped shape his ideas
about how to help the
poor by expanding the
economy and creating
new jobs. Mr. Villar's goal
is to encourage entrepreneurship and inspire people to
help others and themselves
through their own efforts as well
as the government's.
“It’s not just about creating
more work, it’s about distributing the work and the best way
to do that is to create a culture
of entrepreneurship,” Mr. Villar explained. “We need an entrepreneurial revolution in
Mr. Villar sees the Senate as a tool to
help the economy maintain its growth
and add impetus to overseas interest
Making waves in
beautiful success
Splash Corporation is the epitomy of what two minds
and a small budget can achieve in a fluid market
Incorporated in September 1991,
Splash Corporation is the kind of
indigenous venture that galvanizes
national pride while showcasing
Filipino products and progress
across the globe. The brainchild of
Dr. Rolando B Hortaleza and Dr.
Rosalinda Ang-Hortaleza, what began as a small husband-and-wife
side venture to augment their incomes from the medical profession now ranks among the
Philippines’ leading cosmetics
firms, and is the foremost national company in the field. Dr. Hortaleza’s father was an entrepreneur
who owned a chain of of cosmetics outlets, Hortaleza Vaciador and
Beauty Supply – the ideal platform
for the budding distribution business envisaged by the doctors. Having observed that the American
and European penchant for beauty products was beginning to mushroom globally, in May 1985 the
doctors used a P12,000 wedding
gift as start-up capital to distribute
cuticle removers, acetone and cold
wave cream from their home in
Sta.Mesa, Manila – the beginnings
of a journey that would conclude
with the couple at the helm of a P5
ROLANDO B. HORTALEZA
Chairman, Splash Corporation
billion group of companies that is
today taking on global cosmetics giants such as Procter & Gamble,
Johnson & Johnson and Unilever.
Due to the company’s initial success – it posted sales of P100,000
in its first year – Dr. Hortaleza elected to eschew his medical career to
concentrate on the business, renaming it Hortaleza Cosmetics to
take advantage of the family name
and reputation. As the business
Splash Corporation has built its success on the twin bases of market appreciation and a dedicated workforce who work for the common goal of customer satisfaction
blossomed, the enterprising couple
decided that a new name was in order, one that would sound appealing to Filipinos and foreigners alike.
They settled on Splash, named after Darryl Hannah’s famous role in
the eponymous film.
In fact, it was the garish mores
of the late 1980s that launched
Splash Cosmetics on its way to fame
and fortune. In the heyday of Dallas and Dynasty, big hair was in.
And big hair became big business
for Splash Cosmetics. In 1987,
Splash Hairspray generated more
than 1 million pesos in revenues.
But it was to be Extraderm that
make the world sit up and take notice. An exfoliant facial cleanser,
Extraderm slipped under the radar
of the competition as exfoliants
were unclassified at the time. In the
slowing astringent market of the
1990s, Extraderm was a revelation.
A product that previously had only been available over the counter
from specialist outlets stocking privately labelled dermatological
cleansers was now widely available
in beauty stores - and affordable. It
was a watershed moment for the
company, and for the industry at
large. In 1997, against the trend of
a stuttering astringent market, Extraderm recorded a 211.4% leap in
sales. Exfoliants were set to change
the face of the industry.
“Filipino consumers had always
been offered products by these big
companies. Nobody had really offered them alternatives. Filipinos
love Filipino products provided
they are up to international standards. At the end of the day it is
about quality and the product
should deliver on its promise.”
With the runaway success of Extraderm bulging the company’s coffers, the doctors began to look
abroad with expansion on their
minds. The political and economic turmoil in the Philippines dur-
ing the 1980s and 1990s had led
millions of Filipinos to seek their
riches abroad – but not without
taking their kikays (vanity bags)
with them. Splash Corporation’s
brand image at home ensured that
it would travel with the diaspora.
The company now has a presence
in 20 countries through its distributors and exporters.
“In terms of marketing approach,
we are very selective. We do not distribute our products far and wide.
We focus our attention on a number of selected outlets where our
products can be given preferential
attention . As a small organization,
it is more advisable for us to have
a niche. From there, we hope to
achieve increased brand awareness
15
and that is when we shall expand.”
At home, however, the need to
increase market presence in a P90
billion industry is negligible. On
the back of impressive sales the
group listed on the Philippine Stock
Exchange in November last year,
reaping some P2 billion in additional revenues to be channeled into research and development and
brand building overseas.
Much of the resulting windfall
has been spent on the Splash Research Institute, a P40 million complex dedicated to seeking new,
innovative and exciting products
through its team of highly skilled
scientists and its use of the latest
technology. Dr. Hortaleza envisions
the institute becoming the leading
were too big,” he explained. “Nobody was building small houses and so I experimented. I
consulted with a developer who
agreed to sell house and lot with
me. I began the socialized housing system within the Philippines and it succeeded. People
buy homes because they want to
leave their in-laws and be independent.”
Mr. Villar turned out to be
right, and his insight made him
a wealthy man. Getting rich wasn't enough for Mr. Villar, though,
and he decided to turn to politics to try to make a difference
for the country's poorest people.
Once again Mr. Villar met with
unprecedented success, winning
his constituency for congress by
a landslide in the legislative elections in 1992.
“I was attracted to politics and
ran for Congress and won,” he
said. “It was the largest margin
at the time in Philippine history.”
By 1998 Mr. Villar was elected Speaker of the House, where
he led the body in passing the articles of impeachment of President Joseph Estrada in 2000. It
was the first time in Philippine
history that a president was impeached, and in January, 2001,
Estrada was ousted and replaced
by Vice President Gloria Macapagal-Arroyo, who went on to
win a full six-year term in 2004.
Mr. Villar didn't stop there. In
2001 he was elected to the 24seat Senate, and in 2006 he assumed the presidency of the
upper chamber. From that position, Mr. Villar has helped pass
laws that are helping the Philippine economy, which expanded
7.3% last year, continue its recent record of strong growth.
The people at the top have
gained from that growth, and so
should the poor, he said.
“Now that we have achieved
economic growth, what we have
to address is wealth distribution,” said Mr. Villar. “ I think we
should give priority to those who
reduce poverty or increase employment.”
R&D facility in Asia.
“Our mission is to introduce innovative products, not only in terms
of personal care, but also in the
health and wellness market. We
have a good marketing platform
and distribution model to support
that marketing initiative. We are
introducing Filipino brands to the
international market while at the
same time making waves in the local market, due to our competitive
situation with the likes of Unilever,
Procter & Gamble and other
renowned global brands.
As we have very good manufacturing facilities we can highlight
our competitive advantages and
communicate that we are a worldclass organization.”
15/4/08
18:15
Página 16

the Philippines

Transcription

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