philippines - summit reports · philippines the with its strongeconomy, stable democracy and low...

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Resilient economy rides out the stormTHURSDAY, DECEMBER 27, 2001

POPULATION82,841,518

(July 2001 est.)

AREA115,800 square miles.

Slightly larger thanArizona

CURRENCYPhilippine peso (PHP)

EXCHANGE1 US$ = 51.94 PHP

CAPITALManila

GDP$310 billion (2000 est.)

purchasing power parity

RESOURCESNatural resourcesinclude: timber,

petroleum, nickel,cobalt, silver, gold, salt,

copper

INDUSTRIESThe country’s industries

include: textiles,pharmaceuticals,chemicals, woodproducts, food

processing, electronicsassembly, petroleum

refining, fishing

FACTS &FIGURES

PhilippinesThe

WITH ITS STRONG ECONOMY, STABLE DEMOCRACY AND LOW INFLATION,THE PHILIPPINES HAS MORE THAN MATCHED THE PACE OF DEVELOPMENTSHOWN BY ITS SOUTH-EAST ASIAN NEIGHBORS. HAVING RECENTLY PASSED

TWO SIGNIFICANT PIECES OF LEGISLATION–THE POWER SECTOR REFORMLAW AND THE ANTI-MONEY LAUNDERING LAW–THE COUNTRY HAS PROVEDITS DETERMINATION TO SUCCEED ON A TRULY GLOBAL LEVEL

WHILE most of the world was bracingitself at the end of last year for a pre-dicted global economic slowdown, inthe Philippines matters were more com-plicated as the country also had to copewith an upsurge of separatist rebel activity in the south and a corruption-stained president who, by the end of2000, had done more for his own personal economy than for the nation’s,had pushed the national poverty inci-dence back up to 1988 levels (40.6%)after years of steady decline, and all butwiped out investor confidence, both foreign and domestic.

By the end of 2000, Filipinos had hadenough. When Joseph Estrada’s politi-cal allies tried to derail his impeachmenttrial, tens of thousands took to the streetsin mass demonstrations that had thebacking of nearly every sector of soci-ety. He finally threw in the towel on January19 this year and, the day after, his for-mer vice president, Gloria MacapagalArroyo, was sworn in as president anda new era of political transparency andeconomic development began.

The new president, a populartwo-term senator, a former eco-nomics professor and the daugh-ter of a much-loved former pres-ident, immediately announced thather administration would bemarked by four priorities, or whatshe calls her four core beliefs.

a strategy to cure the nation’s ailingeconomy and its crisis of confidence thatkept investors away and pushed Filipinosdeeper into poverty.

According to International MonetaryFund officials, the final economic out-look this year for the Philippines hasgreatly improved since the peacefultransition of power to President Arroyo,with GDP growth expected to nearthe 3.8% mark. “Inflation isfalling, financial markets havecalmed and interest rateshave been lowered to thelevel prior to the recent turmoil.”

The Philippines is also tak-ing a leading role in the ten-nation Association of South EastAsian Nations’ bid to include China,and then Japan and South Korea, in anambitious free-trade pact that woulddecrease the region’s dependency on

the United States.But that doesn’t mean

decades of warm U.S.-Philippine relations are inperil. Indeed, since theSeptember 11 terroristattacks, the two coun-

tries have grown even closer. In earlyNovember, a group of U.S. military ad-visors were on the southern island ofBasilan to assist Manila’s military offensive against the hostage-taking,Islamic fundamentalist rebel group AbuSayyaf, which Washington says hasstrong ties to Saudi dissident Osamabin Laden’s Al Qaida terrorist network.

President Arroyo’s bright youngsecretary of finance, Jose

Camacho, says job creation isa very important aspect ofthe administration’s war onpoverty, and jobs, he says,can only flourish in an investor

friendly environment.“Peace and order are at the

top of everybody’s attention at themoment,” notes Mr. Camacho. “It issomething we talk about regularly inthe government, and it is very high onthe agenda of this administration.”

Peace talks with the country’s largestrebel group are progressing and thePhilippines is still a safe and attractiveplace to visit and to do business in. Still,Mr. Camacho acknowledges that per-ception is a key obstacle to overcome.

“Perception determines investor con-fidence and investor interest. So we areworking to solve the terrorism problemin the south with Abu Sayyaf and theproblem of urban kidnappings,” Mr.Camacho explains. “We need to pro-ject our successes so that the public,and investors in particular, appreciatethat we are making signif icantprogress.”

“Weneed to project

our successes sothat investorsappreciate our

progress”

“Win the battle against poverty within adecade; improve moral standards in gov-ernment and society; establish new politics based on party programs andconsultation with people rather than thetraditional politics of personality and patronage; and lead by example.”

Even before taking over the presi-dency, Ms. Arroyo was pushing for such

GLORIAMACAPAGAL

ARROYOPresident of the

Philippines

BC

AA

The PhilippinesSPECIAL ADVERTISING SUPPLEMENT SPECIAL ADVERTISING SUPPLEMENT

2

THURSDAY, DECEMBER 27, 2001

‘Our numberone priority isfiscal discipline’

Bases assume new roleas hi-tech firms move in

CUTTING THE INHERITED BUDGET DEFICIT AND TARGETING FISCAL BALANCE BY 2006 ARE THE TWINPRIORITIES OF SECRETARY OF FINANCE JOSE CAMACHOWHO OUTLINES THE GOVERNMENT’S VISION BELOW

NEARLY A DECADE AFTER THE U.S. HANDED OVER THE CLARK AIR BASE ANDTHE SUBIC BAY NAVAL BASE, THE PHILIPPINES IS REAPING THE REWARDS OF THEBASES’ CONVERSION INTO HUGELY SUCCESSFUL FREE ZONES

JOSE ISIDRO N. CAMACHO Secretary of Finance

SUBIC-CLARK EXPRESSWAY President Arroyo witnesses the signing of a $345 million loan agreement between Bases ConversionDevelopment Authority (BCDA) chairman Rogelio Singson and Japan Bank for International Cooperation governor Kyosuke Shinozawa.The loan was granted for the construction of a 92-kilometer toll road connecting the Subic and Clark economic zones.

MOST political analysts agree thatthe brightest star of the Arroyo ad-ministration is without a doubtSecretary of Finance Jose Isidro N.Camacho, who also happens to bethe country’s youngest cabinetmember. After a few months at thehead of the Energy Department, Mr.Camacho’s skills became imme-diately apparent and in May he wasshifted over to take up the financeportfolio to tackle the country’s cur-rent economic slowdown. In anexclusive interview, Mr. Camachodiscusses the government’s effortsto boost recovery.

What are the key economic policies of this government?What is its economic direction?I think it is important to first look at our basic economic philosophy, which is grounded onfree enterprise and is comprised ofthree very important components.It begins with the determination ofthe president to win the war onpoverty over the next decade, andthe strong belief that you can onlydo that by creating jobs.

What are these three compo-nents?The first is fiscal discipline. One ofour immediate problems is the sub-stantial deficit that we inheritedfrom the previous administration.We are maintaining our target bud-get deficit of 145 billion pesos(US$2.8 billion) for this year and targeting a fiscal balance by 2006.

Why is that so important? Because it not only signals our discipline on spending or creatingrevenue, but a large uncontrollablefiscal deficit would require us to goto the financial markets and put usin competition with the private sector for capital. The second component of our eco-nomic philosophy is market re-forms, which have been going onfor a long time and really gained momentum during the Ramos administration from 1992 to 1996.We intend to continue with that.

What would be a recent example?As you may know, we just passedthe Power Reform Bill in June. Andthat was probably one of the lastmajor reforms that we need to leg-islate. There are many more, but itis more like cleaning up now. The third aspect of our economicphilosophy is to push for good gov-ernance, which I think is such a softterm. You could really translate thatto good management, as if youwere talking about a corporation.

What would that consist of?It consists of efficiency in runningyour government, cutting out thered tape. This president has beenvery effective and will continue tobe effective because she is trans-lating everything into time-bounddeliveries, so that we can measureourselves, the president can mea-sure us and the country can measure this administration.

THEY say breaking up is hard todo, but sometimes it is clearly theright thing to do. So there wereno bad feelings or regrets in 1992when the United States handedover the facilities on Luzon Islandthat it had built up and used asthe main bases for its military pres-ence in the Pacific ever since theend of World War II.

There was at the time, however,a great deal of concern about howto replace the 30,000 jobs gen-erated by Clark Air Base and SubicBay Naval Base during their ColdWar heyday, and transform 84,000hectares of prime realestate–topped with $12 billionworth of second-hand infrastruc-ture situated 42 miles fromManila–in such a way that it wouldgenerate revenues for the newowners, the Philippine govern-ment.

Few could have expected amajor success story that not onlyrestored but multiplied the van-ished jobs, created an environ-ment that has attracted high-techindustries that gave rise to resi-

dential and recreational facilities,and became a major transportand communications hub serv-ing all of Southeast Asia. A lot ofthe credit is due to the BasesConversion DevelopmentAuthority (BCDA). Set up as anagency, the BCDA’s mission is toestablish and coordinate sub-sidiaries which would serve as itsimplementing arm in developingthe properties.

To date, it has created a freezone in each of the former baseswhich have attracted companiessuch as Acer, Coastal Petroleum,AOL, and Aiwa, while UPS has itsregional hub in Clark and Fed Exoperates out of Subic, which is 45minutes driving time away, andhas a smaller naval airfield. “Underthe Arroyo administration, we aregoing to be even bolder and tryto align the long-term objectivesof both Clark and Subic. We’repromoting it as an integrated pro-ject,” says BCDA Chairman andPresident Rogelio L. Singson.

That involves physical as wellas strategic fusion, to be made

possible by a new toll highwaylinking Clark’s twin-runway international airport with Subic’sdeep-water seaport. The Japa-nese government is providing a$345 million loan to help get thatroadway built, while the local focusremains centered on IT infrastructure.

“We are going all out to offermaximum bandwidth and con-nectivity in the hope of seeingmore call centers and softwaredevelopment outsourced to Clark-Subic,” says Mr. Singson. Thereare also plans to set up a centraldata processing facility for thePhilippine government that wouldserve as a magnet for the futurecyber-community. “We intend tooffer infrastructure, high-end com-puting capability as well as train-ing and incubation facilities.”

In addition to the digital draw-ing cards, BCDA’s satellite cor-porations are also at pains to ensure double-plus quality livingstandards and people-orientedperks, including an 18-hole golfcourse surrounded by luxurious

family homes, anchored by a majorresort hotel that should be open-ing by the end of the year.Japanese, British, and Americanschools will be the linchpin of a trulyglobal community, whose resi-dents will have a cathedral and ahospital at their disposal.

The vision of a common des-tiny for Clark and Subic is sharedby the chairman/administrator ofthe Subic Bay MetropolitanAuthority, Felicito C. Payumo, whohas been working hard to seeSubic Bay’s harbor become thecountry’s second-largest port,thanks to crane facilities and con-tainer terminals to be built by ICTSIand Royal Ports. A modern con-

FELICITO C. PAYUMOChairman/Administrator of SubicBay Metropolitan Authority

the quagmire of poverty and highunemployment.

“In the early years of the Ramosadministration there were morethan 200 economic reform bills,one of which was the SpecialEconomic Zone Act of 1995,” re-calls PEZA general director Liliade Lima. “The thrust of the law isemployment generation, particu-larly in the countryside, and thepromotion of exports with the de-velopment of viable, world-classand environment-friendly economiczones that provide those who set

up there with a long listof attractive incentives.”

PEZA encouragesthe private sector tohandle the developmentof the economic zones.“This means to build,develop, run and oper-ate. The role of PEZA issimply to run the in-centives side of theseeconomic zones.”

The four public and12 private eco-zonesthat were operating in

BRINGING economic prosperityto the Philippine countryside hasbeen an ongoing objective ofseveral administrations and fig-ures high on the agenda ofPresident Arroyo’s plan to erad-icate poverty over the next tenyears. Since 1995, the PhilippineEconomic Zone Authority (PEZA)has taken the leading role in pro-viding the private sector with theright business environment andeconomic advantages to attractworld-class companies to areasthat would otherwise remain in


3


Eco-zones lure multinationals

ROGELIO T. SERAFICACEO and President of Subic Hermosa Cyber City

Economic Zone ExportsIn Billion US Dollars

16

12

8

4

094 95 96 97 98 99 00

Jan.-June

4.36.5

10.6

13.3

15.8

9.1

the country under PEZA’s prede-cessor, the Export Processing ZoneAuthority, have grown to 137 sinceMs. de Lima came on board, including such big names as Intel,Gateway, Isuzu, Samsung, Hitachiand Fujitsu.

The Philippines’ biggest com-petitor for attracting multinationals,especially in the IT sector is India,

according to a recent survey by arespected political and economicrisk consultancy firm out of HongKong. “The Philippines is alwayscompeting with India because italso has an English-speaking work-force, but I think our advantage isthat our culture is American andour English is American English,”Ms. De Lima points out. “As a mat-

JOB-GENERATION AND POVERTY ERADICATION ARE THETWIN TARGETS OF PEZA, THE AUTHORITY TASKED WITH ATTRACTING COMPANIES TO THE PHILIPPINE COUNTRYSIDE

tainer port will be constructed withfinancing coming from the JapanBank of International Cooperationthat will have an eventual capac-ity of close to a million containersper year. This will complete theSubic-Clark intermodal trans-portation park. He is just as up-beat on prospects for developingthe region around Subic, with itsstretches of white sand beachesand 18,000 hectares of one ofAsia’s last virgin rainforest, as aneco-tourism destination.

“They say industrial develop-ment and environmental pro-tection can never go hand inhand. We want to prove themwrong in Subic,” says Mr.Payumo, for whom the worstagent of environmental degra-dation is poverty.

He has high hopes that peo-ple will be able to access Subic’sforests, wildlife and natural attractions through a series of min-imally intrusive interfaces, includ-ing what will be the Philippines’ first

marine park, Ocean Adventure,and cable cars skirting the treecanopy to take visitors deep intothe jungle. Already Subic has finalized plans to set up retirementvillages for Japanese, American,and other foreign senior citizenswho find that their pensions go along way further here than they doin their own countries. Security, always an issue in the Philippines,is another major selling point thatMr. Payumo and his associateshave taken a great deal of trou-ble to optimize.

A quarter hour’s drive fromSubic proper is Subic HermosaCyber City, a 93-hectare IT in-dustrial park under developmentby one of Manila’s leading real es-tate and property managementgroups, Burgundi RealtyCorporation. Its CEO andPresident Rogelio T. Serafica, saysthe aim is to provide a comfort levelthat will make it a major incentiveto high-tech companies, startingfrom what he describes as “a tunnel through the red tape”.

“We will take care of registra-tion, licensing, legal consultancy,customs clearance and make itas easy as checking into a hotel.We know the terrain and can helpavoid a lot of blind alleys and pit-falls,” says Mr. Serafica, who de-scribes the cyber city conceptas a one-stop service center forbusinesses considering relocat-ing to the Philippines, and thusbenefit from its strategic advan-tages in the electronics and ITsectors.

ter of fact, a recent poll of expatsliving in Asia showed that thePhilippines is rated the best interms of quality of life for expats,outclassing Singapore andMalaysia. Last year the Philippineswas third after Australia and theUnited States. This confirms thatexpats prefer living here,” says Ms.De Lima.

Among the reasons listed werethe high availability of quality edu-cation, housing meeting Westernstandards with reasonable rates,

attractive investment incentives,health care services, and sportingand recreational facilities. In Cavitealone, the site of the largest ofPEZA eco-zones, there are 16 golfcourses. “We realize that our Asianneighbors are our nearest com-petitors, and that they are in-creasing their incentives. So wehave to be just as competitive,” Ms.De Lima says. “For example, thereis a move to increase incentiveshere from an eight-year incometax holiday to 12 years.”

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4


Human resources drive IT supremacyWITH OVER 100,000 GRADUATES OF IT-RELATED COURSES A YEAR, THE PHILIPPINES HAS JOINED MALAYSIAAND SINGAPORE AT THE HEAD OF ASEAN TECHNOLOGY

ALTHOUGHthe Philippines is con-sidered a small nation among Asiangiants, there is no shortage of bigthinkers and ambitious projects, especially where the Arroyo ad-

ministration’s economic growth pro-grams and poverty fighting plans areconcerned.

The president has anchored hereconomy’s growth to the mighty

entire ICT environment as well ascommerce.

“I created the cabinet cluster toensure swift and coordinated gov-ernment action on ICT matters,”President Arroyo explains. “In for-mulating the new economic devel-opment strategy for the Philippineswe must focus on the following:

first, enhancing the country’s infor-mation infrastructure; second, cre-ating and enabling a regulatory environment; and third, developinghuman capital. For a country like thePhilippines, developing the infor-mation infrastructure is critical forour future competitiveness.”

She also stressed that her ad-ministration’s ICT thrust will be pri-vate sector-driven, with the gov-ernment coordinating activities andsupporting the private sector with“forward-looking policies”.

Thus, moves to develop infor-mation infrastructure have beendone in tandem with efforts to increase the business applicationsof ICT with both government sup-port and guidance. In 1998 the current Secretary of Trade andIndustry Mar Roxas initiated an e-commerce law that gave thePhilippines the legal framework inwhich ICT businesses could thrive.

N o w a d a y s , he his advocatingamendments to theso-called OmnibusInvestment Plan inorder to boost investments in thesector, with an eyeon bringing to thecountry a share ofthe estimated $700trillion that the B2Bbusiness is expect-ed to generate bythe year 2004.

“Our country issuited to this area,” Mr. Roxas pointsout. “This is primarily because in theIT world it is the processors andcreators of information that are thesources of value and wealth. And ifyou have a population that is edu-cated, English-speaking, dynamic,culturally-aware, creative, and IT-literate, then you have the numberone resource necessary to be successful.”

Assistant Trade and IndustrySecretary and Chief of Staff Toby

Information and CommunicationsTechnology sector, drawing her faithin its success from the country’slarge pool of experts in the ICT field.She has even created a special ICTcabinet cluster to see through fur-ther development of the industry, andher IT and E-Commerce Councilhas been expanded to look into the

Melissa C. Monsod says her de-partment’s strategy is four-fold: tolower the cost of bandwidths inorder to increase access to thecountryside; inspire workers to main-tain and increase their skill levels; cre-ate the legal framework in whichthe sector can grow; and most importantly, to develop business.

“The last point is really marketniche. We are pushing a campaignfor e-services. We started in theUnited States and Japan last yearand are continuing throughoutEurope to promote e-services. Thatis the main thrust of that priority,” Ms.Monsod says.

Besides Mr. Roxas, thePhilippines’ main advocate of the ITrevolution in the country is RobertoR. Romulo, chairman of the boardat Equicom Systems Management,who also serves as a personal ad-visor to the president on new technology and who has been ap-

pointed to chair theregional E-ASEAN(Association ofSouth East AsianNations) task forceon ICT. Although hesays the Philippinesneeds to makegains on the tech-nology side of ICT,he sees the coun-try taking a leadingrole in the sectorbecause of itshuman resources.

“ASEAN is tencountries and half a billion peoplein various stages of IT-literacy anddevelopment. At the very top youhave Singapore and Malaysia,” Mr.Romulo says. “But in the Philippinesthere are more than 100,000 college graduates every year. Thisis the kind of personnel that is re-quired in a knowledge economy.So, Singapore and Malaysia mayhave the technology, but we havethe human resources. On top ofthat, we tend to be more economicthan the wages in Singapore or inIndonesia. That is the strength of thePhilippines in the context of ICT.”

ROBERTO R. ROMULOChairman of the

Board, Equicom SystemsManagement

A DATEWITH THE

FUTUREThe

Philippines’ ICTdevelopment is

largely private-sector

driven.


5


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A sector conducive to growthACCOUNTING FOR SOME 70% OF THE PHILIPPINES’ANNUAL EXPORT SALES ($27 BILLION), ELECTRONICAND SEMICONDUCTOR PRODUCTS REMAIN KEY TOTHE COUNTRY’S INDUSTRIAL OUTPUT

NEARLY 30 years ago investorsturned to the Philippine semi-conductor and electronics in-dustry at a time when globalcompetition dictated an urgentneed to lower production costswithout sacrificing quality. Almostimmediately the Philippinesgained a reputation for quality assembly and test manufactur-ing of everything from smokedetectors and karaoke machinesto Pentium components and cellphones and any other type ofelectronics equipment that require highly technical, labor intensive activities.

Currently, electronic compo-nents and semiconductor de-vices are the Philippines’ top export products,accounting formore than 70% ofthe country’stotal export salesper year, or some$27 billion (ac-cording to SEIPI).Worldwide, semi-conductor salesreached a record$204 billion forthe year 2000and were headedfor a growth rateof 22% beforesales began to slip this year,making double-digit growthseem unlikely as 2001 comes toa close.

While the Philippine semicon-ductor and electronics sector isin a better position to weather theglobal pause, industry associa-tions that support manufactur-ers are being called on to dou-ble their efforts to come up witha viable response to the trend.

In the Philippines the task oftackling industry concerns andissues falls squarely on the shoul-ders of the Semiconductor andElectronics Industry in thePhilippines, Inc. (SEIPI), an as-

sociation of some 160 local andforeign semiconductor and elec-tronics manufacturers that servesas their representative and ad-visor in dealings with the gov-ernment and private institutions.

SEIPI chairman Saturnino G.Belen says that, as far as the association is concerned, it isbusiness as usual and SEIPI willcontinue working towards its topfive objectives: promoting net-working and the sharing of information among members;developing industry linkages withforeign and local industry groupsand companies; advocatingquality, productivity and innova-tion; urging the development of support industries; and

promoting thePhilippines andthe industry inpartnership withthe government.

Mr. Belen cau-tions about over-reacting to thecurrent slowdownin the industry,describing it as asimple adjust-ment following aboom year. “2000was a record year,especially in the

first quarter, as people were post-poning orders at the end of 1999because of Y2K concerns,” heexplains. “Nobody wanted to becaught with a lot of inventoriesbecause they were not sure if a lot of companies were Y2K compliant.”

Orders starting rolling in at thestart of 2000 after it becameclear that the Y2K transition waswithout any big hitches, thus thehuge first quarter sales. “Thenpeople became bullish, thinkingthe U.S. economy was still grow-ing. And so the second quarterwas even stronger than the firstbecause a lot of dot.com com-

HI-TECH The Philippine electronics sector remains buoyant.

UNDER THE MICROSCOPE Semiconductor and Electronics Industry in the Philippines, Inc. (SEIPI) keeps a close eye on the sector.

panies were ordering servers andcommunication infrastructuresystems, “ Mr. Belen explains.

On top of that, cellular tele-phone sales nearly doubled lastyear from 250 million to 420 mil-lion units. “Suddenly, in the thirdquarter of last year they put onthe brakes. By the fourth quar-ter it was pretty evident that alot of people had excess inven-tories,” recalls Mr. Belen, who isalso CEO of Fastech Synergy, aleading provider of semicon-ductor assembly and test ser-vices that is listed on the mainboard of the Singapore StockExchange. Fastech is also oneof the few semiconductor com-ponent manufacturing compa-nies to post gains in the first halfof 2001, reporting a net incomeof $1.76 million from a turnoverof $14.24 million by the end ofJune. Its customer base of com-panies includes names likePhilips and Fujitsu.

“We were really committed togrowing on account of ourSingapore listing,” notes Mr.Belen. “And we were able togrow in sales by an almost evenrate compared to the first quar-ter of 2000, which was a verygood quarter, but our incomewas cut by about 50% becauseour operating expenses werehigher. What we are trying to donow is concentrate on makingsure that our cost structure is re-sponsive to the current envi-ronment. Having said that, weare gratified that we are still mak-ing money when a lot of com-panies were announcing lossesfor the first quarter.”

SATURNINO G. BELEN

CEO of Fastech Synergyand Chairman of SEIPI


6


21st century vision attracts hi-tech giantsWITH STATE-OF-THE-ART COMMUNICATIONS AND EXCEPTIONAL HUMAN RESOURCES, IT IS NO SURPRISE THATGIANTS SUCH AS TEXAS INSTRUMENTS, SUN, AND ORACLEHAVE CHOSEN THE PHILIPPINES AS THEIR REGIONAL HQ

DESPITE all the jockeying amongSoutheast Asian nations to at-tract top Information Technologycompanies, at the end of the daywhat really counts is who man-ages to bring in the big names inthe industry and who has to makedo with the sector’s lesser-knowncompetitors. Any nation in theregion would be more than thrilledto have just one of the giants likeTexas Instruments, Oracle or SunMicrosystems set up on theirhome turf. Unfortunatelyfor them, however, allthree have chosen thePhilippines.

While TexasInstruments doeshave plants scat-tered around the re-gion, its installations inthe Philippines have becomethe Dallas-based multinational’smost sophisticated assemblyand test facilities for productsthat serve the needs of elec-tronics equipment manufactur-ers in the United States, Asia,Europe and Japan.

“Since Texas InstrumentsPhilippines is an assembly andtest site, we are often comparedto our assembly plants inMalaysia, Taiwan and Japan,” ex-plains Norberto A. Viera, presi-dent and managing director ofTexas Instruments Philippines.

“In terms of employees, wehave fewer than our factory inMalaysia, about the same asTaiwan and more than the one inJapan,” he adds. “In terms of vol-ume, we are second to Malaysiabecause we measure our output

in terms of pins per unit. As faras revenue goes, we are thebiggest among the four sites. Thereason for that is the value of theproducts that we assemble here,”says Mr. Viera, the first Filipino tohead the company, who was alsonamed as president in April ofthe powerful SEIPI association(Semiconductor and ElectronicsIndustry in the Philippines Inc.).

The Philippine-assembled de-vices are used worldwide for spe-cialized consumer and industri-al products in the areas of audio,speech processing, multimedia,modems, digital signal process-ing solutions, decoding, note-book computers, automotiveelectronic controls, graphics andasynchronous transfer mode dataencryption.

Since taking the decision toset up in the Philippines 21 yearsago, Texas InstrumentsPhilippines has grown to becomethe country’s top exporter, witha cumulative value of some $11.2

billion since 1980. Exportvalue for the year 2000

was $2.1 billion.Among the

awards the firm haswon over the yearsare the People

Development andManagement Award in

1992, ISO Certification, andthe 1995 Award for TotalProductive MaintenanceExcellence, which is the top prizegiven by the Japan Institute ofPlant Maintenance. TexasInstruments Philippines was oneof the first companies outside ofJapan to receive that distin-guished award.

Sun Microsystems has showneven more confidence in thePhilippines’ high-tech industry,as it chose the country as thesite of its first ever joint venturein 1999 with the PhilippineSystems Products Inc. (PSPI) toform Sun MicrosystemsPhilippines. The courtship beganabout a decade earlier when PSPIacted as the authorized businesspartner of Sun Microsystems. Foryears the company was strug-

IT HQ Major foreign operators are expanding the horizons of the Philippine hi-tech industry.

CYNTHIA ROMEROMAMON President of SunMicrosystems Philippines

BERNARD YUManaging Director of Oracle Systems Philippines

NORBERTO A. VIERAPresident and Managing Directorof Texas Instruments Philippines

gling, and then in 1992 CynthiaRomero Mamon came on boardand turned the company around.In the span of three months, shemoved up from head of market-ing to executive vice presidentand then finally president.

“At the time we couldn’t evenmeet a $1 million quota. Thatwas in 1992. A year later webrought in $2.3 million, and thatstarted turning around the com-pany,” Ms. Romero recalls.

SunPhil, as it is commonly re-ferred to, also does good businesswith another giant in the industry,Oracle, which as a business ser-vice provider is at the core of ITdevelopment in the country.

“We have been doing busi-ness in the Philippines for 10years, and right now we have adominant position in the localmarket, anywhere from 60% to70% of the market share on thedatabase,” notes Oracle SystemsPhilippines managing directorBernard Yu.

He can also boast another firstfor Oracle: while the companyworldwide has captured some5% of the software market,Oracle Systems Philippines hasa whopping 20% to 25% mar-ket share.

TexasInstruments

Philippines hasgrown to becomethe country’s top

exporter

E-ASEAN TASK FORCE

� One thing that setsPhilippine PresidentGloria Macapagal Arroyoapart from herpredecessors is her abilityto rally her staff to takeon and completeHerculean tasks with aneagerness seldom foundamong members of anygovernment agency. In arecent speech to aspecial task force oninformation andcommunicationstechnology (ICT)integration anddevelopment within the10-member Associationof South East AsianNations (the so-called E-ASEAN Task Force),President Arroyo wasgiven a stirring responseas she laid down herobjectives to make ICTthe cornerstone of her

government’s war onpoverty. “The E-ASEAN initiative

is an important elementof an ASEAN strategythat will define our placeand role in the post-ColdWar, post-Asian financialcrisis world,” she told anE-ASEAN gatheringearlier this year.As a true leader, shecommended her ICTtroops for their hard workon coming up with aviable ASEAN frameworkagreement on ICTproducts, services andinvestments.“With this agreement wehave signaled to theworld that here inSoutheast Asia there is acommitment at thehighest level to undertakethe necessary steps toensure prosperity in the

global new economy,”she said. Also, like a true leader,Ms. Arroyo presented along list of challenges,including far-reachingimprovements to thecountry’s ICTinfrastructure, the settingup and enabling of astrong regulatoryenvironment, and thecontinuing enhancementand development ofhuman capital, which arethe backbone of thePhilippine ICT industry. “Our E-ASEAN agreementremains the only covenantamong developingcountries on a coherentstrategy for regional ICTdevelopment. We cannotafford to be complacent,because we cannot affordto be left behind,” thepresident concluded.


7


Domestic players join the fieldPHILIPPINE IT COMPANIES HAVE NOT BEEN LEFT BEHIND IN THE SOUTHEAST ASIAN HI-TECH BOOM,CHIPPING IN WITH THEIR OWN INNOVATIVE CONCEPTSAND PRODUCTS

THE BIG names in the PhilippineInformation Technology sectorare by no means restricted toforeign multinationals.Homegrown firms in the blos-soming industry are quickly es-tablishing themselves as com-petitive players seizing a heftymarket share and spurring de-velopment and job creation.

The three most successfullocal firms in the Philippine ITsector are IntegratedMicroelectronics Inc. (IMI),Automated Technology (ATEC)and Pacific Microwave, whichrecently changed its name toREMEC Philippines.

IMI has been around since1980 as a contract manufac-turer of electronic componentsand sub-assemblies for com-panies such as Hitachi, Toshiba,Alcatel, JVC, American PowerConversion and MitsubishiElectric just to name a few. IMI’smajority shareholder is thePhilippines’ most widely diver-sified conglomerate, AyalaCorporation.

“Being an Ayala-backed company isone of the key thingsthat drew me to thefirm,” remarks ArthurTan, IMI president. “Itmeans we are financial-ly secure.”

It also means that manage-ment at IMI follows the samesuccessful formula as any otherAyala subsidiary. As a result, IMIwas able to undergo a smoothtransition from a semiconduc-tor packaging and testing op-eration to a leading EMS(Electronic ManufacturingServices) company with yearlyprofits of some $5 million on aturnover of more than $60 mil-lion.

ON TRACK Homegrown Philippine companies offer qualityand on-time delivery coupled with excellent customer care.

IMI now caters not only tothe Printed Circuit Board man-ufacturing side, but also to fin-ish form encapsulation andeverything in it. The companyeven has design services thatcan do hardware and softwaredevelopment.

“To be able to make that tran-sition and still have that growthlevel in the end speaks volumesfor this company,” says Mr. Tan.“The main thing now is to makeanother level of transition, whichis one of the challenges that Ihave to face right now.”

Automated Technology, orATEC, on the other hand, hasbeen content to stick with semi-conductor assembly and test-ing, with special emphasis onproviding its service to thosecompanies that need non-stan-dard processes and products.To get the job done, ATEC likesto treat its clients more likestrategic partners than simplycustomers, working closely to

develop their productsand processes to exact

specifications.“These days qual-

ity is a given. Cycletime, on-time deliv-ery, these are all

givens. There’s got tobe something else that

you can offer your cus-tomers,” notes Renato M.Tanseco, ATEC’s chairman andCEO. And that something turnedout to be an innovative conceptcalled the captive line, meaningthat ATEC dedicates a place inits factory specifically to its cus-tomer.

“We have staff that are alsodedicated exclusively to the cus-tomers,” Mr. Tanseco explains.“They have an operation man-ager, quality manager, engi-

neering line and maintenance.These people are all working fora small business unit of theirown. The customer has controlover the line and over priorities.They have flexibility. They havecomplete control of the processand it is their own process thatis followed.”

Fresh thinking is also behindthe success story of the PacificMicrowave Corporation (PMC),which was acquired this sum-mer by the California-basedREMEC group. In 1995, FilipinoDomingo Bonifacio led six otherAsian-American Silicon Valleyentrepreneurs to his native coun-

try with about $3 million in back-ing to set up the nation’s first off-shore plant to assemble andtest fully integrated microwaveproducts for export.

“Our backers had no experi-ence in electronics, but they be-

RENATO M. TANSECOPresident and CEO of ATEC

IMIhas become a

leading electronicmanufacturing

services company

Continued on page 8

ZAMBALES

BATAAN

PAMPANGA

TARLAC

taken steps to assume an evenstronger role.

“Our biggest concern is tomake sure our banks have ade-quate risk management systemsin place,” says Mr. Buenaventura.One result of this policy of pre-emptive prudence is that the per-centage of non-performing loansheld by Philippine banks is onlyaround 15%, the lowest figure forall of Asia, and less than half therate in countries such as Thailandor Indonesia.

“We are not out of the woodsyet,” acknowledges Mr.

Buenaventura. “We certainly haveour problems, like most of ourAsian neighbors, but we feel weare in better shape to deal withthem.” Raising capital adequacyrequirements, imposing tight cri-teria for risk evaluation, closingloopholes that allowed specula-tors to flourish while ensuring thatresult reporting, auditing and ac-counting practices conform to in-ternational standards are some ofthe areas in which the centralbank has taken timely action.

But the scope of its functionsextends beyond supervision, reg-ulation and enforcement. In ad-dition to formulating monetarypolicy by ratcheting interest ratesup and down, it has a proactiveenabling role to help the financialsector develop and become moreinternationally competitive, suchas a legal framework that easesthe way for mergers that bring ef-ficiencies of scale for some bankswhile encouraging smaller play-ers to seek out niches in whichtheir size can best be turned toan advantage.

As part of this ongoingprocess, restrictions on bank own-ership have been loosened toallow foreign entrusts to control100% of a bank’s voting stock incertain cases. “We are probably

lieved that the wireless industrywould be the fastest growingindustry in the next 15 to 20years. They also wanted to con-tribute something to the coun-try,” recalls Mr. Bonifacio.

REMEC chairman and CEORonald E. Ragland says Mr.Bonifacio is nothing less than anational hero. “He ventured off

to the United States and hadburned in him the desire to goback and create opportunity forhis homeland. He spent 20 yearsin Silicon Valley developing aunique skill in a very unique areaof technology, came home andtransformed that dream into re-ality.”

When PMC sought financingearlier this year for a major ex-pansion project, it received of-

fers from at least 10 venturefunds. But at the last minutethey received an offer fromNasdaq-listed REMEC to ac-quire 100% of the firm and nowexpansion plans are even moreambitious.

“Our intention is to expandour team to as many as 10,000employees over five years. Nowwe are currently at 600,” Mr.Ragland says.


8


Continued from page 7

Leading Filipino company has the power and intelligence to succeedBACK in 1991, the 100%Filipino-owned semiconductor-packaging subcontractor TeamPacific Corporation had a diffi-cult decision to make. It couldeither remain in its safe and pros-perous position as an ordinaryassembly subcontractor, ormake a jump to the big leaguesand go for the gold.

“That year we decided to dif-ferentiate ourselves from the restof the subcontractors,” recallsTeam Pacific president and CEOFederico M. Fernandez. “Wedecided to go for the big powerdevices because not too manypeople in the world were doingthat at the time and we were verysuccessful. By the year 2000power devices accounted formore that 60% of our revenue.”

Meanwhile, the market forTeam Pacific’s Plastic Power,Hermetic and OptoElectronicssemiconductor packages hasbeen growing every year andhas attracted several upstarts tothe sector.

“We chose power devicesbecause it was a market that no-body wanted because it is a dif-ficult assembly to do. It is eas-

ier to differentiate when you aredoing something difficult, whicheven the big guys like Philips orAmkor decided to get out of,”Mr. Fernandez explains.

To beat the new competition,Team Pacific has committed it-self to providing unmatched cus-tomer service. Recently thecompany embarked on an ex-tensive “operational excellence”program at its manufacturingplant strategically located in anindustrial complex in TaguigMetro Manila.

It has also been spendingmore money on its large re-

search and development de-partment, which regularly comesup with innovative new powerpackages that respond to itscustomers’ needs, both in termsof quality and price.

Mr. Fernandez says thosecustomers are “Delphi, formerlyDelco, and we have AdvancedPower Technology from Bend,Oregon. Then we also have IXYSCorporation from Santa Clara.These are our three major cus-tomers for power devices.”

Power devices regulate theflow of current, increasing anddecreasing RPM. “The more in-telligence you put into the de-vice, the more work it can do.It may turn on at a time that itis most needed and turn downwhen the demand is low,” Mr.Fernandez explains.

“When I say big power, I’mtalking about devices that cangenerate 5,000 volts, 150 to300 amperes. These are the re-ally big ones. In Europe they usethese for windmills, electric lo-comotives, forklifts, pay load-ers and power stations. Delphiuses it for the automotive industry.”

FEDERICO M.FERNANDEZ Presidentand CEO of Team Pacific

RAFAEL BUENAVENTURAGovernor of the PhilippinesCentral Bank

IN THE SPOTLIGHT Team Pacific Corporation’s move into big power devices has paid off handsomely.

Prudence is bankingsector’s trump cardTHE CENTRAL BANK’S ACTIONS TO SAFEGUARD THEECONOMY’S STABILITY CAME AT A CRUCIAL TIME FORTHE PHILIPPINES AND HELPED THE FINANCIAL SECTOR SAFELY THROUGH THE ASIAN CRISIS

WHEN the Asia crisis of 1997-98 swept through the Pacific likea typhoon, the Philippine bank-ing system managed to stayafloat because someone had theforesight to close the portholes,so to speak, before it hit. Thatprocess had started in 1983when a major crisis and brushwith debt default forced author-ities to ratchet up capital re-quirements and establish the firstbank supervisory mechanisms.As a result, when other coun-tries’ financial institutions werefoundering, listing or simply sunklike a rock, most of those inPhilippines sustained damagethat was kept within the limits ofthe repairable.

According to RafaelBuenaventura, Governor of thePhilippines Central Bank, whatstarted off as a matter of lucky tim-ing has become the key to long-term strategic thinking aimed atbringing greater stability, cohe-sion and modernization to thesector. Rather than indulging inself-congratulation for having got-ten off lightly, the authorities have

BEYOND SEMICONDUCTORS Philippine operators have diversified their business.


9


CUTTING EDGE Renewed competition has forced Philippine banks to invest in technologically-advanced services in order to attract customers.

Asia’s most liberal country in al-lowing the entry of foreign banks,”says Mr. Buenaventura andnotes that the 17 multi-nationals currently op-erating in thePhilippines controlaround 14% of thesystems’ total re-sources. “The result hasbeen an update in deskpractices and technology thathas allowed us to become morecompetitive.”

To meet that goal, in bankingas in other sectors of the econ-omy, IT has proven to be the fac-tor that makes the difference. E-banking is off to a good start andthe Bankers’ Association is work-ing alongside the central bank todevelop an RTGS computerized

system for real-time transactionsettlement. At the same time the

forthcoming Fixed IncomeSecurities Exchange will

be built on a state-of-the art technologyplatform allowing forelectronic tradingand benchmarks

while adhering to thedelivery vs. payment

standard that will reducesettlement risk.

Says Mr. Buenaventura, “wecan retool our banking systembecause we have the people todo it. Like India, almost every-body here speaks English, andFilipinos are quite versatile whenit comes to computer applica-tions. When you go to Malaysiayou’ll find that the engineers are

all from here. As far as program-mers are concerned, we are prob-ably the world’s biggest supplier.We have a lot of engineers, some-thing like 100,000 new graduateseach year.”

The net result, the central bankchief says, will be tremendousimprovements felt at all levels ofthe banking industry and at theconsumer end above all. In an IT-enabled environment, it is not sur-prising Citibank has transferred itscall center to the Philippines. Theiraccounting for the rest of Asia isnow done out of Manila and soonthe European bookkeeping op-erations will migrate as well. “Eventhe Indians are beginning to runinto infrastructure problems andare starting to come here to setup their IT operations.”

Qualityof graduates

draws operatorssuch as Citibank to

set up in thePhilippines

PRESIDENT ARROYO’S U.S. VISIT

DURING HER recent working visit to theUnited States, Philippine President GloriaMacapagal Arroyo used the occasion ofthe 50th anniversary of the twocountries’ mutual defense treaty toannounce a number of economic andmilitary measures. In the words ofPresident Arroyo, “this treaty justdemonstrates how long we've beenallies. Allies in the second world war,allies in the Cold War, allies in the KoreanWar, allies in the Vietnam War, and nowallies in the war against terrorism. We'reallies, too, in the economic front. TheU.S. is our number one trading partner;cumulatively, our number one source ofinvestment.”As U.S. President George W. Bushconfirmed, “the Philippines have beengreat allies and friends for a long periodof time, and it is in our national intereststhat we maintain a very close and strongrelationship.”President Bush announced a package ofmilitary and development assistance forthe Philippines, a country he considershis staunchest ally in Southeast Asia. Themilitary assistance consists of aircraft,patrol boats, army vehicles and other

surplus defense equipment for the ArmedForces of the Philippines. Thedevelopment aid includes an outrightgrant of at least $90 million, mainly for thereconstruction of conflict-stricken areas inMindanao.Aside from the granting of military anddevelopment aid, the concrete results ofthe Arroyo visit are also reflected in anumber of bilateral and businessagreements that have been forged.To be signed by representatives of thePhilippine and U.S. governments are aloan agreement on urban water andsanitation, a grant agreement for thespecial zone of peace and developmentin the southern Philippines, andmemoranda of understanding related tothe United States Agency for InternationalDevelopment and agricultural matters.At least four business agreements, worth$1.8 billion, were also inked byexecutives of Filipino and Americancorporations.What’s more, top-level discussions werealso held on several areas of cooperationand concerns, ranging from agricultureand trade to veteran affairs andenvironmental protection.


10


Do you know where the bestpineapple comes from?

The Philippines!

Del Monte Philippines, Inc.

FruitfulYears75SIN C E 1 9 2 6

Dynamic financial sector breaks with traditionTHE PHILIPPINE BANKING SECTOR HAS SEEN A SERIES OF MERGERS IN RECENT YEARS AS TECHNO-LOGICALLY ADVANCED AND CUSTOMER-FRIENDLYSERVICES BECOME THE ORDER OF THE DAY

GLOBAL PLAYER Located in Manila, the Philippines’ stock exchange is a bustling and growing market.

FOUNDED in 1939, the PhilippineBank of Communications (PBCom)is one of these venerable seen onthe street these days flaunting abrand-new management style. “I’veonly been here a few months,” saysIsidro C. Alcantara, the presidentand CEO, who is first to admit that,

“they hired me to shake things upand transform the place a little.”That brief could equally apply to anumber of other long-establishedPhilippine banks that are unwillingto act the part of dozing dinosaurs.

Throughout its history, the fam-ily-owned PBCom has been a pil-lar of the Chinese-Filipino commu-nity and a major conduit for tradeand investment between thePhilippines and China–and the eth-nic Chinese interests that are promi-nent in business, manufacturingand trade all over the Pacific Rim.

The fact that Mr. Alcantara is thefirst Filipino to take charge at thebank marks a break with the tradi-tion symbolized by the abacus thathas served as PBCom’s corporatetrademark: reliable, slow, andChinese. But being anchored in agiven market and depending on itfor 85% of your business has bothits good and bad points, he pointsout. “The Chinese-Filipino com-munity runs a big part of the econ-omy. It can be seen as a weaknessif the bank restricts itself to a singlemarket or a strength in that it givesyou a solid base from which to di-versify.” Clearly he has opted forthe second alternative, hoping toachieve an equal balance betweenthe bank’s core clientele and a newsegment in which it feels it can becompetitive, defined as “the sec-ond tier of the top-end corporatemarket”.

To that end, PBCom last year ac-quired the Consumer Savings Bankin merger deal about the same timethat it doubled its paid-up capitalwith an infusion of fresh equity. Mr.Alcantara has just finished draftingan IT plan for the bank, and hopesto have all systems fully automat-ed by the end of 2002. That will helpin achieving a 20-30% personnelreduction while PBCom builds upits customer base.

Over at the Philippine NationalBank (PNB) the situation is defi-nitely looking better. Majority stake-holder Lucio Tan and the Arroyoadministration appear to haveagreed on terms that would allowthe bank to convert the $500 mil-lion outstanding debt the bank hasracked up with the Philippine gov-ernment into equity. Once thebank is safely on the road to re-covery and the shares rise in value,the government plans to unloadits stake in a few years’ time.

What went wrong at PNB? Afterall, we’re talking about the nation’s

sixth largest bank, anchoredagainst stormy weather by 34branch offices servicing two mil-lion customers, 79 overseas of-fices, 148 ATMs and its profit-spin-ning subsidiaries operating in thefields of insurance, investmentbanking, forex currency tradingand stock brokerage. A bank with85 years of history behind it that,up until 1949, issued its own cur-rency and acted as the country’sde facto central bank. A surfeit ofmisfortunes, briefly summarizedas exposure to the Asian curren-cies that got clobbered in the 1997crisis and a rotten core of non-performing loans in its portfolio,up to 40% of the total, some ofwhich were granted after a fewarms were twisted by the previousadministration.

In 1999, the government tooka 16% stake in the bank while theTan interests took control and bothpumped in capital to avert a melt-down. Former central bank officialFeliciano L. Miranda was broughtin to get it back on course. “A com-prehensive plan is not yet readybut we have implanted certain turn-around policies,” he says. “First ofall, we have improved our credit de-cision-making process. Second,we have encouraged our branchmanagers to go out in the field andcampaign aggressively for new de-posits. Third, we have been ex-panding our remittance business,

AURELIO R. MONTINOLASenior Executive Vice-Presidentof Bank of the Philippine Islands

FELICIANO L. MIRANDAPresident and CEO of PhilippineNational Bank

ISIDRO C. ALCANTARAPresident and CEO of PhilippineBank of Communications

opening new outlets in Canada,Australia and the United States.”

If age is any sign of steadiness,it would be hard to beat the Bankof the Philippine Islands, over 150years old and still going strongenough to rank second in termsof assets. BPI is a thriving, livelyconcern thanks to a policy of ag-gressive acquisitions and businessbuilding, that has seen it absorb14 competitors in 25 years, a trendthat it capped with the country’slargest-ever bank takeover in 2000that brought the Far East Bankinto the fold.

“As we merge and acquire, wetake the best of the breed, pickthem up, put it all together and ra-tionalize,” says Senior ExecutiveVice-President Aurelio R.Montinola. “We have a tradition ofbeing the first or second to comein with innovations. We have beenextremely successful with our pre-paid cash cards because that al-lowed us to reach people who arenot regular bank users. The otherarea is electronic banking. Up to40% of our transactions take placeoutside the bank.” Mr. Montinolawill not be put out, however, if youaccuse him of taking a conserva-tive approach to risk, since thebottom line shows operating prof-its of $60 million for 2000 that areexpected to grow by at least an-other 20% by the end of the cur-rent year.

“Our biggestconcern is

to make sure bankshave adequate risk managementsystems in place.”

RAFAELBUENAVENTURAGovernor of the Philippines

Central Bank

“We are alwayson the lookout

for possible strategicalliances, particularlyin the area of newtechnologies, be theysystems, products or services.”

ALFONSO S.YUCHENGOExecutive Vice-Chairman and

CEO of RCBC

IN THEIROWNWORDS


11


Banking on innovationAN EMPHASIS ON HUMAN RESOURCES AND CUTTING EDGE TECHNOLOGY HAS ENABLED AMBITIOUS FINANCIAL PLAYERS SUCH AS IBANK AND RCBC TOJOIN THE MAJOR LEAGUE OF PHILIPPINE BANKERS

CUTTING EDGE Renewed competition has forced banks toinvest in technologically-advanced services to attract customers.

OPENING a new bank may notseem the wisest expenditure oftime and talent in a country like thePhilippines where a great many ex-isting institutions (45 to 50) com-pete for what is in reality not all thatmuch in asset terms. But if ever therewas a good reason for bucking thecommon wisdom, the founders ofthe International Exchange Bank(iBank) had one when they con-vinced Ramon Y. Sy to come outof retirement in 1995 and takecharge.

A 50-year-veteran ofthe sector, Mr. Sy hasa reputation as abanker’s banker. Hestarted off as a mes-senger boy at the Bankof America and, in bestrags-to-riches tradition,working long hours and goingto night school, made chairman 25years later. Afterwards he took overas President and CEO of the UnitedCoconut Planters Bank and retiredin 1993, only to find that it is hardwork to take it easy when workinghard is easy to take.

The challenge of organizing andbuilding a major financial institu-tion from the ground up was aboutthe only thing that had not yet ap-peared on his résumé and too good

an opportunity to be passed up. “Ifelt there was room for another wellmanaged, well capitalized bank.Even if we didn’t have the size orthe age–people tend to see thoseas indicators of stability, thoughthat isn’t necessarily the case–wecould position ourselves by beingdifferent.

“In terms of products, ours arethe same as everybody else’s. Youcan call it whatever you please, butin the end, a savings account is

just a savings account. Sowhat we did was to cre-

ate an environment ofservice. We look forservice-oriented peo-ple, spend a lot of timeand money on training

them, and make surethey deliver.”To a large extent, says Mr.

Sy, first impressions are what count.“We try to make our premises spa-cious and airy; there are no metalgrills between client and teller. Wemake sure even the guards arecourteous and well informed. Ourrest rooms can compare to thebest hotels.” The second pillar ofiBank’s success is the somewhatheretical notion that a bank has tosell itself, rather than wait for peo-ple to walk in the door.

“We have an in-house trainingprogram that teaches our salespeople to go out and sell the bank.”Cost management also makes adifference. “Our philosophy is that

how much you spend is less im-portant than spending it right. I don’twant to be told, ‘Sorry, sir, we justdon’t have the budget.’ On theother hand, just because money hasbeen allocated for something, thatdoesn’t mean you have to spendit. Budgets are made by people likeyou and me and can be changedby people like you and me.”

Service at iBank also meansgiving the customer a little morethan he was expecting. All 59 (soonto be 70) branches are fully IT-en-

abled which allows for customersto cash a check at any one of them,thanks to an on-line signature ver-ification facility. Recently the bankadded to its product list thanks toa deal that allows recipients to cashiRemit Internet money remittancesfrom overseas or have the amountcredited instantly to their accounts.

Within a year of its start-up, iBankhad quadrupled its assets and sincehas continued to post phenomenal

Withina year, iBank

had quadrupledits assets and hassince continued

to grow

Continued on page 12

RAMON Y. SYPresident of InternationalExchange Bank (iBank)

Laguna Technopark, Inc. Tel: (632) 818-3840 ● Fax: (632) 818-3696E-mail: [email protected] ● www.lagunatechnopark.com.ph

AYALA LAND, INC. MITSUBISHI CORPORATION KAWASAKI STEEL CORPORATION

A 387-hectare state-of-the-art development backed by three leading names in Asian business


12



growth so that it is now ranked in15th place. In return on equity, iBankis already in the top three. As of Junethis year it had already surpassedits total net income for all 2000. SaysMr. Sy, “our objective was to get upthere in the top ten and I stillsee that happening some-where down the road.Meanwhile, we arehappy if people see usas one of the larger,more aggressive banks,forward-looking andmodern.”

Another institution on thecutting edge is the RizalCommercial Banking Corporation,known universally as RCBC. It op-erates as the financial services armof the Yuchengco Group of

ALFONSO S. YUCHENGCOExecutive Vice-Chairman and CEO of RCBC

Companies, in association withthe Sanwa Bank of Japan, whichholds a quarter of the equity. Thatrelation and other partnershiparrangements allow the bank tooffer a broad range of life and otherinsurance products. As with otherlong-established players, more

than half of RCBC’s turnoverwas coming from a nu-

cleus of corporateclients, so when busi-ness fell off owing tothe difficult econom-ic climate, it was a sig-

nal that it was time tobranch out deeper into

the retail segment. “We made a decision to realign

our portfolios and diversify ourrisk,” says Alfonso S. Yuchengco,RCBC’s Executive Vice-Chairmanand CEO. “We have become thethird-largest issuer of credit cards,number one in auto loans andnumber two in real estate. You getbetter spreads.” Simultaneously,the bank launched EnterpriseBanking, an internet-based plat-form for business clients that of-fers them services such as real-time fund transfers and accountmonitoring. Says Mr. Yuchengco,“we are always on the lookout forpossible strategic alliances, par-ticularly in the area of new tech-nologies, be they systems, prod-ucts or services.”

Newcomer targets ‘middle retail’ nicheIN BANKING as in any otherbusiness, it helps if at all timesyou know where you are andwhere you want to be. For thefamily-owned Banco de Oro(BDO) the answer to both isclearly the ‘middle retail’ mar-ket because the niche it haschosen is a deep and fertileone with plenty of room forgrowth.

“Trying to be all things to allpeople is a surefire recipe forsub-scale business,” saysNestor V. Tan, the bank’s pres-ident. “We are limited in termsof geography to four majorurban centers and in marketpresence to the middle seg-

ment, but we try to maintain astrong position wherever weare.”

Banco de Oro is a relativenewcomer on the scene, its ini-tial capitalization anchored inthe SM chain of upmarket shop-ping malls founded by entre-preneur Henry Sy. It was notvery active until the banking lib-eralization laws of 1997 openeda window of opportunity forSM’s commercial properties tobecome the bank’s interfacewith the consumer market, par-ticularly with the 1.2 million up-scale shoppers who frequent itsmalls and department stores.

“Our strength in the middlesegment is what allows us tobranch out to large corporatesectors as well as the small andmedium-size enterprises,” saysMr. Tan. They also benefit fromthe kind of expertise BDO cansupply in areas such as retaildistribution and cash-flow man-agement, and its long-estab-lished working relationship withthe mid-market distributionsector.

The bank’s chairperson,Teresita Sy, has accepted the

task of seeing that SM andBDO’s interlocking orbits gen-erate the proper synergies thatallow both to achieve their re-spective goals. But she em-phasizes that would be mis-leading to imagine BDO existsto serve SM’s interests or to bea handy source of financing.“We look at the companies asseparate businesses,” she saysand notes that, while at first,much of BDO’s activity was fo-cused on SM’s retail tenantsand suppliers, now that it hasthe distribution channels andnetwork, it is in a position to ex-tend its reach.

The commitment to offer in-novative products and solu-tions led BDO to develop astrategic alliance withAssicurazioni Generali of Italy forits insurance business as wellas moving into foreign ex-change and investment bank-ing. Last year, BDO was cho-sen as a lead underwriter for amajor government bond float,and launched its Internet andphone banking facilities, alongwith two new tax-free invest-ment outlets. Net income rose

to $9 million on a 34% increasein total resources. Depositssoared by 42% to $920 million,and its net worth grew by 8%.The loan portfolio was up 24%to total nearly $600 million, withthe non-performing percent-age only half of the industry av-erage. At the same time, it fi-nalized a share swap deal thatallowed the Dao Heng bank,rated one of the best-managedregional institutions, to take a20% stake.

Although that allowed BDOto benefit from the Hong Kong-based bank’s experience andtechnical know-how in the con-sumer field, Dao Heng recentlyannounced that it will be un-loading its stake in the nearfuture and five other bankshave expressed an interest inbidding. “We haven’t yet gotto where we want to be butwe’ve made it to the uppertier,” says Ms. Sy. “We wouldcertainly like to grow on a moresignificant level, though, We either get out now or build upthe bank with a view to the future. We choose the secondoption.”

NESTOR V. TANPresident of Banco de Oro

RCBCis the third-

largest issuer ofcredit cards andnumber one in

auto loans

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Tough clients make us perform at our best. That’s why we thrive on satisfyingthe toughest of tough customers. We act upon their needs with the expertiseand immediacy they expect. We are honest and fair in all our dealings.And we give them the respect, courtesy and consideration that they deserve.If you’re eyeing the Philippines for your business, talk to us, no matter howtough your needs are.

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SPECIAL ADVERTISING SUPPLEMENT

Southeast Asia’smaritime hubTHE LOGISTICAL NIGHTMARE OF PROVIDING A SHIPPINGSERVICE TO LINK THE PHILIPPINE ARCHIPELAGO’S 7,000-PLUS ISLANDS IS ALSO AN OPPORTUNITY FOR PRIVATE OPERATORS TO MAKE THEIR PRESENCE FELT

SETTING up and maintaining aviable transport infrastructure canbe a major headache and finan-cial drain for the most developedof countries. For the Philippines,however, an archipelago withmore than 7,000 islands and withan economy that is just gettingoff the ground, the challenge iseven more daunting. Only somuch freight can be flown in andout, leaving the shipping indus-try to carry much of the load, soto speak, for an economy that isheavily dependent on importsand exports.

And then of course there isthe logistical nightmare of pro-viding a maritime service that canmove those goods, as well aspeople, within the Philippines’network of ports. Thanks to gov-ernment foresight, the shippingindustry in the Philippines wasderegulated and liberalized be-tween 1992 and 1993. As a re-sult, availability, quality of serviceand maritime safety improved asthe industry began to attract in-vestors and spawn mergers.

One such merger occurredamong the country’s three biginter-island shippers–WilliamLines Inc., Carlos A. GothongLines Inc., and Aboitiz Shipping

Corp., a division of the Aboitizgroup of banking and energycompanies–to form the WG&A,the Philippines largest shippingcompany offering domestic pas-senger and cargo transportacross major routes and to 23principal ports across thearchipelago with itsfleet of 28 modernvessels.

“Without a doubtthat merger was theright thing to do,”says Endika Aboitiz,president and CEO ofWG&A as well as Aboitiz andAboitiz Jebsen. “The first threeyears we had a lot of adjustingto do, but now the operation isrunning very well. The technicalmanagement is fine, we’ve got agood hold on the business andit is fully integrated.”

A good hold means that cur-rently all WG&A routes are prof-itable, with last year’s revenuesover the $100 million mark. Thecompany can hardly miss on theprofit scale, as it accounts fornearly 50% of shipping in thePhilippines.

But management refuses toflounder in the sea of ever-in-creasing competition. WG&A hasfully embraced the IT age by in-stalling operating systems that itneeds to function in the global and

e-business environment. “By theyear 2003 or 2004 we will be afully e-business company. Todaywe are already able to take ap-plications on-line. The operatingsystems of our passage group,freight group and financial sys-tems are all increasingly being in-tegrated,” Mr. Aboitiz proudlynotes.

One of the main priorities forWG&A and for the entire shippingindustry in the Philippines, Mr.

Aboitiz says, is the liberal-ization of the port infra-

structure managementto the private sector,as many of the facili-ties need to be up-

graded. The industryis also pushing for an

even playing field with theairline industry, which gets spe-cial tax treatment from the gov-ernment that allows it to close inon maritime transport rates.

For other companies in theshipping industry, diversificationis the key to growth. TransnationalDiversified Group (TDG), as itsname suggests, is a prime ex-ample. Roberto C.Delgado, TDGchairman and CEO, founded thecompany with 16 employees in1976 on what he calls the prin-ciples of a win-win partnership:synergy and mutual trust. TodayTDG is one of the largest service


ThePhilippine

shipping industrywas deregulatedbetween 1992

and 1993

A WEIGHTY MATTER With deregulation of port infrastructure in sight, the upgrading of facilities is vital.

WG

&A

ENDIKA ABOITIZPresident and CEO of WG&A

Through time... always there... moving forward.

Head Office

PBCom Tower6795 Ayala Avenue corner Herrera Street

Makati City, PhilippinesWebsite: www.pbcom.com.ph

E-mail address: [email protected]

Trunk Line (632) 830-7000Customer Care (632) 830-7070

Treasury (632) 830-7031, 830-7034, 893-3379PBCom Tower Marketing Coordinator (632) 830-7263

Member: PDIC (Deposits insured up to P100,000)

Philippine Bank of Communications


14



intermediaries in the Philippines,with more than 7,000 employ-ees and a turnover of some $300million. Its core business is ship-ping transport and logistics, aswell as land and air cargo, all ofwhich represent 70% of its rev-enue.

“Today we haveevolved into a soliddynamic group ofmore than 30 oper-ating companies,and we have diversi-fied into five operatingdivisions,” says Mr.Delgado. “These divisions are:Total Logistics, which includesshipping, distribution, air cargo,cargo consolidation, warehous-ing, third party logistics, chassis

leasing and customs brokerage;Ship management, comprised ofseafarer training, international de-ployment of seamen, crewing ofluxury liners and maritime e-train-ing; Air and travel, which includesAsiana Airlines, American ExpressTravel and aviation services; ICT, which includes e-business

solutions, businessprocesses outsourcing

services, software de-velopment, and con-tact center/call cen-ter customer e-care;

and Investments,which includes real es-

tate and property devel-opment, construction and pro-

ject management, foodservices and franchising, se-curities trading and insurancerisk management.”

CARRYING THE LOAD The Philippine archipelago’s enviable location at the heart of one of the world’s fastest-growing regionsplaces substantial emphasis on the country’s shipping industry, a sector with significant investment potential.

TDG’sstaff has

grown from 16 workers in 1976 to

today’s 7,000employees

ARTHUR TUGADEPresident of TDG

ROBERTO C. DELGADOChairman and CEO of TDG


15


Changing the landscapeof Philippine Bankingfor the last 150 years.

http://www.bpiexpressonline.com

POWER TO THE PEOPLE Mirant Philippines is the archipelago’s largest private producer of electric power.

Soaring success for high-flying delivery service

WHEN the U.S. multinationalcompany FedEx decided to setup its Asian hub at the formerAmerican base of Subic Baynear Manila, it needed a well-established Philippine transportlogistics company as its locallicensee. The search did nottake long. The only companyto fill the bill was Airfreight 2100,which had built up a reputationas a serious and dependablefirm since it was founded in1979 by six Filipino businessleaders headed by Alberto D.Lina, its current chairman.

Since then, Airfreight’s suc-cess has soared by focusingon the semiconductor andelectronics industry, thePhilippines’ main exportingsector which accounts for 70%of Airfreight 2100’s revenue.Airfreight officials are proud ofthe fact that the company ful-fills 99% of FedEx requirementsin terms of service quality andpick up and delivery commit-ments. Its mainstay is bulkcargo express in which man-ufactured products and partsare flown to Asia and NorthAmerica overnight, a deliveryrecord that would even makeTom Hank’s character in themovie Castaway proud.

“We started as a customsbrokerage company and thengrew into a full-blown logistics

company, including a ware-housing, trucking and inter-modal transport service thatcaters to the electronics in-dustry,” Mr. Lina explains.When we began working asFedEx’s sole licensee in thePhilippines, we were respon-sible for the delivery of ship-ments moving through theFedEx network to thePhilippines. We then expand-ed our partnership, which in-cluded the signing of a trade-mark agreement that allowsAirfreight 2100 the right to usethe FedEx logo in this country.The service agreement also in-cluded pick up and delivery forFedEx in the Philippines.”

The company also assistsFedEx in its clearance opera-tions and provides warehous-ing services to U.S. multina-tionals. In terms of manpower,Airfreight has about 900 peo-ple that support FedEx oper-ations, sales and marketing.

“We are strategically locat-ed in areas where the semi-conductor companies are pre-sent from north to south,” saysMr. Lina. “Our FedEx expressservice, also known asInternational Priority Service,is the most popular service,especially among the semi-conductor and electronics in-dustry. We can provideovernight delivery service tomajor Asian destinations andto all major cities anywhere inthe United States.”

Those companies in thePhilippines counting on thatservice include such big namesas Intel, Texas Instruments,Cypress, Analog, and practi-cally all 161 members of thecountry’s powerful SEIPI(Semiconductor andElectronics Industries in thePhilippines) association.

ALBERTO D. LINAChairman of Airfreight 2100

DEFYINGTIME ANDDISTANCE

With over twodecades of

deliveryexperience

behind them,Airfreight 2100

have built upan extensiveclient base.

Private operators with apowerful presenceWITH DEMAND EXPECTED TO SURPASS SUPPLY WITH-IN THREE YEARS, THE TIME IS RIPE FOR A SURGE INFOREIGN INVESTMENT IN THE LUCRATIVE PHILIPPINE

ENERGY SECTOR. COMPANIES SUCH AS MIRANT ANDAEV ARE SET TO TAKE FULL ADVANTAGE OF THE DIVESTMENT LEGISLATION CURRENTLY IN THE WORKS

IN A BID to keep the cost of de-velopment low in thePhilippines, the governmentaims to move away from thecountry’s dependence on im-ported oil and is pushing to in-crease the private sector’s in-volvement in the geo-thermal,hydropower, coal and nat-ural gas production ofelectric power.Legislation thatwould eventuallylead to the sale ofgenerating plantsbelonging to thestate-owned uti l i tyNapocor is currently in theworks with implementation ex-pected late next year.

The idea is to create a sys-tem in which privatized gener-ators would sell to private dis-tributors who would in turn pushfor market rates. It would alsoleave the door open to moreforeign investment in the sec-tor as demand is expected tosurpass supply within threeyears at the current pace.

The country’s largest privateproducer of electric power isMirant Philippines, a subsidiaryof Atlanta-based MirantCorporation, which is one ofthe world’s leading power pro-ducers with investments in elec-

tricity generation in more thana dozen countries. FormerlySouthern Energy, MirantPhilippines owns and operatesmore than 2,500 megawatts(MW) of installed capacity, whichit supplies entirely to Napocor.The subsidiary handles the par-

ent company’s divisions inAustralia, China and

India.“If you look at

Mirant Philippinestoday, you will seethe blending of East

and West, the best ofboth worlds converg-

ing to create one of thecountry’s most successful com-panies. Nowadays in thePhilippines it’s hard to find acompany that has that kind ofmixture,” notes EdgardoBautista, president of MirantPhilippines.

Over the past four yearsMirant Corporation has poured$2.8 bi l l ion into MirantPhilippines, making it the sin-gle largest U.S. investment inthe archipelago. MirantPhilippines is also one of thecountry’s most successful com-panies with profits runningabout $150 million, and is the

most profitable foreign opera-tion of the NYSE-listed MirantCorporation.

“The Philippines remains avery important market forMirant,” Mr. Bautista explains.“We want to remain a significantbusiness unit of our global com-pany by continuing the excel-lent performance of our peopleand assets as well as meetingthe overal l goals of Mirantworldwide.”

With electricity demand ex-pected to grow by about 9% an-nually until the end of the cur-rent decade, nearly 10,000MWof new installed capacity will beneeded, meaning that there isplenty of room in the sector forthe likes of foreign companiesand local firms like the giantAboitiz Equity Ventures (AEV),

EDGARDO BAUTISTAPresident of Mirant Philippines

Mirant’s$2.8 billion

investment is thesingle largest U.S.investment in the

Philippines


AIR

FR

EIG

HT


16


the holding company of theAboitiz group.

For many years Aboitiz con-centrated its business in thehigh growth areas of central andsouthern Philippines before tak-ing steps to expand northwardsthroughout the archipelago. Thegroup is now concentrating on

its core business in the electricpower sector while divestingfrom other non-performingareas.

AEV is listed on the PhilippineStock Exchange and reportedprofits last year of $21 million onrevenues of $200 million, with68% of that coming from its en-ergy operations and 25% com-ing from its major stakes in the

Union Bank of the Philippines,one of the country’s top five,and City Savings.

AEV, which is strongly com-mitted to investing in thePhilippines, is the owner of sev-eral electricity distribution com-panies, including one of thelargest in the nation, Davao Light& Power, as well as several elec-tricity generating companies.


NATURAL POWER The Philippines is exploring renewable sources of energy to reduce oil dependency.

A business-friendlyenvironmentTHE COUNTRY’S INDUSTRIAL PARKS HAVE BEEN IN-STRUMENTAL IN ATTRACTING AMBITIOUS PRIVATEMANUFACTURING FIRMS TO SET UP IN THE PHILIPPINES

WHILEthe huge private- and state-supported drive to further developthe Philippines’ blossomingInformation Technology industry isgrabbing all the headlines, theremay be a tendency to underesti-mate the economic importance ofthe country’s manufacturing in-dustry, one of the most productivein the region.

As a nation of English speakerswith strong cultural ties to the UnitedStates, the Philippines has devel-oped a work ethic that is strikinglymore American than one can findin most Western European nations.And unlike Europeans, who con-tinually try to point out U.S.-Europeandifferences, Filipinos like to stress thesimilarities and are more willing toconform to American tastes.

That ethos is most apparent inthe major industrial sectors, not

least manufacturing. “We have aclose affinity and relationship withthe United States. Not just politically,but culturally and commercially. Theaverage Filipino inherently under-stands U.S. culture and is thereforebetter able to quickly absorb whatneeds to be done. Thus, he be-comes more productive more

quickly than others do,” explainsPhilippine Secretary of Trade andIndustry, Manuel “Mar” Roxas.

As a result, Philippine industrialparks, which help drive the nation-al economy and fuel the capital’sbustling financial district, are doinga brisk business.

Especially in demand are loca-tions developed by LagunaTechnopark Inc., which was formedin 1989 in response to the gov-ernment’s call for private-sectorparticipation in countryside devel-

VINCENT Y. TANExecutive Vice President-Planning Group of Ayala Land, Inc.

BEN CHANPresident and CEO of Bench


17


LAGUNA TECHNOPARK, located in the Laguna province, is a joint venture between Ayala Land Inc., Mitsubishi Corporation and Kawasaki Steel Corporation.

opment. The company is a jointventure of three established namesin the region: Ayala Land Inc., thereal estate arm of the AyalaCorporation best known for devel-oping Makati, the country’s leadingbusiness and financial center;Mitsubishi Corporation, which isactively involved in marketingLaguna Technopark around theglobe; and Kawasaki SteelCorporation, which contributestechnical expertise in the engineeringand design of Laguna Technoparksites.

Despite its name, the 80 or solocators now operating in the 387-hectares ‘techno’ park in the Lagunaprovince (the country’s largestin terms of locators) are notlimited to IT firms, saysAyala Land’s executivevice president-planning group,Vincent Tan. “LagunaTechnopark is export-oriented and is more fo-cused on light manufactur-ing, especially electronics andautomobile manufacturing.” in-cluding such big names asPanasonic, Hitachi and Honda.

Bobby Dy, assistant vice pres-ident of Ayala Land and generalmanager of Laguna TechnoparkInc. says the key to LagunaTechnopark’s success is its investor-friendly attitude. “We pro-vide world class infrastructureand amenities that make it easyfor companies to set up theirmanufacturing operations,” Mr.Dy explains. “In addition, ex-porters are provided by the gov-ernment with generous tax in-centives” that are available onlyto those who locate in areas rec-ognized as special economiczones, such as LagunaTechnopark.

Since there are few who cancompete with their sites, both Mr.

Dy and Mr. Tan say half the bat-tle is won once companies decideto set up in the Philippines. Thecountry’s strategic location in theheart of Asia’s eastern gateway isa key factor for many, especiallyU.S. firms. The Filipinos’ high pro-ductivity rate and low turnover en-sure business momentum andgenerous tax incentives and sim-plified investment procedures havecreated an environment that for-eign investors find hard to resist.

This dynamic business envi-ronment has also given life to manylocal firms, such as Bench, oneof the country’s leading clothingretailers and designers, which was

started 14 years ago by cur-rent president and CEO

Ben Chan and nowboasts some 200stores and an annu-al turnover of about$100 million.

The Gap-like chain,but with more sophisti-

cated designs than its U.S.counterpart, is quickly becominga complete lifestyle store, sellingaccessories, food, hair and skincare products and cosmetics. “Weare all over the country, in fact wehave buyers from Los Angeles,”Mr. Chan says, adding that thecompany is warming to the ideaof setting up franchises overseas.“We get a lot of inquiries fromFilipinos in the United States. Wewill try it out in Guam and see howit works. Then probably by theend of next year we will open onein California.”

To date, Bench’s combinationof American-style clothing withPhilippine quality and personal-ized service has been a winner.“Anything American will sell wellin the Philippines. So our style isinfluenced by the U.S., but Benchis 100% a Filipino company,” addsMr. Chan.

Generoustax incentivesand simplified

procedures havedrawn companies

to Laguna

Leading Philippine smelting companymakes its presence felt ONE of the drawbacks of pri-vatizing sluggish, non-per-forming companies is that youoften get well-meaning entre-preneurs who make their liv-ing speculating on how cheap-ly a sluggish, non-performingpublic entity can be bought,repackaged and sold at a tidyprofit.

Once in a while, as was thecase of the PhilippineAssociated Smelting andRefining Corp. (PASAR), it turnsout that, under the right man-agement, the non-performerends up evolving into a profit-making entity.

PASAR had been estab-lished in 1976 as a coppersmelter and refinery. One of 11major industrial projectslaunched by the government,PASAR was joint financed bythe National DevelopmentCompany, a consortium ofPhilippine copper mining com-panies, the World Bank, anda consortium of Japanese trad-ing companies.

At about the time that theformer Ramos administrationput PASAR on the block, merchant banker Carlos G.Dominguez was in the marketfor a suitable investment op-portunity. “One of my friendssuggested PASAR. So westarted working on it. We pack-aged it and then went aroundlooking for a strategic partner,”Mr. Dominguez recalls.

In June 1999, a consortiumof Philippine investors and aSwiss trader, Glencore

International, acquired 90% ofthe government’s shares in thecompany. According to Mr.Dominguez, chairman andpresident of the company, “forPASAR, for Glencore, and forthe Philippines as a whole, thisis a very good deal. We bringour knowledge of the Philippinemarket and Glencore bringsits international know-how.”

In October, PASAR, underMr. Dominguez’s leadership,announced trade agreementswith China Minmetals and thePhilippine state-owned utilityNational Power Corp (Napcor)worth about $50 million for2002.

Minmetals agreed to pur-chase a minimum of 24,000metric tons of copper cathodefrom PASAR for around $35million. Another estimated $13

million agreement signed in-cluded a three-way trade dealwhereby PASAR will supplycopper cathode to Minmetal,who will supply coal to Napcor,who will then supply electrici-ty to PASAR .

The deal will give PASARfirm footing in the growingChinese market and lead toPASAR’s export of other prod-ucts. It will also help lower thecompany’s light bill. PASARcurrently consumes more than$1 million of electricity permonth.

CARLOS G. DOMINGUEZChairman and President ofPASAR

SPARKING GROWTHPASAR has announced agree-ments with China Minmetalsand National Power Corp(Napcor).

IN THEIROWNWORDS

“At LagunaTechnopark,

we provide worldclass infrastructureand amenities thatmake it easy forcompanies to setup theirmanufacturingoperations andexporters alsobenefit fromgenerous taxincentives grantedby thegovernment.”

BOBBY DYAssistant Vice President of

Ayala Land and General

manager of Laguna

Technopark, Inc.

“AnythingAmerican

will sell well in the Philippines. So our style is influenced by the United States,but Bench is a100% Filipinocompany.”

BEN CHANPresident and CEO of

Bench


18


The cream of Asiancrop producersSTEADY GROWTH IN THE FACE OF NATURAL CRISESHAS OPENED UP THE PHILIPPINE AGRICULTURAL SECTOR TO INVESTORS, WITH COMPANIES SUCH ASDEL MONTE PHILIPPINES FLOURISHING AS A RESULT

A paradise ofemerald islandsTHE PHILIPPINES’ MAGNIFICENT TROPICAL BEACHESAND MOUNTAIN RANGES, COMBINED WITH A FIRST-CLASS HOTEL INFRASTRUCTURE, ATTRACT BOTHPACKAGE TOURISTS AND BUSINESS TRAVELERS

THE PHILIPPINE agriculture sec-tor is another industry the gov-ernment is promoting in its bidto end poverty by the end of thedecade. The archipelago’s year-round tropical climate has at-tracted some of the biggestmultinational names in the agri-business, which have both thefinancial resources and experi-ence to turn the Philippine agri-culture industry into a widelyprofitable and job-producing en-terprise.

The most recognizable nameby far is Del Monte Pacific andits unit Del Monte PhilippinesInc., which supplies, but is notaffi l iated with, the U.S. DelMonte Corporation or its par-ent Del Monte Foods Company.This state of affairs is a resultof the U.S. food and tobaccogiant JR Reynolds purchasingthe Del Monte Corporation in the1980s and selling off its regionalpieces. Maintaining the 110-year old Del Monte brand, how-ever, provides the Philippinecompany with instant consumerrecognition.

FEW WILL argue that the tourismindustry has seen better days. Therewas a time, before September 11,2001 to be exact, when the waryvacationer could avoid so-calledhot spots or areas of conflict. Theterrorist attacks on the United Stateschanged all the rules. The entireworld is now a hot spot and is ex-pected to remain that way for a longtime. In the meantime, the wondersof the world are still out there andare still as inviting as ever.

And as far as seeing the treasuresof the world are concerned, thePhilippines is a must. An English-speaking nation of 7,000 islands inthe heart of Southeast Asia whosepeople adore everything American,the Philippines remains one of theworld’s unspoiled tropical paradis-es. And in every establishment in thebustling cities–from the most luxu-rious hotel to the local McDonalds–afriendly Filipino face is there to openthe door and greet customers witha sincere welcome and later with ahearty “have a nice day”.

That homegrown courtesy is es-pecially apparent at the PeninsulaManila Hotel, one of the most re-spected and renowned hotels in allof Asia. Rated by Business TravelerAsia as the best hotel in Manila in

Del Monte Pacific is one ofAsia’s leading producers, mar-keters and exporters of premiumquality, branded processed fruits,beverages, tomato and otherprocessed food products, in-cluding spaghetti sauce, ketchupand pasta, and non-processedproducts such as pineapples.

Del Monte Philippines ownsthe Del Monte Brand in that coun-try, where it enjoys the leadingmarket share across all major cat-egories and operates one of theworld’s largest integrated pineap-ple production facilities. The com-pany also has the exclusive rightsto produce and distribute foodand beverage productsunder the Del Montebrand in the Indian sub-continent, as well aslong-term supplyagreements with DelMonte trademarkowners and licenseesin North America, Europeand Asia.

“Del Monte Philippines is a sep-arate legal entity owned byLapanday Macondray (a leadingPhilippine exporter of fresh foodsand a Del Monte supplier) andthe European-based Del MonteInternational. Two years ago wehad an Initial Public Offering inSingapore. The holding compa-ny is Del Monte Pacific Limited,”explains Del Monte Philippinespresident Alejandro T. Castillo.

Del Monte Philippines is one ofthe few companies in the coun-try that has been able to flourishin the face of crisis, whether man-made or natural. “The joke hereis that somebody must have for-

gotten to tell local Del Monte busi-ness that there was an Asian cri-sis, that Mount Pinatubo erupt-ed and that Marcos wasdethroned,” says Mr. Castillo.

Mr. Castillo shrugs off the jokeand points to the company’s re-structuring efforts. “The Lordblessed us. We have grown inspite of any crisis. In fact, our bestyears were during the financialcrisis.” His excellent marketingskills and determination to stickto the basics also accounts for thecompany’s invulnerability to hardtimes.

“For example, at one time allof our sales were going throughsix distributors, and that was tooexpensive. So there’s a structurehere where part of the businessshould be serviced by us and partshould go to the distributors, butthat entailed severing 50-year-old

relationships. So we talkedto them and smoothed

it out. We gave thema chance to bid. Twowon, four lost. Wenow service 65% ofthe business and

they service 35%. The35% is the mom and pop

stores and the 65% are thesupermarkets.”

The company’s one canneryis located on the southern islandof Mindanao and comprises40,000 acres or about the size ofa small province. “All that ispineapple, young pineapple,medium pineapple and full-grownpineapple, it’s enough to makeyou sick and tired of pineapple,”Mr. Castillo jokes.

The plantation contains sev-eral communities with a total pop-ulation of about 3,000 who plantand care for the pineapple.“Depending on the size, a com-munity will have a school, churchand clinic,” he concludes.

PINEAPPLES GALORE Del Monte Philippines’ Mindanao plantation covers some 40,000 acres. TOO GOOD TO BE TRUE The Philippines’ lush interior.

BORACAY ISLAND Lapped by the warm waters of the Pacific Ocean, the Philippines is aparadise of blues and greens renowned for the hospitality of its population.

ALEJANDRO T. CASTILLOPresident of Del MontePhilippines

Del MontePhilippines is owned

by LapandayMacondray and DelMonte International

1998, 1999 and 2000 and listed inCondeNast’s list of distinguished ho-tels, the newly renovated, 25-year-oldPeninsula Manila is considered theundisputed reference for luxury busi-ness hotels in the capital.

“What we are best known for isour high level of service,” notes T.Markland Blaiklock, general manag-er of the Peninsula Manila. “We areknown for having doormen who willremember a guest’s name even aftertwo or three years. We are also a busi-ness hotel that has all the technolo-gy a business person would want.”

The most striking thing about thePeninsula Manila is its lobby. It is the

preferred meeting place for the cap-ital’s power elite and ‘beautiful peo-ple’. It is where one goes to see andbe seen. “Immediately upon enter-ing the lobby, one’s attention isgrabbed by the colossal bronze‘Sunburst’ sculpture by Philippineartist Napoleon Abueva mounted onthe ceiling,” Mr. Blaiklock says. “Thelobby walls also display two largetapestries of the country’s two majormountain ranges, the Sierra Madreand the Cordillera. These are basedon the original oil paintings by Filipinoartist Ephraim Samson that alsohang on the lobby walls. ThePeninsula’s collection of paintings isthe single largest of any hotel in thePhilippines.”

The hotel recently opened thePeninsula Business Club floor, after25 years of being the only hotelwithout one. “That’s because we


19


THE LAP OF LUXURY The Conservatory in the PeninsulaManila, one of the capital’s most exclusive and stylish hotels.

T. MARKLAND BLAIKLOCKGeneral Manager of thePeninsula Manila

offer a butler service on all our floorsto all our rooms. But we saw thatsome business people were notlooking for the extra level of servicein the rooms. They wanted a loungeor private area exclusive to themand the other guests on that floor,”Mr. Blaiklock explains.

After a comfortable working visitto the financial capital of Manila, atrip to one of the country’s island re-sorts is a nice way to unwind. Oneof the most exclusive is theAmanpulu Resort, part of the SevenSeas Resorts and Leisure, Inc.Amanpulo is located on the remoteisland of Pamalican between Manilaand the island of Palawan. Villas gofrom between $400 and $1,000per night and all needs are takencare of down to the last detail.Discretion and privacy are the trade-marks of this isolated island treasure.

USEFUL FACTS FOR TRAVELERS

� VISASFor most foreign visitorsvisas are not needed forstays of less than 21 days.Three-month visas can beobtained in advance andcost around $35. Multiple-entry visas (lasting six and 12months) are also availablebut are expensive and onlyallow for stays of 59 days ata time. Visa extensions arepossible and generally fasterto obtain in regional areas.

� TIMEUTC plus eight hours.

� WHEN TO GOGenerally, the best time totravel is from the middle ofDecember to the middle ofMay–off-season fortyphoons. In the Christmasand Easter breaks, however,everyone is travelling andyou'll have trouble getting aseat on any form oftransport.

January and May have themost colorful festivals, therice terraces of Luzon lookbest in March and April, andthis is also the best time forisland-hopping.

� GETTING THEREBasically the only way to getto the Philippines is by plane;Manila and Cebu are theonly major entry points.There are flights between thePhilippines and plenty ofAsian cities, Australia, NewZealand and the U.S.

� GETTING AROUNDThere are several airlinesoffering internal flightsbetween Philippine cities.There is only one operatingrailway line, from Manila to

Naga in southern Luzon, solong-distance buses are themain overland alternative.There are plenty of ferriesand boats operatingbetween islands. Car rentalis also available, andinternational agencies haveoffices in most major cities.Local transport includesjeepneys (originallyreconstructed jeeps),metered taxis, PU-Cabs(small taxis without meters),tricycles and trishaws.

FOR FURTHER INFORMATION PLEASE CONTACTSUMMIT COMMUNICATIONS AT:

1040 FIRST AVENUE #395, NEW YORK, NY 10022-2902.TEL: (212) 286-0034 FAX: (212) 286-8376

E-MAIL: [email protected]

AN ONLINE VERSION OF THIS REPORT IS

AVAILABLE ATwww.summitreports.com/philippines

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Light Industry & Science Park of the Philippines - SEPZ Cabuyao, Laguna, Philippines.

Tel: (63 49) 543-0333, Fax: (63 49) 543-0334 E-mail: [email protected] / [email protected]

http://www.atecphil.com

Semiconductor GroupP.O. Box 354, Baguio City 2600, Loakan Road

Baguio City, Philippines. Tel: (63 74) 442-5681, Fax: (632) 845-0997

E-mail: [email protected], http://www.ti.com/asia/docs.phil.htm

BACKED BY THE MOVERS AND SHAKERS OF THE DOMESTIC ELECTRONICS AND SEMICONDUCTORS MARKET, SEIPI, THE COUNTRY’S LARGEST EMPLOYER, HAS WORKED TO DISTINGUISH ITSELF IN A MOST DYNAMIC FIELD.

SEIPI’S MISSION IS SIMPLE: TO BECOME THE REGIONAL–AND ULTIMATELY, INTERNATIONAL– LEADER IN THE SECTOR

THAT MATTERS MOST IN THE NEW PHILIPPINE ECONOMY.

(Formerly Pacific Microwave Corporation)14 Ampere Street, Special Export Processing Zone

Light Industry & Science Park, Cabuyao, Laguna, PhilippinesTel: (06349) 543-0823, Fax: (06349) 543-0656

http:// www.pacific-microwave.comFor inquiries: please send mail to

[email protected]

SEMICONDUCTOR & ELECTRONIC INDUSTRIES IN THE PHILIPPINES, INC. (SEIPI)Unit 1102, Alabang Business Tower, Acacia Avenue, Madrigal Business Park, Ayala Alabang, Muntinlupa City Philippines

Tel: (632) 807-8458 / 850-8252 / 850-8227, Fax: (632) 807-8459 / 850-8253

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