Dutch and Japanese firms will pour Billion of investments to the Philippines

Dutch firm Molex Integrated Products Philippines Inc. a Dutch firm and Nippon Keidanren will invest Billions to the Philippines.

Dutch firm Molex Integrated Products Philippines Inc. is investing ₱1.15 billion for the manufacture of cable assemblies in the country, according to Lilia de Lima, director-general of the Philippine Economic Zone Authority (PEZA).

This project pushed up total committed investments in PEZA in January to February by 47 percent, De Lima said.

Investments for the two-month period rose to ₱16 billion from ₱11 billion in the same months last year, De Lima said.

Molex will employ 1,265 at its planned facility to be set up in an 11-hectare property in the Hermosa economic zone.

De Lima said 2012 is a banner year for PEZA even as the agency posted a 41-percent increase in investments last year.

De Lima said Japanese investments will lead the commitments this year in PEZA.

"Japanese investments will drive growth this year," De Lima said.

Japan's biggest printer manufacturing companies Epson, Brother and Canon have set up shop in the Philippines.

Canon, with its ₱20-billion investment, would also eventually manufacture its projectors in the Philippines.

The country, De Lima said, is also on the radar screen of European companies. One Israeli firm engaged in electronics is also keen on the Philippines.

While PEZA strongly pushes manufacturing, it is expecting a huge investment in shipbuilding. De Lima declined to identify the company.

A steel manufacturing project is also in the pipeline.

The Japan Business Federation  (Nippon Keidanren) has expressed eagerness to invest in Philippine tourism, energy, and infrastructure industries even as Malacañang underscored the country's strategic trade agreements with Japan.

Eighteen members of the powerful Keidanren delegation to the Philippines on Friday (March 9, 2012) paid a courtesy call to President Benigno Aquino III, accompanied by the Japanese Minister for Economic Affairs, the Ambassador of Japan to the Philippines, and the second secretary of the Japanese embassy.

With President Aquino were Foreign Affairs Secretary Albert del Rosario, Finance Secretary Cesar Purisima, Trade Secretary Gregory Domingo, and Philippine Ambassador to Japan Manuel Lopez.

"The President discussed with the members of the delegation possible investment areas that they may be interested in, namely infrastructure, energy and tourism and the President likewise stressed the importance of the strategic trade partnership between the Philippines and Japan," Palace spokesperson Abigail Valte said shortly after the meeting.

Members of the Japan Business Federation, who met the President includes:

•  JBF Chairman Nobuo Kuronayanagi,
• The Bank-Mitsubishi UFJ Ltd chairman Mutsutake Otsuka
• East Japan Railway Co. chairman of the board of councilors Fumiaki Watari
• Japan Business Federation chairman Hiromasa Yonekura
• Sumitomo Chemical Co. Ltd senior adviser Katsuaki Watanabi
• Toyota Motor Corp chairman of the board Atsutoshi Nishida
• Toshiba Corp chairman Nobuo Katsumata

Marubeni Corporation chairman of the board Katsutoshi Saito and  Dai-ichi Life Insurance Co. Ltd.

The Nippon Keidanren is an all-encompassing economic organization, established in 2002 following a merger between the Keidanren (Japan Federation of Economic Organizations) and Nikkeiren (Japan Federation of Employers' Associations).

As of mid-2011, the organization was listed as having 1,603 members, consisting of 1,281 companies; 127 industrial associations; and 47 regional economic organizations.

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Philippines tycoon & other 7 - Top 116th richest men in the World 2012

Six business tycoons from the Philippines led by SM group patriarch Henry Sy made it to Forbes Magazine's 2012 list of richest people on the planet.

For the Philippines top $US Dollar Billionaires includes:

• Henry Sy
• Lucio Tan,
• Andrew Tan,
• Enrique Razon Jr.
• Eduardo Cojuangco Jr.
• Roberto Ongpin

Top 10 World's Richest People

1. Carlos Slim Helu & family $69 B (72) - Telecom - Mexico
2. Bill Gates $61 B (56) - Microsoft -  United States
3. Warren Buffett $44 B (81) - Berkshire Hathaway - United States
4. Bernard Arnault $41 B (63) - LVMH - France
5. Amancio Ortega $37.5 B (75) - Zara - Spain
6. Larry Ellison $36 B (67) Oracle - United States
7. Eike Batista $30 B (55) mining, oil - Brazil
8. Stefan Persson $26 B (64)         H&M - Sweden
9. Li Ka-shing $25.5 B (83) diversified - Hong Kong
10. Karl Albrecht $25.4 B (92) Aldi - Germany

In the Philippines, it was the first time for Cojuangco and Ongpin to join the roster of the world's billionaires (in US dollar terms).

Forbes published on March 7 its latest gallery of the world's richest people, an all-time high 1,226 billionaires, who were worth a record $4.6 trillion. When the magazine started this tradition of counting billionaires around the world 25 years ago there were only 140 names.

At the top of Forbes' global list is Mexican Carlos Slim, 72, who has an estimated net worth of $69 billion. Microsoft founder Bill Gates, 56, is second and investment guru Warren Buffet, 81, chair of Berkshire Hathaway, third.

Sy and family ranked 116th richest in the world, cementing his title as the wealthiest man in the Philippines. Forbes estimated his net worth at $8 billion.

Banking, retailing

The 87-year-old Sy leads SM Investments, the dominant player in Philippine banking, retailing and shopping mall development. It is also a fast-growing player in residential and tourism-oriented property development. Sy's group has recently added mining to its portfolio.

Lucio Tan and family ranked 314th on the list with an estimated net worth of $3.5 billion. Lucio Tan, 77, has interests in tobacco and liquor manufacturing, airline, property and banking. He has vast property interests in mainland China and is likewise a big investor in Guam.

Property tycoon Andrew Tan ranked 601st on the global list with a net worth of $2.1 billion. Andrew Tan, 59, built a fortune on real estate development, particularly in offering high-rise residential units to the mass market and in pioneering mixed-use developments to attract business process outsourcing firms.

He has also successfully ventured into the gaming business in partnership with the Genting group of Malaysia. He likewise has consumer-based interests, including a beverage unit and the Philippine chain of McDonald's fast-food stores.

Port operations

Razon, 52, is the fourth and the youngest tycoon from the Philippines with an international rank of 683rd. Forbes estimated his net worth at $1.9 billion. He has built a fortune on international port operations.

Razon has unloaded his interest in the country's electricity transmission superhighway and is now building a casino-hotel complex in Pagcor City. He also has an interest in oil exploration.

Cojuangco, 76, is the fifth Philippine tycoon on the list with a global rank of 960th. The 76-year-old chair of San Miguel Corp. (SMC) has an estimated net worth of $1.3 billion.

Cojuangco has a 15-percent stake in San Miguel which has diversified from its traditional food and beverage businesses into power generation, power distribution (via a minority but significant stake in Manila Electric Co.), oil refining, mining, toll road, airport, banking and telecommunications.

Ongpin's Ashmore

Ongpin, 75, is ranked 1,153rd on the list with an estimated net worth of $1 billion. Ongpin brought in London-based Ashmore as a partner in Philippine investments in recent years. Apart from his interest in San Miguel and Petron Corp., Ongpin is into real estate, mining and recently into banking.

Compared to last year, Sy, Lucio and Andrew Tan and Razon significantly increased their wealth.

Sy was worth $5.8 billion in 2011 while Lucio Tan, Andrew Tan and Razon were worth $2.3 billion, $2.2 billion and $1.1 billion, respectively. With the local stock market outperforming most bourses in the region, the market capitalization of their respective companies has surged.

Counting malls

"The Philippines' richest man, Henry Sy started out in his father's bodega (warehouse) and then opened a shoe store. He now controls the Philippines' largest mall developer, with 42 locations; has five in China, including one that opened last year. Shares in SM Investments, which makes up bulk of his fortune, popped 50 percent in the past year. BDO Unibank, run by daughter Teresita Sy-Coson, is the country's largest bank," Forbes said.

BDO is worth over P1 trillion, the first local bank to breach this mark in asset base. The Sys also own another big bank, China Bank, which is run by the tycoon's sons. The retailing group, operating through a chain of SM Department stores, hypermarts, supermarkets and SaveMore, had a turnover of P148.2 billion in 2011.

Tobacco king

Forbes described Lucio Tan as a "tobacco king" holding over a third in Philip Morris-Fortune Tobacco, a joint venture between his privately held Fortune Tobacco and Philip Morris. The combined entity has an estimated 80-percent share of the Philippine cigarette market. Tan's Asia Brewery is the country's second largest beer maker, according to Forbes.

"A big chunk of fortune comes from Hong Kong-based Eton Properties," the magazine said.

"He got his start as a chemical engineer and mopped floors to pay for school. Tan enjoys flying helicopters," Forbes said.

The publication noted reports that Lucio Tan was in talks to bring in San Miguel to help refurbish the aging fleet of Philippine Airlines. It also noted that three of Tan's companies, Eton Properties, Tanduay Holdings and PAL Holdings, faced delisting by the Philippine Stock Exchange for failing to maintain a 10-percent public float.

Second casino

"Son of a factory worker, Andrew Tan did odd jobs to put himself through college. Saved money he earned as a kitchen appliance salesman to buy a distillery and made his first fortune in brandy. His holding company, Alliance Global, has interests in food and beverage, real estate and gaming. With partner Genting Malaysia, he plans to build a second casino in Pasay City this year," Forbes said.

Cojuangco was described by Forbes as a "former Marcos crony" who controls San Miguel, a food and beverage conglomerate best known for its beer. Forbes noted that San Miguel had spun off its brewery unit in 2007, diversifying into power, infrastructure and heavy industry.

"In 2010, he sold an option to a group of investors to buy him out for an undisclosed sum. The country's Supreme Court has ruled that his stake in San Miguel, which the Presidential Commission on Good Government had alleged he got because of his links with the former dictator, wasn't ill-gotten," Forbes said.

To unload 15%

The Inquirer reported in May 2010 that Cojuangco had made plans to unload his entire 15-percent equity in San Miguel in favor of trusted allies.

The option to buy his shares for P75 per share was given to a holding firm, Top Frontier Investment Holdings. The holding firm is 49-percent owned by San Miguel itself as represented by Cojuangco's trusted lieutenant and concurrent company president Ramon Ang. An investor group, which includes Ongpin, Iñigo Zobel and condiments king Joselito Campos, controls 51 percent.

Forbes noted that Ongpin, a former minister of trade during the Marcos regime, had investments in property, gaming, mining and telecommunications. (His interest in telecoms was recently sold to San Miguel and Ongpin instead took a controlling stake in Philippine Bank of Communications).

Ongpin heads Top Frontier, the entity with a controlling interest in San Miguel. "Last November he appeared before a Senate inquiry over a loan from a state-owned development bank, which he claims was above board. He's a certified public accountant and Harvard Business School graduate," Forbes said.

Aside from the interests mentioned by Forbes, Ongpin has an interest in media being the deputy chair of South China Morning Post in Hong Kong.

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Europe - Japan- Australia pouring in BPO & KPO in the Philippines - broader outsourcing role

The Philippines is the world's call-centre capital, but will need more graduates and better trained professionals if it's to be a major force in the broader outsourcing market, where growth is in providing research and analytics for the legal, healthcare and financial industries.

In little more than a decade, the Philippines has overtaken India in running call-centers, helped by an affinity for the language, culture and work ethic of the United States, its former colonial master.

The number of Filipinos offering a cheery "Have a nice day" while working the graveyard shift to answer calls on behalf of multinational clients such as Citigroup (C.N) and JPMorgan Chase now far exceeds India's 350,000, and the government wants to double the market to $25 billion by 2016, employing 1.3 million workers.

But to do that the Southeast Asian nation must convince investors it has more to offer than just a huge pool of talent speaking English with an American accent.

Research firm Everest Group has forecast the global business process outsourcing (BPO) industry could be worth $220-$280 billion this year, with 90 percent of that in non-voice work - providing more complex skills and services in research and analytics for lawyers, doctors and bankers.

In the Philippines, non-voice work last year accounted for just over a fifth of total BPO revenues of $10.9 billion, but employed a third of the BPO workforce, or around 220,000 people.

"The goal is aggressive but achievable as long as we know one thing: that what got us here won't get us to where we need to be," said Maulik Parekh, president and CEO of outsourcing services provider SPi Global, part of Philippine Long Distance Telephone Co (PLDT) (TEL.PS), the country's most valuable listed company.

"A lot of the focus of the tripartite relationship between the government, educational institutions and the private sector has been about English language skills. We need to start to focus on how we can have a thriving healthcare, publishing, finance, human resource, procurement, IT-related BPO," Parekh said.

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GRAPHIC: BPO data: r.reuters.com/jeh96s

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India is expected to continue to dominate in outsourcing; with its first-mover advantage and skills in software development, but the Philippines has its eye on the non-voice market's potential.

"While some providers are leveraging the Philippines for non-voice functions, the scale of work is relatively low. However, tremendous market potential exists if service providers can successfully manage talent-related constraints," Nikhil Rajpal, partner at Everest, wrote in a study.

With China, Latin America and other Asian markets such as Malaysia also making strides in outsourcing, the Philippines must ensure it has a steady supply of professionals and highly-skilled workers to offer the more complex, added-value services to meet clients' changing and increasing demands.

In Manila, Cebu and beyond, demand for outsourcing is growing at around 20 percent a year, but the number of local university graduates is growing at only 3 percent, and only 5-8 percent of them are hire-able, based on government data, highlighting a need to re-engineer the country's educational system.

The Philippines has a 10-year basic education system, which the government is looking to extend by two years, by adding a pre-school kindergarten program, to match its Asian rivals.

"The challenge is to be able to supply the human resources to support the industry both from the entry level to middle managers and executives," said Trade Secretary Gregorio Domingo.

The country turns out 470,000 accountants, lawyers, nurses and engineers each year, but that figure is dwarfed by the 4 million college graduates in India and 2 million in China.

INSOURCING

The Americas remain the biggest clients for the Philippine outsourcing industry, accounting for nearly three-quarters of the domestic BPO market, but Europe, Australia and Japan are increasingly knocking at the door for business.

Some local BPO operators worry about the possible impact of U.S. President Barack Obama's election-year pledge to close tax breaks for companies that move U.S. jobs overseas and offer incentives to firms bringing those jobs back home.

But Jose Cuisia, Manila's ambassador to Washington, has sought to allay those fears, saying a pending bill in the U.S. Congress to end job exports lacks support from the Republicans that dominate the lower house of the Congress.

"I don't think that will pass, even in an election year," Cuisia said at a recent forum with Deputy U.S. Trade Representative Demetrios Marantis, noting that outsourcing backroom functions makes U.S. companies more competitive.

In its 2011 Global Services Location Index, consultancy firm A.T. Kearney ranked the Philippines 9th out of 50 outsourcing destinations, saying: "Politicians are using global services offshoring as an easy scapegoat for current economic woes and high unemployment levels in their home countries, stoking resentment against globalised firms and their host countries."

"Although signs of a slowdown in the growth of global services are evident in this environment, don't expect offshoring to end. In fact, the global services industry's full potential is ready to be tapped."

FORMIDABLE FORCE

The growth in the Philippine outsourcing sector has made it indispensable to the economy and to employment, with local officials citing it as one of the reasons the country escaped recession in the wake of the 2008 global financial crisis.

In 2009, when much of the world was reeling from the crisis, the United States invested $1.4 billion in the Philippine BPO sector, up from $986 million a year earlier, central bank data showed.

"The BPO industry is one that takes advantage of the strength of the Philippines, which is its people," Finance Secretary Cesar Purisima said.

"It's an industry that not only offers direct employment (but) also supports the real estate industry and the service industry, and, together with remittances from Filipinos working abroad and tourism, will form part of the three strong legs that will be the platform for growth of the Philippines in the next years."

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