CEOs brace for rocky 2009
By Ronnel Domingo, Elizabeth Sanchez-Lacson, Riza T. Olchondra, Michelle Remo
Philippine Daily Inquirer
First Posted 22:03:00 01/03/2009
Filed Under: World Financial Crisis, Economy and Business and Finance
MANILA, Philippines—The late Frank Sinatra would not call 2008 a very good year. Far from it.
Most, especially those who lost their jobs or saw their fortunes wiped out, would want to wake up tomorrow thinking that it had never happened. But it did. And as this year comes to a close, people are fervently hoping that 2009 would be better or at least not as bad as 2008.
The Philippines, fortunately, has not been as hard hit as other economies like the United States and Japan but most economists and policymakers feel that the full brunt of the global financial crisis will hurt the country in 2009.
How will companies cope?
The Philippine Daily Inquirer asked a number of CEOs and top executives this question and their varied answers give an idea of what’s in store next year.
Greg Navarro
Chief Executive Officer,
Managing Director
Punongbayan & Araullo
“During these difficult times, we are working on creating more capacity; we are increasing productivity of our people through additional training (higher productivity improves company’s income).”
“We are also extensively using IT (information technology) to save on costs. We used to have a lot of typists. But with the help of computers and technology, even I make my own memos and print them myself. We don’t need a lot of administrative and clerical help anymore.
“For 2009, there are some industries that will be badly affected by the global crisis, such as the manufacturing sector and the electronics makers, which are dependent on China and the United States for export markets.
“But there will also be industries that will do good in 2009. These include tourism, wellness, and the BPO (business process outsourcing) industries. For instance, I know of a very large bank that will reduce its staff worldwide by the thousands, but 60 percent of the labor requirements will be outsourced in Manila as a cost-cutting measure (labor in the Philippines is relatively cheap). That will be good for the Philippines.”
George Mercado
President
Prudential Life
“We are prepared to bear the brunt of the coming year.
“We are actually expanding, working on putting up more sales offices nationwide. We are hoping that by putting sales professionals in areas where our presence is not yet felt, we will be able to boost sales revenues. We are also planning to introduce more insurance products that will cater to the needs of the market (having more choices of products for customers is seen to help boost sales).
“But our expansion plan will be not as big as originally planned. We plan to put up offices in Cebu and in few other locations, unlike our earlier plan to put up much more offices nationwide.
“For 2009, remittances from overseas Filipino workers might be reduced as a result of the global crisis, as some OFWs might get laid off. This could affect overall consumption because remittances help spur spending.
“But although we see a decline in the remittances, the drop is not likely to be substantial. So there is still reason to invest on improving the company’s sales performance.”
Bim Galicia
Corporate Relations Director
Liquor distributor Diageo Philippines Inc.
“We are doing extreme budget cuts—less foreign travels, cut down on usage of electric power, and limiting spending on campaigns and advertisements.”
“In fact, this year we had a very simple Christmas party, we just enjoyed good dinner. Before, our parties used to be lavish. In choosing campaign projects, we try to prioritize those that are very urgent and we defer those that we think can be done some other time.”
Ian Thackwray
COO
Holcim Phils. Inc.
“It is clear that our 2008 profitability is down and 2009 will be challenging, but we remain cautiously confident. We’re being asked to optimize cash flow [and] the consequence is that we have budgets and plans that manage cost effectively and limit capital expenditure.
“We have enough capital expenditure to continue to maintain our plants to good standards and make sure that we comply with our environmental standards and improve our efficiencies, but there is no money for expansion or new capacity.”
Fernando Fernandez
Chair
Unilever Philippines
“2008 was a tough year but we managed to have very good results. We are very optimistic that we can sustain Unilever’s continuous growth in the market in the coming year. We have the best people and we have the plans to make a big 2009.”
Simplicio Umali Jr.
General Manager
Gardenia Bakeries Philippines
“Because we are in the business of food, which is a basic need, Gardenia is taking steps to expand its operations and broaden its market base next year. We aim at turning the crisis into opportunities by developing new products. But we are also cutting down on expenses—like overhead—and motivating our workers to be more productive, which is our way of avoiding additional hiring.”
Enrique K. Razon Jr.
Chair
International Container Terminal Services Inc.
“The developed nations are in deep recession and this will probably get worse in 2009.
“This will drag Asian economies down. And until credit markets open up this situation will persist. Contraction in US consumption will have a severe impact on Asian countries’ exports. Investment will disappear, leaving the rest of the world in recession. We can expect lay offs in OFWs as recession and low oil prices hit the Middle East. Although lower prices here will cushion some of the impact.
“We have recent experience with the Asian crisis of the late 1990s so we are well prepared and will wait for the right growth opportunities [in 2009].”
Reghis Romero II
President and CEO
R-II Holdings Inc.
“Others see 2009 to hold projects first and wait for the outcome on the effects of the financial crisis. They tend not to invest and hold on to their money. For me and my conglomerate companies, we see [demand] in housing projects that is why we are constructing for the coming year 6,000 low-cost house and lots. I expect OFWs (overseas Filipino workers) to buy since $16 billion is expected to be remitted by end-2008 and about the same for 2009.
“In housing, about 60 percent is sold to OFWs.
“Another growth driver is the BPO (business process outsourcing) sector. It is said that BPOs are hiring about 800,000 workers for the next two years. When there are jobs there will be housing needs.
“Therefore we shall continue our effort to build more houses for the next year without let-up. We will also continue to invest in projects like railway and port construction and operation.”
Oscar Sańez
CEO
Business Process Association of the Philippines
“The Philippines continues to be an attractive destination for outsourcing so our prospects remain positive. With the pressure for many US companies to restructure and cost-save, many will be using outsourcing solutions to remain competitive. As a country, we should take advantage of this opportunity to promote the industry through marketing missions abroad and continue to invest in infrastructure and education to ensure that we get a significant share of the expected growth.
“The BPAP recently surveyed BPO executives, who said that business prospects in 2009 are good especially for non-voice providers. Almost 65 percent of respondents said 2009 prospects are excellent to outstanding, and 30 percent said prospects are good. Only 5 percent of respondents said 2009 business prospects are only fair, and none responded that prospects are poor.
“A total of 188 respondents participated in the survey, which was sent to 583 BPO executives, providing a 32-percent response rate. Eighty-four percent of respondents provide non-voice outsourced business process services.”
Donald Dee
Chair
Zest Airways
“From a macro viewpoint, the Philippine economy will be able to grow at 4 to 4.5 percent in GDP. The areas for growth will be in the service sectors, BPO, and food sectors, especially popular food chains like Jollibee. The construction companies will also do well due to public sector expenditures. Businesses like property development for tourism would most likely face a slowdown due to tight credits plus the fact that tourism travel is expected to decline. Overall, 2009 will present challenges but by the second quarter we will begin to see positive signed toward economic stability and the road to recovery.”
Victor Luciano
President
Clark International Airport Corp.
“The global economic downturn makes us view 2009 with cautious optimism as we see encouraging opportunities based on 1) renewed and stronger interest by foreign and local investors in the development of terminal 2; 2) 20-percent increase in passenger traffic in the past two months compared to the same period last year; 3) Asians will prefer to travel closer to home, thus more short haul travel for which DMIA is most suitable; and 4) construction of aviation services such as MRO, logistics, are going full blast because they have defined markets not vulnerable to cyclical trends. On the downside, Korea’s currency and economic problems may result in decline in Korean passenger traffic and investments of which Clark is a major destination.”
Orlando Vea
Chief Wireless Adviser
Smart Communications
“I’m tempted to join the chorus and say 2009 will be a challenging year. It is, but rather than speculate on the future my team at Smart will just create it. We will make 2009 the year of the mobile Internet. We will make high-speed Internet available anytime, anywhere to anyone.”
Dennis Valdes
CEO
PhilWeb Corp.
“The majority of economists are predicting gloom and doom in ’09, but the clever businessmen are keeping their eyes open for opportunities that can lead to fantastic growth.
“I recall taipan Henry Sy in 1983, the year Ninoy was shot and our country was faced with capital flight, building SM North Edsa and turning it into a catalyst that has brought the SM group to the pinnacles that it has attained today. How fitting that North Edsa has just been expanded and again is a symbol of a visionary taipan’s faith in the resilience and strength of the Filipino in overcoming any economic doubters.
“As the leader of Philweb, I take heart in the examples of Henry Sy and the other great business leaders who have always operated with long-term courage in our country’s abilities. In 2009, I will certainly be trying, in small ways, to emulate their examples.”
Eric Recto
CEO
ISM
“2009 will be tough for everyone and belts will have to be tightened. But it will also be exciting … many tempting opportunities will pop up, but patience will be a virtue.
“ISM is embarking on a stock rights offer to raise about P655 million of capital ‘to take advantage of certain IT-related business opportunities it is presently negotiating.’”
Teresita T. Sy
Chair
Banco de Oro Unibank Inc.
“I am still optimistic (about 2009) because the Philippines will still have continuous inflows of funds from remittances by OFWs even if there is a forecast of job cuts in the world. We will still continue to export service providers. We have a good BSP monitoring our fiscal policy, thus insulating our economy from big swings. Our economic fundamentals are sound. We are lucky.
“On the projected slowdown, we have set a growth target but we will review this every quarter and calibrate our target according to the economic condition prevailing during those periods.”
Ramon S. Ang
President and COO
San Miguel Corp.
“San Miguel is projecting growth in most of its businesses and it is well-prepared to take on any opportunity. We have good plans.”
Danilo Ignacio
President
Eton Properties Philippines Inc.
“2009 will be a difficult year and there is a lot of uncertainty. We don’t know to what extent the global economic crisis will affect the Philippines. Right now there is a lot of wait and see. The way I see it, there is a battle of fundamentals and emotion. I think the Philippine economy is still solid on fundamentals. The country is well positioned to handle this crisis because it learned from the 1997 Asian Financial crisis. I don’t think the Philippines will suffer the same as what is being suffered by other countries. Our banks are disciplined so we won’t have the same problems banks are having in the US.
“But on the other side, the Philippines can’t be isolated. That is where potential difficulties may arise. To what extent, we don’t know.
“For 2009, we will be very cautious. We will approach 2009 with cautious optimism and there will be continued opportunities even during a crisis. I don’t think there will be a recession in the Philippines. All projections point to some growth. There might be an economic slowdown but not a recession. In the case of Eton, we are fortunate that we are debt-free and we have an extensive landbank.
“If you look at what happened in 1997, most of the real-estate developers that had problems in 1997, are the developers who borrowed money, used that money to buy land and because of the crisis could not launch projects and could not pay back their loans. So the banks foreclosed these properties. Some of them ended up as part of the landbank of Eton through our sister banks (PNB and Allied Bank).
“In the case of us, we are debt-free and we don’t use any cash to buy land. That allows us to launch a project if and when opportunities arises. We have several projects in the pipeline that is push-button ready for launch if there is an opportunity.
“I think in 2009, the focus will be on our existing customer so that means we will finish all our projects.”
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