Breaktime: Repair for the worst

The Aquino (Part II) administration, in power since 2010, had all the time in the world to prepare the country for the so-called Asean integration, but it is now feared that it would fail the business sector once again.

Unless another world war would break out or another ice age would arrive, upon the start of the Asean free market in 2015 under an agreement called the Asean Economic Community, the free market system would mean that all Asean members would have to dismantle all trade barriers.

For many years now, everybody was saying that the Philippine business would be facing stiff competition from other Asean countries, including multinational firms that relocated their factories from the Philippines to neighboring countries in the region.

That kind of tough competition! Among “think-tanks” in the business sector, the big question remains: How prepared is the country for such an intense competition?

The Asian Institute of Management, for instance, consistently called for serious repairs in bureaucracy to reduce “red tape” and infrastructure for better business logistics.

Those were the two worst areas of governance under the Aquino (Part II) administration, according to the World Bank yearly index on “ease of doing business” that measures business environment in 189 economies. This was the kind of international studies that the spin doctors in the Palace of our dear leader Benigno Simeon (aka BS) could never hope to repair with their slogans and media campaigns.

In the 2015 World Bank index, the Philippines went down to 95th, from a ranking of 86th in 2014, and all the other original members of the Asean, even new addition Vietnam, beat the Philippines badly.

Aside from the problem of “red tape” and poor infrastructure, the AIM cautioned the government to “pay attention to its much neglected physical ports facilities.”

The terrible debilitating congestion at the Port of Manila, which was said to have directly caused the laying off of some 20,000 workers, should tell us that this administration was too busy in other things in the past four years to bother with infrastructure and bureaucratic reforms.

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In the private sector, however, industries have invested heavily in their preparation for the Asean integration.

According to the Globefish Reports of the UN Food and Agriculture Organization (FAO), the Philippines continues to capture substantial share in the canned tuna markets in Europe, Asean and the Middle East, and expand traditional markets in the United States and Japan.

In fact, most big fish canning companies in General Santos City—the so-called tuna capital of the Philippines—have set up factories in Indonesia and Papua New Guinea to tap rich fishing grounds.

One of these companies was publicly listed Alliance Select Foods International (known as FOOD on the stock exchange board), which already bought a number of companies overseas and, just recently, effected a management restructuring, including changes in the composition of its board.

From what I heard, the founder of Alliance Select, incumbent president Jonathan Dee, would assume the position of board chair, passing on the presidency to Raymond See, a relatively young executive who rose through the ranks at Pilipinas Shell in the past 20 years.

The company would have new faces in the board, while a couple of top executives would retire and would be replaced by executives recruited from other firms, such as Lisa Dejadina, another executive from Pilipinas Shell.

Of course the stock market could only look at the changes in the board and management of the company as the result of an intra-corporate feud early this year between the Dee group and two Singaporean stockholders.

As we all know, the Singaporean investors led by Albert Hong Hin Kay and Hedy Yap-Chua made a lot of noise in local media last June, criticizing the management of Alliance Select. They questioned particularly the company’s decision to accept the P563-million investment of another company called Strong Oak, claiming the management denied them access to information.

However, according to the Dee group, who led the company during the past 10 years of tremendous growth, the timing of the changes in its top management and board was purely coincidental with the tiff with the Singaporean stockholders.

In the past 10 years, the firm diversified its product lines, using its expertise in manufacturing and global marketing, even setting up marketing offices in Bangkok, Thailand, to tap the hordes of buyers and brokers based in that country.

The company also bought a 40-percent stake in a can making company called FDCP Inc., which assured Alliance Select a steady supply of its main man-made raw material, the tin cans, at competitive prices.

In 2008, Alliance Select established another subsidiary, called PT International Alliance Foods Indonesia (PTIAFI), which subsequently acquired the assets of an Indonesian tuna cannery in Bitung, North Sulawesi. The factory was completely renovated, with its capacity increased to 90 metric tons per day.

More importantly, however, the investment in Indonesia gave Alliance Select access to rich fishing grounds in Indonesia. Thus, today, the company could boast of the combined operating capacity of its two canning plants of some 230 metric tons per day.

Not yet done, to gain more access to consistent supply of tuna, Alliance Select set up another company in Indonesia called PT Van de Zee, which obtained a fishing license from the Indonesian government for up to 30,000 metric tons until 2016.

As part of its diversification, the company invested in the New Zealand-based processor of smoked salmon, called Prime Foods New Zealand Ltd (PFNZ), and, together, they established a joint venture called Big Glory Bay Salmon & Seafood. The joint venture imports salmon from New Zealand and other countries for processing in the plants of Alliance Select in GenSan for reexport.

Also acquired was Massachusetts-based Spence & Co. Ltd., one of the leading salmon processors in the United States which has an extensive marketing network. This gives Alliance Select an opening for its export products.

What I am saying is that Alliance Select, like many other private companies, prepared well for its survival in the face of stiff competition in the forthcoming Asean integration.

It is something that business can hardly say about the Aquino (Part II) administration.