Following last years List of the Top Entrepreneurs, it would be beneficial to analyze the structure of wealth creation in the Philippines. We can see from Forbe’s list of Billionaires, that the the Ayalas (Jaime Zobel de Ayala & Family) are strangely not on the list and Henry Sy’s net worth is a few hundred million dollar$ lower this year.🙂
In the past, it has been the landed and the ruling families that were dominating the market. Today, they still are. But newer players and companies are rising to take their place in Philippine business.
In the 1960s and 70s, the landed families are cashing-in from agriculture, fishing and garments and manufacturing. The earnings came from the working class, whether from sugar in Negros or rice, coconut or tobaco in North and Central Luzon. In 1974, the US closed its market for sugar imports. For the next decade, local produce from developing economies threw a stiff competition of subsidized agricultural imports with Philippines local produce. “As it is, it is a technically impossible for Philippine capitalists today to amass fortunes on either the backs of the peasant or the worker class. Even at the advent of the internet and the knowledge worker age, our local market has not developed the right competencies for export-oriented industrialization. The top market makers find themselves in an uphill climb compared to the’50s and ’60s, when wealth was created with relaxed competition from sugar barons and manufacturing production. During those years, the industrial capitalist were backed up by the cronies of older administration.” said Kenneth Cardenas, in his article for PDI.
Yet against all odds we see the Filipino Businessman rising among the Top in the World! What are they doing right? As the business landscape is becoming more competitive there are significant factors for our local businesses not just to thrive but to expand. The OFW Reality When we look back at the past four decades, we have seen a steady decline of our economy due to corruption and other causes, which led to mass migration of our workforce to the more “greener” pastures of the first world economies. This synchronized with the Asian Crisis of 2001 where hundreds of employees were retrenched and lots of businesses closed down. As our professionals left the country, it meant lesser disposable income flowing in the economy. Surprisingly, money kept pouring in from a different source: OFWs or Overseas Filipino Workers. Overseas Filipino Workers became our savior in our time of deepest need. They plugged in the resources needed to develop our now empty neighborhoods (7% are abroad , and another 2% settled in their host country) The OFWs send billions of dollars, for their children and family to spend buying new homes. Services, outsourcing firms renting office space and mall operators are now cashing in on the newfound consuming power of the globalized middle classes. Property Development Here in Bacolod City, we see a rise in development mainly in Business Process Outsourcing, and Commercial and Residential Property Development. Land, which has long been the main foundation of wealth and power in Philippine society, has re-emerged as the cornerstone of Philippine Capitalists for the 21st century. But instead of tobacco, sugarcane and coconuts, the new cash crops are condominiums, office towers and malls. Over the past decade, property development and real estate has consistently been one of the best-performing subsectors of the economy: Data from the National Statistical Coordination Board (NSCB) show that, if considered separately from ownership of dwellings, the gross value added of real estate expanded at a clip of 141 percent from 2000 to 2010. Indeed, among the 10 Filipinos on Forbes’ 2014 world’s billionaires list, nine have significant stakes in real estate. From the Top Filipino Entrepreneurs, there are many newcomers to the real estate business. Only Jose Antonio (Century Properties), Manuel Villar (Vista Land and Lifescapes) and Andrew Gotianun (Filinvest), built their fortunes on real estate, while the others are recent players in the property development sector. The largest property developer in the country is SM Development, which only ventured in real estate 2003. In close second is Megaworld, which entered the market in 1994 yet it had captured 13.1 percent of the market in 2012. For many of these conglomerates, their property development represent a sizeable portion of their business portfolio’s net income.
Economic Zones and Land Conversion Another factor that contributed to the development of these businessmen are the incentives given to economic zone locators and the relaxation of rules. The government supported the creation of industrial zones in a wave of development starting from offices in Manila’s business districts and then to “next wave” of cities across the country. Thousands of hectares of urban land, such as agriculture land and rice fields left idle by their owners and reclassified to avoid agrarian reform, previously privatized state assets and abandoned factories and warehouses are now converted to residences for the new middle class of the overseas economy.
Limits to Foreign Ownership Perhaps, the decisive last factor that greatly contributed to the rise of property developers in the Philippines is the provision in our 1987 Constitution. The Constitution states that “the State shall protect Filipino enterprises against unfair foreign competition“, limiting foreign ownership of private land to 40% of the Total Equity. This provision gives local businesses the edge from foreign capital and competition. And this does not apply only to property and real estate, but covered other sectors as well: banking, retail, infrastructure, airlines, energy, retail, utilities, medical facilities and the education industry. The move of the government to clearly stipulate laws in our Constitution is a vote of confidence from the Philippines Government to encourage global leaders from local businesses. Entrepreneurs live in constantly changing times and situations. It is indeed great to live in a time as exciting in Philippine business such as ours. Source: Kenneth Cardenas, Philippine Daily Inquirer March 15, 2014 Article
Forbe’s Top Entrepreneurs List for 2014.
Read Related Articles: