5 challenges to ASEAN businesses in 2015

What is the government doing to raise our awareness and boost preparations for the coming 2015 ASEAN economic community (AEC) — envisioned to be a single market and production base for 10 countries, with 600 million consumers, US$1.9 trillion in GDP, duty-free imports and tougher competition within our region?

At the recent Asian Family Business Conference held at the Asian Institute of Management (AIM) Conference Center in Makati City, I was invited to be guest speaker, with the topic “Understanding the economic implications of ASEAN integration to family business.” Here is a condensed version of my speech:

Who are the successful Philippine entrepreneurs already boldly spreading out in the Association of Southeast Asian Nations and Asia?

Billionaire Ricky Razon’s International Container Services Terminal, Inc. (ICTSI) has operations at Muara in Brunei, the Jakarta and Makassar ports of Indonesia, and Yantai in China.

Carlos Chan of the Liwayway Group and Oishi brand of snacks entered Vietnam in 1997 and Myanmar in 1999; factories in Thailand and Indonesia were developed in 2006, and they’ve been pioneers and flourishing all over China.

Carlos Chan’s younger brother Ben Chan is taking his Bench fashion brand global in a breathtaking way with 83 international stores and the brand is still growing fast. Competitor Penshoppe of entrepreneur Bernie Liu is also active abroad, reportedly targeting 300 stores in ASEAN’s biggest nation, Indonesia, alone in just a few years.

During my trip to Myanmar early this year, aside from Oishi, the other Philippine brand I saw with outdoor advertising on buses and billboards is Lucio Tan’s Asia Brewery, Inc. (ABI) energy-drink brand Cobra run by his son Michael “Mike” G. Tan. The Tan family also has diverse investments in Papua New Guinea, Guam, Hong Kong and China.

The Ayala Group, led by Jaime Augusto Zobel de Ayala, has international businesses like Integrated Microelectronics Inc.  (with various factories from Sichuan to Guangdong provinces) and LiveIT Holdings, also Ayala Land’s property investment in Tianjin City of China, Manila Water’s projects in Vietnam, water projects in Indonesia and plans also for Myanmar.

John Gokongwei Jr. is a visionary who years ago talked to me about his dreams to go global, from his snack foods to bringing his Cebu Pacific Air across the Pacific Ocean on long-haul flights. The international business of his Universal Robina Corp. (URC) is growing at a compounded annual rate of 21 percent, and margins are higher than in the Philippine market. In ASEAN, his Vietnam sales volume yearly is now $240 million, compared to $1 billion here in the Philippines built up through 53 years. His China investments are also flourishing. 

According to Prof. Enrique “Eric” Soriano III, former group CEO of the Belo Medical Group, the United Laboratories (Unilab) of the late Jose Yao Campos has already built up huge pharmaceutical operations in Indonesia and Thailand.   

The ASEAN giants are already coming to the Philippines, too.

Kopiko of Indonesia sells its coffee to over 50 countries worldwide and distributed in the Philippines by Jun Sy, with local sales here already at a phenomenal P25 billion a year.

Former Trade & Industry Minister Roberto “Bobby” Ongpin years ago brought in Malaysian taipan Robert Kuok Hock Nien of the Shangri-La Hotel chain to invest in Philippine tourism. 

From Sept. 24 to 26 in Chengdu City in rural southwest China’s Sichuan province, I was an invited guest at the 12th World Chinese Entrepreneurs Convention with the organizers led by Thailand’s wealthiest billionaire, Charoen Pokphand Group (CP Group) boss and Forbes Asia magazine’s “Businessman of the Year” Dhanin Chearavanont. His agri-business multinational already has initial investments of P7 billion in the Philippines with a swine project in Pampanga, a broiler project in Bulacan and an aqua feed mill in Samal, Bulacan. CP Group has annual revenues of US$33 billion worldwide.

I believe five challenges confront us in this new era of opportunities:

• First, the challenge of size or scale – Last week at the convention, attended by over 3,200 top entrepreneurs from 105 countries, Hapee toothpaste owner and Federation of Filipino Chinese Chambers of Commerce & Industry, Inc. (FFCCCII) vice president Cecilio K. Pedro said that with the coming 2015 ASEAN economic integration, family businesses in the Philippines can really survive and flourish by either becoming bigger or remaining really small. It seems apparent that size is indeed a challenge in this coming new era.

Self-made Gibi shoe tycoon and FFCCCII vice president William Castro told me that merging, consolidating or selling off are not the only ways. He said we should study and learn from Taiwanese family businesses in the small and medium-scale enterprise (SME) category, how small firms coalesce and complement each other by producing different parts of shoes or computers to unite their strengths.

• Second, the challenge of competitive spirit – Oishi/Liwayway boss Carlos Chan shared that among the reasons for his family doing well in overseas business operations there and now in ASEAN include sheer hard work, and “not being complacent.” He added that China’s economy is huge and growing very fast, it is also “an intensely competitive market where all players work hard very hard.” He added half-jokingly: “No time for mah-jong.”

In this era of globalization, we need to make the Philippines truly more competitive, not having the same surnames on top of business and even politics for decades. We should enact anti-trust laws and not allow monopolies, duopolies or oligopolies to choke the competitive spirit in key sectors of our economy.

Indeed, in highly competitive China, you are not always No. 1 for so long. In their annual richest tycoons, the names of the top business leaders keep changing over the past 10 years. This year the No. 1 richest is Wang Jianlin, the 59-year-old founder of the Dalian Wanda realty group; in 2012 it was Zong Qinghou, boss of the Wahaha drinks group; before them the founders of the Sany group, Gome group, and Hope feeds group were all once No. 1.

• Third, the challenge of speed – Bacolod-born ethnic Chinese entrepreneur Bonnie Gamboa of the Hexagon Group of Companies shared a nugget of wisdom that I believe is applicable not only to family businesses in this era of impending 2015 ASEAN economic integration, but also for professionals.

Regarding the old saying about “big businesses eating up small businesses,” Gamboa said, “Nowadays, it’s not just size anymore that matters, but also how fast we are. In more cases, the fast can eat up the slow.”  

Indeed, we can see cases of businesses that are fast eating up or defeating rivals who are slow. Worse than slow, some businesses are stagnant as well. In our 21st century with fast-changing technologies, dynamic market conditions and robust competitors in an increasingly borderless world, speed is also important in order to survive and flourish.

Whether big conglomerates or mom-and-pop family businesses, let us increase our speed not only in business transactions, productivity, developing new strategies and ideas, but also in adapting new ideas and strategies.

• Fourth, the challenge of efficiency – This fourth challenge is not only a big and serious challenge to family businesses of all sizes, but also to the whole of Philippine society and most especially to our national government. A young, self-made entrepreneur in downtown Manila told me that not a few of the established family businesses in our society have been reluctant to invest in new machinery for decades, without calculating the advantages of sheer higher efficiency.

We should invest in better technology and more training for our people. Our government should upgrade our telecommunications, infrastructure and other essential basic services, which can enhance our competitive edge in business.

• Fifth, the challenge of having a globalized mind-set – I don’t know if it is due to our archipelagic situation or our being physically separated from much of Southeast Asia, or maybe due to our peculiar history of having Spanish and American colonizers so different culturally and politically from those of others in ASEAN, or a combination of all these factors, but it seems we in the Philippines tend to have less of an ASEAN and international mindset. 

It is true that most of us tend to think mostly of California or New York halfway around the globe when asked to think outside the Philippines, instead of Malaysia’s progressive Penang state, Thai cities Phuket and Chiang Mai, or Indonesia’s second and third largest cities of Surabaya and Bandung. 

The only places most of us know about China are Shanghai, Beijing, Xiamen or Guangzhou, not realizing that the fast-changing country is five times the size of the Euro zone region in population and staggering in sheer economic potential.

We need to wake up — not soon, not tomorrow, not in 2015 when the ASEAN Economic Community (AEC) starts — but right now in order to survive and flourish! 

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