The Philippines gets ready for AEC

26 July, 2014
As appeared in TheStar.com.my

I WAS in Manila last week to give the keynote address at a conference to get small and medium enterprises (SMEs) prepared for the coming Asean Economic Community (AEC). I stayed back for the programme afterwards and attended the breakout sessions.

A number of things struck me. There were no qualms about the AEC. It was coming anyway, but there was no questioning why or looking for protection. The main interest was to know more and to learn how to take advantage of it despite the challenges.

The Philippines is, of course, a founder member of Asean. Indeed it was in the Philippines that the date for implementation of the AEC was brought forward from 2020 to 2015. However, that was an official decision. It was good to see the private sector, SMEs in particular, facing up to an oncoming reality without reservation; with enthusiasm in fact.

How many are truly prepared it is hard to say. However the spirit of wanting to know and, especially of sharing knowledge and experience, was so evident.

In the main panel discussion, the exchanges, including questions from the floor, were convivial and substantive. Manuel V. Pangilinan, chairman of the PLDT group, the leading telecommunications service provider in the Philippines, emphasised the need not to be afraid of failure, to pick oneself up and to move on. He was referred to as Mannie by everyone, no titles to distance him from the audience.

One of the Philippines’ most successful business leaders, he did not talk down to anyone. He was engaged and engaging. Something some Malaysian business leaders should emulate.

Another of the panelists, Bernie H. Liu (again, just Bernie to everyone), president and CEO of Golden ABC, the leading fashion group in the Philippines which also has a large footprint in the region, was equally humble. Understandably, he emphasised branding and the need to register the brands early. Another good point he made was the need to understand the local culture, an aspect of business critical particularly in the retail industry.

On the obverse side, a Bain and Co study of the retail grocery industry, for instance, emphasised local company defensive strategies against the challenge and competition of foreign companies seeking to break into the market. These strategies have helped local companies such as Big Bazaar in India, China’s RT-Mart, and Indonesia’s Hero supermarket. Multinational competitors lost market share largely because they failed to adapt strategies to vastly different countries in varying stages of development.

The rules for success are:

1. Build local footprint and local market share (good example: Mumbai-based D-mart)
2. Provide online service – a digital presence is now key
3. Have fresh food and locally relevant products (Good example: Hero supermarket in Indonesia)
4. Establish a low-price perception through frequent promotions and low shelf prices – Vietnam’s Big C has done this well
5. Provide training to ensure good frontline talent – which is often neglected that, again, Big C does well.

So, there are sound defensive strategies, even as Asean markets are opened up. The prize, don’t forget, is an emerging Asia grocery retail market which, by 2017, will be larger than those in Europe and America.

But defensive strategies anywhere in any industry can be pierced by counter-attacking strategies. It was thus elevating to hear at one of the breakout sessions at the Manila conference, how a local cosmetics and skincare company has been penetrating markets bowed before the well-known global brand names.

Laura Verallo de Bertotto of VMV Hypoallergenics swept the audience off their feet with her narration of how her company is making a mark in the international marketplace. It has gone for a costly USP (unique selling point) – always making sure before hand its products are most reliably the safest and the best for a number of specialist lines.

It has outlets in some of the most sophisticated centres like New York (in Soho) and Singapore. Indeed Laura wondered whether she had done the right thing going to Singapore where the rental is higher than in New York!

The whole point is there are no barriers to success in business in an open economy whether you are competitively protecting and expanding your market, or when you get into a crowded market even with oligopolistic brands.

It was interesting to experience the verve and can-do attitude of the business persons I met in Manila, and their willingness to share their experiences with the SMEs.

Just a few days after my Manila trip, Philippine President Benigno Aquino (pic) signed into law a bill allowing foreign banks to take full control of local financial institutions, even as Indonesia was mulling rolling back the foreign shareholding limits of its banks. In the Philippines, economic needs met with regulatory confidence.

Of course the Philippines still has big macro problems. I remember the big coming out party at the UNCTAD (United Nations Conference onTrade and Development) in May 1979 before Ferdinand Marcos and his wife Imelda folded the country up, and an economy of drips and drabs since then. Just recently the economy has bloomed, something associated with the Aquino administration, particularly its committed fight against corruption – the Philippines’ singular and most debilitating cause of economic stagnation.

There is also a big problem with power generation – both its reliable supply and its exorbitant cost.

Will that May 1979 coming out party haunt the May 2014 coming back party, when the Philippines hosted with great style the East Asia World Economic Forum and other events? President Aquino will have to step down in 2016. There is understandable concern over who will take over and where he or she will lead the country.

However, underneath it all, there is a nation with abundant talent which has the ideas, ability and confidence. If only bad government in the Philippines does not get in the way.

For Malaysia, it is a plus that we have generally good government, but we also have a problem with corruption, although perhaps not at the same debilitating level as the Philippines. However, before we jump up in celebration, just imagine how our achievements can be optimised if there was insignificant corruption. Just as talent in the Philippines shows all the evidence of how that country could be launched into the economic big league if there was not the scourge of corruption.