Jaime Augusto Zobel de Ayala : The Philippines is in Great Shape

JAZA: The Philippines is in Great Shape

While nearly half of 1,258 chief executive officers polled worldwide believe the global economy will decline even further in the next 12 months, as indicated in the 15th Annual Global CEO Survey of financial services firm PricewaterhouseCoopers International, nearly three times as many CEOs are confident in their own companies’ growth prospects for the next 12 months.

This suggests that CEOs believe they have learned how to manage through difficult and volatile economic times, according to the survey results released at the recent World Economic Forum annual meeting in Davos, Switzerland.

Among these confident CEOs is Ayala Corp. chairman and CEO Jaime Augusto Zobel de Ayala (JAZA), who was one of 38 CEOs who granted in-depth interviews that formed part of the report of PwC, of which Isla Lipana & Co. is the local member firm.

When asked about his view on the global ecomomy, JAZA cites statistics over the last five years: “Asian economies are trading with each other much more than ever before. This includes the changes taking place in China. Asia’s consumption-led demand is still quite strong, and so is infrastructure development. Those two elements will fuel a growth in our part of the world that you will probably not see elsewhere,” he says.

JAZA also seems unfazed by Europe’s problematic fiscal position, and expresses his confidence in the fiscal position of the Philippines and other Asian countries. “We still have growth, which is not happening in other parts of the world. We are also in a fairly good fiscal position. International reserves are at the highest ever, so our currency has been strong. In fact, some would argue that it’s been too strong that it has affected exports. Still, because of the strong currency, our interest rates have remained low. We’re lucky also that the inflation rate has remained tempered. From a fiscal position, the Philippines is in great shape.”

JAZA cites reasons for this confidence, saying, “Consumption-led growth, the strength of our currency, and the fact that our international reserves are so high have given us stability in our own national balance sheet. We are getting more retention now than ever before from the investment community. The revenue flows to the government are also increasing because the minister of finance is taking the tax recovery situation much more seriously. You’ve got a very good set of parameters [with regards to investment and government revenue] in our country right now. If all of that comes together, if we get things right, you may see growth numbers of between four and five percent, maybe a minimum of 3.5 percent. These are not bad numbers in relative terms, compared to what’s happening in the rest of the world. We’re really in a position to do some interesting things. It’s now time to execute.”

It was also noted in the interview that the Ayala Group today is very different from how it was five years ago. JAZA turns to Ayala Land in illustrating the change: “Once upon a time, we had one or two product ranges at the top end of the market that dealt with high-end subdivisions and the needs of the people in the wealthier segment of our community. We built our reputation for quality in that sector. In order to be relevant to the bulk of the Filipino community, we’ve had to introduce smaller lots and the use of technology to pre-fabricate [homes]. We’ve had to bring housing costs down to a whole different level,” he says. Another change he cited is their growth from having just two brands in the past to now having five. The price points have shifted significantly, too. “Price points have moved way down to houses at less than a million pesos,” he says.

There has also been an increasing effort to cater to the lowest-income groups, as seen particularly in their water distribution company. “It is our mandate to be relevant to them and to be able to deliver water to them at price points far below what the public/government service structure delivered before,” he reveals.

With the Philippines’ fiscal position looking good, the economy having the capacity to keep growing, and the Ayala Group growing and changing so much faster, JAZA considers this “an exciting time.” He declares, “That, combined with a dynamic private sector, can lead to tremendous development.”

Philippine Daily Inquirer
By: Tina Arceo-Dumlao
6 February 2012