Philippines: Reflections

The Philippines is not your typical  Asian country. We were often reminded that the Philippines is a country that spent “300 years in a convent, and 50 years in Hollywood”. This phrase is commonly used to describe the countries colonial rule by Spain and then the United States. This rich history adds to the country’s cultural diversity! I am always excited to learn about a country’s culture and its people, and especially the food. I’ve enjoyed Filipino people and its food from the United States, and it was an honor to experience this first hand.

7 days, 20 business meetings, 30 classmates, 1 professor – lots of learning and lots of laughs. We learned how there are various businesses and activities engaging in the pursuit for progress for the Philippines, and the following areas were common themes as we learned more Filipino culture and business:

FinTech – There is a rise in FinTech businesses across the Philippines. Presently 3 out of 10 Filipinos have a bank account, and the remainder keeps their savings in their homes. 68% of financial institutions are pawn shops. Digital payments are low, and consumers take advantage of cash on delivery payments. There are currently a lot of ventures focusing on this space such as Coins.PH focusing on meeting the needs of consumers who do not have bank accounts.

Telecommunications: The Philippines has a population of over 105M people, and about 67M people have access to the internet. The Philippines spends about 4 hours on social media on average (compared to 2 hours in the US). With the average age of Filipino Citizens hovering around 24, the internet and social media will continue to play an active role in politics and the rise of many industries.

Tourism: During our last day, we visited Bohol, the 10th largest island in the Philippines, and home to many resorts. We learned about the tourism industry. Tourism is forecasted to be one of the largest industries in the Philippines. In Bohol, there are many programs in place to help support this growing industry, such as a local school where students grades 8-12 can take part in the Turo-Tourism program and prepare to work in local resorts.

The Philippines is forecasted to be the 16th largest economy by 2050, and I look forward to visiting the Philippines long before then to witness the greatness that lies ahead!

Jacinta James (’19) is an MBA Candidate at Columbia Business School

Philippines: Doing Business for Good

GIP Philippines class at Ayala Corporation

We visited about 15 companies in Manila, Philippines. These industries vary from food to fashion to telecommunications. And despite varying areas of focus, they did have one thing in common and that was to improve the lives of Filipino Citizens.

The Philippines has a population of 107 million people across its 7,000 islands. And half of the population is younger than 23 years old. While the Philippines economy is growing annually at 6% +, there is still much to be done to help the Filipino people. Local corporations are not leaving it in the hands of the government along but are working in partnership with the government.

Ayala Corporation is the Philippines’ oldest and largest conglomerate. Ayala Corporation was founded in 1834, managed by 7 generations of Ayalas and there are currently 3 family members working in the business. The company’s business portfolio includes real estate, telecommunication, water, energy, infrastructure, health care, and education. Ayala Corporation prides itself on its commitment to social causes,  being the Philippines’ partner in its pursuit for progress and building the nation and innovation.

ABS-CBN is the Philippines leading news organization. ABS-CBN also has a public service framework, where they aim to be in service of every Filipino through the following key areas:

  • Humanitarian Relief and Rehab
  • Child Welfare
  • Education
  • Health and Wellness
  • Overseas Filipino Welfare
  • Environment

It was definitely inspiring to meet with these companies and to see that a company can be both successful industry leaders while operating with a social mission in mind.

Jacinta James (’19) is an MBA Candidate at Columbia Business School

Myanmar: A Lesson in Leapfrog

Facebook has become the internet of Myanmar

Over and over again, at each company we have visited, we hear the same story about the incredibly high penetration of smartphones in the Myanmar population. The figures shared with us have been astounding, all above the 90% mark. Thura Ko Ko, a senior adviser to TPG Capital and co-founder of YGA Capital, talked about the phenomenon. “Around 2014, the percentage of Myanmar citizens with cell phones was about 8%. From 2014 to 2018, that figure has risen to almost 100%. What is even more impressive is that over 85% of those who have a cell phone, own a smartphone,” Thura says as he leans against the podium at Myanmar Imperial University.

Thura Ko Ko, a Myanmar citizen, spent his early years as a telecommunications investment banker in London. After a successful career in private equity in the United Kingdom, he finally decided to move back home. Using his expertise, he has advised or individually invested in several projects in Myanmar over the last decade. He spoke about the smartphone penetration phenomenon as if it happened by accident. When the government realized they needed to catch-up to their neighboring countries, they passed a law allowing foreign companies to build and operate cell phone towers. This brought rapid investments with towers sprouting up all over Myanmar. Suddenly, there was 4G available wherever you went and citizens leapfrogged the normal progression of cell phone purchases of flip phones to smartphones. Furthermore, Facebook has become the go-to search engine or means for any internet use whatsoever. It has defined and molded the way citizens conduct modern business.

“It’s crazy. I walk out of the plane in Munich and pop in my SIM card and barely get 2G service if I’m lucky. I’ll fly back to Myanmar and literally everywhere I go, there is 4G service and you can download videos, movies, anything you want,” Alex Spitzy from JJ-PUN told our group.

This leapfrog effect that Myanmar has witnessed in smartphone technology is not isolated to just this industry. Thura Ko Ko believes it will also happen in healthcare, finance and retail as well. With regard to retail, he mentioned that only 30% of the population live in cities with malls and the current infrastructure issues deter those with access to traditional retail stores from shopping there.

Myanmar Imperial University, the first private university in Myanmar, hosted us for a discussion and networking event at their brand new campus

“E-commerce and Fin Tech should do well because of the large population…the big guys are coming. Alibaba, Baidu, they’re all on the doorstep,” he says as he answers questions from MBA candidates from Columbia Business School and Myanmar Imperial University, “Financial access to banking is incredibly low. You will see us bypass the normal banking branches and head straight to Fin Tech.”

That’s exactly what Brad Jones, CEO at Wave Money, is doing in Myanmar. With an incredible story of Fin Tech penetrating Myanmar of mobile banking, Brad and his team have captured 95% of the market share. Wave Money has essentially become a cash transport system that can send money across the country in minutes. A customer goes to a Wave Money agent, pays in cash, the Wave Money agent sends this to a customer’s account, and that customer can go to one of any 38,000 active shops to receive the money. In an economy where there is only about 6% formal banking penetration and cash is king, Wave Money has become the go-to solution for Myanmar citizens who need to send money to families back home after earning wages in the major cities.

With all this rapid growth and the leapfrog effect coming soon, coupled with the high transparency in the country because of high-speed internet and high smartphone penetration, it is imperative for companies to also develop their social and sustainability programs. Large multinational corporations like Unilever, and smaller companies like Arao Company, are doing exactly that.

Trisha answers questions after the formal presentation

Trisha Mukherjee, the marketing director at Unilever for Myanmar, Cambodia and Laos, talked about the importance of building the next generation of Myanmar leaders through their “Leaders Grow Leaders” campaign. From 2014-2017 they sent 4 employees to different countries to work and learn better practices to bring back to Myanmar. In 2019, they plan to expand the program and send 6 more. Of the over 1,500 employees they currently employ, there are 30 managerial roles. 11 of those roles have been localized by Myanmar citizens and they have a goal to double that number to 22 in the next few years.

When asked about the 2018 Myanmar minimum wage increase to $3.60 per day (up from $2.50) and how they were paying their factory workers, Trisha said that the Unilever-only factory workers are paid substantially above minimum wage and the two joint venture factories are slightly above with monthly incentives and benefits.

Smiles from the factory workers come across their faces as we walk through the floor

Khaing Mie Mie Win, a Burmese businesswoman with an incredible story from rags to riches (see link for full story), has built Arao Company from the ground up to several large garment factories with over 3,200 employees. The factories have been modernized and the working conditions are well above expectations. Some workers are paid minimum wage, but most above the new Myanmar standard and all with compensation incentive packages.

Khaing Mie Mie Win discusses her incredible story as a widowed tailor to the employer of over 3,200 people

Not only are the facilities being modernized, but the systems and operations are being optimized as well. “Last year we were producing 35 pieces of garment per hour. After our factory manager rearranged the floor with a new system, we are now producing around 55 pieces of garment per hour. Our goal for the next year is to get to 65,” Khaing Mie Mie Win tells us at her factory.

Both visits to Unilever and Arao Company opened the discussion about gender biases and what the companies are doing to correct them. Unilever has created ads that break down the cultural norms about patriarchy and empower women with the knowledge that they can compete with men on every level. Both companies employ majority women in their factories (Unilever over 60%; Arao Company almost 90%). Khaing Mie Mie Win told us as she finished her compelling story, “that [this] become my motivation, to help these women have better lives.”

A woman in the Arao Company factory marks fabric samples

Although it seems like operational efficiencies have developed in some factories, there is still substantial room for improvement. “There is a lot of hand holding that has to be done in Myanmar operations. A job that would usually be done by 1 [person] is done by 3. The level of skill needed is still far behind other countries,” says Trisha.

Operational inefficiencies don’t just occur on the individual level, but on the corporate level as well. When asked about the potential for good investments in the airline industry, Thura Ko Ko scoffed at the idea. “We had 8 airlines in the country. Last year, 5 of them went out of business. We have 23 private banks in Myanmar. Not all of them will survive. Consolidation is not easy and will be challenging going forward,” he says as he wraps up the optimistic discussion with a bitter reality.

There is much work needed for Myanmar to become a major player in Southeast Asia, but with each visit, we become more and more convinced of the potential for success.

Oliver Salman (’19) is an MBA Candidate at Columbia Business School