The Philippines In 2019: Resilient And Rising

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The Philippine-headquartered global port operator is thriving at 32—sustaining market leadership while facilitating trade, powering economic activity and delivering higher value to its shareholders with strategic investments in the Philippines and beyond.

Thirty-two years after port operator International Container Terminal Services, Inc. (ICTSI) assumed operations of the Port of Manila in December 1987, the company led by Spanish-Filipino billionaire Enrique K. Razon Jr. has carried on its tradition of boldly taking on risky businesses.

Established at a tumultuous time in Philippine history, when the country was rebuilding its democratic foundations after the EDSA People Power Revolution, ICTSI has proven itself resilient to trying times by skillfully navigating volatility and transforming obstacles into opportunities.

“The Port of Manila started it all for us,” relates Razon, who started his career as a teenager working at the quays. Through the challenges of the 1998 Asian financial crisis and the global financial crisis 10 years later, Razon has steered the company to where it is now: a company with a global portfolio of 32 terminals across 18 countries. “Our experience at the Manila ports prepared us to navigate the high-risk, high-reward opportunities that lay ahead. We realized we could, so we did—and we have been successful.”

Quays to Economic Prosperity

Today, ICTSI is the Philippines’ leading terminal operator, having acquired, managed and enhanced the efficiencies of the country’s busiest ports. Replicating its success at its flagship Manila International Container Terminal (MICT)—the Philippines’ first port privatization effort—ICTSI has been flying the flag for Philippine ingenuity overseas.

Known for its audacious strategy of investing in emerging markets like Papua New Guinea, Honduras and Iraq, ICTSI has helped governments worldwide to modernize their port assets with adequate investments in operations, equipment and technology. Its focus on predominantly gateway cargoes, with its promise of immediate efficiency gains and strong cash flow potential, has been cited by Lloyd’s List, the world’s oldest maritime publication, as a “successful strategy”.

“Coming from an emerging market like the Philippines, we have always felt comfortable in doing business with that part of the world. The growth potential has always been higher,” says Razon.

True enough, the latest financials in the first half of 2019 reported ICTSI’s net attributable income to be up by 42% to US$128.5 million from the US$90.2 million recorded in the first half of 2018. Improving income contributions from terminals in Iraq, Australia, DR Congo and Subic, and the ramp up of new terminals in Papua New Guinea, powered this increase.

Beyond profitability, ICTSI recognizes the complex role ports play in a country’s economic development. Says Razon: “Part of the equation is knowing what we can do for our government partners and their country. If you run a port properly, profit, supply chain improvement, government revenue and economic growth all fall into place.”

In the Philippines, ICTSI has been an active supporter and participant of the government’s massive Build, Build, Build infrastructure program. Its recently opened Cavite Gateway Terminal—a barge terminal in Tanza—offers faster, cost-effective maritime links to Cavite locators, and has contributed to reducing the number of trucks clogging Metro Manila’s roads.

Ramping up its expansion drive, ICTSI has also proposed to develop and modernize the Iloilo Port Complex and the Port of Dumangas in central Philippines, and recently announced acquisitions in Rio de Janeiro, Brazil and Kribi, Cameroon.

Future Proof

Sustainability-centered momentum is driving ICTSI’s efforts to create positive impact across its operations. New berth and yard spaces are being constructed to prepare for increasing volumes, while its flagship, MICT, is seeing significant equipment upgrades, including three neo-Panamax cranes—the largest port-handling equipment in the country—and 16 new eco-efficient hybrid rubber-tired gantries expected to lessen the port’s carbon footprint.

The company’s jewel in Australia, Victoria International Container Terminal (VICT), is redefining global port standards for its innovative and sustainable design. The world’s first fully automated international container terminal, VICT is a recipient of Australia’s Smart Infrastructure Project Award.

As a corporate citizen of its host countries, ICTSI initiates programs with local communities to promote inclusive growth. One of its most notable community projects has been in Papua New Guinea, where ICTSI partnered with landowner groups to establish a collaborative framework that effectively made the latter shareholders of ICTSI terminals in Lae and Port Moresby. “As a good neighbor to our host communities, it is our duty to provide the opportunity for social and economic development,” states Razon.

With world trade expected to face strong headwinds in 2019 and 2020—the World Trade Organization forecasts growth to fall to 2.6% in 2019 and possibly rebound to 3.0% in 2020, assuming trade tensions ease between the United States and China—it seems ICTSI once again finds itself navigating familiar, albeit volatile, territory.

With quiet fortitude, Razon is prepared to face whatever challenges may lie ahead: “The future is always unpredictable. Where that will take us we don’t know yet, but given ICTSI’s diverse portfolio and what we’ve done in the past three decades, this is definitely not stopping our growth.”

Philippine conglomerate SM Investments Corporation (SM) is sustaining market leadership across its diverse interests while strengthening its role as an active partner for sustainable development.

Amid its aggressive growth plans for its core portfolio, Philippine conglomerate SM Investments Corporation (SM) continues to enhance its capabilities by constantly innovating, managing its expansion responsibly, and by investing in opportunities and strong partners to deliver greater shareholder value. This is further complemented by strong synergies across the group, which drive SM to better serve communities and energize local economies where it is present.

Across the group, SM’s solid performance for the first half of the year carries the growth momentum of its expanding interests in the country. SM delivered an increase of 27% in net income to US$440.61 million, underpinned by remarkable bank earnings and robust residential take-up. The double-digit increase affirms the conglomerate’s capability for sustained growth. Meanwhile, SM’s assets increased 5% to US$21.46 billion.

“We are well capitalized to expand our presence in Metro Manila and widen our extensive network of retail and banking businesses, as well as to provide more integrated property developments across the country,” says SM President and Chief Executive Officer Frederic DyBuncio.

SM has an expansive and diversified presence in retail under SM Retail, Inc., operating food, non-food and specialty stores. Its property arm, SM Prime Holdings, the largest integrated property developer in the Philippines, has 73 shopping malls in the Philippines and seven in China. SM Prime also holds interests in residences, offices and hotels, as well as convention centers and tourism-related property developments. Its banking arms, BDO Unibank and China Banking Corporation, are the country’s largest and sixth largest, respectively, in terms of total assets, loans and deposit.

“At SM, sustainability is integral to the way we do business and it’s driven at the top.”

– Frederic Dybuncio, President and Chief Executive Officer, SM Investments Corporation

Strong ESG performance

Aside from pursuing aggressive domestic expansion and reinforcing its capabilities with strategic partners, SM’s pillars of growth are anchored on good corporate governance and sustainable operations.

SM also has the highest governance score based on the ASEAN Corporate Governance Scorecard, and has been consistently honored as a Platinum Awardee for leadership in sustainability and governance by The Asset.

In 2018, Forbes cited SM in the Global 2000 list of the World’s Best Employers and the World’s Best Regarded Companies. For 2019, Forbes once again named SM as one of the Top 250 Best Regarded Companies—the only Philippine corporate to do so.

Partner in Sustainable Development

SM recognizes the importance of the private sector’s role in achieving the United Nations (UN) Sustainable Development Goals (SDGs). It is doing its share towards achieving the UN SDGs by adopting the targets in its operations and in reporting standards, as the group continues to align its sustainable business practices and strategic social investments with the sustainable development goals.

Likewise, SM is a signatory to the United Nations Global Compact (UNGC), supporting the 10 Principles of the UNGC, which advocate for engaging in just labor, upholding human rights, promoting environmental responsibility and working against corruption.

“At SM, sustainability is integral to the way we do business and it’s driven at the top. We anchor all our businesses on good corporate governance and ensure that the long-term success of the company remains balanced with the long-term best interests of our various stakeholders, most especially in the communities we serve,” says DyBuncio.

The company’s pillars of sustainability further cement SM’s focus on creating inclusive economic opportunities, promoting environmental responsibility and responsible consumption, and in creating positive social impact. DyBuncio adds that SM’s diverse interests and targeted social investments in areas such as education, healthcare, food security and social development programs facilitate development in communities and bring about meaningful impact to society.

“For us, stakeholders of our businesses are key, so we ensure that we support each other and contribute to achieving the sustainable development goals,” adds DyBuncio.

A leading health and beauty network marketing company in the Philippines is doing more than its fair share to foster equitable growth.

FRONTROW Enterprise may not be your typical conglomerate, but the Manila-based health and wellness networking company punches above its weight when it comes to corporate social responsibility.

In December 2017, the company’s co-founders, RS Francisco and Sam Verzosa, bagged a deal with the Miss Universe Organization to bring to Manila three Miss Universe pageant winners to grace a fashion show to raise funds for charity. The event was a big success and raised millions of pesos for a scholarship program for poor children in Tondo, one of Manila’s biggest slum communities. FRONTROW and Miss Universe Organization staged a similar event last June to raise money for scholarship programs as well as LGBT rights and HIV awareness groups.

The partnership with Miss Universe Organization underscores how Francisco and Verzosa are creatively combining business with philanthropy. While product endorsements are part of the deal, the two organizations also act as genuine partners in raising funds for charitable causes they both cherish.

“We’re very happy with these events because they show that FRONTROW isn’t all about the money and the commissions (that members are earning),” says Verzosa. “We’re also paying it forward. Whatever we’re getting, we’re sharing with others, with Filipinos who need help the most.”

With more than a million members in over a dozen countries who supplement their salaries and earnings by selling FRONTROW’s high-quality whitening, slimming and energy-boosting products, the company is channeling the growing purchasing power of the middle-class into livelihood opportunities for motivated self-starters belonging to low-income families. Thousands of FRONTROW members have become more prosperous through direct selling and also through their direct referrals or downlines.

According to Francisco, FRONTROW is one of the leading direct selling and network marketing companies in Southeast Asia, winning top awards from prestigious bodies such as network marketing authority Asian Networkers Convention and Expo (ANCE), which hailed FRONTROW as the “Best Global Company” in 2017, 2018 and 2019.

A key element to FRONTROW’s huge impact on members’ financial well-being is the sizeable 50% discount they get when purchasing products from the company. This ensures they make enough money when they resell at the suggested retail price. “Once you join FRONTROW, you are entitled to a lifetime of discounts which will allow you to earn remarkable profit from the sale of products,” says Francisco.

Floyd Mayweather, a FRONTROW brand ambassador, observed first-hand the company’s transformative impact on members’ lives during a visit to Manila last year. The boxer, who was ranked as the world’s highest-paid athlete by Forbes magazine in 2018, and who returned to Manila in April 2019 for a second photoshoot with FRONTROW, was escorted by a fleet of luxury cars owned by FRONTROW members and partners on his way from the airport to the venue for the shoot. Before joining the networking company, many of the members didn’t own cars and commuted via public transportation.

Realizing that it’s not enough to improve the financial well-being of its members, Francisco and Verzosa formed FRONTROW Cares Foundation in 2017 to share the company’s gains with the less fortunate members of society. “We’ve been helping a lot of people within the organization. So we thought we also wanted to help people outside the organization. As such, we established the foundation,” says Verzosa. “We realized we also needed to do something for the wider community, the country.”

Apart from scholarships and other kinds of financial assistance for indigent children, FRONTROW Cares also supports the restoration of churches, outreach programs for cancer-stricken children and assistance for abandoned elderly people. In December 2018, it also launched a project to provide business capital for overseas Filipino workers who are keen to return to the Philippines and become entrepreneurs.

FRONTROW’s philanthropic projects inspired some members, especially those who are doing very well, to launch their own charitable programs. “After we began doing these kinds of charity events, some of our members started doing their own as well,” says Verzosa. “One of them goes to different cities around the country every month to personally deliver financial assistance to people asking for help.”

Still, the FRONTROW Enterprise makes its biggest and most sustainable impact in changing lives for the better by helping tens of thousands of its members earn extra money and improve their financial well-being through selling the company’s products.

A major challenge facing government and business leaders in the Philippines is making economic growth more equitable. Despite a faster pace of GDP expansion in the last decade, poverty and inequality remain pervasive. With a quarter of the population officially classified as poor, it seems that growth has mainly benefitted the upper and middle classes while leaving the rest behind. Though its founders say they are only getting started, FRONTROW’s way of doing business helps turn “inclusive growth” from mere buzzword to reality.