Job creation will be the top priority for the Philippines' next president if the country's entrepreneurial class is to succeed, according to a business specialist. John Gokongwei said the Philippines' entrepreneurial class needs favorable conditions to compete on the international stage. Faced with globalization and trade agreements such as the WTO and the AFTA, he said the nation's entrepreneurs must strengthen their businesses or risk losing out to more competitive international rivals.
Delivering a speech at San Carlos University's convocation where he was awarded a doctorate in business and enterprise development honoris causa, Mr Gokongwei said the country lacked world-class entrepreneurs and needs to nurture home-grown talent that can compete internationally - similar to how Philippine boxer Manny Pacquiao emerged to become a world champion.
Mr Gokongwei questioned why Thailand, a country with roughly similar populations, racial mix and natural resources, has double the Philippines' per-capita income.
"Thailand can produce candies at a much cheaper price than here. With the almost-zero trade barriers, branded candies, some of them Filipino in origin, will be made there and exported to us. This will be a very common scenario in the future if we do not change. If this continues, we will be a country that creates nothing and imports everything," he said.
Mr Gokongwei further outlined several areas where change is required to forge a stronger business class:
o Access to capital: Nearby Thailand's interest rates fall as low as 2.3 per cent whereas the Philippine business class borrows at between 7 to 8 per cent. Long-term Thai borrowers further enjoy 5 per cent interest, allowing them to build competitive industries, according to Mr Gokongwei.
o Labor management: The Philippines' wages are competitive with Thailand's but local uncertainty makes it difficult for Philippine entrepreneurs to forecast accurately their short-term labor needs. Mr Gokongwei proposes legislation that would award an extra one to six months of separation pay on top of the current severance package mandated by law. The proposed new law would give employers flexibility during an economic downturn while providing workers with sufficient wherewithal until new employment is found.
o Cheaper power: Mr Gokongwei compared his food-manufacturing business in Thailand, which purchases power at P3.5 per kilowatt-hour, with Philippine power that costs P7 per kilowatt-hour.
"Just to give you an example of how we can cut down power costs, we have built power plants for two of our power-dependent businesses, petrochemicals and textiles. We did this because high power costs had killed most of our competitors in both industries," he said, adding he pays only P2.75 per kilowatt-hour.
o Agricultural productivity management: Whereas the Philippines was previously a net exporter of rice and sugar, today the country is a net importer. Mr Gokongwei said the nation's farmers must become more competitive by trimming costs, generating greater profit and perhaps pass the savings onto consumers.
o Foreign-exchange management: Since the Asian crisis in July 1997, the Thai baht has devalued from 29.48 baht to the US dollar to 39 baht. The peso fell from P29.33 to the dollar to P56 in the same period. Filipino entrepreneurs who borrowed P29 in July 1997 would have to repay a usurious P56 today, Mr Gokongwei said.
