“INCLUSIVE GROWTH – IMPOSSIBLE DREAM?”
MANUEL V. PANGILINAN
37th General Assembly & Annual Meeting
Bishops-Businessmen’s Conference
July 8, 2013 Pope Pius XII Center
HIS EMINENCE CARDINAL TAGLE, MINISTERS OF THE CHURCH, BBC MEMBERS, FRIENDS – THANK YOU FOR THE OPPORTUNITY TO SHARE OUR THOUGHTS ON INCLUSIVE GROWTH.
WHEN CHITO FRANCISCO INVITED ME TO SPEAK BEFORE ALL OF YOU, I WAS RELUCTANT AT FIRST, BECAUSE THE ONLY EXPERIENCE I HAVE, SPEAKING WITH PRIESTS, IS IN THE CONFESSIONAL.
I WAS HESITANT BECAUSE BUSINESS AND SOME SECTORS OF THE CHURCH MAY HOLD DIVERGENT VIEWS ON CERTAIN BUSINESS MATTERS.
BUT I FELT IT IMPORTANT TO ACKNOWLEDGE THAT DESPITE THOSE DIFFERENCES, OUR VALUES CONVERGE ON OUR MOST ESSENTIAL GOAL – TO IMPROVE THE LIVES OF OUR PEOPLE. WE’VE LONG WORKED WITH THE CHURCH ON MANY SOCIAL PROGRAMS – POVERTY RELIEF, DISASTER RESPONSE, HEALTH CARE, EDUCATION – BUILDING ON SHARED MISSIONS.
INTRODUCTION
I UNDERSTAND THAT INCLUSIVE GROWTH WAS ALSO THE THEME OF LAST YEAR’S ASSEMBLY. THIS SUGGESTS THAT THE BBC ACCORDS IT THE URGENCY IT DESERVES. AGAINST THE BACKDROP OF RECENT IMPRESSIVE GDP GROWTH RATES, POVERTY REDUCTION, AS DESIRED, HAS NOT BEEN MET.
AT THE OUTSET, I MUST CONCEDE THAT INCLUSIVE GROWTH IS COMPLEX AND ENIGMATIC TO DEFINE. THERE IS A THE SIMPLISTIC VIEW THAT DEVELOPMENT IS A MATTER OF ENDOWING THE POOREST WITH THE MOST BENEFIT, THAT THE SOLUTION IS AS STRAIGHTFORWARD AS CREATING MORE JOBS. SEDUCTIVELY SIMPLE AND YET NAÏVE. ONE OTHER VIEW IS THAT INCLUSIVE GROWTH INVOLVES A COMPLICATED INTERPLAY OF POLICIES, INCENTIVES, FOCUS, AND SOUND MANAGEMENT TO WORK. EVEN THEN, SOLUTIONS WILL NOT BE IMMEDIATE, BUT LONG-TERM. THERE IS ALSO THE CONVENTIONAL THEORY WHICH PROPOSES THAT SIGNIFICANT AND SUSTAINED GDP GROWTH CAN CREATE SUCH MOMENTUM AS TO LIFT THE WELFARE OF THE GREATER NUMBER OF THE POOR. THE 600 MILLION PEOPLE IN CHINA WILL ATTEST TO THIS. HOWEVER, THE EXPERIENCE IN INDIA HAS NOT BEEN SIMILAR.
BUSINESS AND THE POOR – THE FIRST PACIFIC VIEW
TO PROVIDE CONTEXT TO MY REMARKS TODAY, LET ME DESCRIBE TWO BASIC PRINCIPLES CLOSE TO OUR HEART AT FIRST PACIFIC:
FIRST, BUSINESS’S TRADITIONAL ROLE IS TO PROVIDE GOODS AND SERVICES FOR A PROFIT. BEYOND THIS LIES A SOCIAL DIMENSION
THAT FORMS AN INTEGRAL PART OF OUR BUSINESS. WE EXIST BECAUSE THERE ARE MARKETS – AND MARKETS ARE PEOPLE, RICH AND POOR. WHEN BOTH MARKETS AND BUSINESS THRIVE, THEY SERVE ALL PARTS OF THE ECONOMIC PYRAMID – THE TOP AS WELL AS THE BOTTOM.
BUSINESSES DO TRANSFORM SOCIETIES. THEY NOT ONLY SHAPE OUR PHYSICAL AND OUR VIRTUAL WORLDS, BUT ALSO CREATE NEW NEEDS, NEW HOPES, NEW DREAMS. JUST THINK OF CELFONES IN THE HANDS OF FARMERS.
INDEED, BECAUSE OF ITS SIZE AND INFLUENCE – THE PRIVATE SECTOR IS THE LARGEST EMPLOYER IN THE ECONOMY – BUSINESS MUST CARRY WITH IT THE COMMENSURATE MEASURE OF RESPONSIBILITY AND ACCOUNTABILITY TO SOCIETY.
HELPING THE POOR RUNS TO BUSINESS’S SELF-INTEREST. AS ECONOMIC WELFARE IMPROVES, PURCHASING POWER RISES AND ENABLES EVEN THE POOR TO RAISE THEIR DEMAND FOR PRODUCTS AND SERVICES. A VIRTUAL CYCLE OF PROSPERITY IS THEREFORE CREATED.
AN APPROACH TO INCLUSIVE GROWTH
FROM OUR PERSPECTIVE, GROWTH MEANS SUPPLYING TWO THINGS: FIRST, DEMOCRATIZING ACCESS FOR THE POOR – ACCESS TO CREDIT, TO MARKETS, TO TECHNOLOGY AND INFORMATION, TO EDUCATION AND TO INFRASTRUCTURE, SECOND, EMPOWERING THE POOR WITH SOUND MANAGEMENT AND AN ENTREPRENEURIAL SPIRIT.
E-LOAD AND PASALOAD
LET ME GIVE A FEW EXAMPLES ON HOW BUSINESS HELPS PROVIDE ACCESS.
THE FOLKLORE WITHIN SMART IS THAT THE IDEA FOR SMART’S ELECTRONIC LOAD WAS INCUBATED OVER LUNCH, AT OUR CORPORATE CANTEEN. ONE SALES PERSON ASKED IF IT WAS POSSIBLE TO SELL PREPAID LOAD IN SMALLER AMOUNTS – OR SACHETS – AND PASS IT AROUND AMONGST SUBSCRIBERS VIA CELPHONES.
HERETOFORE, PREPAID LOAD WAS SOLD THROUGH EXPENSIVE, UNWIELDY PREPAID CARDS, THE LOWEST DENOMINATION AT 300 PESOS. MANY HAVE BENEFITTED FROM PREPAID SERVICE, BUT THERE WERE MANY MORE WHO COULD NOT AFFORD TO BUY A 300 PESO LOAD. THE SECRET INGREDIENT LAY IN SELLING AIRTIME LOAD IN SACHET SIZES. NOW, YOU CAN BUY LOAD FOR AS LOW AS 10 PESOS. LIKE SELLING SOAP AND SHAMPOO.SO VERY FILIPINO.
SMART, TALK N’ TEXT AND SUN CELLULAR TOGETHER HAVE ABOUT 1.2 MILLION ACTIVE RETAILERS. MARGINS FOR E-LOAD ARE ATTRACTIVE AT 8%. IN COMPARISON, MARGINS FOR MOST FAST MOVING CONSUMER GOODS IS ABOUT 5-6%. FOR LIQUOR, MARGINS ARE 7 TO 8%.
IN ADDITION, MARGINS OF OUR RETAILERS ARE AMPLIFIED BY THE VELOCITY OF E-LOAD TRANSACTIONS, WHOSE TURNOVER IS GREATER THAN SOAP, SHAMPOO OR LIQUOR.
FINALLY, ELOAD IS LOW-COST. IT DOES NOT OCCUPY SHELF SPACE. UNLIKE SOFT DRINKS, YOU DON’T NEED REFRIGERATORS WHICH CONSUME ELECTRICITY. START UP COST CAN BE AS LOW AS 1,000 PESOS – 500 PESOS FOR A CELFONE AND ANOTHER 500 PESOS FOR INITIAL AIRTIME LOAD.
WE’RE ALSO TESTING THE USE OF CELFONES TO OPEN ACCESS FOR THE UNBANKED POOR. SMART IS WORKING WITH PLANET FINANCE TO DEVELOP A PROGRAM THAT WILL DELIVER LOANS IN DENOMINATIONS WITHIN REACH OF THE POOR, AND RECEIVE MICROPAYMENTS, USING THE CELFONE – AT COSTS LOWER THAN THOSE OF TRADITIONAL BANKING.
MICROFINANCE AS INCLUSIVE GROWTH INTERVENTION
TOGETHER WITH PINOYME FOUNDATION – A SOCIAL INVESTMENT FUND INSPIRED BY FORMER PRESIDENT CORY AQUINO – TWO IMPORTANT INNOVATIONS WERE CRAFTED:
FIRST, A BUSINESS-TO-BUSINESS PORTAL WHERE MICRO-ENTREPRENEURS CAN DISPLAY AND DESCRIBE THEIR PRODUCTS ON NET AND PROMOTE THEIR BUSINESS DIRECTLY TO THE BUYING PUBLIC.
SECOND, IS HAPINOY, A CHAIN OF THOUSANDS OF SARI-SARI STORES THAT POOL THEIR PURCHASING REQUIREMENTS, AND ARE THUS ABLE TO OBTAIN DISCOUNTS FROM SUPPLIERS AND MANUFACTURERS.
ELECTRICITY AND WATER
OUR EXPERIENCE IN DEPLOYING TECHNOLOGY TO DEMOCRATIZE ACCESS IN THE TELCO SPACE IS NOW BEING REPLICATED IN OUR POWER AND WATER.
MERALCO IS PILOT-TESTING ITS SMART GRID PREPAID ELECTRICITY SERVICE IN ANTIPOLO. THE GOAL IS TO ENABLE HOUSEHOLDS MANAGE THEIR ELECTRICITY CONSUMPTION BETTER, BY PROVIDING INFORMATION IN REAL-TIME. BETTER MANAGEMENT WILL LEAD TO LOWER POWER BILLS.
SUCCESS IN ELECTRICITY CAN LEAD US TO REPLICATE THE PREPAID SERVICE IN WATER.
MORE BROADLY, WE’RE INVESTING IN INFRASTRUCTURE TO SUPPLY ACCESS TO ALL. WE’VE EXPANDED OUR TELECOMS NETWORKS TO PROVIDE MORE INFORMATION, ESPECIALLY TO THE POOR. WE’VE INVESTED IN POWER TO PROVIDE GREATER ACCESS TO ELECTRICITY AT AFFORDABLE PRICE. WE’VE INVESTED IN WATER TO SUPPLY ACCESS TO CLEAN WATER AND BETTER SEWERAGE. WE’VE INVESTED IN TOLLWAYS SO THAT PEOPLE AND GOODS CAN TRAVEL FASTER AND AT LOWER COST.
WHY AGRICULTURE?
LET ME TURN TO AGRICULTURE.
ABJECT POVERTY IS MOST ENDEMIC IN AGRICULTURE – WHERE MAJORITY OF OUR LABOR FORCE, DIRECT AND INDIRECT, ARE DEPLOYED.
A STAGNANT AGRICULTURE EXACERBATES RURAL POVERTY, AND INCUBATES A SECOND ENCLAVE ECONOMY BY FORCING MIGRATION FROM OUR BARRIOS TO OUR CITIES.
A VIBRANT AGRICULTURE WOULD FEED OUR PEOPLE, PROVIDE JOBS TO FARMERS, AND TO WORKERS IN PROCESSING INDUSTRIES.
ONE APPROACH FOR AGRICULTURAL DEVELOPMENT – AND THE CONSEQUENT AMELIORATION OF POVERTY – MAY CONSIDER WHAT INDONESIA HAS DONE. IT IS CALLED “INTI PLASMA.” THIS INVOLVES COMMERCIAL FARMS ACTING AS CATALYSTS AND NUCLEI OF DEVELOPMENT (OR INTI). CLUSTERED AROUND INTI ARE SMALL HOLDERS (OR PLASMA), WHICH WILL EMERGE AND BENEFIT FROM THE RESOURCES IN TECHNOLOGY, CREDIT, INFRASTRUCTURE, PROCESSING FACILITIES AND MARKETS THAT LARGE COMMERCIAL FARMS CAN PROVIDE.
THE IDEA OF COMMERCIAL FARMING WAS HATCHED IN THE AFTERMATH OF TYPHOON PABLO LAST YEAR, WHICH DEVASTATED DAVAO ORIENTAL, INCLUDING COCONUT AND BANANA PLANTATIONS.
FIRST PACIFIC, TOGETHER WITH OUR SUBSIDARY, INDOFOOD – THE LARGEST INTEGRATED, PLANTATION TO FOOD COMPANY IN INDONESIA
– IS LOOKING TO DEVELOP A PALM OIL PLANTATION IN DAVAO ORIENTAL. INDOFOOD’S PLANTATIONS COVER MORE THAN 300,000 HECTARES PLANTED PRINCIPALLY TO PALM OIL, AND TO RUBBER, SUGAR, COFFEE, AND CACAO. WE ARE THE WORLD’S 3RD LARGEST PALM OIL PRODUCER. INDOFOOD EMPLOYS ABOUT 300,000 WORKERS IN ITS PLANTATIONS.
WE APPRECIATE THAT THE NOTION OF COMMERCIAL FARMING CAN INVITE APPREHENSION AND CRITICISM – PARTICULARLY IN LIGHT OF AGRARIAN REFORM. IN FACT, WE’VE ALREADY RECEIVED DISAPPROVING REMARKS EVEN BEFORE THE FIRST SPADE HAS BEEN PLACED ON THE GROUND. BUT LET ME QUICKLY GIVE YOU AN IDEA OF OUR THINKING.
THE GLOBAL MARKET FOR PALM OIL IS NEARLY SEVEN TIMES IN VALUE THAN THAT FOR COCONUT OIL. THE COST OF PRODUCING COCONUT OIL IS 27 PERCENT HIGHER THAN THAT FOR PALM. AND YET, PALM OIL YIELDS ABOUT THREE TIMES THE PROFIT FOR EVERY HECTARE OF PRODUCTION COMPARED WITH COCONUT PLANTATIONS. PALM TREES CAN ALSO BE HARVESTED AT PRACTICALLY HALF THE TIME IT TAKES FOR COCONUT TREES TO MATURE.
IN THIS COUNTRY, ON AVERAGE, 90,000 COCONUT HECTARES ARE NEEDED TO SERVE ONE COCONUT OIL MILL. FOR PALM PLANTATIONS, THE RATIO IS ONE MILL FOR EVERY 5,000 HECTARES. THIS MEANS MORE CAPITAL INVESTMENT WITH 18 PALM MILLS.
AND FINALLY: PALM OIL PLANTATIONS REQUIRE TWICE MORE WORKERS THAN COCONUT FARMS.
OUR INTEREST IN AGRICULTURE RESTS PRECISELY BECAUSE IT CAN BE A MAJOR CREATOR OF JOBS IN PLACES WHERE THEY’RE DESPERATELY NEEDED. PALM OIL WOULD BE A START; WE’RE OPEN TO COFFEE, CACAO AND RUBBER AS WELL.
CONCLUSION
LET ME CLOSE BY SAYING THAT POVERTY PROVIDES A STARK REMINDER THAT WE – INCLUDING CHURCH AND BUSINESS – ARE ALL TIED TOGETHER IN THIS LIFE, IN THIS NATION – THAT THE DESPAIR OF ONE TOUCHES US ALL. TO PARAPHRASE THE MESSAGE OF THE DISASTER MOVIE,“2012” –“A PERSON BECOMES HUMAN NOT AS AN INDIVIDUAL, BUT IN COMMUNITY.”
I KNOW THAT WHEN YOU’RE SLEEPING ON THE STREETS OF CEBU, OR SITTING ON THE ROOF OF YOUR FLOODED HOME IN CATEEL, OR DIVING IN THE POLLUTED WATERS OF MANILA BAY AS A BAKAL BOY, IT IS HARD TO IMAGINE ANY FUTURE. BUT WE MUST BELIEVE THAT THAT FUTURE WILL COME – THAT WITH EVERY DEPRIVATION COMES THE CHANCE OF RENEWAL, THAT ADVERSITY CAN GIVE BIRTH TO HOPE, THAT INCLUSIVE GROWTH HOLDS THE KEY TO A BETTER FUTURE FOR MOST OF OUR PEOPLE.
IF WE ARE TO BUILD THE KINGDOM HERE ON EARTH, HERE IN THESE BLESSED ISLANDS, WE MUST LEARN TO BELIEVE IN OURSELVES, AND IN OUR FUTURE. AT FIRST PACIFIC, THE OPTIMISTS HAVE IT — NOT BECAUSE THEY ARE RIGHT BUT BECAUSE THEY ARE POSITIVE. THAT IS THE WAY OF ACHIEVEMENT, OF IMPROVEMENT, OF SUCCES.
THANK YOU AND GOOD AFTERNOON.
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