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Thursday, January 2, 2014

Philippine Business History: The Ayalas, The Business Legends and The Marcos Cronies

Ayala Corporation
I. The Oldest Business House
Ayala Corporation (Spanish: Ayala y Compañía) is a holding company for the diversified interests of the Ayala Group. Founded in the Philippines by the Spanish and German Ayala, Roxas, and Zobel families during colonial rule, it is the country's oldest and largest conglomerate. The company has a portfolio of diverse business interests, including investments in retail, real estate, banking, telecommunications, water infrastructure, renewable energy, electronics, information technology, and management and business process outsourcing. From Wikipedia
In 1834, Domingo Roxas and partner Antonio de Ayala established a company that had no precursor, no precedent. Endowed with limited resources and a brave, optimistic vision of what the future might hold, our founding partners were among the nation’s first entrepreneurs. They found themselves hungry for opportunity and eager for evolutionary ways to do business. One wonders if they knew how long and how far their undertaking would go, or if they had an idea that the company they established would be a precursor to the conglomerate that it is today.

Pioneers from the beginning The country's first business house, 1834 Antonio de Ayala, son of Don Raimundo Ayala and Doña Maria Lorenza Ortiz de Urbina, arrived in Manila, by way of a circuitous route, from the small town of Alava in the Basque Country of Spain. 

Poor but determined to make something of himself, the young man had arrived eager to assist his uncle, Jose Maria Segui, the Archbishop of Manila, an Augustinian priest who had served as a missionary in the Philippines and China. 

But Antonio displayed equal zeal in the world of commerce. He concurrently held the job of assistant to Domingo Roxas, descendant of settlers who had arrived by way of Acapulco in the late 1770s. 
Ayala Corporation expands its reach
The fevered development of Makati and the further expansion of the real estate business were tempered by the divestment of non-essential land developments and balanced by expansion into international real estate investments.

At the same time, Ayala Corporation’s insurance divisions had undergone strategic streamlining, with the incorporation of the FGU Insurance Company, and later on, the reorganization of the Universal Insurance and Indemnity Company into the Universal Reinsurance Corporation. 

Further on, toward the mid-1970s, Ayala would invest in Globe-Mackay Cable & Radio Corporation. Ayala was one of the first to carry out brisk business moves in the light of this program. It was a move that—as chairman Enrique Zobel had predicted—would carry with it the seeds of tremendous growth in the future.

By the time Ayala went public in 1976, it had gone through more changes in corporate structure and modes of management than any other company in the country. This made it all the more surprising that it had managed to preserve its unique company culture for over a hundred years.

From the proclamation of Martial Law in 1972, all through its abolition in 1980, Ayala carried on with the central expansion of its business empire, as well as stabilizing infusions of investment and expertise from global companies.

Foreign investments became a focal point for national development, and in 1973, Ayala welcomed several Mitsubishi companies, led by Mitsubishi Corporation as investors, and signed a business collaboration agreement to explore new investment opportunities in the Philippines.

This partnership has been instrumental in creating the country’s leading industrial park and other ventures in automotive manufacturing, information technology, and water infrastructure. Forays into consumer-food manufacturing and progressive agriculture, with the purchase of majority equity in Pure Foods Corporation and the establishment of the Ayala Agricultural Development Corporation, marked the beginning of the 1980s.

In 1984, Jaime Zobel de Ayala ascended to the chairmanship of Ayala Corporation. At the same time, the conglomerate—and the entire country with it—was entering an altogether new world. It was also the year opposition leader Benigno Aquino, Jr. was assassinated upon his return from the United States, an event that began the unraveling of the Marcos dictatorship and along with it, the decline of the Philippine economy.
“The economy had gone through the floor, the political system was cracking,” Jaime Zobel observed, before employing the time-honored practice that Ayala had mastered: multiple management. 
The mid-1990s saw Jaime Zobel de Ayala’s two sons rise to the highest circle of the Ayala leadership as co-vice chairmen, with Jaime Augusto Zobel as president, and Fernando Zobel as executive managing director. 

Beyond family relations, the Ayala leadership has kept its stringent eye for cachet and credentials: Jaime Augusto was educated at Harvard University, and is the first Filipino recipient of the Harvard Business School’s highest honor, the Alumni Achievement Award, while Fernando was educated also at Harvard, as well as INSEAD in France. But before any of the above qualifications, the Ayala leadership potential found its beginnings at home, where Jaime Zobel prescribed the primary ingredient that was the prerequisite for joining the family business: passion.

Besides seeking constant balance in management and in investment strategy, Ayala leaders also continuously countered business pursuits with social and cultural cultivation. For all the sharpness they displayed, from the first day on, in managing capital, and the decisiveness they exercised, both in divesting some business units and investing in extremely speculative ventures, they also showed a deep human sensitivity for the Filipino cause. And by doing it, continuously, consciously, over almost two centuries of existence, Ayala demonstrated that it was no society softshoe act, no marketing gimmick. There was a real company behind it all, thinking, well rounded, interested, with a real personality and a genuine soul. 

To the public at large and its business customers, it all amounted to a most powerful kind of corporate charisma—a characteristic that allowed Ayala Corporation to adapt well to changing times and fortunes, and profit handsomely.
II. Philippine Monopoly Games (Present Time)
If business is war, then the leaders of the Ayala and SM groups are fierce rivals in the field of battle.
BPI and BDO are two of the largest banks in the Philippines. BPI is the most profitable bank. BDO is the fastest growing bank. 
Ayala Malls is a real-estate subsidiary of Ayala Land, an affiliate of Ayala Corporation. SM Supermalls, owned by SM Prime Holdings, Inc., is a chain of shopping malls in the Philippines, with 43 malls across the Philippines as well as branches in China.
Ramon Ang Versus Manny Pangilinan
It does not require rocket science to predict that Ramon Ang and Manny Pangilinan will continue their "Monopoly Games"in 2014.
The $ 64,000 question is really what will they buy NEXT?
-RSA: acquire majority control of PAL from Lucio Tan?
-MVP: acquire GMA 7?

III. Philippine Business Legends: The Sorianos, The Elizaldes, The Palancas
Andrés Soriano (February 8, 1898 – 1964), also called Don Andres Soriano,[1] was an influential Filipino-Spanish businessman of the early 20th century. He was well known for expanding the San Miguel Brewery that eventually became as San Miguel Corporation. 
In the 1930s, Soriano established ANSCOR (A.Soriano Corporation) as a holding company for his investments. Initially, the Company concentrated on natural resources and basic industries investing in Atlas Consolidated Mining and Development Corporation, Phelps Dodge Phils. and Atlas Fertilizer Corporation.
Andres' management company, A. Soriano y Cia, eventually went into insurance; gold-mining (Antamok Mining which together with the companies of John Hausserman and Jan Hendrik Marsman made the Philippines second only to California as the top gold producer of the world); oil exploration (PODCO); airline (PAL - Philippine Air Lines); copper-mining (Atlas Consolidated); copper wire manufacture (Phelps Dodge of the Philippines); fertilizer from pyrite (Atlas Fertilizer); logging and lumber (Bislig Bay Lumber); paper manufacture (PICOP); fluorescent lamps and incandescent bulbs (PEMCO); jute bags (ITEMCOP); steel drums (Rheem of the Philippines); mass communications (Herald Publishing and Channel 13). Atlas Consolidated grew to be the largest copper mine of its time in the Far East and one of the ten largest copper mines in the world.
At the time of his death, in 1964, his firms were moving into ramie, glass manufacturing, cattle ranching. From Wikipedia
Elizalde Brothers with MLQ
Don Manolo Diaz-Moreu established the first radio station in the Phlippines, KZRH in 1940 which became the Manila Broadcasting Company. He owned steel, hemp, paint and wine factories, along with a media empire of radio, television and newspapers, and a hacienda and sugar central in Negros Occidental. He served as the resident commissioner and Philippine ambassador to the US. From
Tanduay Distillery/ "Sapak and apak sa YCO floor wax"
Elizalde and Company
A once famed Philippine-Spanish business family, whose conglomerate firm, Elizalde & Co., formerly had interests in broadcasting, paints, waxes, ropes, sugar and its derivatives (Tanduay Rhum), and firearms (Elisco).
Today, only the broadcasting unit (MBC) remains. From Wikipedia
Carlos Palanca, Sr. was one of the most prominent Filipino-Chinese or Tsinoy businessmen and philanthropists during the American era. Palanca diversified into textile trading until 1902, when he started a small distillery named La Tondeña. The distillery merged with the Song Fo Company in a partnership until 1913. Due to Palanca's astute business acumen, he was able to propel his company to become one of the top liquor suppliers. For example, he realized early on the value of upgrading and modernizing equipment and switching from nipa palm to molasses as a steady and plentiful supply of alcohol.
La Tondena Inc.
Between 1906 and 1929 his business enterprises prospered on the back of a huge boom in alcohol consumption. For example, the Singaporean scholar Wong Kwok-Chu noted in his landmark study "Chinese in the Philippine Economy" that alcohol revenues surged from 1.3 million pesos to 4.8 million pesos. In 1924 Palanca bought the distillery arm of Ayala y Cia (Destilleria Ayala) and acquired Ginebra San Miguel, Ginebra Ayala, and Colonial Rum. A third distillery company Philippine Motor Alchohol Corporation (PMAC) was devoted to manufacturing alcohol motor fuel, a business well ahead of its time. From WikiPilipinas
IV. Marcos Business Cronies:Danding Cojuangco, Lucio Tan, Roberto Benedicto, Rodolfo Cuenca, Ricardo Silverio, Herminio Disini, Kokoy Romualdez, etc.
The largest, most productive, and technically most advanced manufacturing enterprises were gradually brought under the control of Marcos's cronies. For example, the huge business conglomerate owned by the Lopez family, which included major newspapers, a broadcast network, and the country's largest electric power company, was broken up and distributed to Marcos loyalists including Imelda Marcos's brother, Benjamin "Kokoy" Romualdez, and another loyal crony, Roberto Benedicto. Huge monopolies and semimonopolies were established in manufacturing (Lucio Tan), construction(Rodolfo Cuenca), and financial services. When these giants proved unprofitable, the government subsidized them with allocations amounting to hundreds of millions of pesos. Philippine Airlines, the nation's international and domestic air carrier, was nationalized and turned into what one author has called a "virtual private commuter line" for Imelda Marcos and her friends on shopping excursions to New York and Europe .
Probably the most negative impact of crony capitalism, however, was felt in the traditional cash-crop sector, which employed millions of ordinary Filipinos in the rural areas. (The coconut industry alone brought income to an estimated 15 million to 18 million people.) Under Benedicto and Eduardo Cojuangco, distribution and marketing monopolies for sugar and coconuts were established. Farmers on the local level were obliged to sell only to the monopolies and received less than world prices for their crops; they also were the first to suffer when world commodity prices dropped. Millions of dollars in profits from these monopolies were diverted overseas into Swiss bank accounts, real estate deals, and purchases of art, jewelry, and antiques. On the island of Negros in the Visayas, the region developed by Nicholas Loney for the sugar industry in the nineteenth century, sugar barons continued to live lives of luxury, but the farming community suffered from degrees of malnutrition rare in other parts of Southeast Asia.
“The business crony who engineered the Bataaan Nuclear Power Plant deal for Ferdinand was Herminio Disini. Disini was part of the royal family, married to Inday Escolin, a first cousin of Imelda Marcos who also served as one of her physicians. Like Eduardo Cojuangco, Disini was twenty years Ferdinand’s junior.” Disini built Herdis Group, Inc., a conglomerate of fifty companies with $1 billion in assets.  From The Marcos Dynasty, by Sterling Seagrave
 Another Marcos business crony was Ricardo Silverio. He owned and/or controlled several giant companies that included automobile company (Delta Motors-Toyota), industrial engine maker Kawasaki, and construction equipment manufacturer Komatsu Philippines.