The world economy in 2011 was in a state of constant turmoil that saw Europe and the United States in so much trouble. Recent developments seem to indicate the fragility of the global economy. With instability of the Euro zone, the emerging markets have become more interesting to many investors. But there is no way of isolating the economic problems of the Western economies from the rest of the world. The generally high unemployment, depressed asset prices, and relatively slower global trade kept and continues to keep most economies on the defensive.
As if there weren't enough man-made economic disasters to deal with, a natural calamity in Japan coupled with poor regulation of its nuclear power industry, devastated a significant portion of Northeastern Japan leaving thousands homeless, unable to go back to their homes for the next few years. Political unrest in the Middle East, called the Arab Spring, continues to threaten the political order in an already volatile area of the world… with the resulting impact to our economy in the form of rising oil prices.
Yet, last year also saw the Philippine economy starting to draw the interest of investors around the world. They are likely seeing the potentials of a country that is finally under a government that is led by a President who is perceived as honest, sincere and trustworthy, a sharp change from what we have had in the recent past.
Ruchir Sharma, the head of Morgan Stanley’s Emerging Markets wrote a book entitled Breakout Nations: In Pursuit of the Next Economic Miracles about an exciting new group of up-and-coming countries. Believe it or not, the Philippines is one of the Breakout Nations he cited.
Like a growing number of investors, Sharma found it easy to put his trust in President Aquino’s promise of a level playing field, one that will allow investors to be their best, unhindered by the usual political rent seekers of the past. In his book, Sharma expressed high hopes of our bright future, sparked by the excitement generated by P-Noy’s aura of honesty and good governance.
In the meantime, the ever increasing remittances of our OFWs (overseas Filipino workers) continue to help boost confidence in our economy. The growth of the BPO (business process outsource) industry and the increases in the investments generated in our export processing zones all contribute to the confidence of a fast-growing economy in the years to come.
For the first few months of this year, optimism in our business sector can be seen in the rise in private investment. A government declaration to reverse the under-spending of the previous year due to anti-corruption reforms was also seen as a promise of a more robust economy than we have seen in recent years.
Analysts see a moderately positive scenario for the economy with about 4.5% growth this year and 5.5% the next. They, however, warn of contagion from the downside risks to the global economy and the fragile recovery of our export sector. All these considered, the best- and worst-case economic scenarios for the Philippines, according to some analysts, critically hinge on what happens to Europe and consequently to other major economies, especially the US.
In this milieu, our major investees, ABS-CBN Corporation (ABS-CBN) and First Philippine Holdings Corporation (FPH) performed creditably. ABS-CBN maintained its ratings leadership locally and globally. It delivered news and entertainment content on multiple platforms, offering the widest array of media content and channels for advertisers and viewers alike. ABS-CBN is all set to launch Digital Television broadcast in the Philippines and is just waiting for government’s approval to do so.
ABS-CBN has also continued to fulfill its mission to serve our fellow Filipinos all over the world. ABS-CBN Global offered innovative tier packages to address the needs of subscribers adversely affected by the situation in the Middle East and Japan, and to some extent in the US. FPH celebrated its 50th anniversary in 2011. With a revamp of its investment portfolio, First Holdings is now quite happy to be primarily a power generation company, which is how it began and always had been. FPH may also participate in the government s public private partnership program involving power plants. First Gen Corporation (First Gen), a First Holdings subsidiary, successfully laid the groundwork for international operations. After signing deals with an Australian company to co-develop geothermal resources in Chile and Peru, First Gen is also considering Indonesia as a possible expansion site.
Meanwhile, Lopez Holdings worked on completing its debt restructuring process, which began in 2002. Our efforts were rewarded as the stock market anticipated our success with the stock price of Lopez Holdings reaching an intra-day high of P6.95 in May 2011. To regain the confidence of stock investors is a significant milestone for the company, considering that our shares were trading even below par as late as in December 2008.
Immediately after the tender offer for un-restructured debt was completed in September 2011, the board approved the first cash dividend of Lopez Holdings since becoming a publicly listed company in 1993. Although the rate was a modest P0.10 per share, it was symbolic of corporate recovery, following years of utilizing the company’s cash and resources in solving its debt problems. Earlier this month, the board approved our second cash dividend at P0.10 per share to be paid on or before June 15. The challenge now of your board and management team is ensuring that shareholder return is done on a consistent and regular basis.
Lopez Holdings is a young corporation, not even two decades old. We renew our commitment every year to the development of our nation, aware that only a prosperous people can be truly free. We have always united ourselves with our people’s aspirations for a better tomorrow, putting ourselves at their service: to provide them with services that improve the quality of their lives; to inspire them with the best in Filipino talent and ingenuity; to provide them with clean, indigenous and/or renewable energy; to be their tool for investing in all that is good in our country.
All told, while it was a trying year for most of the world, our companies have been able to benefit from the renewed confidence in our economy and our country's leadership. We were indeed, confident enough to spread our wings beyond our shores and as mentioned earlier, we got our first contracts to look for geothermal energy in Chile.
We look to the future with hope and anticipation of better times for our country and people. We remain focused on growing our current businesses to reach more Filipinos and contribute to their well-being. We respond to the needs of our nation with integrity and responsibility.
We thank you, our shareholders, for keeping faith with us through the difficult times. We have overcome our difficulties now and it is certain that the best is yet to come. We are now excited to go up the next level and with a more focused portfolio of investments, and show the world how we can help our country's economic growth through our meaningful investments in needed infrastructure.
Finally, I want to thank all those among you who have expressed support for my work in Tokyo. It is a huge commitment requiring patience, sacrifice and understanding. We have 220,000 kababayans in Japan, and their welfare is our primary concern. The embassy is also very busy running programs to bring more Japanese investments into the Philippines, as well as to bring in more tourists. Investments and tourism have a multiplier effect in terms of employment and we would like our kababayans to benefit from that.
Thank you for your faith in your Board and in your management team.