James Evenson
Manila, 27 August 2024
Last week’s Global Investor addressed how we identify and assess investment prospects in global markets. Our investment mandate is to find asymmetrical opportunities, often in places where others are not looking. If you missed the article, Evaluating Opportunities Around the World, you will find it here.
This week, we present to you our first market spotlight with a focus on the Philippines. While it is no coincidence that the next Obris Investor Meet Up will take place in Manila later this year, we present our assessment of the Philippines to you because it is clearly a growing emerging market with significant potential.
_________________________________
As a reminder, the Global Investor is Obris’ complementary newsletter. Our goal is to provide readers like you with thought provoking content that will lead you to invest well – to help your money work for you as you grow your wealth. We also utilize the Global Investor to illuminate our core principles of People, Places & Deals.
Obris was created to bring together accomplished professionals to pursue wealth creation, experience a community of like-minded successful people, and make their hard-earned wealth work harder.
Interested in learning more about Obris, our events or our investments? Please contact us at investors@crownprivate.com.
The Philippines – SE Asia’s Hidden Powerhouse
Few people know that The Philippines has the fastest growing economy in SE Asia. The country ended 2023 with 5.9% growth following 5.6% in 2021 and 7.6% in 2022. 2024 is expected to produce a GDP growth of between 5 and 6 percent.
While we have yet to find a consensus among those who assess economic outlook, the economy is forecast to grow by at least 4% annually for the forceable future.
The Philippines has been on Obris’ radar for several years. I (James) have been traveling to The Philippines regularly for the past decade, and Marvin has made several investment exploration trips as well.
We have also carried out due diligence on several promising companies dating back to 2016. While we have yet to take on any significant investments, we believe that this is the right time to gather, explore and invest.
Evaluation Summary
Last week’s Global Investor outlined two sets of criteria for assessing markets around the world. The IESE Business School of Navarra in Barcelona’s Venture Capital & Private Equity Country Attractive Index is a great starting point.
It is, however, quite conservative and risk averse. The U.S. market is ranked #1 (no surprise) and the top 10 countries are, as one would expect, all established markets.
IESE ranks the Philippines #40 with an overall score of 54.5/100. That does not read as promising if you base your assessment solely on IESE’s six criteria outlined below.
IESE’s evaluation is valuable and provides an underlying framework for our own due diligence. As you may recall from last week, though, we utilize IESE’s evaluation and expand to adapt an Obris lens.
I visit the Philippines at least twice yearly. With each visit, after essential meetings, delicious meals of chicken adobe, lechon (whole roasted pig) and my favorite – Halo Halo, plus a bit of high-end shopping in the capital Manila, I venture out to explore the country.
Sometimes we stay on Luzon, the largest Island – to visit emerging economic centers like Filinvest and Angeles, explore beach or mountain resorts, and even spend a night at the Taal Vista Hotel to catch a sunrise view of the very active Tall Volcano – that is a mere two hours’ drive from Manila.
Other times, we fly to another of the Country’s 7641 Islands to explore, meet with entrepreneurs, walk sandy beaches, kite board, surf and gaze out at breathtaking vistas across the water. Few destinations are more than an hours’ flight from Manila.
Wherever I go in the Philippines I feel a strong entrepreneurial spirit, an infectious energy to step up the economic ladder – to thrive, to be happy and to have the means to own a home and acquire possessions.
I see innovative new businesses starting around the country by people who exude creativity but are also adequately educated to make their businesses thrive. Entrepreneurs create and grow enterprises that serve their communities and sustain their families.
Often this spirit is clouded by the stagnancy that is produced by over-employment – in public service or hospitality roles, for example, it is not uncommon to see 2-3 people doing the work that one person should be able to accomplish. This is the result of having a large population with predominantly low wages.
Yet, most people want to get ahead.
Many pursue higher education or vocational training. The Philippines has a literacy rate of 99.27%. Primary education is compulsory – 82.4% of the population over the age of 25 completed grade school. 30.5% finished high school. 24.4% completed a bachelor’s degree.
Something is clearly working. In the decade that I have explored the Philippines, I have observed a dramatic increase in consumerism – vast shopping centers sprout, grow and thrive. Vast malls are full of stores including many global brands that you would recognize and consumers who are buying their goods. Mom and Pops are everywhere. Consumers increasingly have the means to buy, buy, buy…
What puts this country on Obris’ radar?
My observations lead to hypotheses. Hypotheses lead to research and research leads to assessment. Any good scientist knows that every hypothesis must be test, tested and tested yet again.
We shared Obris’ investment criteria last week. Rather than articulate each, I will synthesize why we are looking for opportunities in the Philippines. Here are some of the key indicators that shape our view that the Philippines is ripe for foreign investment.
Demographics – The demographics are unparalleled in SE Asia – The Philippines has a population of 119 million people, a median age of 26, a culture with significant entrepreneurial drive and a well-educated population.
A rather obvious example of how such demographics play out may be found in the significant growth of BPOs – Business Process Outsourcing companies. Most of us are familiar with the friendly voices who answer our calls for technical or sales support – this is just the tip of the iceberg, as BPOs offer extensive solutions in finance, IT, marketing and nearly every job you could imagine.
No other developing world country has a fluent English-speaking population and a natural service-oriented work ethic.
Market Growth & Government – The Philippines’ increasing agility and positive environment for growth derive from significant increased market potential combined with recent government developments that favor foreign direct investment.
Does the family name Marcos ring a bell? It should – Bongbong’s father Ferdinand served as President from 1965 to 1986. His mother Imelda was best known for using a portion of the $5-10 billion she and her husband stole from the Philippine people to amass a collection of 3000 pairs of shoes.
Remarkably, Bongbong is viewed as a positive influence by the Philippine majority. His vice president is Sara Duterte, daughter of Rodrigo Duterte who served as president from 2016 to 2022.
Geopolitics – The Philippines has demonstrated a remarkable agility and ingenuity to navigate growing tensions within the region – most prominently with its overbearing and ambitious neighbor across the South China Sea.
Each of these indicators combined with our diligent research and boots on the ground exploration lead us to believe that The Philippines is ripe for investment.
Once again, it may appear that I am leading you toward a pitch for our Obris event. That is true, but feel free to stop here and do your own due diligence.
You have already read this far, so please indulge me for a few more paragraphs.
We will hear pitches and evaluate companies that may be the next SE Asia unicorn, or at the very least companies that will produce a significant return to Obris investors in a reasonable time.
Through excursions, meals and roof top bars we will take in the best that the Country has to offer.
We will have a great time together – I think that few things are more valuable in life than developing quality relationships. If you have not been to an Obris event, I guarantee that you will find considerable value in our crowd – all high-net-worth, mostly self-made, adventurous and interesting people who already make their money work for them.
The Philippines Obris Meet Up will take place in two locations to maximize our exposure to investment opportunities and explore the country.
We will start in Manila for presentations, investment pitches, and to network while we indulge in this world-class city’s cuisine, night life and history.
After two full days in Manila we will head to my favorite island, Boracay. We will have a few more presentations amidst exploring Boracay’s beaches and island adventures.
When I state favorite island, I really mean “so far.” The Philippines has 7641 islands grouped into three regions – Luzon, the Visayas and Mindanao.
Of this vast number of islands, approximately 2000 are inhabited and 5000 are yet-to-be named. A popular saying is that The Philippines has 7000+ islands during low tide and 700+ during high tide.
Sincerely,
James
