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How's
Business?
By Michael Alan Hamlin
March 29, 2004
In the best of times, no one asks how business is.
When times - meaning business conditions - are good, the assumption
is that everyone is prospering. As in the case of all generalizations,
that's probably mostly true. But nothing is ever absolutely true,
and some businesses actually do better when the economy is slow.
Following the onset of the 1997 Asian Financial Crisis, the fast
food industry throughout the region experienced an unprecedented
boom as former high-flyers began to chow down as a result of dramatically
clipped entertainment budgets.
Current business conditions in the Philippines are similarly schizophrenic.
If you are fortunate enough to be involved in some of the business
process outsourcing (BPO) sectors, chances are that your business
is booming. As one call center executive told me recently about
competition in the industry, "There's enough business out there
for everybody. In fact, there's way more than enough." Regular
readers of this column know that the call center industry is expected
to double every year in terms of seats and employment for the next
five years.
Those not involved in the exciting high-growth BPO sectors frequently
aren't quite as upbeat. Despite reported economic growth of between
four and five percent, most executives I speak with complain of
a prolonged slowdown, and pin the blame on political uncertainty
and the elections, a negative country image, and bureaucratic inefficiency
and corruption. As a result, businesses and consumers alike are
conserving funds as a hedge on the chance things could get worse.
I find that while all companies are concerned about the upcoming
elections that some companies see past the elections, while others
see no further than the elections. In the case of companies that
see past the elections, and this group is dominated by multinationals,
the view appears to be relatively upbeat. A win by opposition candidate
Fernando Poe is typically viewed as a negative in terms of prospects
for improved economic and business conditions. But these companies
don't see the economy moving dramatically backward either if Poe
does get himself elected.
That could be because the impact of a Poe win has already been factored
into the economy, as evidenced by the declining value of the peso,
the slowdown in manufacturing, and lackluster retail sales. Some
of these companies have also been here for decades, through the
best of times and the worst of times, and are confident that business
will go on no matter that happens. That's a reasonable proposition
for exporters, but this view is also expressed by executives whose
evaluations and career prospects are tied to how well they do selling
in the local marketplace. And so they do their jobs despite the
hurdles, and do them well for the most part.
Companies that only see up to the May elections are in a sort of
enterprise purgatory. They are unwilling to take investment or new
product and service development risks because they believe there
are real prospects for a sudden, paralyzing meltdown if the outcome
of the elections breeds more uncertainty, which a Poe win is likely
to do in their view. The reasons are obvious. Poe would be a new
president, with no economic platform and a populist constituency.
He is surrounded by political opportunists whose records clearly
suggest that the country's wellbeing if far from the top of their
priority lists. As a result, if Poe wins many claim that the rush
for the exits - already a serious hemorrhage of talent - will explode
into a debilitating orgy of lost hope.
A senior official of one of the foreign associations lamented last
week that during the administration of former president Fidel V.
Ramos he would receive 30-40 prospective investors every month.
These days, he said sadly, "we're lucky if we get 30-40 a year,
and those we do get are all involved in the call center industry."
But it seems clear to me that the slowdown in investor interest
has more to do with poor management of the country's image and the
emergence of stiff competition for foreign investment than the coming
elections.
Post-election, there will still be competition, and hopefully the
administration in power will take image building seriously enough
to turn around the highly negative perception of the Philippines
prevalent among prospective investors. But whether that turns out
to be the case or not, companies that see beyond the elections now,
and act accordingly, are going to be much better positioned to leverage
opportunity - and there is always opportunity - after the elections.
Those that don't will no doubt find another hurdle to complain about.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001), and he is currently
at work on High Visibility: The Making and Marketing of Asian Professionals
into Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2003 Michael Alan
Hamlin. All Rights Reserved.
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