How does Primeiro Partners work and what are the opportunities and challenges that the company deals within its operations?
Stephen Sieh (SS):
We are a financial advisory firm focused on three business verticals: investment banking, asset management, and strategic partnerships. We see a wide variety of very attractive opportunities in the ASEAN region. Under our investment banking group, we are advising companies that are pursuing merger and acquisition opportunities in the region, raising capital for growth and/or undergoing a fundamental transformation in their businesses. We have advised in more than ten different industries, and currently we are particularly active in the real estate, healthcare, consumer and business services. On the asset management side, we invest in promising entrepreneurial ventures that address market needs primarily via technology. Under our strategic partnerships, we have a number of joint ventures with mature, reputable ASEAN companies participating in the renewable energy and financial technology space.
The operational challenges that we experience, for the most part, revolve around the amount of resources we need to deploy to achieve successful executions in a timely manner. Some of those challenges are brought about by the regulatory environment that we operate under. Another critical operational component for us is acquiring top talent that matches our firm’s culture of integrity and excellence. In our strategic partnership business, one of the key challenges for our biofuels trading platform has been logistics. Do you consider the Philippines as being competitive within the ASEAN region in terms of the investment climate and the ease of doing business? What do you think could the government do to improve the business environment and what could Primeiro Partners do for its clients?
Relative to all countries part of the ASEAN, I would rank The Philippines as being somewhat in the middle. We are certainly not as ‘plug and play’ as Singapore, but certainly not as difficult to do business in as some other ASEAN participants. One aspect that I believe makes pursuing and developing business in the Philippines extremely compelling is the fact that it has the largest English speaking population of the ASEAN member states, by far.
The government’s platform is “build, build, build.” In line with that slogan, if the government can build a vision, build the infrastructure to implement that vision, and build the previous two with long term consistency we will be vastly more competitive. From a business perspective, stability and predictability is so important, it is the basis for trust, and trust brings investment.
Primeiro Partners provides leadership, credibility, and commitment to clients. To every engagement, investment or partnership, we bring a unique combination of global know-how, strategic, financial and operational experience, and an unmatched network of relationships built on trust. What is your opinion with regard to the direction of the banking sector? What are the strategies that help the sector grow and how is Primeiro supporting this? Lastly, how important is it going to be to maintain the growth of the Philippines?
Lorenzo Tan (LT):
We have a crowded banking industry in the Philippines. There is still a lot of room for consolidation to promote stronger balance sheets, cost efficiency and improved customer service. We are in a position to advice foreign or local investors who wish to acquire or consolidate their banking interests in the Philippines.
The Central Bank has been advocating financial inclusion to the various banks and the population. However, only a few universal banks have entered this field. RCBC became the first to be part of this advocacy followed by BPI and BDO. I heard the rest are also following.
Similarly, the Japanese banks are accustomed to the distribution of wealth. Thus, they are big in wholesale banking and good at consumer and private banking, but are not familiar with products for the C and D market. The distribution of wealth in the Philippines resemble a pyramid where the C and D markets each involve approximately 40 million Filipinos. So, there is a huge portion of the population who eats almost once a day. The challenge now is how to teach these people to save money over time.
Without a doubt, this can be done and the people can be taught. When I was president of PNB, the average deposit was three thousand pesos per account and we were able to bring it up to fifteen thousand pesos per account by giving them incentives to save. We created products that do not incur penalties if you do not have money. For the longest time, depositors have to pay a penalty if their balance falls below USD 200 a month. To encourage savings among the people, PNB created products for people who may have zero balance at a certain point in a month.
It is evolving, and it is good for the Japanese banks to enter the Philippines, collaborate with the local banks in creating products for the C and D market, and successfully enter the ASEAN region. So, from 105 million people, the Japanese can grow their market to more than 630 million people in this regard. This opportunity gives Japan or other foreign investors the key to nine other countries in the region. Not to mention, going into business in the Philippines also give the investors the possibility of finding the talent adaptable enough to be sent to the other ASEAN countries.
A positive phenomenon in the Philippines is that you can find a lot of Filipinos in the financial services sector with US, London, or Japan training who come back and foster some sort of knowledge transfer. In fact, most of the CEOs right now are changing and are becoming more global. From people in the sector beginning and ending their careers in the country to people beginning their career overseas and moving back to the Philippines—these reflect how the banks went through a competitive and cultural transformation. The skills are passed on to the younger individuals working in the sector.How important is it for Primeiro Partners to be recognized as a company that make investments to help social inclusiveness here in the Philippines?
A key aspect of our mission is to provide consumer and financial services for Micro and SME businesses which are often restricted in their growth due to the lack of capital and expertise. We have extensive experience in building products and services for the C and D market in the Philippines.What are the core values of Primeiro Partners?
Our core values are independence, integrity, and intellectual capital. We are not transaction driven, we are driven by creating long-term value to our clients. If the transaction does not make strategic sense or does not generate incremental value, we are not pressured to say so.
Independence and integrity is at the very core of Primeiro. We believe that to provide objective advice, we remain completely un-conflicted and ensure that all client matters are treated with confidentiality. Thus, we do not trade our clients’ stocks, we do not write research about them, nor do we try to push any banking product. We want to make it clear that there is no another agenda other than our client’s best interest. In terms of financing, what do you think could be the opportunities in the electronic banking sector?
There are tremendous opportunities in the electronic banking sector. I always tell our staff not to look at our competitors and our past. Instead, I advise them to look at other industries and learn from them. Thus, we looked at Compartamos Banco and Banco Azteca in Mexico. We started the first microfinance bank of a Universal Bank in the Philippines with Compartamos as our role model. Meanwhile, Banco Azteca was a bank that started in an appliance store in Mexico.
In this light, the Filipinos could adapt quickly if one can bring these banking models here. They told me before that the older Filipinos cannot be taught how to use the ATM. I said if you see them texting, which we do, you can teach them how to use the ATM. In this sense, we are able to change behaviour. There are indeed a lot of opportunities. In fact, we were able to grow the customers of my previous bank from 700 thousand to 7.3 million customers.
The challenge is your operations or backroom must be scalable and nimble. One cannot sell the best burger in the world, and tell the customer to wait 30 minutes before it could be served. The backroom (“kitchen”) must be scalable, in order to have a standard when it comes to delivering one’s products. There are a lot of opportunities, but regulators must give you the space and opportunity to innovate. Finally, what are your expectations with regard to business for Primeiro Partners in the Philippines?
Primeiro Partners is in a fiduciary business. People deal with us because they trust us. We provide more than just capital. We are in the business of managing risks and providing opportunities. We would like to see our clients transform over time from Micro to SME, SME to big corporates, from corporates to conglomerates, while enriching the lives of their employees, customers and their communities. SS:
Lorenzo and I worked the majority of our careers for financial institutions with very high world-class standards. Our approach is to continue to grow Primeiro with such standards, and be the leading firm that corporates and investors alike welcome partnering with for advice, capital, and execution. The Philippines is an enormously promising country, we see so many opportunities here on a daily basis. We are very excited for what is ahead.
Date: 12 Nov 2017