Why Foreign Companies are Leaving the Philippines

Summary

The video script discusses the exit of major foreign investors from the Philippines, including Intel, Citibank, and Ford, citing reasons such as global economic shifts, high operational costs, and company performance issues. Despite these departures, the script highlights the resilience of the Philippine economy with examples of local companies stepping in and the continued growth of the electronics industry, suggesting that the country remains an area of interest for foreign investment.

Takeaways

• 🌐 Foreign investors from various sectors have been leaving the Philippines, including major players like Intel and Citibank.
• 💡 Intel's exit from the Philippines was part of a global restructuring plan and was influenced by a downturn in the semiconductor industry and high energy costs.
• 🏭 Ford ceased its production in the Philippines due to a lack of a strong business case for local manufacturing, opting to import from other global plants.
• 📉 Hanjin Philippines filed for bankruptcy, burdened by over $1.4 billion in debt and a damaged brand name from the collapse of Hanjin Shipping.
• 🏦 Citibank sold its consumer banking business in the Philippines to Unionbank, signaling an end to its retail banking operations in the country.
• 📈 Despite the departure of some foreign companies, the Philippine electronic industry continued to grow, with Texas Instruments taking over as a leading investor.
• 💼 The closure of Intel's Philippine operations was not solely due to local issues but was part of a broader economic slowdown and company-specific challenges.
• 🛠️ Infrastructure issues, such as high energy costs, were cited as a reason for some companies leaving, but other factors like global uncertainty and company performance also played a role.
• 🌟 Texas Instruments' expansion in the Philippines indicates confidence in the local market and the ability of the industry to adapt and grow despite setbacks.
• 💼 Citibank's exit from the Philippines was part of a larger strategy to exit consumer banking in over 13 countries, reflecting its own performance issues rather than solely local market conditions.
• 🏗️ The acquisition of Citibank's operations by Unionbank and the revival of the Hanjin shipyard show that there are local companies ready to capitalize on opportunities left by foreign firms.

Q & A

Why did foreign investors like Intel and Ford leave the Philippines?

Intel left due to a broader slowdown in the global economy and the semiconductor industry, as well as high operating costs in the Philippines. Ford closed its plant as there was not a strong enough business case for continuing local manufacturing and decided to supply the Philippine market by importing from other global plants.

What was the impact of Intel's exit on the Philippines' electronic industry?

Despite Intel's exit, the Philippine electronic industry continued to grow, with Texas Instruments Philippines taking over as a leading semiconductor firm and announcing a one billion dollar expansion, indicating their confidence in the Philippines.

Why did Citibank sell its consumer bank in the Philippines?

Citibank sold its consumer bank as part of a global restructuring plan, exiting consumer franchises in over 13 countries. The decision was also influenced by Citibank's own performance issues rather than solely domestic market factors in the Philippines.

What were the reasons behind Hanjin Philippines' bankruptcy?

Hanjin Philippines filed for bankruptcy due to taking on too much debt, amounting to over 1.4 billion dollars, and being unable to repay it. The Hanjin name was also damaged by the collapse of Hanjin Shipping a few years prior.

How did the local economy respond to the exit of these foreign companies?

Local companies like Unionbank and Texas Instruments stepped in to take advantage of the opportunities left by the foreign companies. Unionbank acquired Citibank's consumer business, and Texas Instruments continued to grow and invest in the Philippines.

What does the exit of these foreign companies imply about the Philippines as an investment destination?

The exits suggest that while there may be challenges such as global uncertainty, inadequate infrastructure, and high energy costs, the Philippines still offers opportunities for growth and investment, as evidenced by the continued presence and expansion of other companies.

What was the role of Intel in the Philippine Economic Zone before its closure?

Intel was the first US semiconductor firm to establish a facility in the Philippines, contributing approximately 15 percent of the annual export revenues and being the largest contributor to the Philippine Economic Zone total exports.

How did the global financial crisis affect Intel and the semiconductor industry?

The global financial crisis led to a significant decline in sales and profits for Intel and other chip companies like AMD, contributing to Intel's decision to restructure and close facilities, including the one in the Philippines.

What was the business case for Ford's decision to close its Philippine plant?

Ford decided to close its Philippine plant due to a lack of a strong business case for local manufacturing, opting instead to supply the market by importing vehicles from other global plants, primarily in Thailand.

What happened to the Ford plant in the Philippines after its closure?

Two years after Ford closed the plant, it was acquired by Mitsubishi Motors Corporation, suggesting that Ford's performance in the local market was not strong enough to continue local manufacturing.

How did the bankruptcy of Hanjin Philippines impact the shipyard industry in the country?

After Hanjin Philippines declared bankruptcy, the shipyard was taken over by private equity firm Cerberus Capital Management, which revived the shipyard, and HD Hyundai Heavy Industries became one of the new tenants.

What are some of the reasons foreign investors might leave the Philippines according to the script?

Reasons include global uncertainty, inadequate local infrastructure, high energy costs, and the performance of the companies themselves, which might not be as strong as they once were.