Relevant leadership
(This was the speech delivered by the author as the Guest of Honor during the 76th Management Association of the Philippines or MAP Inaugural Meeting 2024.)
Ithank MAP for inviting me to share my thoughts on this topic of relevant leadership. Allow me to share some ideas, as well as some stories on how we at Ayala apply this interpretation of relevant leadership.
Right off the bat, let me state that relevant leaders are those that are capable of deeply understanding what the pain points of a community are, while also appreciating their dreams and aspirations. Relevant leaders are also those who can steer their organizations to address these in a collaborative, and a financially, environmentally, and socially sustainable manner.
This realization started forming when I came home from my studies in the United States. However, upon returning home, I found that many frameworks were not fully applicable to a country that was undergoing a massive transformation of its economy and society.
This was in the late ’80s to early ’90s — and the country was grappling with various socioeconomic challenges. However, the idea of the private sector playing a more active role in development started taking root. This would eventually become a pillar of the country’s development through liberalization and public-private partnerships (PPP).
From then, I started a practice that would eventually be the template to how I structured my professional and personal engagements. I had devoted around 20% of my time to civic and philanthropic causes to better understand the country’s other problems, as well as to build a network of like-minded peers committed to finding lasting solutions. Fortunately, Philippine business does not run short of committed individuals and institutions, which of course include MAP.
This belief in business as a platform for good crystallized in my mind and eventually became a guiding philosophy to how Fernando and I led Ayala when we took the reins of the company. These ideas were not fully alien to the organization, as aligning our business objectives to opportunities that address customer pain points and aspirations have long been part of Ayala’s 190year history.
Thus, in the ’90s, we started to deliberately invest in industries that would help usher and empower the Filipino towards greater progress. We believe that this was a meaningful and sustainable business model — one that expands the economy and elevates quality of life, while building a significant groundswell of trust with our host communities and partners.
For instance, Ayala Land expanded its portfolio from just catering to higher income populations to a broad set of offerings across all market segments. Starting as a brand that likewise catered to the premium market, Globe widened its reach, steadily transitioned towards digital and data, and is now reaping the rewards of this shift. BPI, for its part, began a gradual digital transformation and financial inclusion campaign. On this point of financial inclusion, between BPI BanKo and GCash, Ayala is among the country’s largest microlending institutions, having disbursed over P150 billion worth of loans to small businesses and individuals since 2016. ACEN, meanwhile, started from zero in 2012 and began investing in thermal assets, given the energy needs of the country at the time. It has since pivoted towards more sustainable energy sources, and is now one of the fastest growing renewables companies in the region, remaining on track to reach 20 GW of renewable capacity by 2030.
From then, until now, and towards the future, we see tremendous potential in the country. For 40 years since coming back, we have seen a growing Philippines, but a Philippines that needs to remain competitive with its neighbors.
I believe that if we all want to see a globally competitive Philippines in the next 40 years — this progressive future that we are talking about — I think that all institutions should work hand in hand to build a strong platform for exponential growth and equitable progress. It is important to ensure that the economy grows in an exponential and equitable manner, while our population also grows. To illustrate the scale of the challenge, the government aims to nearly triple income per capita to $11,000 by 2040, compared to just around $3,950 today. Even then, this is still a far cry from Singapore’s 2022 per capita income of $82,807, or Indonesia’s $4,580.
Allow me to share some sectors where we have seen persistent gaps to close, but at the same time excellent opportunities to create value.
Firstly, healthcare. The pandemic exposed the most vulnerable areas in our system, while also elevating having a proactive and holistic approach to wellness. There is still a “beds and heads” challenge in that we require not only more hospital capacity, but perhaps most importantly, a significantly higher number of healthcare practitioners and allied personnel. The full implementation of Universal Healthcare will also be critical.
Secondly, infrastructure. It is notable that we continue to invest over 5% of GDP in infrastructure, which will be bolstered by the recently passed PPP Act. Nevertheless, the gap has become quite large that faster and larger investments are required. We hope that our strengthened PPP framework will continue to provide a viable and fair way to encourage the private sector to help close these gaps.
This will be crucial if we intend to transform the Philippines into a truly attractive place for capital. As of 2022, the Philippines attracted the least amount of FDI (foreign direct investments) among ASEAN’s six largest economies, at $9.2B. Singapore was the highest FDI recipient at $141B, followed by Indonesia at $22B, then by Vietnam at $18B.
On education, we have seen a creeping learning challenge affecting young Filipinos. The World Bank and other reputable institutions have reported that the Philippines performs below our potential in literacy, mathematics, and science. This is likewise a critical sector that would need support to ensure that we have the talent base to take the country several levels higher. We note the tremendous contributions of various groups, such as Philippine Business for Education, along this front. We are likewise dedicating capital to this sector, together with the Yuchengco Group, through iPeople.
Lastly, agriculture. We note that this sector remains extremely challenged due to persistent structural issues. We are hopeful that the private sector can perhaps more meaningfully participate in this space. A strong agriculture sector can generate excellent economic returns and equity for our farmers and guarantee proper nutrition and food security.
These bring us to today. There are present realities that we must face as a country, and no single institution can tackle these alone. From mitigating the impact of climate change; reducing or even eliminating social and economic inequities; to elevating the Filipino’s living standards to a level that we all deserve, there is an implicit call for all of us to address these, collaboratively and in a value-generating manner. I am encouraged that this thinking is gaining tremendous momentum here and overseas.
Globally, there is the Council for Inclusive Capitalism. It started with tremendous support from the Vatican and has since expanded to count the largest global companies and faith groups as members. Another coalition is the World Business Council for Sustainable Development (WBCSD). WBCSD’s goal is ambitious, comprehensive, and specific: to ensure that 9 billion people will be able to live well, within planetary boundaries, by 2050. Lastly, within WBCSD is an entity called the Business Commission to Tackle Inequality (BCTI). This global alliance of businesses aims to address the S of ESG. We hope that more Filipino companies can be part of these coalitions.
On this point, I recall that, in 2020 the MAP spearheaded the launch of the Covenant for Shared Prosperity, supported by almost all Philippine business groups. I hope that MAP will revisit this covenant and see how we may use it as a platform for meaningful impact.
I believe that this is at the heart of relevant leadership — to help alleviate pains and enable aspirations to be achieved. This also makes tremendous business sense — enterprises cannot succeed, let alone exist, when the environment is severely degraded, and social tensions remain high. In fact, we believe that there are significant business opportunities and operational efficiencies to be unlocked when an organization aligns itself to relevant leadership.
We need not look far to see the power of relevant leadership. Recall that during the pandemic, there was no playbook on how to deal with a deadly virus that resulted in an economic shutdown and social isolation.
In fact, the pandemic challenged our long-held notions of how businesses should operate. We have all been taught about the primacy of fierce competition for success. However, the pandemic revealed that it was cooperation that creates the most value.
Dr. Ciel Habito has extensively written about this, using the term, “coopetition,” to achieve higher value creation and impact.
To illustrate, the Philippines can and should be exceptionally proud of how different institutions — government, civil society, the business community, and the Church — came together to tackle this massive challenge head-on. Task Force T3 and Project Ugnayan were massive successes and effective templates for others to adopt during emergencies. Relevant leadership grounded on cooperation is strong and alive in our country.
As a closing note, this year, Ayala will be celebrating its 190th anniversary. Entering this milestone year, we embarked on an initiative to refresh and further deepen our understanding of our stakeholders, as well as revisit our purpose and values as an organization.
We have rediscovered that our purpose at Ayala Corp. is to build businesses that enable people to thrive — a purpose that is quite
aligned to relevant leadership. This is the common thread that ties together our heritage, all our subsidiaries, and employees over many years.
Most significantly, this will be the anchor from which our future initiatives will be founded on.
Moving forward, Ayala intends to intensify investments in several meaningful areas. On Sustainability, we remain on track to achieve Net Zero Greenhouse Gas Emissions across all scopes and across the group by 2050. We are taking this journey step by step. Our largest subsidiaries have completed their respective baseline studies and their roadmaps towards 2050 and will be embarking on projects to reduce and better manage emissions.
Aligned with our commitments to the BCTI, we are developing a view on social impact and equity action, focusing on diversity, equity, and inclusion; and investing heavily in community and leadership development. All these will lead up to what will be a comprehensive sustainability strategy, which we are excited to share soon.
Our newest investments — healthcare and electric mobility — will continue to receive significant support from the Ayala Group. We remain highly excited about the ability of these sectors to generate sustainable value, contribute meaningfully to enhancing the health and well-being of our population, and upgrade our transportation infrastructure.
We are grateful for the trust that we have received from our stakeholders and host communities, our investors and shareholders, and our friends and partners across Philippine business, especially from MAP.
There is still a lot more to be done, and I look forward to reconnecting with all of you to see how we can resolve these persistent challenges.
I hope that we can work together towards building a more equitable and progressive Philippines, where all Filipinos are healthy, educated, and are included; can enjoy the benefits of a modern economy and an enhanced standard of living; and ultimately, be their best selves and thrive.