A Safe Harbour to capitalise on the vast array of opportunities in the booming Philippines
Scandinavian expats are encouraging compatriots to capitalise on the vast array of opportunities in the booming Philippines
Paal Utvik, a Norwegian naval architect with 20 years of experience xin the shipping and offshore sector, has led a colourful life to say the least. His career got started in the US and South Korea, before moving to China to finish his MBA. He remained there after completing his studies for nearly a decade to work in business development and investment analysis in the maritime sector.
In 2012, Mr Utvik decided to leave his position as the head of business development at Grieg Shipping Asia in Shanghai to join forces with his friend David Wu, also a shipping and offshore oil & gas specialist, in establishing a company called Landmark Capital, which was to facilitate Chinese investments and financing for projects within the maritime sector.
Landmark Capital became “relatively successful” and the duo was able to launch their own investment firm from the proceeds, managing their own investments in startups and assets in shipping and offshore.
After setting up the first oversea shop in Singapore, Utvik and Wu partnered with others in several locations, in order to have local presence in the most significant regions for the industry.
Singapore was somewhat “stale and boring”, Mr Utvik says, and I decided to move to Manila in order to, yet again be hands on - on the ground. That’s the only way to recognize real opportunities.
“I got together with two gentlemen, Knut Ove Nytre and Joeran Noestvik, whom I’ve known for a while, all of us with slightly different backgrounds, but in one way or another connected to the maritime industry and also all of us having served as local representatives of foreign companies. Together we started discussing what is interesting and doable in the Philippines. With a population of 100 million and an economy expanding at 6% per year, there is a lot that can be done, especially in terms of infrastructure.”
After further investigation, it became clear that there is a strong need for foreign investment, but there wasn’t anyone in the market with relevant expertise and the ability to bridge projects with financing. As a result, EntryPoint Partners was established, specialising in business advisory, financial consulting, identification of maritime and renewable energy investments, as well as technology solutions across various industries. The company is part of the extended network of the Landmark Group.
“Our aim is to help foreign companies set up operations in the Philippines, and to match them with local partners. This can be quite risky if you’re not on the ground as you need to navigate bureaucratic red tape and local ownership structures. In addition to bringing funds to the Philippines, we can act as the local partner for Scandinavian companies that are looking to bring their products and services here, but don’t want to spend USD 1 million per year on setting up the legal structure and running a small office. Essentially, we’re the boots on the ground that manage and build your business here as required.”
Mr Utvik considers risk mitigation, much less capital intensive entry, local
expertise and their network of offices around the globe that their clients can tap in at any time to be the key reasons for partnering with EntryPoint Partners.
Mr Utvik notes that the Philippines is the most westernised out of all the ASEAN countries, and that the culture along with the Catholic background provides mutual understanding. English being the official language, in addition to Filipino, makes a huge difference as well, as it eliminates the need for translation of official documents that other countries in the region require. This can oftentimes create misunderstandings due to interpretation of jargon as the local language will always supersede translations.
Some of the challenges of doing business here include an unpredictable legal system, low trust and transparency, overall fragmentation and security, as the Philippines is considered as one of the more unsafe countries in the region – which makes having a local expert on the ground all the more valuable.
There is also the question of uncertainty as the internal political situation, at least viewed through the lens of international media, paints a rather dire picture, noting that a lot of foreign investors are pulling out. At the same time, President Duterte’s approval ratings are at an all-time high (Bloomberg writes on 12 October that Philippine voters have given President Rodrigo Duterte a job-approval rating of 86% after three months in office, despite international criticism of a deadly drug war that has seen more than 3,000 people killed).
“While westerners may find him controversial and unpredictable, the people absolutely love him, and it could be speculated that he’s bringing himself, and by proxy the entire country, under the media spotlight on purpose. As a by-product of his outspokenness, there seems to be a renewed interest and attention on the country. Lately I’ve had people calling me from China, South Africa and Brazil, all looking to invest after investigating the country out of curiosity because of the media frenzy.” During President Duterte’s recent state visit to China, wherein the two governments signed economic and trade agreements worth USD 24 billion, Mr Utvik noted an increased eagerness from Landmark Capital’s network in China to do business in the Philippines. The recent historic trip may have resulted in a golden opportunity to assist Chinese investors with M&A transaction services in the Philippines.
Mr Utvik says that western investors pulling out is not a huge issue since the Chinese are much quicker to invest, especially in largescale infrastructure projects rather than westerners who mostly invest in smaller projects and the stock market.
The country’s investment grade, too, remains rock solid. Back in April, Fitch ratings agency affirmed the Philippines at BBB- with a positive outlook on the back of its robust economic growth. The economy has expanded by an average of 5.9% from 2011 to 2015, and it is forecast to accelerate further to 6% this year and next. Other countries with a similar credit rating typically grow by only 3.3%.
For growth areas in the coming years, Mr Utvik is looking towards power generation as a key area for his clients and his personal investments because there is a severe deficiency in power and a huge opportunity in utilising the country’s natural capabilities for renewables, such as wind and solar, but also the vast potential for replacing coal with LNG. Aside from those, the maritime industry is one that shows great promise.
“The Philippines is comprised of 7,000 islands and the whole maritime culture is deeply engrained in them, so it creates a strong common ground especially with Norwegians. Another commonality between the two is agriculture, and there is a massive, untapped opportunity for fish farming and seafood in general. Norway and the Philippines have had a decades long relationship, build largely on providing cheap labour, but it could be so much more.”