San Miguel and Ibang may pinagsamahan

Ibang may pinagsamahan. That is a classic line from a San Miguel Beer ad, which starred the late FPJ (Fernando Poe, Jr).

The youth might not relate with that—“it’s so last century.” The icon of today’s adventuresome young generation is the exotic and swarthy Lovi Poe, FPJ’s love child. She endorses Red Horse, a product of San Miguel, and her enticing delivery of the sound bite Tama ka (a double entendre) has fortified the beer company’s cash flow.

In another sense, Ibang may pinagsamahan aptly describes the relationship of Danding Cojuangco, the Boss or the chair of San Miguel Corporation, with the late Ferdinand Marcos. The closeness of The Boss to the dictator, even serving as political adviser to the latter, was parlayed into wielding tremendous economic power. It is said that the funds used by Cojuangco to gain control over San Miguel came from the levy that the Marcos regime imposed on the coconut farmers. Danding Cojuangco benefited from the regime’s crony capitalism, thanks to ibang may pinagsamahan.

Unfortunately, the abuses associated with crony capitalism have led quite a few to dismiss the idea of government giving a helping hand to industry, other than the provision of general public goods (infrastructure and macroeconomic stability, for example). An arms’ length relationship is desirable, so they say.

The distaste for government giving a helping hand to or even favoring an industry became dominant during the reign of the free market in the last two decades of the last century. “It’s so last century,” too.

The fact is government and the private sector cooperate closely, taking the form of what is known as industrial policy (IP). IP has been done successfully in many countries, even in countries with similar conditions as the Philippines. It nevertheless has resulted in failures in other places.

The concern over non-productive rent seeking and corruption arising from IP is not enough reason to reject it. Rather, the challenge is how to put in place the disciplining mechanisms to curb abuse. Marcos’s crony capitalism or even the policy of subsequent administrations was all about giving carrots but without applying the stick.

IP has made a comeback globally. Like it or not, IP is necessary for long-term growth and development. Such tool precisely addresses market failure: inter alia, solving the coordination problem, aligning incentives with social benefits, sharing knowledge and information, developing and appropriating technology.

Such realization has made IP a favorable topic even in the bastions of the ancient “Washington Consensus” like the World Bank and the Asian Development Bank.

Hence, we can make Ibang may pinagsamahan work in the context of the collaboration of the Philippine government and the private sector towards achieving long-term prosperity.

Ibang may pinagsamahan likewise characterizes the relationship of Danding with Ramon S. Ang. Mr. Ang, also known as RSA, has now assumed effective control of San Miguel Corporation, after Danding sold his shares, at a friendly price, to his protégé and loyal friend.

The passing of the torch to RSA is Danding’s and the corporation’s recognition that he is the most capable to lead a global multinational that is San Miguel during a time of global turbulence. That San Miguel is a world-class organization is demonstrated by the professional talent it has. The organizational culture of San Miguel today is far different from its culture of yesteryears, in which the owners’ families dominated the board and executive positions. RSA has become chairman not because of his lineage but because of his qualities, including being a bold and astute businessman and being a most trustworthy lieutenant of Danding.

San Miguel Corporation has dramatically grown globally, especially during the Danding era, which cannot be attributed to its government connections. In the Philippines and abroad, the food and beverage industry is very competitive. San Miguel, the biggest food and beverage manufacturer in the Philippines and one of the world’s top beer producers, is a success because it is efficient, nimble, and innovative.

In the Philippines, San Miguel has diversified its businesses, going to areas that are not exactly its “historical strength.” In particular, it has heavily invested in power, mining, petroleum, telecommunications and infrastructure. Recently, it has gained control over Philippine Airlines. Note that these industries are “non-tradables.”

It is obvious that growth and profit in the Philippines are now concentrated in the “non-tradables,” not in manufacturing. But the “non-tradables” cited above are subject to heavy government regulation. This is to say that the temptation is for businessmen to rely more on ibang may pinagsamahan in the regulated sectors. But under the PNoy administration, ibang may pinagsamahan is constrained by daang matuwid. (Think Kim Henares or Leila de Lima.)

Ibang may pinagsamahan is positive in another way. After all, Danding and PNoy are relatives, and are now political allies, despite the tension brought about by Danding’s closeness to Marcos. Danding has a vision of industrialization, and RSA has time and again expressed his commitment to nation building.

Our hope is that San Miguel will help PNoy’s nation-building agenda. Building the public infrastructure and increasing its contribution to government’s internal revenue are examples of how San Miguel can support nation building. Infrastructure bottleneck and low revenues are binding constraints. In turn, government can clear market failures in the new areas where San Miguel is venturing. This should be the new spirit of ibang may pinagsamahan.

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