KEYNOTE ADDRESS OF SECRETARY RAMON M. LOPEZ
FRANCHISE ASIA PHILIPPINES 2019 INTERNATIONAL CONFERENCE
27 March 2019, World Trade Center, Pasay City
GREETINGS
Good afternoon everyone. I’d like to greet, of course, my seatmate, Secretary Berna. Mag-seatmate kami, pero hindi kami nagkokopyahan.
The other seatmate, actually, is Secretary Art Tugade. We happen to be all together last week in the investment roadshow in Tokyo.
Of course, ang mga mahal ko pong kaibigan at partners sa Philippine Franchise Association, led by Chair Emeritus, Mr. Samie Lim. Ms. Bing Sibal-Limjoco, is also sa PCCI President and Vice Chair. Mr. Rihard Sanz, PFA President. Dr. Alan Escalona, PFA Chair.
The PFA Board of Trustees and Officers. Of course we have here, Sherill, lahat ito mga partners and mentors in the entrepreneurship advocacy in the last 14 years already. Ms. Sherill Quintana, Ms. Yvette, Mr. Dominic, Jo Magsaysay, Vic Paterno, Mr. Fred, Rebecca, Chris, another special friend who’s hiding at the back, Richie Cuna. And of course, special mention to our long-time partner, the SM Group, led by Ms. Tessy Sy-Coson, a partner in many DTI programs, I must say.
And all the partners and supporting organizations of this event, the international delegates, and participants, good afternoon once again.
INTRODUCTION
To the partners and friends at the Philippine Franchising Association (PFA), thank you for inviting me to speak in today’s Franchise Asia Philippines (FAPHL). I think I haven’t missed any Franchise Asia Conference for the past three years. And I’ve made several presentations already of the DTI programs. It’s always a pleasure to see, this time, the next generation of franchisees and franchisors.
I also want to recognize the significant role of the members of PFA in generating inclusive economic growth in the country. As you know, inclusive economic growth is the primary concern and goal of our president, President Duterte. Whether it’s doing well in business or teaching aspiring entrepreneurs how to do well, PFA has always been supportive of the work that we do at the Department of Trade and Industry (DTI). For that, I sincerely thank you.
I hope that PFA and all the entrepreneurs here continue to participate in the country’s economic growth story. Because if there’s one key takeaway that you should learn from my talk, it’s this: IT’S A GOOD TIME TO DO BUSINESS IN THE PHILIPPINES TODAY.
PH GROWTH STORY
Last year, the Philippine economy was a bright spot in Asia and was the second fastest economy in ASEAN. Our GDP growth was at 6.2%, this is really a continuous 80 quarters of positive growth rate, and 50 straight quarters of growth rates above 6%. With our relatively fast GDP growth, this means the Philippines is gaining more economic opportunities, from attracting investments to creating jobs, generating more income, and enlarging the consumer base.
With this development, we also see a fast-growing middle class sector in the economy. And I’m sure all of your franchisors and franchisees are experiencing this growth. One statistic also tells us that the eating out habit has posted a faster growth rate, faster than the GDP growth. So they are nearing 10% growth rate.
Speaking of investments that translate to more jobs, I’d like to mention that the Philippines hit record-breaking levels again. For 2018, our investment approvals hit Php915B, an increase by 48% year-on-year. At that time, that was already a record-breaking achievement in the 50-year history of the BOI—the 617B approved investments in 2017. .
These investment approvals signify two crucial facts. One is that investor confidence in the Duterte’s administration is quite high thanks to the economy’s strong performance. Second is that more investments mean more jobs for our countrymen.
The good thing about this is that the development is not only anchored in one sector, but on more sectors of the economy. If you look at the expenditures side, what’s bringing up the growth is consumption spending. And we would normally grow at 5-6%. But now we see investments, gross national capital formation performing a high single digit and government spending going into investments, into the Build Build Build, also performing a double digit growth close to 16%.
On the production side, we have agriculture, industry, and services. We used to rely only on services. And services would only grow at around 6-7%. The good thing is that we are maintaining that growth. But now the manufacturing sector, which used to be performing with a 3% growth, is now performing at over 5 to 6% growth.
In the industry, it’s also manufacturing and construction. If you look at the construction industry, we have a 15.8% growth, this is already a result of the Build Build Build project, which is an aggressive infrastructure development program of the Duterte administration.
Stronger domestic demand means stronger consumption and more money being spent. For this, we can also credit the tax reform 1 that resulted into lower tax rates for many people. This helps to enrich our consumer base, which means there’s more money floating into the system, higher disposable income for more Filipinos. Meanwhile, our tax reforms also help to attract even more investments. Especially, as we begin to consider the second tax reform. That is now pending in the Senate.
Likewise, our unemployment rate is at the lowest in nearly 40 years. It’s down to 5.2%, that unemployment rate used to be at the 6.6% level. So again, more employed, lesser unemployed. And we hope, like last year, it was reported that we generated 826,000 new jobs, which means more of our people now have jobs—and the money to spend.What we are seeing now is a virtuous cycle for our economy.
The consumer confidence has also gone up. This is also assisted by the lowering of the inflation rate. Last year, we talked about a lot regarding inflation—but you know, it’s only a 5.2 % inflation. It’s not that high considering the double digit inflation rates in previous administrations or in other countries. That 5.2% full year average has gone down to 4.4% in January and 3.8% in February. And we see this settling at a level of 3%. And frankly, personally, I see this going a little lower than 3%.
All these factors are good for business as the government continues to institute more economic stimulators that would create more prosperous Filipinos. Thus, we’re not surprised that an HSBC report last year declared that the Philippines is expected to become the 14th largest economy in the world by 2040.
TIME TO DO BUSINESS
A growing economy is the best time to do business. As the saying goes, “A rising tide lifts all boats.” This means that everyone benefits when the general economy rises—and continues to improve.
That’s why DTI is committed to creating more businesses by pushing the development of Micro, Small, and Medium Enterprises (MSMEs). And I always say this, even when we are in Tokyo, how I love tourism to really grow.
Because in tourism, we really see a lot of Micro SMEs in that sector. From the transportation sector that will carry the tourists from the plane to resorts. The resorts themselves, the bed and breakfasts, the restaurants, the food suppliers to the restaurants, the gifts and souvenirs industry. So many Micro SMEs in that particular. So we are all out, 200%, behind tourism development. And we are actually creating more and synergies with the DOT, with respect to promoting our country. We promote the products and services, and of course they promote tourism.
By creating inclusive economic growth through MSME development, we not only empower our countrymen to uplift themselves but also reduce poverty. In 2018, we posted a huge growth in registered enterprises. What used to be 900,000 in registered enterprises, we have gone to up 1.3 million registered enterprises. And we see this to be continuously growing.
To this end, DTI created the 7Ms Framework of Successful Entrepreneurship that helps promote entrepreneurship as well as create smarter entrepreneurs. The 7Ms are: Mindset, Mastery, Mentoring, Money, Machine, Markets, and Models of Negosyo—of which one is Franchising.
FRANCHISING & ITS BENEFITS
DTI FIRMLY BELIEVES IN FRANCHISING AS A MODEL OF NEGOSYO. The wonderful thing about Franchising is that you can do it in two ways. One is that you can become a franchisee; or you push your business to the next level of its growth cycle to become a franchise.
As a franchisee, the learning curve is not as high as it teaches aspiring entrepreneurs tried and tested business concepts. Because of this, Franchising has a 90% success rate as compared to 25% for traditional retail and businesses. Franchising also acts as an enabler as it gives entrepreneurs a chance to upgrade their business into becoming a franchise. And I urge the PFA members to make use of the 1,049 Negosyo Centers as your tool or venue to offer franchising as models of businesses.
Aside from Models of Negosyo, Franchising uses extensively from Mentoring as entrepreneurs learn the important elements of business. You’re never alone when you go into Franchising because you’re always learning from those who have business experience.
That’s why I’d like to thank PFA for being one of our pillars of support in our Mentoring Programs in the DTI Negosyo Centers. They are the ones who mentor our entrepreneurs on how to set up and grow their business, as well as promote Franchising as a successful business model.
THE KAPETIRYA CASE
I’d like to point out our recent program that is, in a way, franchising a government concept. We’ve launched last week our KAPEtirya, which would help our coffee farmers by raising awareness of and mainstreaming local coffee.
Presently, the Philippines is the 5th top coffee-consuming country. However, 80% of our coffee is imported. There’s a need to encourage more coffee producers. Moreover, while our country is part of the coffee belt and our land is 100% suitable for coffee production—would you believe, we are the top importer of coffee worldwide.
That’s why we opened the first KAPEtirya coffee shop in Baguio last week. Focusing on selling only Philippines coffee products, this coffee shop will be a collaboration between the public and private sector. That is, while DTI owns the KAPEtirya brand, the shop is run by a private sector partner. And soon, we shall develop a manual of operations that will make this product franchiseable. And we hope to have more than 500 stores or kiosks nationwide.
Moving forward, we envision KAPEtirya shops serving local coffee products to over 500 stores nationwide. This would not only create more demand for Philippine coffee, it would create an impetus for local coffee farmers to plant more so that they can address this market.
This is not the first time that DTI has done a franchising concept. Aside from KAPEtirya, Go Lokal is DTI’s way to mainstream top quality local products from our MSMEs that haven’t gone mainstream yet in high-foot traffic areas like malls. We believe that the private sector is the engine of growth and they should really be the ones operating businesses. Government will be introducing concepts and business models that will be run by the private sector, to make the operation really sustainable.
While both KAPEtirya and Go Lokal are franchises, DTI isn’t doing this for the money but rather focuses on concept development for a more inclusive economic growth and development. In the case of KAPEtirya, our goal is to make local coffee mainstream even as our private sector partner makes the operation of the coffee shop profitable for themselves.
CONCLUSION
To conclude, I’d like to part with a quote from the inventor Thomas Edison, who said: “I didn’t fail 1,000 times. The light bulb was an invention with 1,000 steps.” This is something that any successful businessman understands: there is no overnight success, and that any success is the result of hard work. But it’s also good to remember that with Franchising, it’s easy to replicate success.
As our country continues its growth story, I am confident that the businesses you create today will help sustain this growth. My hope is that this will help the Philippines sustain the recognition as the “Franchise Hub of Asia,” as well as a more inclusive and prosperous nation.
Thank you and mabuhay tayong lahat.