Chair, Ayala Corp.

BizNewsAsia Publisher and President Tony S. Lopez recently had an hour-long televised interview with Jaime Augusto Zobel de Ayala, 65, chair of the Ayala Corp., the Philippines’ oldest business house.  Excerpts:
Tony Lopez

I am privileged, honored, and happy to have as my guest one of the greatest names in Philippine business today in terms of heritage, legacy, achievements, innovation, sense of purpose, and community spirit.  No one probably can beat Ayala Corporation. It’s a very large conglomerate, the oldest company,   And with us is the headman, the patriarch, the young patriarch of Ayala Corporation, the chairman of Ayala Corporation, Jaime Augusto Zobel de Ayala. JAZA for short.

JAZA

Thanks very much, Tony.  I am very happy to be here.
It’s been a little while since we last saw each other.

Yeah. I have always loved Ayala.
The company is 190 years old.

It’s a great heritage.  Of course, we don’t tend to look at the past too much, but every now and then when you hit 190, you have to reflect on it and celebrate it.

And one of the builders of Ayala,
of course, is your dad.

He turned 90 also this year.

Ayala Corporation turned 190,
and your dad turned 90.

So that means he was born when the corporation turned 100. I was actually looking at some pictures of Ayala’s celebration when it took place 100 years ago.
And of course, as I was looking at the pictures, I realized it was the day he was born as well. So it was quite meaningful. And he was very touched. We had some small celebrations for the 190th. He was quite emotional, actually.

Ayala also founded the first bank, not only in the Philippines, but in Southeast Asia.

We did not naman found it, the Bank of the Philippine Islands was really the de facto Central Bank of the Philippines.

It was the original central bank.

Yeah, and it evolved into a private bank. But one little-known fact is it was actually a member of our family who was the first independent director back in the 1800s when it was formed they needed one person from the private sector. It was one of our great, great, great grandparents, and grandfathers who was asked to be the independent director.

So it’s a tribute to the Ayala name. Because you can see things from a great perspective, both long-term and short-term. And also the commitment to the country and people.

That’s very kind.

How did you find the July 22, 2024 State of the Nation Address of the President? Personally, I cried at the end of the speech. It was really very moving.

It was actually a great speech. I was very happy to be there personally upon invitation by Speaker (Martin) Romualdez and the President as well.

There were a number of us from the private sector there. I think in the past, not that many private sector individuals were invited. So it was actually an honor to be there. I thought it (the SONA) was a great speech.

It was, I think, a great way to showcase the President, the way he walked in, the way it was filmed, the way it was portrayed. And the substance, I guess, of his dialogue was superb. What I liked in particular was he started right off the bat in Tagalog talking about something that’s very important to the average Filipino, which is the price of their food.

So he started straight off with agriculture and the price of food and everything that he’s trying to do to streamline the supply chains and bring food prices down. I think that must resonate with the average Filipino because issues of inflation, and issues of the price of goods are fundamental to the daily wage earner.

And so I thought he did a great job by touching right away on a topic like that, which is a pain point for the average citizen, the cost of food. And the efforts that he is making both to bring technology to the agricultural sector, to streamline the supply chain, and to do what he can.

And the bureaucracy, digitalization.

Well, yeah, all the elements bringing technology as well into anything that will make the agricultural sector more efficient. It’s a difficult task. Many have tried it, but he was quite eloquent in the way he put that forward.

It’s an amazing speech, especially the intro where he was by his lonesome self-walking towards the arena.

That was actually quite beautifully done. And as you pointed out yourself, Tony, and quoting from you, leadership can be a lonely thing. And that entry showed really an individual by himself, a leader of a country, and then entering an arena with representatives from many different sectors of society there.

There was the roar of the crowd. This is the guy who will slay the monster.

Well, it’s not a gladiator movie, but I thought it was very effective. It gave importance to his role as well as leading the country. I thought it was very nicely done.

I was amazed that he admitted that “being the fastest-growing economy in the world means nothing unless I can bring food to the table of almost everyone”.

I think a State of the Nation Address like this, you have to connect with people. And economic numbers, while they’re important to all of us in the business sector, he’s correct. It doesn’t mean anything to the average citizen unless it affects their lives. And so I think his starting on that topic, Tony, was a great way to connect immediately with the average citizen.  So I thought that was great. But then he went on from there. There were many topics he touched on.

And he talked about all the fundamental building blocks of the economy. But he translated it in ways that affected the average citizen. So I can’t remember exactly the order that he went through, but just touching base on some of the topics, he talked a great deal about the energy infrastructure and tried to create a unified transmission system. That meant a lot to us in the business sector.  

Unified grid system.
What does it mean to you?

Essentially we’re 7,000 islands, right? We’re in the energy business ourselves.

We’re a big proponent of renewable energy in the country.

But the transmission is very important, because you can be producing energy at one point in the country, but it can’t be transported to other sectors that need it. So a grid can belong to just an island or it can be connected nationally.

The President talked about connecting Bohol and Cebu. He also talked about connecting Pampanga, and Bulacan.

You’re very good with the details. Yeah, he mentioned specifics. But what you really need is, you know, a country like the Philippines has many islands.

But if they’re not unified by a unified grid, and the grid is, of course, separate from the energy providers like ourselves, then you can’t basically produce for other parts of the country.

And we have a system where people can buy their energy from wherever they want, but if we don’t have a unified grid then there’s no way to access that energy.

You produce so much energy in one place, and yet you cannot deliver it because the grid is not there.

And energy costs, again, like food, are important to the average citizen.

Energy is easily 20% of the production cost today of a manufacturing company.

Yeah, many different sectors.

Higher than labor component.

Well, depending on the more advanced things nowadays, data centers have become a very important component of the Philippine system.

Well, energy, you’re a pioneer in renewable energy here in the Philippines and abroad.

We’ve expanded. We decided to invest in the energy field relatively recently in our history. It’s been over the last decade. And we started with thermal assets, and then we moved on to the renewable sector.

We started to do wind projects in the north and moved to solar.

But then opportunities started to appear within the region, so we invested quite heavily in Australia. That’s been going through a massive transformation.

Vietnam also.

Yeah, Vietnam.

I think you are also in India.

We have a small component in India. In Indonesia, we also have a geothermal investment and also some wind. But I think what’s important, Tony, is that the world is realizing that climate change is a real problem. And I think the President himself made reference to the renewable sector and its importance in all of us as countries.

You know, there are certain problems that we can tackle individually, certain problems that we can tackle as companies, certain problems that we can tackle nationally. But for things like climate change, we all have to unite and do things together.

So there’s been a global movement to move towards the renewable sector and try to bring the temperature of the world down. Heating is beginning to take place across nation-states, and it’s affecting our weather patterns. Countries like ours, you know, we are very affected by these weather patterns as it is.

You know, we have typhoons, we have earthquakes. Many of our cities, major cities, are at sea level.

We are among the top three countries in the world most vulnerable to climate change.

That’s correct. So we have a role together with others, and there’s been a movement, a global movement, to try to address some of the carbon dioxide that comes into the air and bring down the temperature. So we felt, as Ayala, that we should get into the renewable sector.

But to go back to the President’s talk, you know, a unified grid, which he was putting an emphasis on, is very important to all of us who produce energy.

Because you’ve got to be able to get energy from one point of the country to the other in the most efficient way.

Transmission cost today is how
much of energy retailed?

I’m not sure what the numbers would be, Tony, but it’s an important component. More than the cost, it’s important to be able to get it to different parts of the country in the most cost-effective way. So those words had a big effect, I guess.

Because of our countryside, many are undeveloped. It requires just an injection of electricity. Because when you have electricity, you have a telephone signal. When you have a telephone signal and you have electricity, you add roads, you have connectivity. 

That’s correct.

You’re absolutely right. So you touched just on two points that he also mentioned. The President mentioned mobility.

The ability to get products from one area to another. He talked about air, about roads, about rail. He felt that he would like to create a rail renaissance in the Philippines.

He talked about the privatization of NAIA, and getting private sector groups involved in redoing the airports.

He talked about the road networks. Mobility is just a fundamental component. Not only in a city like Metro Manila where density is high and you’ve got to get people to move around. But also throughout the country, farm-to-market roads for farmers and the like.

So that emphasis on transportation, and mobility received, I think, a lot of applause. And people were happy to see it.

He talked about energy, again, another key component of it. And there was one other area that you mentioned, Tony, I guess mobility.

He was very keen on education.

Well, towards the end, the President talked about two areas, education and health. And actually the two go hand in hand.

They go hand in hand.

The President, I think, made that connection.

Through technology, he said.

Not really. I think technology is one. But I think he felt that if nutrition was not there for a young child.

For the first 1,000 days, he said, for a child.

Correct. The learning abilities, of course, of a child suffer.

So I thought his emphasis on health and then education were key components of an area where we could potentially be very strong.

You know, we’re getting to, you know, 115 million people. Maybe 120 million.

That’s the 12 largest human capital on earth.

And to a certain extent, our ability, our human capital is becoming a critical resource. And I think it’s been discussed that on so many fronts, our human capital is what’s keeping the economy going.

Unless we feed that human capital properly and educate it. And take care of their health. We cannot have the so-called democratic dividends.

Very good. You took the words right out of my mouth. That’s exactly right. He  (Marcos Jr.)put a lot of emphasis there. Interestingly, within the Ayala group.

Yes, Ayala is the pioneer in
education and health care.

We’re not pioneers.

In the right quality of education and the right quality of health care. Education, basic, high school, and health care, and also primary.

We’ve been trying to dedicate capital to those two areas. I was very happy to hear the President put it out there.

Although they are not exactly money-making.

You know, these things, everything in life needs an investment. Then you build it up and then, you know, returns come later. Returns don’t always come straight away. But on the health care…

How extensive is your education investment? You have APEC schools?

Yes, APEC schools. But then, if you remember, we combined forces with the Yuchengco Group.

Yes, you’re all part of MAPUA.

No, we actually merged. The different schools that we had with the MAPUA schools. And we now work hand-in-hand with them. We’re just one company with the Yuchengco Group. And so we have everything from primary school all the way to technical education.

To engineering school. Because MAPUA is one of our best engineering schools.

And MAPUA recently also tied up with Arizona State in the United States. It’s a very interesting program where a Filipino can start a program in one of the MAPUA schools. And then finish their program at Arizona State.

And then get a joint degree in MAPUA and Arizona State. And then be able to work in the United States after that degree. Because it’s a STEM, usually a STEM degree.

So there’s an opportunity at a different price point for Filipinos to participate in a global education as well. We’re very excited about this field. It’s doing very well. We’re delighted to be working with the Yuchengco Group.

But going back to the President, many of us were very happy to see him put an emphasis both on the health and education side. It’s the basic building block of our human capital, Tony.

And if we’re going to succeed as a nation, those are elements that are fundamental to building that community of Filipinos in the future. That can thrive, that can grow, that can contribute to the global economy. And not only with our business processing outsourcing sector, which has become a very large component.

Because you’re running out of manpower for business processing. The rejection rate is now higher.

Yeah, we’ve become much more sophisticated with every passing year. And then, of course, we have many overseas service providers that provide services. And I think, I’ve argued time and time again, Tony, that people saw the movement of people out of the Philippines as a weakness. And I’ve always argued the opposite. I said, why is it that capital can go outside? Manufacturing can go global. In many areas, financial services can go global. But people cannot, it’s a weakness. It’s not.

Actually, the best free trade
is export of human capital.

Well, Filipinos are providing services.

People being able to travel freely.

Well, travel freely and then provide services abroad. You look at it. Those service providers, numbers, even during the worst of our crisis, have not declined.

During the COVID, the Queen of England was administered by a Filipino nurse.

That’s so true. They thanked them personally. So, to invest in our human capital is, I think, extraordinary, it’s a big, important component. And for the President to put emphasis on our educational system and upgrading it. And I particularly like he mentioned TechVoc.

I’m a big believer in technical education. The vast majority of Filipinos don’t graduate from high school. They can’t go to college for cost reasons or otherwise. And so, if we could strengthen our TechVoc schooling so a high school student can come out and find work immediately. You don’t need a college degree. That again, you know, spreads the amount, the number of Filipinos.

Because you need TechVoc manpower for your industries. Because you’re a huge industrial empire. And you have the best industrial products.

But even beyond that, Tony, it’s giving Filipinos who can’t get a college education an opportunity for jobs. So, the stronger our TechVoc processes and the strength of that degree, the more opportunities Filipinos coming out of high school.

Because we have a labor surplus of about 12 million who need a better job and better pay.

That’s the key.

And TechVoc is the solution.

And actually, going back to that, the President also mentioned those numbers. He mentioned that underemployment numbers have come down. It was great to hear that poverty levels have come down.

The unemployment rate is below 5%, 4.3%, I think. (3% by June 2024).

That’s correct. Which I thought was an impressive number.  There was a nice mixture in the President’s remarks of achievements but at the same time aspirations. And so, it was quite comprehensive.

And more than anything, I like that it touched the needs of the average Filipino, the average human being. While at the same time, speaking as well to the business sector, and broader economic plan.

So, it was a great mixture of what the common citizen needs and at the same time what the economy needs and the businessman needs. I thought it was a sophisticated speech.

Yeah, it’s a very good speech. He first identified the major problems. Food and inflation, education, and ease of doing business.

Telecommunications as well.

Healthcare. Energy.

It was quite comprehensive but it managed to create a balance between speaking to the Filipinos and at the same time to the global community.

At the same time, of course, he tackled emotional issues like the West Philippine Sea.

Well, that’s true.

For which he got a standing ovation.
Most number of minutes. And the POGO.

Well, issues of national sovereignty mean a lot to all of us. And for the President to stand strong in what he believes in our rights as a country, I think is something that we all need.

And I like that he declared the West Philippine policy in Tagalog—Hindi sariling katha. It’s not a figment of the imagination. It’s real. It’s living. And it will be with us forever.

When he said it, you could see that he had a lot of sincerity.

And we will not yield.

And on the POGO, I thought he made some very good points.

It just requires a lot of statesmanship to give up. My estimate of POGO is about 200,000 jobs. One million players.

Well, I think he mentioned that POGOs have a lot of negative externalities.

The great crimes.

I think he was saying he would rather channel those resources into things with positive externalities. And I think that struck a chord as well with a lot of people. So, all in all, I thought it was a very successful State of the Nation. In its way, there’s a lot to cover.

But I think it was well done. I love the way he mixed Tagalog and English. Touching base with the global community. But at the same time, touching the average Filipino with what they needed. It was impressive, but it was well received. And it certainly was a pleasure to meet him.

Then I was amazed that the CREATE Act has created P1 trillion investments and 100,000 jobs.

I don’t know about the number of jobs created. All I know is that underemployment has come down. And that we’ve been getting more and more employment. Employment figures are an important indicator for our country.  In many other countries, those numbers are given quarterly. And so, for the President to address issues of employment and the fact that we’re being able to give employment.

The high employment figure is more than 95%, somehow makes up for the high inflation rate. But I don’t know if people get the message.

Inflation is always going to be a sensitive issue. But I think for the President to put an emphasis on that. And food is a big component of the inflation.

For the very poor, food is 55% of expenses.

Exactly. And rice, of course, is a big component of that. So, he talked a lot about that. And trying to address it, I thought it was great.

And of course, he mentioned that for the first time ever, the biggest palay production. More than 20 million tons.

That’s true. That’s absolutely true. You remember all the numbers.

More than 20 million tons. But I wish they could sustain it.

Well, we hope so too. But I think the sincerity was there. The determination was there. And we’re all excited and hopeful. I was looking at our capital expenditure budgets in Ayala.

Yeah, one of the biggest. Amazing.

Well, you know, I think last year, we spent over 260 billion in capital expenditures across our group. This year, it’s gone up to 294. That’s our plan. So, that’s the kind of commitment we have. With this kind of leadership.

Almost 600 billion in two years.

And so, these are numbers that contribute. And with an economy that’s growing, I think the President did touch on it at great lengths. But we’re also one of the fastest-growing economies.

Because the President said that he wants growth that is investment-led. Because right now, we are consumption-led.

That’s correct. And nothing wrong with consumption-led growth, by the way. And many other countries are trying to find it. But we do need more investment-led growth. And so, to see him put an emphasis on that, it means a lot to all of us. Because, as they say, when the tide rises, all the boats rise with it.

Yeah, a rising tide brings up all ships. Create a bigger pie, everybody will have a share.

And given the fact that we already have good consumption-led growth, if you add investment-led growth to that, that’s a very strong…

Because consumption right now is 84% of the economy. On the expenditure side. And according to Ralph Recto, consumption has been growing by 7% per year.

We’re very strong. You gonna remember Tony, many countries would love to have consumption-led growth. Even China right now.

The United States is also consumption-led.

Yeah. But we do need investment-led growth. And for that…

Nothing like putting up machinery, factories.

Hard assets that have long-term returns.

That employs a large number of people.

That’s absolutely right. Anything—construction, factories, infrastructure. But the President has been very friendly to the private sector. He has put a lot of emphasis on PPPs—private-public partnerships. He’s emphasized it. His economic team put an emphasis on it. In that mix of private capital with public capital, it’s a very powerful resource. And he sent signals. Well, he bidded out NAIA, which became a PPP, a successful PPP. He intends to do more. A group like ours, we’re happy to participate in any of these types of projects.

Yeah, I know. Basically, the theme was about mobility. Through inclusion. People going up the ladder—the income ladder. That’s mobility. Through digitalization. You can play a role there. Because he said 77% of Internet reach is very low. I think it’s already very high.

Well, actually, you’ve got to remember that we have a lot of rural areas. We have a lot of islands. But I believe the President’s correct, I mean, even if were at 75%, 76%.

I think my figures only said 56%.

It should be 100% ideally.

It should be 120% actually.

We’ve improved dramatically. I think that’s why we have a big, strong BPO business. Telecommunication facilities are a lot better now than they used to be. And I think for the average Filipino, there are more cellphones than there are people.

You have one of the most robust telco infrastructures.

I wouldn’t say it’s the most robust.

One of the most robust.

Definitely, it continues to increase. It continues to get stronger. More and more cable systems are being more and more investments.

It’s awesome that you cater to the low-end and the highest-end.

That’s correct.

The business phone is Globe and also now the phone of the masses. That’s an incredible fit.

I think for everyone to have access to telecommunication facilities is important. But also on the business front, we become a global service provider through the BPO. And the BPOs are very sophisticated operations. Now they do engineering work. They do equity analysis. They do sophisticated work.

Accounting, customer service.

For major institutions. And so for that, you need very robust platforms to be able to…

You need a good signal and a good telecommunication network nationwide—24/7.

Now, a lot of Filipinos are probably not appreciated. But I’m sure everybody in this room has someone that they know—that there’s a lot of people who in it’s not even corporations. A lot of people work independently providing services of one kind or another through telecommunication to all parts of the world—accounting, and backroom services.

Actually, our professionals top notch—most desired in the world.

But that’s why we have to keep the educational—

At least, you can have more APEC School and MAPUA schools.

Well, that’s doing very well. That investment with the Yuchengcos continues to grow and we keep investing in it. 

And it’s a small contribution to the broader needs of the educational sector but it’s vital to the success.

There was a World Bank estimate, we need 570,000 engineers right now and we produce only at best 10,000.

Yeah. So much is needed so there can’t be enough there. There can’t be enough investment on that front Tony.

You should have more APEC
and MAPUA schools

Well, I think the country…

How many APEC schools have you got? 60?

I don’t know the number. But at the top of my head, I think maybe 60 sounds like the right number.

It keeps growing but beyond APEC, we also have bought into a number of universities.

You’re also very good primary schools.

Yeah. Correct. All aspects of it.

So you complete the educational cycle not only K1 to K12 but also college and master’s degrees with this Arizona thing.

Yeah. That’s correct.

Because America still produces
the best engineers.

Well, Arizona State is a great partnership because Arizona State they’re the ones that produce a lot of the NASA engineers and you know a lot of those types. It’s a great university and we’re very happy to have partnered with them.

By the way, if I do some commercials. My grandson—my first grandson graduated from Georgia Tech. He is at the top of the class.

That’s one of the great technical schools.

It’s the best engineering school that is government.

Fantastic. Public yeah.

You also are a product of the best Ivy League school in America.

That was a long time ago Tony. Thank you.

And still the best name in the business for Ivy League, Harvard. It’s the richest Ivy League school. The one with the most endowment.

You’re full of facts, Tony.

They also train the people with the best brain endowment like you.

About the Ayala, the Ayala culture 190 years, where are you going into kasi you are known for innovation and you have the best family genes. You also have the ability to hire the best outsider professionals so that makes you a going concern.

Because you have experienced the highest and the lowest points of our country. You have been to what—three revolutions—Spanish, American, two World Wars, one People Power, nine coup d’etat, and even your executive, Rene was in the government for a while.

Yeah, Rene. We’re very lucky we’ve had a number of executives who been a part of different administrations. Rene certainly provided a lot of leadership in this role. Well, I think we’ve had a tradition of providing professional leadership. Of course, there’s been family membership as well. But the current President of Ayala and CEO is Bong Consing, he’s not a family member—an independent executive.

You have the highest-ranking woman chief executive—Ayala Land.

Ayala Land. Margarita Dy, just took over recently.

One of the biggest advocates of DEI (diversity, equity, and inclusion).

I’ll be frank. You know, I think we have a culture in our country where women and men are treated the same. They have contributed in similar ways.

We have a woman president far ahead of the United States—twice.

Yeah. Twice na.

Although their rule was rather controversial.

I think female leadership in our country is not an issue.

Ayala I think is matriarchal—Margarita Roxas.

Yeah. We have more than Margarita. There were a couple of others as well who provided leadership. We have pictures of them at the head of the table.

Amazing legacy. Heritage, history. No other company can boast of it.

You’re very kind.

Congratulations JAZA.

Salamat.

Moving forward, how is the business and how do you find the government—is it a help?

I think President Marcos set the tone from very early on that he wanted the private sector to be allied with the government in the growth of the country. And his actions speak louder than his words. He’s been a very strong advocate of supporting private sector engagement and all sectors of the economy. He’s encouraging. He holds these gatherings on a regular basis.

Yeah. I understand, he hears you out regularly. He’s the first President who does it.

It was organized by industry groupings. He’s very sincere.

You lead what industry group?

I’m not with any of the industry groups but I have attended a number of gatherings. But a number of Ayala executives are involved. And he’s divided it up. Some are job creation. Some are health-related. Some are education-related.

These are long meetings. He’s engaged personally and then he makes decisions at the end of these gatherings. So, there’s a strong rapport between the private sector and public sector wherein being partners I guess, in an economy that needs to grow.

I know the President was very keen on technology and connectivity. Because that’s the whole idea behind the biggest infrastructure program—P9.5 trillion. And also, the modernization of the Philippine bureaucracy through technology. And ease of doing business is also through technology. And that technology is in your hands—the private sector.

Well, I think digitization is important to all of us. The way products and services. The way we communicate digitization has brought down the cost and created accessibility. I think there are more Filipinos now who have access to financial services, it’s because of digitization as well.

And we are the texting capital of the world.

That was way back, Tony. Now, we moved on beyond that. There’s a lot to be proud of but still a lot more to do and I think the President showed tremendous leadership and us in the private sector.

Yeah. Tremendous leadership. A tremendous nationalism. I like that he said, love your country, the Philippines. Love the Filipino.

The President has connected very well with world leaders as well. And I think people don’t appreciate how important that is. I think he has to build a rapport. We’re a community of nations, we all have to work together. We affect each other and his personal engagement with world leaders is been exceptional. And for all of us, and the Philippines to see him build trust with other countries and become partners with other countries, that’s a big help to all of us.

He’s a fresh wind of change.

Yeah.

I like that he said that he was able to manage the drug problem without killing anybody.

Yeah. He made that point.

And he also said that West Philippines will be with us as long as the stirring of our spirit goes on and on, I like that. He said that in Tagalog.

I think he touched everyone’s heart with that speech and people felt his sincerity and there was a lot of national pride that came out of with the way he spoke.

And Ayala being the first company in the Philippines, you’ll be there at the front—front line.

Yeah. We’re all in as I mentioned earlier, we continue to invest a great deal in the country. A lot of capital expenditure. A lot of expansion and we feel support.

Almost 600 billion. Amazing your capacity to look forward, go there, innovate, and lead the country.

Thanks, Tony. You’re always very kind with your words.

On behalf of my colleagues and our countrymen, thank you for that JAZA.

Salamat Tony.

You may look like Brad Pitt but you are a Filipino in every gene and muscle in your heart and in your body.

Thank you, Tony. It’s been a pleasure always talking to you. Salamat.

You are one of the best-looking CEO.

Si Tony talaga.