Stepping up to the plate

Former Asian Spirit chairman Noel Oñate who has made quite a bit of money as an investment banker may either be a hero or a fool for buying the beleaguered pre-need firm Pacific Plans Inc. (PPI). It can be recalled that PPI was one of the top pre-need companies in the Philippines, but its troubles started in 2002 when it became unable to pay the traditional open-ended plan holders’ claims issued in the ’80s. Under the traditional plan, the payment of a beneficiary’s tuition fees is guaranteed regardless of the cost at the time when it is finally availed. However, the unprecedented and unregulated rise in the cost of tuition fees posed liquidity problems for the pre-need company, forcing it to seek rehabilitation in 2005.

Noel Oñate acquired the entire outstanding capital of PPI for P250 million, and given the former Asian Spirit chairman’s optimism, the deal may sound like a good investment but it can also be a precarious proposition given the problems of PPI. It has about 300,000 plan holders and is facing opposition from the Parents Enabling Parents (PEP) Coalition that continues to insist that the beleaguered company honor its open-ended traditional plans. Under PPI’s approved rehab plan, plan holders have the option to swap their open-ended plans with fixed value plans redeemable by 2010.

Noel will certainly be a hero in the eyes of parents who saved up their hard-earned money for their children’s education if he manages to make PPI – now known as Abundance Providers and Investment Corp. – viable once again. No one can’t really blame these parents for insisting that PPI honor its commitment with traditional plan holders, given the fact that they entrusted their savings to the pre-need firm. According to sources, bad investments also added to the liquidity problems of the Yuchengco-owned company.

Those who know Noel are not really surprised at his decision to buy PPI. After all, he is considered a maverick and a risk taker, starting out Asian Spirit – a budget airline company servicing missionary routes – at a time when it was deemed unprofitable to do so. From two-second hand aircraft flying to Boracay in 1995, Asian Spirit eventually expanded with a fleet of aircraft flying to international routes like Malaysia, Macau, and Seoul. Noel recently sold his Asian Spirit shares for P1.4 billion to Zesto owner Fred Yao.

What is quite clear is that the pre-need industry is not in the best of positions particularly with news of several pre-need firms closing down, making plan holders jittery once again. But Noel seems to look at the glass as half-full, pointing out PPI’s consolidated trust fund assets of P12.5 billion and operating revenues of P1.8 billion. “I love challenges. There is always opportunity in adversity and crisis,” he said, adding that fresh perspective from a new management will give more opportunities to stakeholders and plan holders.

Stepping up to the plate is a great goal, but even the grandest of plans and the noblest of purpose can go awry if Murphy’s Law strikes – in which case Noel may end up holding an empty bag of experience.

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A week before Barack Obama was sworn in as the 44th president of the United States, he wrote a letter to his children Malia and Sasha, telling them why he decided to run and what he wishes them – and every American child – to have. It was a simple message, telling them he wished all “children to go to schools worthy of their potential… to go to college – even if their parents aren’t rich. I want them to get good jobs… that pay well and give them benefits like health care, jobs that let them spend time with their own kids and retire with dignity.” He also explained why it is sometimes necessary to go into war, while underscoring the need to settle differences peacefully. But the most profound portions stressed that the great privilege of being an American is accompanied by great responsibility, and that everyone has an obligation to give back to the country, to “hitch (their) wagon” to something larger than themselves to realize their true potential.

While some said Obama’s letter had a bit of politicking in it, his message is timely because it urges everyone to be responsible and reinforces his theme of change – change in perspective, in habit and in lifestyle. The whole economic crisis was caused by the simple fact that Americans have been so used to living beyond their means, spending more than they can earn, living on borrowed money. This has always been the story of many people who go bankrupt. America is technically bankrupt but since it is a wealthy country and considerably has the largest economy, the US can pay back debts but the resulting effect can be widespread and overarching – like what is happening today with the US-driven global financial crisis.

Here in the Philippines, things can’t get really worse since we are a poor country, so the effect is not as acutely felt as in the US and other wealthy countries that have been so used to very high standards of living. That’s the difference between them and us, the “consuelo de bobo” of being a poor country all this time.

No doubt the economic picture has changed all over the world, with China emerging as the only major economy which could likely grow despite the crisis. Ironically, the reason for China’s resilience is the very same one that was ridiculed by a lot of economists: the state’s meddling in the banking sector, setting limits and imposing heavy regulations on the financial industry. Today, the US is heavily indebted to China that owns about a trillion dollars in US treasury bonds. Clearly, Obama’s job will be even tougher than he thought, and he must be able to navigate this crisis to help ensure the future not only for his children but for every child – because what happens to America will ultimately affect the whole world.

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