Simon Roces Paterno: From Wall Street to DBP
July 31, 2002 | 12:00am
We should reform the many wrong policies of the traditional elite of the past that kept the Philippine economy backward and inward-looking," says the idealistic and soft-spoken Simon Roces Paterno. The 43-year-old banker is the youngest ever president of the Development Bank of the Philippines (DBP) and one of the top Wall Street bankers on the economic team of Gloria Macapagal-Arroyo’s administration.
He continues, "We should push far-reaching economic and social reforms because we can only have a true democracy if we have a true middle-class, if we create a lot of new jobs, and we can create many jobs if capital from abroad comes in substantial amounts. This view may not be politically correct, but I believe we need a huge influx of foreign investments to modernize our economy.
A few months ago, Simon R. Paterno gave me a book entitled Looking for Liling: A Family History of World War II Martyr Rafael Roces, Jr. authored by the hero’s youngest brother Alfredo Roces. Liling was Simon’s grand-uncle, the eldest brother of his grandfather Jesus "Tuting" Roces. Other outstanding relatives include the late Joaquin "Chino" Roces, and Philippine STAR columnist and scholar Anding Roces.
Simon says, "This is the story of Liling’s life – and ultimate martyrdom – a case of heroism in these times of pop stars, media darlings and other false idols. Here is the exact opposite, here is a life consigned to obscurity, whose work will forever need no validation."
DBP has P148.57 billion in financial resources. Simon R. Paterno emphasizes that DBP has a "development mandate" to assist rural countryside development and support small and medium enterprises.
Paterno stresses that the distinction of his being the youngest DBP president is "meaningless" because he has, after all, been in banking for 22 years. He graduated cum laude with an AB Economics degree from the Ateneo de Manila University, earned his Master’s in Business Administration (MBA) from Stanford University and studied French language for three months at the Universite de Paris-Sorbonne Nouvelle.
Before he was "pirated" by Finance Secretary Lito Camacho to join government service, Simon was the managing director, head of Philippine Investment Banking of JP Morgan. During the Asian financial crisis of 1997, he was managing director, head of Sovereign Group of JP Morgan, based in Hong Kong and tasked with advising governments and the central banks of South Korea, Thailand, Malaysia, Indonesia, Vietnam and the Philippines. He was former vice president of JP Morgan Securities, Inc. on Wall Street, New York and had also worked with Morgan Stanley International in London. Among the exciting mega deals he advised on include the merger of George SK Ty’s Metrobank with the Madrigal clan’s Solidbank, the merger of the Zobel-Ayala clan’s Bank of the Philippine Islands with Far East Bank, the merger of Equitable Bank with PCIBank, the IPO of Henry Sy’s SM Prime Holdings, Inc. and many others.
The Philippine STAR: Both the surnames of your father and mother represent the country’s traditional power elite, an elite that failed to lead the Philippines towards true socio-economic progress. How are you related to Senator Vicente Paterno, the 19th-century ilustrado Pedro Paterno, and also to the Roces clan in media and politics?
Simon R. Paterno: (Laughs) Vicente Paterno is my father’s first cousin. My father is Manuel Paterno. My mother, Regina Roces, is related to the famous Roces personalities. I agree with your critical view of the country’s traditional elite. The tradition of the elite was to create walls and barriers to protect their interests. Even the post-war economic policies of government reflected this pro-elite bias, with import-substitution policies. Since the elite owned the factories of production, they wanted to keep foreign competition out, so you have all these Filipinization policies. You will notice that there is this constitutional prohibition on land ownership for foreign investors, prohibition on foreign ownership of certain industries like the mass media. Even this prohibition on foreigners not owning more than 40 percent of corporations – it’s wrong and not beneficial to our economy.
All this was adopted by our traditional elite against foreign entrepreneurs of the past and these policies are now adopted by so-called nationalists. This view may not be politically correct, but these narrow-minded prohibitions will not benefit the Philippine economy and the vast majority of our people, only the traditional elite.
You have a more open-minded perspective on the importance of foreign investments.
I think the traditional elite of our country have manipulated the population into thinking that these barriers against foreign investors and foreign businessmen are actually in the public interest, but I believe that we can only have true democracy, true economic progress and more industries if we allow the entry of substantial amounts of foreign investments. Look at China, Malaysia and Thailand, and the impact of foreign investments in these countries. Look at Henry Sy and his malls, he did not fight the retail trade liberalization act. You know what he did? He prepared for it, he built world-class malls and he built up his huge land bank around his malls, so that in the future, foreign investors like Walmart would become his tenants.
What other social reforms do you advocate?
What I really sincerely believe in is that to get this country moving forward, we have to act more securely as a people. For example, we equate language with nationalism. Consequently, while other countries around us are improving their English proficiency, we are moving backwards. Our ability to integrate ourselves with the world economy is crucial to our national survival. This is true whether we are businessmen dealing with foreign counterparts or overseas contract workers (OCWs) dealing with foreign employers. Do we have the will as a secure people to push English as key to our national survival? This is a politically-charged topic, magagalit sa akin yung mga so-called nationalists (laughs). English is not a threat to our national culture. English is in fact one of the few real comparative advantages of our country, but do we have the courage to say this publicly and to promote better English language education nationwide?
How would you describe the Roces family on your mother’s side? The family has produced businessmen, scholars and even rebels.
Perhaps, one could compare the Roces family with that of the Kennedy family of the US in terms of producing many unique achievers and personalities.
Is there a single common trait in the Roces family?
I guess...it’s the Roces tradition of public service, our patriotism and love of country. For example, I am proud to be a grand-nephew of the late newspaper publisher and social activist Chino Roces. In fact, I am a director of his foundation. He was a very low-key member of a politically powerful family. He was publisher of the biggest newspaper before martial law, the Manila Times, but he led a life of humility, simplicity and one grounded in moral authority. Another great inspiration for me is my grand-uncle Rafael "Liling" Roces Jr., who led a heroic life. Liling was handsome, he looked like a movie star, and was talented and idealistic. He was executed by the Japanese invaders. Liling could have been president of the Philippines.
Which business tycoons do you admire most?
Henry Sy. He was an immigrant who became a self-made tycoon. Do you know that he was the first person to call me to congratulate me upon my appointment as DBP president? I truly appreciated his call, because I have the greatest respect for him. His call was not only an honor for me, it was a reflection of the great personality that he is. Coincidentally, the Roces family also used to be the landlords of Henry Sy in his first Shoemart on Manila’s Echague Street (now Carlos Palanca Sr. St.) at the corner of Rizal Avenue
Another tycoon I admire is John Gokongwei Jr. He is an outsider, an independent man and thinker. Unlike other tycoons or powerful families, he never relied on rent-seeking to build his empire. Look at the industries he went into, such as airline which came in as the low-cost provider and alternative. The business community may look at him as a corporate raider and maverick, but he has done much for the public than he is credited with. The only other person I would put in this category is Henry Sy because his businesses do not rely on government.
How are you related to the late Susana Paterno Madrigal, who came from the poorer side of the ilustrado Paterno clan and who was the entrepreneurial wife of the pre-war tycoon Vicente Madrigal?
(Laughs) She was the sister of my grandfather Simon Paterno, vice chairman of Solidbank. Susana P. Madrigal’s other brother was Jose, father of Senator Vicente Paterno. She was my grand-aunt. In fact, I was then with JP Morgan when our firm advised against the merger plans of Solidbank with Metrobank. The great Chinese philosopher Confucius must have been turning in his grave at that time because I was a family member and I was advising against the wishes of my relatives. It was a hostile takeover by Metrobank, their bid to merge with Solidbank. My relatives, the Madrigals and Paternos, wanted to sell their Solidbank shares to Metrobank, but kawawa naman yung partner nila, the Nova Scotia Bank of Canada. It was nothing personal, because I was a professional in banking, and I had to act for the best interests of our clients.
Why did you take up your MBA in Stanford, not in traditional favorites like Wharton or Harvard? Was it because you preferred the sunny climate of California?
(Laughs) No, my earliest ambition as a young boy was to someday study at the Harvard Business School. In the end, I chose Stanford on the advice of my uncle Vicente Paterno, who himself had studied in Harvard. I graduated from Ateneo which had a soft economics program, parang I felt that I came out of college with very few skills for the business world. I was weak in finance and accounting, so when the opportunity to choose between Harvard and Stanford came, I chose the school that had the stronger technical program. Even my uncle Vicente Paterno advised me to go to Stanford because of its strong quantitative program. He felt I would have an easier time in Harvard. He said to me: "If you want to grow, you must stretch yourself." I’ve never forgotten that advice.
How do you apply this advice to your position at DBP today?
I applied it in my decision to go to DBP. After 18 years in JP Morgan, I was already in the comfort zone. I believe that serving our country and helping our government achieve economic progress through DBP is an opportunity to stretch myself.
How much income loss did you suffer since going into DBP?
(Smiles and, shaking his head, turns very red) I agree on your complaint about government salaries. If you don’t pay civil servants high enough, you will end up with thieves or elitists in government. I admit that being here is a personal financial sacrifice, but I wouldn’t have done this for another president. I truly believe in the leadership of President Gloria Macapagal-Arroyo. I suggest that reforms in government be made – first, reduce the number of employees in government; second, pay higher salary to the remaining government employees. We need reforms in order to remove the undesirables, the laggards, the thieves and the plainly incompetent personnel in government.
As a top banker, what is your advice to the private business sector, our entrepreneurs and business executives?
(Laughs) My advice? Very simple lang. I have three pieces of advice: kayod, kayod, kayod.
The question of family planning seems to be a controversy that many political leaders refuse to address, but don’t you think our rapid population growth is bad for economic and social development?
I believe we have to grow economically much faster than our population. I won’t give you more details, because I am not a politician (laughs).
You were once bridge champion at the Ateneo. China’s late leader Deng Xiaoping was also a talented bridge player. Do you still play?
I’ve already stopped playing bridge. It’s a very enjoyable, difficult and intellectually stimulating game.
How is your golf game?
I have been a beginner in golf for the past 18 years.
Your job before as international investment banker must have been very interesting.
(Smiles) One day, I’m going to write a book about the many business deals that didn’t happen, all the lost opportunities on failed merger deals and their background stories. The most exciting deal was that between Metrobank and Solidbank which involved my relatives. I was even served a subpoena by the Securities and Exchange Commission (SEC)...
Since you were an expert investment banker involved in past big corporate deals, how do you assess the Gokongwei-Salim deal on PLDT and the Pangilinan opposition to it? Who will win?
In mergers and acquisitions, the rule of thumb is there is no successful defense versus a higher price. You can only delay or make it more expensive for the other person.
What is the secret of your success?
I’ve been lucky to have worked and to be working with very talented people. Ang nakatabi sa batis, nakikinabang sa lamig. That’s an old Tagalog expression.
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