Right treatment of investors

The Filipino snack food giant Oishi is to go public in China, where it has 15 provincial factories. Oishi-China has set for late next year the initial public offer. Oishi-China founder Carlos Chan and chairman-son Larry met last week in Hong Kong with potential underwriters: Bank of China and HSBC.

Oishi-China’s IPO is the logical next step in its expansion in the most populous country. Father-and-son Chan aim to diversify from snacks to full meals. With 15 production-marketing operations in all four corners of China, “we have a platform to branch out into related fields,” Larry says. To which Carlos adds: “To do that we need new resources.” Both foresee Oishi growing at least fivefold, like businesses that first rode the rise of China’s middle class in the 1990s.

Assisted as well by elder sons Carlson and Archie, Carlos grew Oishi-China from a single Shanghai factory in 1993. Larry joined two years later, first as merchandise promoter, then rose to department head and general manager. Oishi now has modern facilities in coastal and central China, to as far west as Xinjiang. A 16th plant is to open next year in Fujian, from where most Chinese-Filipinos descend. Starting with prawn crackers and fish flakes, Oishi-China now makes over a hundred varieties of chips, balls, candies, and juices. Carlos’ fourth son Oszen handles R&D.

Oishi operations in the Philippines and Southeast Asia are to remain under Liwayway Marketing Corp., founded by Carlos’ parents in 1946. The China IPO is to coincide with Liwayway’s 70th anniversary.

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Product excellence, corporate integrity, and personal reputation made Oishi-China what it is today. But the Chans also give credit to the ease of doing business in China. Local government officials and Communist Party counterparts aggressively invite them to set up shop in their locales, Carlos says. Good relations do not end there. The officials fulfill all promised infrastructure and utilities, and assign permanent liaisons to solve any unforeseen problems. In short, they walk the talk.

In Henan province’s newly industrializing Luohe district last week, the city mayor and vice mayors, county commissars, and higher officers took turns touring Carlos and Larry to choice factory sites. They alternated in hosting lunches and dinners, even in taking the Chans’ party of friends (me included) to historic and cultural spots, like the famed Shaolin Temple.

As soon as a factory lot was identified, a memo of understanding was signed with the Chans, listing the deadlines of the locals to connect water, power, telecoms, fuel lines, and other needs. Luohe is 155 kilometers from the provincial airport in Zhengzhou, the capital where Oishi’s old plant is. The two-hour car ride will soon be halved, as a high-speed railway is being rushed between the two cities, plus a metro within Luohe.

Proof of the follow-through is an earlier visit to Jinan, capital of Shandong. Provincial and city bigwigs rolled out the red carpet for Carlos, Carlson, and Larry. They did it not to invite them to invest – Oishi’s largest, most modern plant already stands there. They needed to show their continuing support for the investor from the Philippines.

The Chans, like other foreign investors of Chinese extraction, are considered “returning Chinese.” There is a special government agency for the three million such entrepreneurs, under the Office of the Premier in Beijing, with provincial branches. At the province and city level too are federations of “returned Chinese” from various trades and professions. One special dinner last week was with the Henan provincial chairwoman of the agency and federation, who first invited the Chans to relocate from the capital to Luohe. She wanted to ensure a smooth transfer.

The local officials do not care about the maritime tensions between China and the Philippines. That’s for Beijing and Manila to resolve. Foremost in their minds are the employment, taxes, commerce, and prestige the investors bring. And that suits businessmen like the Chans just fine.

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In contrast, the Philippine government burdens investors. Take as example, the Bureau of Customs.

The other week Customs head Alberto Lina arbitrarily doubled the duties on Balikbayan boxes. The new charges are: P40,000 per cargo container effective last July 27, plus another P60,000 starting Oct. 1.

That’s on top of the P80,000 that Customs already exacts per container. The P180,000-total will be in force by the Christmas delivery season. Unhappy holidays for Balikbayan-box businessmen and customers in America, Europe, and Asia.

Sneaky was how the new charges were set, noted Fil-Am newsman Val Abelgas hinted in a report from Los Angeles. Lina announced it three days after first collecting them, on July 30. He told it not to Balikbayan freight forwarders, but to customs brokers. Allegedly he warned the latter to not complain, since it’s their forwarder-clients who will pay the doubled duties anyway.

Lina supposedly added that those who still grumble would be subjected to 100-percent inspection. Meaning, containers would be held at the port and the 400 or so Balikbayan boxes pulled out and opened for minute scrutiny. That would entail for the forwarders additional costs for helpers to watch that Customs inspectors don’t filch anything, and then to repack each box. Not to mention, days-long port delays for which Customs will impose penalties, and in delivery to enraged recipients.

Lina has it all figured out. The Balikbayan forwarders have no choice but comply, or else close shop. If they pass on the P100,000 added duty to customers, at $7 additional per $52-box, it’s they who would be blamed, not the Customs. That’s what happened last year, when angry customers filed lawsuits abroad against the forwarders for late deliveries due to port congestion – caused by slow Customs document processing.

In the end, it’s the poor overseas Filipinos who’d suffer. Painstakingly they assemble small gift items in the boxes, to send to poorer relatives in the Philippines.

Belatedly, Lina called to a meeting at month’s end the Manila-based president of the association of Balikbayan businessmen. For what is unclear, since the damage has been done with the doubling of the charges without the mandatory consultation with stakeholders, and covering memos from the finance department.

Belatedly too, Lina is telling the press that the new charges were due to reports of smuggling using Balikbayan boxes. Of what items, by whom, and in what quantities, he did not say. Unclear too is how higher duties on Balikbayan boxes can stop the supposed smuggling.

Smugglers need to be flushed out, to be sure. But the Balikbayan containers already pass through the Customs’ giant x-rays. There already is a working system. Sometimes are detected gun parts or too many shampoo bottles in one box, which promptly are confiscated or slapped with commercial duties. To punish all Balikbayan box senders for a few petty criminals is like what the transportation department is doing: it is requiring the replacement of all 10 million vehicle license plates because one-half of one percent, or 50,000, supposedly have been faked.

What remains unchecked is large-scale smuggling of rice, onion, ginger, and pork. These do not come in Balikbayan boxes but in bulk freights and refrigerated containers. The culprits are Liberal Party mates and henchmen of the administration for which Lina works. Early in the LP admin’s tenure disappeared from the Customs warehouses more than 2,000 containers of pork and other highly dutiable goods. The agency was then under a Lina recommendee, his company’s ex-general manager.

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