Industrialized Philippines, an impossible dream?

The late retail tycoon John Gokongwei Jr. once had this dream of seeing the Philippines become an industrialized nation, along with the greats, perhaps Korea, Japan and maybe even US and China.

And he didn’t stop at that. He actually tried to help make that dream come true. Thus the conglomerate that he founded put up a petrochemical business, JG Summit Petrochemical Corp., which traces its roots in the early 1990s. The company would operate what would be the country’s first naphtha cracker plant and in Gokongwei’s mind, pave the way for a booming local petrochemical industry.

Becoming an industrialized nation seems to be an impossible dream, however, no thanks to tough competition from other more sophisticated markets, the lack of government support, the perennial and deeply ingrained corruption in the bureaucracy and the high cost of electricity and labor compared to other Asian markets.

And Gokongwei, despite his patriotic intentions, would learn this the hard way – after investing billions in the petrochemical business.

Fast forward to 2026 and his only son Lance Gokongwei has had to make the tough decision of letting go of JG Summit’s petrochemical business and, in a sense, his father’s dream.

“It’s a difficult decision,” Lance said in a recent chat with the press on Monday at the lovely Cantabria by Chele Gonzalez resto on the rooftop of Westin Manila.

He said it was especially tough because they had to let go of the plant’s workers – roughly 1,500.

The Gokongwei Group is now in talks with potential buyers to acquire the business.

In May, he told The STAR that the potential buyers could be someone looking at the Philippines as a manufacturing base for Southeast Asia.

They would also need to have privileged feedstock, meaning they have to have a source of naphtha that is very competitively priced and that they can use the JG facility to convert their feedstock to higher value petrochemicals.

I’m assuming only foreign players would have the capacity to acquire the assets of JG’s petrochemical business.

For sure, it’s a tough decision for Lance to make but it was the only rational decision in a pragmatic and economic sense, especially amid overcapacity in petrochemical supply.

Some kibitzers were even surprised the business lasted this long before JG announced a plant shutdown in January last year.

It was in 1994 when JG Summit established JG Summit Petrochemical, initially as a joint venture between JG Summit and Marubeni Corp. of Japan.

In 1998, polyethylene and polypropylene plants started commercial operations. The following year, the company exported the products to different markets. These products are used in the packaging, automotive and construction industries.

In 2008, JG Summit Olefins Corp. was established.

However, in the mid-2000s, the market drastically changed. There was a persistent global oversupply of polymers and, according to InsiderPH, quoting Argus Media, capacity additions in China led to an oversupply of resins.

In January last year, JG Summit announced that it was putting the plant on indefinite shutdown, given the unfavorable market conditions in the global petrochemical industry.

The petrochemicals group, according to the company, has faced the adverse effects of challenging market conditions, with close to about P100 billion in debt.

“I think the direction is that we recognize we are probably not natural owners of this group. We realize our core is consumer-related business. This is a very industrial B2B (business-to-business)-type of business,” Lance said at the time.

The silver lining is that the Gokongwei Group has already made that tough decision and has managed to remove the “thorn in its side.”

As for the rest of the group’s businesses, Lance remains optimistic, especially with consumer spending still strong, despite last year’s uncertainty. The Gokongwei Group is doing well – from Cebu Air’s continued recovery from the pre-pandemic to the conglomerate’s expanding retail and property businesses, among others.

In his message during the thanksgiving lunch he hosted for the media on Monday, Lance expressed hopes that this year would be better.

I’m sure that John Gokongwei himself would have seen the wisdom of Lance’s decision, especially knowing full well that industrialization in the Philippines turned out to be an impossible dream.

Even the late trade minister Bobby Ongpin envisioned massive Philippine industrialization with his overarching 11 major industrial projects – an integrated steel mill, copper smelter, aluminum smelter, petrochemical complex, phosphate fertilizer plant, diesel engine manufacturing, cement industry expansion, integrated pulp and paper mill, heavy engineering industries and an alcogas plant.

The projects would have transformed the Philippines into a newly industrialized country almost overnight but a debt crisis, cronyism and the ouster of Ferdinand Marcos Sr. in 1986 sent Ongpin’s projects into oblivion.

And today, that curse remains. The result is the sad reality in our country today – we failed to industrialize.

Many businesses in the Philippines opted not to make big bets on heavy manufacturing, which could have created more jobs.

One could not blame them. Investing heavily in manufacturing without a stable policy environment and government support isn’t exactly for the faint of heart.

As I’ve said before, what we have now is a largely consumer-driven economy and we import a lot of what we need, even the same products we used to produce big time – from galunggong to rice to fruits.

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