Cross-border transactions

Dave Gutman is the marketing whiz of Ford Philippines. He and Terry Emrick (Ford’s country chief) rebuilt Ford and Ford’s dealership network in the Philippines to be a major player in both brand awareness and units sold. Their Expeditions and Clubwagons are top-of-mind purchases for our high net worth families. (But our story today is not about Ford.)

Dave is moving back to Detroit to handle bigger and better things. Susan, his wife, related to me how they bought their new home in Michigan. Everything was done from Alabang.

Choosing. Having seen some homes last summer, Susan went to the Web to get some more alternatives. On the Web, some real estate sites she went to had 360-degree virtual tours and some had ordinary pictures scanned in. She identified a few homes that caught her eye.

Susan then gave the list to Dave who was in Detroit for the week on his way to Ford in South America. (Hmmm, I wonder if he could sell me some of his million miles). They made a choice within a few days.

Compare that to the weeks it takes people to choose houses in the Philippines and the traffic to get there! On the bright side, there is a site that helps expats moving from abroad to the Philippines. Passport2Manila.com (www.passport2manila.com) is a site by expats for expats, created by two really switched-on ladies, one in New Jersey and the other in Manila. (I am married to the one in Manila.)

Financing. Susan next went to the Wells Fargo and Citibank websites to start the mortgage process. Apparently, these two banks have a relationship with Ford that allowed her to reduce her costs. She went with Wells Fargo because the application process was less tedious. In less than two hours, she got an approval for a 5.75 percent 15-year loan. (Compare that to the 20 percent plus mortgages we get here in Manila. There must be a way we can make mortgages affordable to the common man like us!)

Touch-ups. Susan is now on the phone with her broker to get subcontractors to fix her fence, her driveway and other minor touch-ups so that the house will be ready when they come in January.

My Two Cents: Overall, Susan was quite delighted with the seemingly smooth transaction. Moving is one of the more stressful events that a person goes through, after loss of a spouse or changing jobs. At least this part of the transition was not as stressful. (Not so sure about mortgage payments though.)

When it works, e-commerce is really changing the way we do business. It increases the speed and reduces the frictional costs of transaction. However, the basic lending spread needs to go down. Banks can make more money on the fees rather than on the rate spread. By bringing down the spread, more people can borrow at lower mortgage costs; default risk is spread, further bringing down the cost. Of course, if there is a greed factor, the spread remains huge.

Where our future lies

Market research firms like Dataquest and IDC estimated that the market for Business Process Outsourcing (BPO) in 1999 was US$175 billion to US$200 billion. With a projected growth rate of more than 20 percent, they project this market to be in the $300 billion to $500 billion range in five years.

The Philippines is well-positioned to take a slice of this market from contact centers, medical transcription and other high-labor, high-English processing functions.

Dr. Bernie. I recently attended an economic briefing done by Dr. Bernie Villegas, hosted by Ward Howell ZMG. Chicho Chuaquico of Ward Howell invited me.

Dr. Bernie was cautiously optimistic about our next 12 to 18 months. His forecast had the Philippine real GDP growing at 3.4 percent. Except for China and Japan, most other Asian growth rates ranged from 3 to 5 percent. China was projected at 7.9 percent and Japan at 0.5 percent. Noting that we probably will never be strong in the chip design nor other hardware technologies, Dr. Bernie gave us a quick SWOT analysis and concluded that the Philippines is in a good position for IT-enabled services.

EasyCall. In my column last year, I spoke about the Transnational Diversified Group headed by J. Roberto Delgado Jr. I told you to watch out for this low-profile group. They have since invested in EasyCall, the pioneer in paging in the Philippines and currently repositioning itself to be a strong competitor in the contact management business with target customers from the US.

Hatchasia. It recently opened its conference and classroom facilities at the Fort. Hatchasia will be holding call center training classes as well as computer training and executive development classes at its new facilities.

These and other groups are building their positions to take advantage of this window for IT-enabled services.

However, not everything is working toward that goal. Our telecom costs are still high. Although we have now dropped to 40 US cents from the US$2 a minute a few years back, there is still room to reduce as the real cost is probably in the 2 cents per minute range.

My Two Cents: At the risk of sounding like a broken record, our friends at the Department of Trade and Industry and DOTC have to work together to get more competition into the bandwidth arena so that IT-enabled services will flourish. With bandwidth, telecom costs should come down.

Second Two Cents: A very Merry Christmas and Season’s Greetings to one and all!!

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Dickson Co is CFO for both Dfnn and HatchAsia.com. For comments and suggestions, e-mail [email protected].