In the Philippines, family is integral to our national fiber. It is arguably the most basic political, social and economic unit. Extended families are common across different social strata and the disintegration of the family unit is not as evident as in some other countries. Maybe it has to do with our religious leanings and social values that enshrine the elders as head of the family. In many ways, I believe that families define how we progress as a country, too.
The Department of Trade and Industry (DTI) reported that in 2022, 99.5 percent of business establishments in the Philippines – 1.1 million of them – were classified as micro, small and medium enterprises (MSME). They accounted for 65 percent of employment to the Philippine workforce, approximately 5.6 million Filipinos. The United Nations Development Programme (UNDP), on the other hand, reported that MSME’s contribute about 40 percent to the country’s Gross Domestic Product (GDP).
Ownership of most of these entrepreneurial ventures can be largely traced to families or what might be more commonly referred to as “mom and pop” shops. This underscores the centrality of family-operated businesses to our country’s economy. They are, indeed, the backbone of the business sector.
But the story of the family goes beyond MSME’s. The remaining 0.5% of businesses in the country – some 4,500 large enterprises – tell a similar tale. These companies employ about 3.0 million Filipinos or around 35% of our country’s workforce. If we do a quick scan of the top companies in this sector, we can easily understand that almost all – if not all – are owned and operated by families that have been part of the Philippine business landscape for generations, though some newer than others.
A list prepared by dailyPik – an online investment platform – in January of this year shows that the combined market capitalization of the top 30 publicly-listed enterprises runs up to P9.347 trillion. On the other hand, as of December 15, 2022, CNI Index placed the total market capitalization of the 286 listed companies on the Philippine Stock Exchange (PSE) at P16.46 trillion. If we discount the slight timing difference, it appears that the top 30 listed companies account for about 57 percent of total market cap.
Going through the list, the “family” presence becomes readily evident. Among the holding companies on the list, for example, SM Investments Corp (SMIC) comes out as the runaway leader with a market cap of PHP 1.1 trillion. SMIC, of course, is owned by the Sy family. The Ayala Corporation (AC) and the LT Group – owned by the Lucio Tan family – on the other hand, have market caps of PHP 435 billion and PHP 104 billion, respectively. These are among the more storied holding firms. AC was founded in 1834, the LT Group in 1937 and SMIC in 1958.
The younger holding firms were established in the late eighties onwards as family-holdings in diverse businesses were consolidated. These include JG Summit (JGS) Holdings of the Gokongwei’s (1990), Aboitiz Equity Ventures (1989), the Alliance Global Group of Dr. Andrew Tan (1989) and GT Capital Holdings of the Ty family (2007)
The businesses that these holding companies own or have significant stakes in range from real estate to banking to infrastructure, water and power, food, airlines, hospitality, auto manufacturing and telecommunications. It is a very wide range of operating companies that span the breadth and depth of Philippine life.
2023 is a banner year for holding companies if the third quarter results are any indication. Double digit increases in net income numbers litter the latest earnings reports. The two companies that posted the highest growth rates were JG Summit and GT Capital.
JG Summit reported a huge swing in earnings in the first three quarters of 2023 to P15 billion from a P900 million loss in the same period last year. The turnaround was greatly helped by the surge in revenues and profits of Cebu Air. Its nine-month net income rose to P5 billion from a P12 billion net loss last year. Margin gains in their real estate and food business also drove the gains of the holding company. Robinsons Land Corporation grew profits by 31 percent while Universal Robina Corporation recorded a nine percent growth in revenues.
GT Capital Holdings, on the other hand, recorded a consolidated net income of P23.1 billion in the first nine months of the year, a growth of 54 percent. This earning level was a record high for the company in any nine-month period driven by record profits from Metropolitan Bank and Trust Company, up 36 percent to P31.8 billion. Toyota Motor Philippines and Federal Land also reported very significant growths of 159 percent and 176 percent, respectively.
Indeed, families pervade every aspect of life in the Philippines. We rest assured that family takes care of its own.
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