Six months ago, Robert F. Young was ready to write off the Philippines. Young is president of Lockheed Martin Corp. for the Asia Pacific region, and for more than three years, the U.S. aviation giant had been trying to build a maintenance facility at the former U.S. Clark Air base north of Manila. The project was going nowhere. Like other foreign companies, Lockheed Martin had been caught up in the chaos that prevailed during the administration of President Joseph Estrada. "Nothing was getting done," Young recalls. "We were starting to despair."
Now, suddenly, says Young, "things are looking up." Lockheed Martin has decided to proceed with the facility after all. The decision has everything to do with the rise of Gloria Macapagal Arroyo, who replaced Estrada on Jan. 20. While Lockheed has yet to define the scope of the project, Young reports that doing business with Arroyo's government is far easier than it was with the previous regime. As Finance Secretary Alberto Romulo says: "We want to carry the message that there is a new government, and we want investors to come back to our shores."
It seems to be working. Lockheed Martin is only one of a number of companies taking a fresh look at the Philippines. Five days after Arroyo's swearing in, Asia Global Crossing, a joint venture of telecom infrastructure provider Global Crossing, Softbank, and Microsoft, signed a $30 million agreement to bring a fiber-optic cable ashore. Like Global Crossing, Taiwan's Uni-President Enterprises Corp. also put projects on hold during the Estrada administration. It has since announced an $8 million noodle-making venture in Batangas province. Philip Morris Cos. also seems likely to go ahead with a $300 million cigarette plant.
These are early days, but the change in sentiment is remarkable nonetheless. Since Arroyo took over, the stock market has rebounded 8%, the peso has recovered much of the ground it lost last year, and Manila malls are thronged with shoppers. "I've never seen things so energized," says Lance Gokongwei, executive vice-president of local conglomerate JG Summit Holdings Inc.
BIZ BIGWIGS. Arroyo has hosted a steady parade of foreign execs. In late February, she met a U.S. delegation that read like a who's who of Corporate America. Among the visitors: reps of AOL Time Warner, General Motors, Sun Microsystems, and Federal Express. The visit didn't immediately lead to new deals, but Ernest Z. Bower, who led the group as president of the U.S.-Asean Business Council, says several big projects are in the offing.
Ironically, progress in restoring trade and foreign investment is being helped by reforms that Estrada set in motion. A bill passed last year allows 100% foreign ownership of retail outlets. Since Arroyo took over, Wal-Mart Stores Inc. has started studying the feasibility of opening stores in the Philippines, and French retail giant Carrefour is not far behind. Another bill passed under Estrada allows foreign banks to buy local institutions. NewBridge Capital and Taiwan's Fubon Group are both considering bidding for Equitable PCI Bank, the nation's third-largest lender.
Investor enthusiasm mostly hinges on faith in Arroyo. She'll need to deliver. Foreigners will be watching closely to see if she can pass a power bill aimed at creating a level playing field in a key sector. Another issue is bringing down the ballooning budget deficit. Until Arroyo cleans house, most investors will likely wait on the sidelines. Bower says Manila should seize the opportunity now that stability has returned. "If it's not grasped," he says, "the Philippines will fall to the back of the pack." That's a scenario Arroyo is determined to avoid. By Frederik Balfour, with Girlie Linao, in Manila