The Philippines has seen its fair share of foreign companies packing up and leaving. From manufacturing giants like Intel and Ford to financial heavyweights like Citibank, these departures raise eyebrows and beg the question: is the Philippines a bad place for foreign investment?
While a quick glance might suggest a struggling economy, the reality is far more nuanced. To truly understand these exits, we need to dig deeper into each company’s story. Why did they leave? What challenges did they face? And what does their departure say about the Philippine market as a whole?
Intel’s Departure: A Semiconductor Story
Intel, a pioneering force in the Philippine electronics industry, decided to close its doors in 2009. The move, while significant, wasn’t entirely unexpected. Rumors had been swirling since 2005, fueled by Intel’s investments in new facilities in Vietnam, Malaysia, and China.
The official reason? A global semiconductor industry slowdown triggered by the 2008 financial crisis. Intel’s profits plummeted, and they implemented a global restructuring plan that included shutting down facilities in multiple countries, including the Philippines.
Some argue that the Philippines’ infrastructure challenges and high energy costs played a role. While these factors might have contributed, it’s crucial to remember that Intel itself was grappling with stagnation. Their market valuation hadn’t grown significantly for years, suggesting deeper internal issues.
Interestingly, Intel’s exit didn’t spell doom for the Philippine electronics industry. Texas Instruments Philippines, another major player, stepped in, expanding its operations and becoming a leading foreign investor. This suggests that the industry itself remained viable, even as one company struggled.
Source: Intel Reveals Factory Closure To Filipino Workers
Citibank’s Exit: A Global Shift
In 2021, Citibank announced it was selling its consumer banking business in the Philippines. This decision was part of a broader strategy to exit consumer franchises in 13 countries, signaling a global shift for the banking giant.
Citibank wasn’t just any foreign bank in the Philippines. They had a strong presence, serving a significant portion of multinational and local corporations. Their decision to leave wasn’t driven by a lack of opportunity in the Philippine market but rather by Citibank’s own financial performance.
Since the 2008 financial crisis, Citibank’s net income had shrunk considerably. Their global restructuring reflected a need to consolidate and refocus, rather than an indictment of the Philippine market.
Reinforcing this point, Unionbank, a local Philippine bank, acquired Citibank’s consumer business for a hefty sum. This acquisition highlights the presence of strong local players ready and willing to step in when foreign companies withdraw.
Source: Citibank to exit the Philippines’ consumer banking business
Ford’s Closure: A Case of Competitive Disadvantage
Ford’s decision to close its assembly plant in the Philippines in 2012 was driven by a lack of a “strong enough business case.” They opted to supply the Philippine market through imports, primarily from Thailand.
While some may point fingers at the Philippines’ infrastructure or operating costs, the shift to Thailand – a country with arguably higher operating costs – suggests a different story. It’s more likely that Ford struggled to compete effectively in the Philippine market.
Furthermore, just two years later, Mitsubishi Motors Corporation acquired Ford’s former plant. This acquisition implies that the facility itself wasn’t the issue but rather Ford’s own performance within the competitive landscape.
Source: Ford to close Philippines assembly plant
Hanjin’s Bankruptcy: A Cautionary Tale
Hanjin Philippines, a shipbuilding giant, declared bankruptcy in 2019 due to insurmountable debt, exacerbated by the collapse of its parent company, Hanjin Shipping, a few years prior. This situation underlines the vulnerability of subsidiaries to the financial health of their parent companies.
However, even in this case, opportunity arose from the ashes. Private equity firm Cerberus Capital Management acquired and revived the shipyard. Today, HD Hyundai Heavy Industries, the world’s largest shipbuilding firm, operates from the very same facility.
Source: Hanjin Philippines shipbuilding bankruptcy
The Bigger Picture: A Nuanced Perspective
The departures of these foreign companies, while noteworthy, don’t necessarily paint a bleak picture of the Philippine economy. In many cases, the reasons for leaving were complex and multifaceted, often stemming from internal company challenges or global economic shifts rather than solely due to the Philippine business environment.
Furthermore, the emergence of local companies like Texas Instruments Philippines and Unionbank, who seized opportunities created by these exits, demonstrates the resilience and dynamism of the Philippine market.
Ultimately, the decision for foreign companies to invest or divest in any country is a complex one, influenced by a multitude of factors. While the Philippines faces its own set of challenges, it’s also a market brimming with potential, attracting new investors and fostering the growth of local champions.
