Presidents Report 2016

Mabuhay Holdings Corporation

President’s Report – 2016


Valued Shareholders of Mabuhay Holding Corporation, Ladies and Gentlemen,

Allow me to extend a warm welcome to all of you for coming to attend our 2016 Annual General Meeting.

Our country has a new President now. Our Kababayan are looking to the new administration for bringing changes to address our social, economic and political problems. We have confidence in our new government and we are optimistic that things will work out well, and we can look forward to a better tomorrow.

However, it appears that we have chosen a not-so-good time to hold our stockholders’ meeting this year. Last month, Great Britain held a referendum and decided to leave the European Union. This so-called “BREXIT” political maneuver had brought shock waves to the international financial markets. We are grateful that despite all the uncertainties in the market, you still show your concern for our Company and find time to attend our AGM today. Thank you and mabuhay to all of you!

Last year, we had our AGM held here in Sofitel and the response from our shareholders was good, so we choose to come back here today and we hope that all of you will enjoy our yearly gathering this afternoon.

Before I report to you on the status of our Company, I think we should try to tackle our national economy first, and before we do that, maybe we should briefly evaluate the international economic situation which is essential in shaping our national economic development. 

If we are going to find one word to describe the world economy at this stage, the most suitable word would be “uncertainty”. Yes, most economies around the world, particularly among those nations that traditionally serve as the power engines for international economic growth, namely, the United States, the European Union, Japan and China, are all facing the phenomenon of uncertainty. These countries are considered as the “big brothers” who bring opportunities and assistance to the smaller countries, including the Philippines, but it appears that all these big brothers are now busy dealing with their own problems.

As I said a while ago, the uncertainty in the international financial markets came as a result of the recent United Kingdom referendum which voted for UK to spin off the European Union. The result of this referendum not only rocked the United Kingdom and the European community, it also adversely affected the other countries in the whole world. Most of the major international currencies fluctuated abnormally and stock markets throughout the world experienced sharp price adjustments. We all know that EU is still facing a lot of internal problems such as the poor economic performance of several member countries and the inflow of hundreds of thousands of refugees from Middle East and North Africa. Now adding the prospective exit of UK which will seriously affect the solidarity of the European Union, we really cannot expect the European countries, even the traditionally strong economies like Germany and France, to contribute much to the worldwide economic recovery and growth at this time.

For a while, the United States economy appeared to be back in good shape. The Federal Reserve had not only scrapped the Quantitative Easing (QE) policy, but was even contemplating to increase interest rates to counter any possible inflation. However, recent developments in Europe and the other parts of the world alarm the US financial markets and Fed Fund has deferred the interest hike. We should also take note that although the U.S. economy is improving, the US government is still encountering huge budget and fiscal deficits, especially when the Obama administration is aggressively expanding its military presence in Europe, Middle East and Asia Pacific region. The US national debt continues to grow with a unbelievable speed. Expecting US to assist the poorer countries to achieve economic growth at this stage is but a dream. The uncertainty in the US economy aggravates since this year is an election year. Both the Democrat and Republican candidates are hawkish in nature. If Hillary Clinton wins the election, there is a possibility that she may elevate disputes in the Middle East and West Pacific into military conflicts. If Donald Trump wins the Presidency, he will most likely impose a lot of sanctions and restrictions on the US trading partners and start a trade war. In either case, we can expect tsunamis to hit the world economy.  

The Japanese economy is another interesting study case. Prime Minister Shinzo Abe tried to improve the economic growth by imitating the US policy of Quantitative Easing, printing more money and devaluating the Japanese currency. He did achieve some temporary results but it is not sustainable. We just notice that after the recent UK referendum, Japanese Yen immediately appreciated sharply and Abe’s economic policy was out of rail again. Japan tops the world in encountering the problem of an aging population, which demands huge social welfare expenditure from the government. Aside from that, Prime Minister Abe’s aggressive plans to expand the Japanese military build-up will entail huge increase in military expenditure. The Japanese government already has a debt to GDP ratio of more than 200%, higher than that of the United States. Abe has no other alternative but to increase tax on his people very soon. With its internal fiscal problems, Japan would have very limited resources to assist the developing countries at this stage. 

In the past two decades, China has constantly outperformed the other countries in GDP growth rates. China is looked up to as a reliable source for providing energy to the recovery and development of the world economy. In fact, even the developed countries like the US and the European countries also count on China to provide investments and tourists to boost their economic growth. But the fact is that the economic growth of China is also slowing down these days. The Chinese government is trying to maintain the economic growth by initiating a structural transformation of the Chinese economy. Unavoidably, China is experiencing pains in the process. However, China is such a country that despite all the internal problems, it will continue to play the role of a “Big Brother”. Furthermore, China has reached the point of domestic saturation and there is an over production of infrastructural materials, so China is busy looking for foreign markets to send out the excessive resources. At present, China is busy launching its “One Belt, One Road” strategic plan, and at the same time eagerly pushing for the successful functioning of the Asian Infrastructure Investment Bank (AIIB). In effect, China is pouring sizeable funds to assist the various smaller countries in their economic development. It appears that under the present situation, China is the only country that the smaller nations can look up to for help. But unfortunately, the Aquino administration had adopted a not-so-friendly policy in dealing with China due to our territorial disputes. Aquino government refused to hold any bilateral dialogues with China in the past four years, resulting in the freezing of relations between our two countries. Thus, we lost to our ASEAN neighbors in attracting Chinese investments and tourists to help boost our economic growth in the past years.  

As a member of the international community, the Philippines is riding in the same boat with the other nations and we cannot avoid being hit by the tidal waves. We are fortunate that our country is least affected by the recent “Brexit”, but our currency the Peso also devalued substantially as a consequence. We are happy to say that since we have a change of government administration just three weeks ago and the business community has shown confidence in our new leaders, the Philippine economy is stable and our stock market continues to perform well. We are all looking forward to a cleaner, friendlier and more peaceful environment to conduct business and investments, for both the local and foreign entrepreneurs alike.  

We notice that the Philippines had achieved outstanding GDP growth in the past few years. In fact, we were constantly on top of the other ASEAN countries in this aspect. As a result of our continuous high GDP growth rates, the international rating companies had upgraded our country to the status that investments are recommended. However, if we evaluate the economic situation of our country carefully, we will find out that despite the high GDP growth rates, no new industry or big manufacturing enterprises were established over this period of time, the unemployment and poverty problems of our country did not improved much. Actually we owe our GDP growth to the vast remittances sent in by the Overseas Filipino Workers (OFW), and the income generated from the Business Process Outsourcing (BPO) or the Call Center business. 

Our Central Bank and the National Economic Development Authority (NEDA) came out with the conclusion that our GDP growth is mainly due to the booming of the consumer economy and infrastructure. The OFW’s are sending in more than 2 billion U.S. dollars in foreign currency remittance every month. We know that our people are by nature a “spending population” rather than a “saving race”, the families of the OFW’s and BPO workers have very strong consuming power and as a result, the retail market in our country is doing very well. Shopping malls, restaurants, hotels, movie houses and other retail outlets are always full of  patrons. The OFW families are also the key buyers of housing units, appliances, furniture and other household items, accelerating the rate of our GDP growth. 

Over the past years, we have been advocating for our government not to depend so much on the OFW’s and BPO’s for our economic growth. Although the OFW’s and BPO’s are good sources of our foreign exchange income, but it is not a good idea to continue sending more workers abroad, since it will mean more separated couples which can possibly result in more social problems such as broken families and problematic children. It is also not healthy to ask more of our young people to work in Call Centers with odd hours, reverting their days and nights, since it will expose them to more temptations to adopt bad habits resulting in their health problems. Our government should exert more efforts to build up our economy with broader manufacturing and service industries, including tourism as the bases. Provide enough jobs locally so that we won’t have to send our compatriots abroad away from their families. The Filipino talents should stay home and help build a strong Pilipino nation.

Now, let us come to our Company, Mabuhay Holdings Corporation. For this past year, we did not engage in any new project but concentrated in solving our existing problems such as the legal actions against the squatters who occupy our Tagaytay property. We also exert all possible efforts to assist and nurture our affiliated company, IRC Properties, Inc., of which we hold substantial equities. With more than 2,200 hectares of land holding in Binangonan, Rizal, IRC is now developing affordable housing projects on its property, in support of the government program of providing housing units to the lower income sector in our society. With Dreamhauz Management and Development Corporation as its partner, IRC had completed its first project, the Sunshine Fiesta Subdivision wherein almost 900 housing units had been built and sold. IRC is now undertaking another development project call Fiesta Casitas Subdivision with Green Roof Corporation as its partner, building more than 1,000 housing units. With the funding of the seed money from a Japanese partner, Tamura Kenzai, IRC has taken the lead role as the developer and started a third project, the Casas Aurora Subdivision. This project is comprised of close to 500 houses upon completion. IRC will launch another bigger project before the end of this year. 

Last year, IRC had conducted a Private Placement and placed 127.2 million new shares to a Japanese investment fund called Rizal Partners Co. Inc. In February this year, IRC had placed another 200 million shares to a Cayman Island fund, Sigma Epsilon Fund Limited. With these placements, IRC was able to generate new capital to pay off its loans and to fund its clearing of land and housing projects. The private placements also indicate that foreign investors are showing their confidence in our country and our company.  

In our AGM last year, I reported to you on Tagaytay Property & Holdings Corporation, another affiliated company of Mabuhay. As you know, this company owns a 10-hectare valuable property located near the Tagaytay rotunda overlooking Taal Lake. Unfortunately the original caretaker of the property became the mastermind of squatters. It took us 12 years to win the court cases and we were able to demolish the illegal structures and eject the squatters, but still pending the final dismissal of a Homestead Patent registration. Until now, we are still waiting for the court to take the final decision in this regard. Let us hope that the court will give us the go-signal to start the development of our property very soon.  

The management of Mabuhay Holdings Corporation would like to extend to all our valued shareholders our heartfelt gratitude and sincere appreciation for your continued support and trust. We will try to explore business and investment opportunities under the new administration and we look forward to a better year for Mabuhay. Thank you.


Esteban G. Peña Sy


July 21, 2016