Anthony Yuen: We all know the Chinese in Southeast Asia all have the experience of suffering till present. For example, Thailand, Malaysia and Singapore all face some difficulties, but they share a common point. That is, in the early days, in order to prevent Chinese people from competing with the lower-income local people, they all prohibited Chinese people from involving in their retail sector. The Philippines is a typical example. Recently, we paid a visit to the Philippines and found the Philippines didn't open retail sector till a few years ago and the Chinese people were only allowed to engage in factories. Why? Because running a factory needs huge capital, so they won't compete with the poor people in the Philippines. Under this circumstance, there are many successful stories of Chinese people in the Philippines. Of course, there are also the stories of failure. Today, our guest in "Dialogue with World Leaders" is the richest Philippine Chinese Mr. Lucio C. Tan. He is the largest shareholder of Philippine National Bank, accounting for about 90% of the stock. He is also the Board Chairman of Philippine Airlines. He also owns many successful enterprises. How did he build up a fortune? What is his business philosophy? Mr. Lucio C. Tan is taciturn, but his words provide subtle and interesting business philosophy.
Voiceover: Mr. Lucio C. Tan is a household name in the Philippines. Since 1990s, this name has frequently appeared on some international newspapers and periodicals in the United States and Asia-Pacific region. This second generation overseas Chinese in the Philippines has ascended into the ranks of famous entrepreneurs in Asia. Lucio C. Tan seemingly bears modest smile all the time. He claims he is a "nobody". Lucio C. Tan who started with tobacco and wine businesses in the Philippines leads a colossal business kingdom, involving numerous industries: In the Philippines, the largest tobacco maker, the second largest brewery and the time-honored gin distillery are all his companies. The acquisition of Philippine Airlines in 1990s and Philippine National Bank last year are his most amazing acts.
Anthony Yuen: Mr. Tan, thank you very much for accepting our interview. Now you own a multinational corporation in the Philippines. You are a very successful entrepreneur. Please tell us what made you decide to set up a company after your graduation?
Lucio C. Tan: My business is not successful yet.
Anthony Yuen: You are too modest.
Lucio C. Tan: In most cases, I didn't do things with a definite goal. Instead, I followed opportunities.
Anthony Yuen: But, it is reported that you wanted to study in the United States and become a scientist after graduation. I know your major is chemistry. What made you change your dream from a scientist into an entrepreneur?
Lucio C. Tan: Let nature take its course. I follow opportunities. When I have an opportunity to do something, I will do it.
Anthony Yuen: We often ask entrepreneurs the question of the first pot of gold. Your first enterprise and your most successful enterprise, which has brought you the most profit?
Lucio C. Tan: I used to do starch business, as well as trade, chemicals and packaging, and later I took up industrial products.
Anthony Yuen: You have been doing business so many years. When did you make your best decision, which led to your great success?
Lucio C. Tan: The time when I did the business of industrial materials.
Anthony Yuen: What was the macro-background then?
Lucio C. Tan: In that period, Chinese people and foreigners were not allowed to do retail business in the Philippines. For this reason, many Chinese people left the Philippines. Those having some money went into industry and run factories. In that period, the Philippines was ruled by President Sergio Osmena and conquered by Japanese invader, and many ordinary industrial products were made in the Philippines, so many Chinese people wanted to produce industrial products. I had a few good friends as chemists. I said to them: I may open a factory and in the factory, you may make anything you like.
Title: Lucio C. Tan took over Philippine National Bank and digested its bad debts.
Anthony Yuen: Recently, you acquired Philippine National Bank. Same as the acquisition of Philippine Airlines, what made you take such bold action?
Lucio C. Tan: The national bank had a mountain of debts. If I can solve the problem for it, it will become a great help to me in the future. Every president considers the national bank a political chip and lends money from it as the greatest favor. The bank had a large amount of debts. It will be good if we can digest the bad debts.
Anthony Yuen: Before the acquisition, did you send a group of experts to study how to digest the bad debts and how to make money. Did any expert plan it for you?
Lucio C. Tan: Yes.
Anthony Yuen: Because you had a bank already.
Lucio C. Tan: Some people did it before, but the loss was heavy. Anyway, the current bank is former Philippine National Bank.
Anthony Yuen: The politicians and government lend out money from Philippine National Bank as a favor.
Somehow it likes some Chinese banks. Why were you sure you may ignore these relations after your take over the bank? Will the government press on you and ask you to issue loans to some companies?
Lucio C. Tan: The first job is to eliminate its bad debts and let it run. If we can't digest these bad debts, we will have to pay out of our own pocket. We also suffered loss in Philippine Airlines. You must pay out when it is time to pay out, while you will reap when it is time to harvest.
Anthony Yuen: Does Philippine Airlines not make profit till present?
Lucio C. Tan: Yes, we have started making money now, but the profit is not large. When the business goes down to a specific point, it will turn back.
……
Voiceover: Owing to the impact of multiple factors such as: global economic slowdown, high oil price, political turbulence and natural disasters, it will be difficult for Philippine economy to realize the preset goal of 5.3%~6.3% in 2005. The central bank of the Philippine forecasts the remittance of Filipinos working abroad will reach 10.3 billion dollars in 2005, accounting for above 10% of the GDP of the Philippines. It is the greatest support to Philippine economy.
The World Bank forecasts Philippine economy will grow by 5% in 2006. Plus the drive of the dollars remitted back to the country by the Filipinos working abroad, Philippine economy will maintain a desirable speed all the time. Even the Asian financial crisis in 1997 had transient influence on the Philippines. The political situation of the Philippines is always unstable, so political disturbance will affect the Philippines, but it won't result in massive regression.
Anthony Yuen: After listening to the talk between me and Mr. Lucio C. Tan, you may feel incredible. Mr. Tan is 74 years old. He talks about business at ease. He thinks it is an ordinary thing, but we feel a profound theory in it. For example, he often says as a businessman, you must make money before you spend money. We all know this sentence. It is same as an old Chinese saying: great fortune comes from the God. Little fortune comes from thrifty. He also says one should seize business opportunities, buy in at a low price and sell out at a high price. It is also known to all, but why ordinary people cannot make it? From the talk with him, we may feel he is down to earth. For example, today he wears a traditional Philippine-style transparent dress. When our cameramen put on a microphone to the dress, they found the dress is old and there are some stains that can not be removed. Mr. Tan didn't throw the clothes away though he owns a fortune. This reflects his thrifty.
Anthony Yuen: Do you think it is risky under the current situation of the Philippine government?
Lucio C. Tan: Yes, it is, so we need to do some things. In the future, big fish will swallow little fish.
Anthony Yuen: Fortunately, you are a big fish.
Lucio C. Tan: No, we are not. Probably we are a big fish among small enterprises, but we are a little fish among large enterprises.
Anthony Yuen: Do you have a plan to become a multinational company and a big fish in a large pond?
Lucio C. Tan: I am not confident. Of course, the bigger, the better. The large fish may swallow all little fish.
Title: Both the government and citizens are responsible for Philippine economy.
Anthony Yuen: In your opinion, WTO is a sheer game rule for large rich countries.
Lucio C. Tan: If the people are hard working, like the people in China, it will be good to enter WTO, but if the workers are lazy and disobedient, the product cost is high and the government discourages projects and encourages import, like in the Philippines, the import goods will be cheaper. In the end, workers are exported.
Anthony Yuen: Export workers?
Lucio C. Tan: Industrial products are imported and workers are exported. In the Philippines, the government does not encourage production, but encourages import, so everything is imported and workers are exported. All imported goods are cheaper, including raw materials. The Philippines doesn't have energy, gasoline, petroleum oil and raw materials, so the wage is high.
Anthony Yuen: The wage is high?
Lucio C. Tan: It is not very high, but as the efficiency is very low, the wage is high relatively. Taking Hong Kong for example, the wage is three times as high as that in the Philippines, but their efficiency is five times higher than ours, so relatively speaking, the wage in Hong Kong is lower. Filipinos are hard working abroad, but don't do work in their own country. If you are strict with them, they may fight back every day. There are many problems, so it is a big headache to managers.
Anthony Yuen: Doesn't the government know this situation?
Lucio C. Tan: Yes, it is, but nobody dares to change the situation. It is most difficult to revise labor law, even more difficult than the revision of the constitution.
Anthony Yuen: Therefore, it is not only the government to blame for the poor economy of the Philippines. The people are also accountable.
Lucio C. Tan: Nowadays, great change and rapid progress have taken place in China. Some people asked me the reason. I said I didn't know either. I often visit China. China changes a lot every year. I think Chinese people spend 5% of their time on politics and 95% on work, but in the Philippines, the other round is right. In the Philippines, the wage is low, but the efficiency is much lower and it is impossible to mobilize the workers. Particularly, those troublesome trade unions and leaders, they will bring you to the court.
Anthony Yuen: What about dismissal?
Lucio C. Tan: Dismissal is a serious thing. You have to find a middleman and give more compensation.
Anthony Yuen: Is everybody like this?
Lucio C. Tan: If you don't know the situation here, you will suffer setbacks when you run factories here.
Title: Importance of Chinese culture to overseas Chinese.
Anthony Yuen: You think highly of Chinese culture. You want your children to receive education in Beijing.
Why? Is it because of your mother's influence or other factors?
Lucio C. Tan: Not only me. Many people have sent their children to China to receive education. They want their children to learn some traditional culture and habits, like being filial to their parents, being frugal, tolerant, faithful and honest. All these are very important. Different from foreign countries, Chinese nation has these merits and virtues, which should be passed down generation by generation. One year, I sent hundreds of students to a summer palace in China during summer holiday. In the two months, the students learned some Chinese language. More importantly, they should be taught traditional Chinese virtues. They will become our successors in the future, so I will organize this activity every year. Next year, I will send more than 1000 students to China.
Anthony Yuen: When you manage your enterprises, do you apply this philosophy? For example, before you promote somebody to a senior position, will you check whether he is filial and tallies with Chinese traditional virtues?
Lucio C. Tan: Yes, I will. I will know his personal integrity at first. In fact, filial piety is very important.
Anthony Yuen: Because you are a filial son.
Lucio C. Tan: A little.
Anthony Yuen: You said you will send 1000 Chinese kids to Mainland China. Are they the children of your employees?
Lucio C. Tan: No, they are not. They are recommended and selected by schools. All of them will go to Xiamen.
Anthony Yuen: Do you do this for the purpose of training future employees for your company or for training ordinary people in the society…?
Lucio C. Tan: They may not come to our company. They may work anywhere.
Anthony Yuen: OK. Thank you very much today.
Lucio C. Tan: You are welcome.
Anthony Yuen: Mr. Lucio C. Tan may be reckoned as a king of a business kingdom. In his kingdom, his enterprises have made great success. However, in the conversation with him, he said there is no secret for the success of his enterprises. He owes the success to luck, but no enterprise can be lucky all the while and no enterprise can be lucky so thoroughly. I think it is not luck but his concept of "administering a great state is like cooking seafood" that leads to his success. He said you should make money before spending money.
From his business concept, we may easily see that Chinese people in Southeast Asia, even in the whole world have their unique business philosophy and unique abilities. These abilities perhaps include the interpersonal relations with the people in the political and economic circles, but they mostly are about the thrifty business concept.
(The pictures are from Baidu)