Chris Beshouri is currently the chief strategy officer for Aboitiz Equity Ventures and Aboitiz Power. Prior to joining the Aboitiz Company in the latter half of 2018, he was group president and COO of Vicsal Development, a diversified conglomerate in the Philippines focused on financial services, property development, and retail. He also sat on the boards of publicly traded businesses in the Philippines. At McKinsey, Beshouri was the managing partner of the Philippines office for eight years and served as the chief of staff for Asia. His professional experience also includes working with the US Department of Treasury as an adjunct professor of finance at Georgetown University. Beshouri recently spoke with McKinsey about tech, investment, and urban mobility in the Philippines. This conversation is part of the broader Philippines Growth Dialogues interview anthology, which explores the opportunities and challenges to future-proof the country's next horizon of growth and innovation. The following is an edited transcript of the discussion.
Being the text capital
McKinsey: What do you think have been the most exciting recent developments in the Philippines, and what is your outlook for the country?
Christopher Beshouri: In the Philippines, I find the whole tech space quite interesting. The telcos here were much more innovative than was probably apparent to other telcos around the world. The Philippines was the text capital of the universe well before any other countries were really even fully adopting it, and you see a lot of innovation from the telcos. I think people would complain and identify that we have some network issues, but I think they’re quite innovative in how they’re trying to evolve.
Looking at the venture capital space, I find that quite exciting. I do believe we’re a bit behind other markets; but in that respect, it also means you should begin to see a fairly sizable push into this market as models are developed elsewhere and then brought to bear here. Particularly, when you combine that with the fact that the Philippines’ middle income is growing and that it’s a young economy and country—62 percent are less than 30 years of age—that speaks to a swell of a young consumer class in the country that’s going to be tech based. When you combine the venture capital space with the forces at work in the economy, it looks like it will get pretty interesting.
The Philippines was the text capital of the universe well before any other countries were really even fully adopting it.
Unlocking latent potential
McKinsey: What can the Philippines do to be more globally competitive? Are there insights from other countries that are applicable for the Philippine economy?
Christopher Beshouri: From an investment perspective, you need clear rules: you have to have clear rules of engagement in interaction and operations in industries and sectors. If you don’t have clear rules of engagement—and enforce those rules—you introduce enormous amounts of uncertainty for investors. And I’m not talking about small amounts; I’m talking about billions of dollars of investment. If I’m uncertain about whether these rules are going to be enforced, then I’m going to hesitate to put the capital on the ground in the first place.
I think the investment climate looks good, especially with factors in the near term—for example, with interest rates, this makes money inexpensive to raise. With the program around infrastructure, you are going to see an enormous amount of fiscal impetus and stimulus being pumped into the economy. Not only does this effect expenditure, but this enables growth. So when an infrastructure program is implemented, you’re going to put the country on a trajectory to capture a lot of the hidden potential that’s in the economy.
Transforming urban mobility
McKinsey: What integral component of economic development should the Philippines prioritize to spur growth?
Christopher Beshouri: Transportation issues: urban planning—how we lay out our cities—is an incredibly important topic. If you get off on the wrong direction, you have a very difficult time reversing field. If a city is not laid out in an intelligent manner; if the basic grid isn’t present; if you don’t have the ability to move people, product, inputs, and raw materials and bring fresh produce out of Baguio or materials from the ports and airports and move them around relatively easily; and if you can’t get people who are looking for employment into the areas where the jobs are and get them out again, you have an enormous amount of inefficiency. You lose enormous amounts of productivity and you create large disincentives to work, let alone to invest.
And if you’re setting up an operational-logistics operation and you have to be too far south or too far north, or if you’re setting up a farm and moving that product or even setting up renewables, the further you are from the transmission grid, the more you have to put in place. We’ve got a lot of growth, but we continue to have transport-congestion issues, and as a continued influx of people come into the cities, transportation is key.
Reinvigorating small businesses
McKinsey: What can the public and private sectors do to encourage entrepreneurship and develop a dynamic start-up ecosystem in the Philippines?
Christopher Beshouri: Well, maybe I can take that question slightly differently: What could we be doing to help promote the small-and medium-size enterprises (SME), the small business community?
One of the things UBP—Union Bank of the Philippines—is doing, which I find really compelling, is that they’re setting up a model by which they can support smaller rural banks who may be either deficient in deposits or deficient in loan opportunities. They work with them to develop loan products or develop deposit products to be able to better serve the communities in which they’re operating—which tends to be small business. This would help them put the credit-underwriting engine in place and be able to more effectively and more efficiently price loans and assess credit risk.
In the larger context of financial inclusion, the biggest constraint on small businesses is that they have trouble getting access to credit because of a lack of information. Some small businesses operate in communities where there are credit constraints. With UBP as an example, by being able to work with a dozen—or three dozen—smaller banks in an area to provide them the overall technology layer, as well as the access to the settlement and clearing system and access to surplus funds, or to buy off their loans and give them funds to continue lending, you could have a significant impact on the availability of credit through that model. This pertains not to the ground level of individual small business units [SBUs] but more so on the critical enablers of SBUs—which would include credit.
In the larger context of financial inclusion, the biggest constraint on small businesses is that they have trouble getting access to credit because of a lack of information.
Comments and opinions expressed by interviewees are their own and do not represent or reflect the opinions, policies, or positions of McKinsey & Company or have its endorsement.
