Bancom Memoirs by Dr. Sixto k. Roxas ebook

The ebook version of this book may be downloaded at www.xBancom.com

This Bancom book project was made possible by the generous support of mr. manuel V. Pangilinan.

The book launching was sponsored by smart infinity

copyright © 2013 by sixto K. roxas

Bancom

memoirs by sixto K. roxas

With a Compendium of Recollections and Tribute Pieces from Bancom Alumni and Friends Edited by

eduardo a. Yotoko Published by

PLDT-smart Foundation, inc and Bancom alumni, inc. (BaLi)

contents Foreword by Evelyn R. Singson Foreword by Francis G. Estrada Preface Prologue: Bancom and the Philippine financial markets chapter 1 Bancom at its 10th year chapter 2 BTco and cBTc, Bliss and Barcelon chapter 3 ripe for investment banking chapter 4 Founding eDF chapter 5 organizing PDcP chapter 6 childhood, ateneo and social action chapter 7 my development as an economist chapter 8 Practicing economics at central Bank and PnB chapter 9 corporate finance at Filoil chapter 10 economic planning under macapagal chapter 11 shaping the development vision chapter 12 entering the money market chapter 13 creating the Treasury Bill market chapter 14 advising on external debt management chapter 15 Forming a virtual merchant bank chapter 16 Functional merger with rcBc chapter 17 asean merchant banking network chapter 18 some key asian central bankers chapter 19 asia’s star economic planners chapter 20 my american express interlude chapter 21 radical reorganization and BiHL chapter 22 Dewey Dee and the end of Bancom chapter 23 The total development company components chapter 24 a changed life-world chapter 25 The sustainable development movement chapter 26 The Bancom university of experience chapter 27 summing up the legacy Photo Folio compendium of recollections and Tribute Pieces from Bancom alumni and Friends

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5 7 9 13 24 28 34 41 44 48 55 59 63 71 76 84 88 90 103 108 112 117 122 126 136 141 143 156 167 174 186 198 205

Bancom was absorbed by union Bank in 1981. However, it lives in the hearts of people whose lives it touched. The institution is gone but the people, whose careers it built, have moved on to become important players in Philippine business and government to this day. The names are too many to mention here. The Trustees of Bancom alumni, inc. (BaLi) acknowledge the generosity of the men and women of Bancom who funded the research, writing and publication of sKr’s Bancom Memoirs. i make special mention of the generosity of our constant benefactor mr. manny Pangilinan, mr. roly Gapud, and the officers of BaLi who gave their time and financial support to get this book off the press. To sKr, who will be turning 86 on august 6, 2013, our sincerest thanks for devoting his valuable time to collecting documents and records over the years that made writing this memoir possible. With this memoir, Bancom’s memory and legacy will live on even beyond our time.

evelyn r. singson Chairperson Bancom Alumni, Inc.

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Bancom memoirs

Foreword by Francis G. Estrada once every number of years, through vision, leadership, alchemy, happenstance and Providence, a special organization is born. With not a little hubris, one might say that in the tradition of venerable investment banks of the past – like Lazard Frères, s.G. Warburg, rothschild, Kuhn Loeb, mediobanca and nomura – Bancom was that and more, in the Philippines and asia in the late sixties and seventies. Bancom, and the individuals that comprised it, never saw themselves “imprisoned” in, or by, their traditions, milieu or history. The perennial question that reverberated throughout the organization as it sought new solutions to increasingly large problems was: Why not? it dared to dream the unthinkable, pioneer a different type of financial intermediation and look at the financing requirements of its large clients (private and public) as unique – not to be addressed with “off the shelf”, “one size fits all” commercial banking products. sixto K. roxas (sKr) was the visionary, augusto m. Barcelon (amB) was the ambassador, the consummate relationship manager and repository of a deep knowledge of the Philippine corporate and banking sectors. rolando c. Gapud (rcG), ramon K. illusorio (rKi) and Luis r. Villafuerte (LrV) were the first “field marshals” charged with realizing the vision. While Bancom Memoirs sees Bancom from sKr’s perspective, the accompanying Compendium reveals the perspectives of many of those who had shared the experience in some meaningful way, shape or form. one should not expect symmetry on the many Bancom accounts. a bit like the elephant and the blind men trying to figure out what was before them, Bancom was different things to the different people who underwent the exhilarating experience. The question is: Why write this Bancom book, almost 50 years from the organization’s establishment? several reasons, i submit: 1) it was a remarkable organization that – in its day – with relatively insignificant capital, was home to some of the Philippines’ best, brightest and most imaginative professionals. 2) To study its numerous achievements and customization of financial services then-available only in “developed” economies. 3) albeit partisan, it provides a comprehensive account of contemporary Philippine financial history. ForeWorD

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4) Long before it became fashionable, it sought to address transcendental issues like inclusive and sustainable growth and the need to integrate financial markets with the real economy. 5) Having foreshadowed subsequent domestic, regional and global economic crises, there is much to be learned by policymakers, regulators, practitioners and stakeholders – in its successes and (probably, even more) in its failures. so what does that have to do with the price of rice? sKr’s Bancom story is the story of individuals and an organization that – naïve as it might have been – tried to address the raison d’etre of any institution based in a society with great inequalities. How does one build and conduct a business that actually addresses the needs and imperatives of the community it operates in? Perhaps a private enterprise model was not the appropriate platform to pursue an “integrated area development” vision; perhaps the inordinate focus on innovation and enterprise – rather than risk management and administrative efficiency and effectiveness was wrong; perhaps the relative disdain for financial (rather than intellectual) capital was its undoing. The fact is, this modestly capitalized investment banking organization manned by a cadre of exceptionally bright and talented individuals with “out-sized” ambitions, did test the traditional paradigms and the limits of private enterprise. its many accomplishments notwithstanding, Bancom did not achieve what it sought to do. it is our hope that sharing the Bancom dream and the experience might inspire some readers – perhaps more intelligent, or more “street smart” – to build on the experience and complete the task and realize the objectives that the original band of “dreamers” set out to achieve. Writing this book was not a “piece of cake” for sKr; nor was organizing a vast amount of material and editing numerous drafts. in addition to sKr, we are indebted to many of you who have taken time and the trouble to share your Bancom experiences with us. Danding Yotoko has been an excellent editor, thoughtful contributor and very effective cheerleader. Jacky atienza, ming roxas (sKr’s eldest) and chris Gotanco (who worked with the group in the difficult early stages) provided valuable insights and substance – let alone delightful sustenance – in the many editorial committee breakfasts held at ming’s mariposa home. To you all, thank you very much.

Francis G. estrada

Chairman, Editorial Committee Bancom Book Project

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Bancom memoirs

Preface Oh Lord, help me... to speak out spontaneously and say what i sincerely want readers of these memoirs to derive from it. i am writing to leave as a legacy the lessons from my over four score years of life so far. every life is meant to offer a unique contribution to the forming of the mystical Body of christ. each person born has qualities that make him unique. This is what Duns scotus, i think, labelled haecceitas, the “thisness” of every creature – every rock, every plant, or flowering tree, every bird, fish, mammal or insect, every human person – the uniqueness that the Jesuit poet, Gerard manley Hopkins, celebrates in his poetry. Those qualities and talents that make him unique impose on each individual the responsibility to do everything possible to realize the full glory of his potential. it is what caroline myss called his Sacred Contract. The fulfillment of that contract entails each person’s use of the unique combination of talents, propensities and inclinations which he was endowed with from birth, and the exercise of his free will in making the “right” choices from among the circumstances and options that his life opens up. Destiny deals a person a unique combination of cards. God leaves every person the freedom to choose how to play them. For the author, this combination of destiny and choice committed him to a calling that i define as that of a Sustainable Development Professional. This unique calling established as his life’s goal a twofold quest: to understand how communities and nations achieve a political, social, and economic structure that eliminates involuntary poverty, and to find an appropriate staging area from which he could make a meaningful contribution to its realization in his country and for its people. The professional appellation is derived from an older meaning of the term that is the reverse of its current connotation, which makes a practitioner a professional if he works for money and an amateur if he works for free or as a hobby. The original definition in medieval europe gave one the noble title of professional if he practised an art as a service to his community, and the somewhat derogatory term tradesman if he practised his art primarily for pay. The Bancom story – the 17 years where it evolved from investment banking to the outlines of a total development company and then back again into a conventional commercial bank – is, for my four score and six years of life, and for the scores of wonderful, dedicated, gifted persons whose life courses merged into this stream, an episode in the evolution, albeit an important one. What makes this episode so meaningful that the story is worth telling more than three decades after it ended? P r e Fa c e

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Bancom started as a financial company and many financial institutions, older in years, larger in balance sheet size, operating in a much grander geographical scope, have come into existence and faded into history. The persons who played roles in their establishment and operation have gone on to assume leading roles in other important pursuits and institutions. rarely do such a talented and spirited group of accomplished people come again together, decades after their dispersal, to form a Foundation to have the account of their former institution commemorated in a written story. Yet, this is precisely the phenomenon that has given birth to this book. i am privileged to have been tasked to author this story and to situate it in my own personal life story. it is a privilege because the Bancom story is not my story alone – it is also that of the many hundreds whose lives formed it and were, in turn and in varying degrees, formed by it. i do own much of the responsibility for the course it took and for its rise and fall. The recounting of the story suffers from this authorship. it reflects the bias of one person’s point of view and the limits of his memory. The perspective of a person who started as chief executive of a corporation and remained so throughout its life necessarily suffers as well from the inevitable distance that widens as a business grows between top management’s view and the nuances of execution, the specifics of transactions and interpersonal relations that enrich a story, spicing up the dull details of an institution’s day-to-day operations. The editorial committee has attempted to make up for the constraint of memory by soliciting recollections from the Bancom alumni. But my perspective remains dominant in the telling of the tale. The reader is assured that the tale is told with honesty, the investment banker’s commitment to full disclosure, and a fierce personal passion to be authentic and true. The perspective explains the direction that Bancom’s evolution took over the years. something that has been for many a puzzle at best and more often, a critique: its apparent diversification into a conglomerate. “By 1975, the Bancom Group had evolved into a conglomerate that was unique in the Philippines and probably in Asia, and rare in the world of private enterprise. Bancom had teams of professionals who were at home in the Board rooms of Makati talking sophisticated corporate finance deals. It had an army of traders that dealt in Treasuries, commercial paper, and foreign exchange, and arbitraged between the stock exchanges in Manila and New York. Other Bancom specialists organized barefoot farmers into cooperatives in villages of remote provincial towns, provided health care services, insurance, and estate management, and packaged agrarian reform projects for farmer beneficiaries and the government agrarian office.” What sort of animal was this? Was it a product of chaotic chance or deliberate delusion? if the dream of building a corporation that made development a primary objective of a moneymaking business was madness then Bancom was madness – presumably with a method.

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Bancom memoirs

From this person’s perspective then, Bancom’s story is not the banal story of a financial corporation that was modestly established, rose to great size and prominence and then faded into oblivion. it is an account of the ambitious attempt to build on the platform of a modern business corporation an institution committed to serving the needs of communities at every stage of development or underdevelopment. as it sought this wild vision, it brought together and motivated a corps of some of the most brilliant, creative and aggressive young men and women the country has seen, to shape an organization with an esprit that is still remembered as a camelot – and it almost succeeded.

Acknowledgements it is tremendous good fortune for a person to be enabled in the evening of his life to look back and recollect the course his life journey has taken, the turns, up and down, the bright and the dark episodes, the good times and the not so good, and reflect on what he has learned. i have the Good Lord to thank for giving me the time and the strength and the many persons without whose generosity, care and assistance i could never have accomplished even the modest work i now present. Financing from the PLDT-smart Foundation, inc. and personal contributions from the individual members of the Bancom alumni, inc. foundation (BaLi) have covered the costs of research, writing, editing and publishing. i wish here to acknowledge my deep debt of gratitude to mr. manuel V. Pangilinan, chairman of the PLDT-smart Foundation, and to ms. esther o. santos, its President, for the generous grant that has enabled me to spend over a year to weave these recollections and reflections into a faithful and hopefully, interesting and meaningful story. BaLi’s Board of Trustees – evelyn singson, the chairperson, manny Tordesillas, the President, ric Pascua and Jing Warren, Treasurers, foundation secretaries art Ponsaran and nenette Zapanta Lee, the other members, Josue camba and cynthia Picazo – all have been sources of support, encouragement, and inspiration. The editorial committee, under its chairman, Francis estrada, and members Danding Yotoko, Jacky atienza, and for some months, chris Gotanco, was, at times gently critical, but always wisely counselling and encouraging and offering sage guidance to keep me from straying too far afield in my tracing of the stages and episodes of our Bancom days. i must acknowledge the superb job that Danding Yotoko did in organizing and editing the drafts i submitted into a coherent and easy-flowing story. my thanks to Francis estrada for supplying the subheadings within the chapters to enhance the readability of my narrative. The main Library of the university of the Philippines accepted for archiving all of my official and personal papers and files including all of my Bancom papers, digitized them and made them available online for downloading. This was an invaluable source of documentation for the Bancom story. For P r e Fa c e

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this, i owe profound thanks to the (now retired) Director of the Library, ms. salvacion arlante and her dedicated staff. The two members of our research team, Thomas mcWalter, who had charge of the research and documentation, and roberto mission, who manned the computer workstations and the office in the asian social institute, made it possible for me to recall important episodes in our history that an eighty-five year old memory could not retain. Let me acknowledge here as well the part played by two of my daughters, ming and susan, who participated in some of the editorial committee meetings to offer their own critique and suggestions after reading the drafts. Let me not omit the invaluable help i received from my niece, rina malonzo, a creative director, who taught me how to shake off dry periods and sheer inertia and to build up a writing momentum, particularly in the early stages of this project. i would also like to thank Paco Guerrero, my grand-nephew, who kindly offered to take photographs of me, one of which graces the cover of this book. Finally, i must express appreciation here for the hospitality we enjoyed from the asian social institute where we located our work stations. We are happy in accordance with our commitment to donate to the institute two computers and the LcD television to be part of the equipment of the Library donated by the maximo T. Kalaw institute for sustainable Development and myself, and now located in the Hall the institute kindly named after me. While i owe, to those i mentioned here and to the many more persons whose names i have not included, help, encouragement and inspiration, the recollections and reflections in this story of the rise and fall of an institution are my own, as are any slips, for which the elapsed time and advancing age must provide my excuse.

sixto K. roxas

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Bancom memoirs

Prologue (The following description of Bancom and its role in the evolution of the financial markets is taken from Book 2 of the 1974 Annual Report of Bancom Group, Inc.) Bancom and the Philippine financial markets Only 100 minutes from Hong Kong, 15 hours from the U.S. West Coast and a couple of hours farther from Europe, a new Asian financial center -- with “a highly organized system of financial intermediation that can be matched only in a few places around the world” -- has been growing rather rapidly lately in the Manila suburb of Makati.

Actually the formal financial markets in the Philippines go back about a half century earlier. In 1927, during the more placid age between the two World Wars, the long-term capital market began to take orderly shape with the organization of the Manila Stock Exchange.

Trading in stocks, however, has advanced since in spurts principally in the later thirties and, long after following the formation of a second exchange in Makati, toward the end of the sixties and early in the seventies.

In the meantime, the short-term end of the financial markets was born. Borrowers with established credit could obtain financing for periods anywhere from one day to one year and lenders provided the funds by purchasing liquid and fixed income-generating instruments issued by the borrowers. The money market took root almost overnight and swiftly surpassed the equities division, becoming one of the most sophisticated in Southeast Asia today. First decade. It was during the first decade of Bancom Development Corporation that a good deal of the development of the Philippine financial markets came about.

The people who founded Bancom, while concerned with the financial success of their corporate creation, were aware from the outset of the need in the Philippine context to involve the company in strictly developmental activities in the financial markets. This meant not only having to create its own market but even encouraging its own competition so that a network of intermediaries which would constitute the market would exist. It meant mobilizing potential savers into actual investors. And it meant establishing its own conventions, adopting flexible trading techniques, and at its initiative developing for its clients at great manpower costs even the information and the structure of operations that would make them creditworthy for an unsophisticated market.

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Open market. More specifically, this meant promoting greater competence in financial planning and fund management, gradually inducing corporate and governmental entities to look to the open market as a regular source of financing of both their short- and long-term needs, and designing the appropriate types of security to suit the peculiar financing requirements of each type of borrower. It meant developing a more efficient money market, helping generate more readily transferable money instruments and stimulating active secondary trading in these instruments. And it meant further developing the market for long-term securities, generating a more regular flow and a wider assortment of high-grade corporate issues, building up more outlets and promoting secondary trading in investment-grade securities.

Later, as the amounts of capital required by businesses grew larger as the economy moved to industrialization, the active public distribution of securities to a wider base of the population would become the more practicable and efficient mechanism for capital formation. To the extent that the ownership of enterprises through common stock issues is, by means of its intermediation, dispersed nationwide to a larger number of small investors, an investment banker then would be performing the fundamental economic function of redistributing income and wealth. But additionally an investment bank must develop, even as a moral obligation, a secondary market for the financial instruments that it underwrites and merchandises, thereby assuring investors a medium for converting securities into cash at a price that the market commands from time to time. Liquidity could then be assured to investors and, over time, the maturity of the instruments they could buy should be irrelevant if they could encash them at will.

Providing securities a ready market at a price would be inadequate, however, without a facility for stabilizing the movement of prices. There would be need, therefore, for an investment bank to operate as a dealer, prepared at all times to “make a market”, that is, to buy from any seller or to sell to any buyer the securities that it deals in. A dealer would be of particular service in sizable transactions that usually result in erratic disturbances in the market. The dealer would properly position the large blocks being sold or bought in such transactions to avoid the occurrence of disorderly movements in the price of the security involved which are not related in any manner to its merits and real value. The stabilization measure and techniques adopted by the dealer would thus help preserve values for other investors as well.

Investment counsel. At the same time, mainly because of its continuing exposure to the design and distribution of marketable securities, the investment banker could expect invariably to be looked upon to give counsel on the fundamental and technical factors that affect securities outstanding in the market, including those which others might have originated. An investment house must therefore tool up as well to give continuing investment advice to clients not only based on the merits of particular securities but also on their relevance to the specific objectives of investors.

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But no highly developed economy can have an efficient capital market without first evolving a money market with depth and resiIiency in the secondary trading of financial claims. No one should Bancom memoirs

be expected to buy a 15-year bond if even one-year commercial paper is not readily available. Longer periods breed more uncertainty; confidence in long-term securities is a natural consequence of confidence in short-term instruments. An investment bank has no choice then but to begin to deal substantially in short-term securities, extending their maturity patterns as confidence in the market grows. A developed money market would be necessary to increase the fluidity in the field of investments by functioning as the common denominator into which participants in the capital market could move. Moreover, a developed money market would permit the proper implementation of monetary policy, for desired rate changes could be worked out by money managers in a more automatic and responsive manner. Pre-1965. Prior to 1965, money market activity in the Philippines consisted of primary trading among participants with no secondary outlet for investments made.

There were four major submarkets: First, the supported government securities market. The Central Bank of the Philippines stood ready at all times to buy back on demand the tax-exempt government notes and bonds sold in the market. Commercial banks were the principal holders of the bonds since these were eligible as bank reserves. Second, the interbank call loan market. Friendly commercial banks traded excess reserves with each other to adjust their daily reserve positions with the Central Bank. A bank with excess reserves for the day would lend its excess funds on “call” (repayable on demand) to another bank with deficient reserves.

Third, the bank deposit market. Here banks floated interest-paying time deposit certificates and socalled bankers’ acceptances. The latter differed from the former only by tenor and permitted banks to pay rates above the ceiling on time deposits set by the Central Bank, thus enabling the banks to compete with the higher-yielding promissory notes of finance companies. Fourth, the intercompany market. High-grade companies financed their seasonal deficits through usually unsecured promissory notes by tapping the seasonal surpluses of other firms. Important in this market at the time were the promissory notes of installment finance houses, which offered high interest rates.

However, shifting from an instrument in a submarket to an instrument in another submarket or even to an instrument in the same submarket was difficult because secondary trading was relatively unknown. Pioneer participants. Upon its establishment, Bancom lined up 34 high-grade companies to compose an informal intercompany market. The companies participated actively in trading unsecured promissory notes with Bancom as the principal. The instruments provided short-term financing to debtor companies and income-generating liquidity to creditor companies. Regularly submitted and sound financial statements attested to the creditworthiness of debtor companies. Until late in 1965, however, turnover in the intercompany market, while encouraging, was not spectacular, in part because of a lack of instruments to provide acceptable features to both

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borrowers and lenders. Recognizing that it is only when an investor can sell that he will buy, Bancom offered to buy back securities that it sold to assure liquidity and marketability. Bancom sold third-party paper with recourse to it. And it issued its own debt instrument, called the “Bancom bill”, giving investors the option to be repaid anytime provided notice of call was submitted on a predetermined number of days beforehand. Call periods ranged from one to 30 days. Other than servicing the liquidity and short-term requirements of money market participants, proceeds generated through Bancom bills represented a standby line of defense against future underwriting commitments. Bancom likewise introduced resale agreements to provide flexibility to money market paper. Government consultant. Six months after it started operations, Bancom was engaged by the Central Bank of the Philippines to design a strategy to develop a noninflationary domestic private market for government securities.

The next year saw the birth of unsupported treasury bills. Bancom’s undertaking under its consultancy agreement with the Central Bank extended all the way from establishing the procedures and mechanics of handling treasury bills to the organization of a dealership network in support of the secondary market for the bills. The strategy adopted called for the maturities of the bills to be gradually stretched from 13 weeks to one year as the market learned to accept and place more confidence in the instruments. To broaden the public’s understanding of the bill market, Bancom also conducted various seminars and discussions which were attended by corporate treasurers and bank officers.

Under the same consultancy with the Central Bank, Bancom designed tax anticipation bills to enable the government to generate cash in advance of annual income tax payment dates. The government has since programed income tax payment dates for corporations on a quarterly schedule and for individuals on a two-stage basis a month apart depending on whether one’s income is fixed or variable. The developments in the government securities market marked the first time in Philippine financial history that excess funds of the private sector were logically pooled and channeled to the largest potential user of funds, the national government. They also signified a shift in the government’s policy on domestic borrowing: from direct drawings from institutions, the government now turned to the open market. Also in 1966, for the first time in Southeast Asia, Bancom offered Eurocurrency market facilities for the foreign exchange needs of local industries and the investment requirements of Eurocurrency holders. On the government side, the Development Bank of the Philippines launched its tax-free “Progress bonds”, also redeemable on demand.

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During the year, the Bancom bill continued to be the primary instrument of trading in the intercorporate money market. Together with treasury bills, the Bancom bill was probably the only other instrument which was traded substantially by all of the submarkets of the local money market. Some commercial banks even found the Bancom bill a suitable instrument for their secondary reserves. Bancom memoirs

To give commercial enterprises and banks greater access to the newly integrated money market, Bancom laid the groundwork in 1966 to permit the development of a secondary market for trade and bankers’ acceptances.

Capital notes. Even as it was getting on with its normal investment banking business on its first year, acting as underwriter or soliciting dealer or negotiating private placements, Bancom designed, managed and underwrote -- to the extent of 60 percent on a firm basis -- an issue of commercial bank capital notes, the first such security offered in the domestic capital market. The issue was successfully placed prior to the expiration of the offering period. The capital notes were also offered on a short-term basis via repurchase agreements. At the option of their buyers, Bancom undertook to buy back the notes sold to them if they desired placements with shorter than one year maturities. When Bancom and three other domestic investment houses began fulltime investment banking operations in 1965, signaling a new industry’s modest start in providing effective conduits for savings and investments in the economy, some of the issues they sold clearly implied the necessity for an overall investment education program for the utilization of corporate securities as a valuable tool for investments. At the same time, companies and institutions realized the need for better grounded financial planning and full financial disclosure in order to be in a position to efficiently tap the local capital market for their fund requirements.

Financial consultancy. Through its financial consultancy services, Bancom proceeded to package financial plans, formulate strategies for their implementation and design security issues for companies searching for capital funds. The resulting financial strategy provided a company’s management with a means of instituting necessary structural changes often leading to greater efficiencies and profits. The investment banker, on the other hand, could gauge the company’s ability to reform itself and could therefore design and offer a sounder security when the time came for a public issue. Bancom then started promoting the concept of integrated financial planning among corporations. The experience of 1965, when expansions and constructions were halted at midstream due to the unavailability of funds from institutions, plainly demonstrated the importance of such a concept for corporate managers. Especially in an underdeveloped capital market, the sources of funds for capital budgets are critical elements in the formulation of an overall corporate strategy over the long term.

Certain developments followed auguring well for the development of the capital market. A law (Republic Act 4917) was approved which, by exempting from taxes the benefits paid under pension, gratuity, stock bonus and profit-sharing plans, provided that these are funded, could create quite a good demand for high-grade securities. Also, the active promotion by commercial bank trust departments and investment houses of professional investment advisory services was starting to provide more sophisticated portfolio planning and investment techniques in the local market. The elements were thus present for the building up of a substantial institutional volume in the capital market. Gold subsidy note. In 1967, under a consultancy agreement with the Philippine Gold Producers Association, a major segment of the country’s mining industry, Bancom designed a marketable certificate of indebtedness that made possible the payment to gold producers of the prevailing government subsidy then without upsetting official cash flows.

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To assist the government in implementing its land reform program, Bancom also formed a syndicate of local consultants to undertake the identification of feasible projects that could make effective use of bonds issued by the government’s Land Bank. Two years later another consultancy with the Central Bank of the Philippines enlisted Bancom in the management of the country’s external debt. Since its series of consultancies with the Philippine government, three other Asian governments have sought Bancom’s assistance in the development of the financial markets in their respective countries.

The first years of the seventies saw the entry of several new dealers into the money market through the “money desks” of commercial banks, many of them tie-ups between local and well-known foreign institutions. In addition, some banks have spun off their money desks to investment houses. These developments, while augmenting the breadth and continuity of the money market, have made competition among dealers a lot keener.

Financial reforms. Late in 1971, the Central Bank constituted a survey commission with the International Monetary Fund to review the Philippine financial system and to recommend reforms to make the system more responsive to the needs of development as well as to the changing structure of the country’s economy.

Following the declaration of martial law in 1972, fiscal and monetary policies began to work hand in hand with overall investments management. The policy direction and supervision of the entire credit system was effectively integrated under the Central Bank. For the first time in 50 years, the fixing of ceilings on lending interest rates assumed new flexibility so these could be readily adjusted to realistic levels and serve to promote long-term savings along with a more sensible allocation of financial resources. The Central Bank also moved in on the money market, regulating the size of fund placements, methods of marketing and distribution, reserve requirements against money market borrowings for relending, and market data reporting.

In the capital market, the tax on stock transfers that substituted for the capital gains tax in securities transactions was slashed from 2 percent to 1/4 of 1 percent; the reduced tax may be made permanent and extended to apply as well to shareholdings purchased prior to the approval of the tax. The broker’s commission has been marked down to a uniform 1 percent for all the operating stock exchanges and all of the issues of the nearly 200 companies traded in the stock market are now automatically listed on all the exchanges. The most decisive of the changes acting on the financial markets has been a policy announced in March 1973 allowing the free entry and exit of new foreign investments and their gains, thus genuinely opening the Philippines to foreign capital for the first time in nearly a generation.

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Money market. Today the Philippine money market, which a respected London monthly, The Banker, has said “is at the heart of the Philippine financial structure,” exhibits the characteristics of Bancom memoirs

a well-developed trading mechanism, participated in by virtually all the banking institutions and investment houses, finance companies and other securities dealers. Approximately 90 percent of money market dealers are in metropolitan Manila; the rest are in key provincial cities.

The market offers the widest range of negotiable short-term government and corporate securities over a developed maturity spectrum. The major types are: • • • • •

Interbank call slips, which are clean notes, non-negotiable and demandable on call. Commercial paper and bankers’ acceptances, which are negotiable and are also sold under repurchase agreements. Government securities, including treasury bills, treasury notes, Central Bank certificates of indebtedness (CBCIs) and DBP bonds. Except for treasury bills, all the other government securities have maturities of beyond one year but can always be liquidated by their holders anytime before maturity. Dealer paper, which are issued directly by dealers and are non-negotiable. Their maturity is on call of one, seven or 30 days or fixed for one year. Repurchase agreements, under which a dealer firmly undertakes to buy back an instrument at a pre-agreed price on a specified future date, thus tailoring the instrument’s maturity to the investor’s requirement.

The total outstanding claims in the money market in 1974 amounted to an estimated P24,971 million, distributed as follows: banks 40 percent, government 28 percent, private corporations 19 percent, and money market dealers and intermediaries 13 percent. The weekly volume of transactions has averaged P2,890 million recently, of which 83 percent were promissory notes and 14 percent interbank call loans.

Stock exchanges. Greater Manila’s stock exchanges have added a third in the meanwhile. Besides the Manila Stock Exchange and the Makati Stock Exchange, there is now the Metropolitan Stock Exchange in Quezon City. A fourth, in Cebu City, the entrepot of southern Philippines, has been authorized to operate. A couple of mutual funds have also been established.

The government has introduced three more securities and is preparing a fourth one. The more successful of the longer term securities are the Central Bank certificates of indebtedness, introduced in 1970. The three-year CBCIs, on whose 9-percent yield the Central Bank pays the corresponding tax for the account of their buyers, are now always sold out upon issue. The “Premyo savings bond” aimed at the smaller savers, is redeemable on demand, pays no interest but affords its holder a chance to win a substantial cash “premyo” or prize tax free at daily and monthly draws. The Development Bank of the Philippines, issuer of the earlier Progress bonds, has floated “countryside bills” that are similar to the CBCIs except that the bills run for a longer five years. Banking institutions can comply with a Central Bank requirement that they channel at least 25 percent of their loanable funds for agricultural credit by simply purchasing DBP countryside bills. The DBP is also readying a ten-year “bonus savings bond” for the small saver, offering a tax-free

ProLoGue

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9-percent interest. The “bonus” is reportedly a higher interest that comes to the buyer the longer he holds the bond, although a secondary market is planned to be created for the bonds. Largest underwriting. The country’s largest firm underwriting during Bancom’s first decade took place in 1970. Bancom managed the public offering of P28,500,000 of common stock of the Paper Industries Corporation of the Philippines, the first integrated pulp and paper enterprise in Southeast Asia.

Bancom introduced full merchant banking in the Philippines in 1969, offering a complete range of financial services, financial engineering and financial management. Earlier, when it began its own investment advisory services in 1967, Bancom had ushered in total family financial planning in the country. Together with its domestic merchant banking partner today, the Far East Bank & Trust Co., which handles the investment of the country’s largest pool of trust funds, Bancom now manages the first Europe-based capital fund for investment entirely in the Philippines. As it begins its second decade, Bancom is entering new paths to capital formation, as outlined in Book 4, and continues to increase the variety and market penetration of financial markets instruments, hewing to its original strategy of lengthening maturity structures with every qualitative leap in investor confidence.

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Bancom memoirs

Bancom participated in these major issues (medium/long- term funds) Issuer

1. Underwritings

Instrument

1965

PLDT

Common shares

21.446

ESSO Standard Fertilizer and Agricultural Chemicals co. Inc.

Common shares

20.000

Soliciting dealer

Commercial Bank & Trust Co.

9% Capital Notes

5.00

Sole Underwriter & Soliciting Dealer

Concepcion Industries, Inc.

12% Serial First Mortgage Bonds

1.500

1966

Development Bank of the Philippines

PLDT

Size of Issue Bancom’s (in million) Participation

7% Tax-Free Bonds (Series A)

100.000

8% Cumulative Convertible Preferred Stock

20.000

1967

Development Bank of the Philippines

7% Tax-Free Bonds (Series B and C)

100.000

1968

Marinduque Mining & Industrial Corp.

6% Subordinated Convertible Debentures

60.000

1969

Mariwasa Distributors, Inc.

Unimart, Inc.

Industrial Textiles Manufacturing Co., of the Phils. PLDT

10% Cumulative Preferred Shares with Stock Purchase Warrants

2.000

Participating Underwriter & Soliciting Dealer

Participating Underwriter & Soliciting Dealer

Sole Underwriter & Soliciting Dealer Soliciting Dealer/ Consultant Participating Underwriter

Sole Underwriter & Soliciting Dealer Soliciting Dealer

12% Guaranteed Convertible Bonds with Negative Mortgage Clause

3.000

Sole Underwriter & Soliciting Dealer

Common Shares

4.027

Common Shares

28.447

Sole Underwriter & Soliciting Dealer Participating Underwriter & Soliciting Dealer

ProLoGue

21

1970

1971

1972

1973 1974

Paper Industries Corp. of the Phils.

Common Shares

28.500

Syndicated Manager

Central Bank of the Philippines

CB Certificates of indebtedness

145.900*

Participating Underwriter

Philippine Petroleum Corp. Central Bank of the Philippines Soriano Corp. USIPHIL

Globe Mackay Cable & Radio

Common Shares

CB Certificates of indebtedness Common Shares Common Shares

Common Shares

Philippine Investment Co. Common Shares

2. Private Placements (Investment House: Bancom) 1965

1966

The San Miguel Corp.

Promissory Note

1969

Paper Industries Corp. of the Phils.

Common Shares

1970

Marinduque Mining & Industrial Corp.

Promissory Note

Paper Industries Corp. of the Phils.

Atlas Consolidated Mining & Development Corp.

Bancom memoirs

33.008

60.300 5.500

3.840

The San Miguel Corp.

The San Miguel Corp.

18.664

11% Certificate of Participation

1968

Paper Industries Corp. of the Phils.

45.750

18.000

Northern Motors, Inc.

Nutritional Products, Inc.

114.650*

Promissory Note

1967

1971

22

Atlas Fertilizer Corp.

18.900

Mortgage Participation Certificate (Syndicated manager: Bancom)

9.300

12% Assignment of Credit

2.500

Preferred Shares

15.485

Promissory Note

Equipment Credit and Cash loan Promissory Note

86.515

32.175 30.000

173.284 32.780

Participating Underwriter

Participating Underwriter

Participating Underwriter Syndicated Manager

Participating Underwriter

Participating Underwriter

Bislig Bay Lumber Co.

Arca & Co., Inc.

Lu Do & Lu Ym Corp.

1972

1973

19.180

Promissory Note

15.000

Cash Loan and Equipment Credit

1,244.915

Promissory Note

Legaspi Oil Co., Inc.

Promissory Note

Development Bank of the Philippines

Promissory Note

Ramie Textile Corp.

Promissory Note

Philippine National Bank

Certificate of Deposit

Marinduque Mining & Industrial Corp. Marinduque Mining & Industrial Corp.

Western Minolco Corp.

Wholesale Commodity and Exchange, Inc. 1974

Promissory Note

Common Shares

15.000

340.000 183.100 19.500

Promissory Note

64.282

Promissory Note

3.000

Iligan Integrated Steel Mills, Inc.

Promissory Note

Western Minolco Corp.

Promissory Notes and Lease Purchase Agreement

Central Bank of the Philippines

30.000

Revolving Credit Line

201.180 101.498

1,005.000

29.480

Nutritional Products, Inc.

Promissory Note

3. Secondary Offerings (Soliciting Dealer: Bancom)

10.000

1966

Victorias Milling Co., Inc.

Common Shares

5.600

1972

Marinduque Mining & Industrial Corp.

Common Shares

27.834

1969

1973 1974

Rizal Commercial Banking Corporation

Paper Industries Corp. of the Phils.

Atlas Consolidated Mining & Development Corp.

Common Shares

Common Shares

Common Shares

Co-manager

10.347

6.335

10.000

ProLoGue

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chapter 1 Bancom at its 10th year The year is 1975. Ferdinand marcos is in malacañang, on his tenth year as President of the Philippines, his third as dictator under the martial law regime. imelda marcos is taking on a more visible political presence and will soon be presiding over the fate of metropolitan manila as its Governor. The world is in recession. The Philippines has recovered from its external debt crisis in 1970. it has returned to the good graces of foreign creditors. it is comfortable with Petrodollar loans. The scene is the manila Hilton Hotel’s grand ballroom, all decked out for a celebration. The country’s financial and business community is in attendance. The Governor of the central Bank, Gregorio Licaros, is the guest of honor. The occasion is the gala dinner marking the 10th anniversary of the founding of Bancom Development corporation. ramon del rosario Jr., First Vice President and deputy head of Bancom’s investment banking division, is master of ceremonies. in his introduction of hosts and guests, he states as my unique mark in the company, “the only officer of Bancom who has received no promotion in ten years.” and in my own introduction of our guest of honor, i cite Licaros as “the man who has changed the skyline of the city.” i am referring to the well-known fact that at every government financial institution he has headed (the Government service insurance system, the Development Bank of the Philippines, and now the central Bank), Licaros showed an avid propensity to build a massive, new headquarters building. it is this sort of light banter that pervades the celebration. But it is, for me and other co-founders of Bancom, a significant milestone. Ten years before, we had launched the company with all of its staff of seven, four of whom were executives, squatting initially in the library of the commercial Bank and Trust company’s head office in makati. But at its launching, the country’s President, Diosdado macapagal, Vice President emmanuel Pelaez, and cardinal rufino santos, the archbishop of manila, all came as our guests in an inaugural ceremony that was strangely grandiose for a financial company with only a handful of people and a capital of only P7 million. at this celebration, ten years after, Bancom is now a large diversified company that its founders and leaders have proudly labeled a total development company. its vision and mission, the orientation of its officers and staff, its anatomy and physiology, and its evolution over its ten-year history entitled it to claim that label. What had started as Bancom Development corporation, the investment bank, was now the Bancom Group, inc. with eleven companies operating businesses that built low-cost houses, worked with

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rural farmers, traded in commodities, provided health services, designed and managed personal estates, insured people and property, manufactured farm equipment, produced movies, and supplied financial and banking services in metro manila and key cities in the Philippines, as well as in Hong Kong, malaysia, indonesia and Thailand. The company that had opened for business in January of 1965 with P7 million of capital, four executives and a support staff of three, had total assets of P1.1 billion at the close of 1975 and its equity had grown to P92.1 million. its officers and employees now numbered in excess of 500. in its 1975 annual report, Bancom expressed its thrust in these words: its primary business is the translation of strategic development activities into viable, efficient working systems and organizations whose viability and efficiency are manifested and measured through profits for stockholders, income, and professional growth for its manpower. What now could be properly called an institution had emerged out of the convergence in the Philippines of national historical streams, the course of the personal histories of different individuals, and the strategic directions of corporate enterprises. indeed, by the time of our tenth anniversary in 1975, we had more or less completed the transformation of Bancom into a total development company, servicing a full range of requirements of community and government, of business, and personal needs. What opened for business in 1965 as an investment bank had now evolved into a complex business. The term conglomerate is inappropriate for what it was, because it was not simply a patchwork of diversified businesses. its lines and capabilities followed an explicitly articulated purpose and design. i quote at length from the opening chapter of the second volume of Bancom’s annual report for 1975, which was aptly entitled, The Bancom Group Incorporated is an Engine For and Of Development: The primary business is carried out through an orchestration of four major units: a traditional investment banking company (Bancom Development corporation), international subsidiaries and offshore joint ventures, a brood of diversified domestic subsidiaries, and the parent company itself – The Bancom Group incorporated. Before any set of goals is effectively achieved, however, there must be operative command over three resources: first, a corps of imaginative, dedicated, trained, and experienced managerial and professional manpower; second, substantial financial resources; third, a suitable and tested technology. Because of its premier position in investment banking over the past decade, Bancom Development corporation became the Resource Mobilizer and was able to attract and subsequently mold the necessary mix of manpower while, at the same time, developing access to adequate financial resources. an international subsidiary (Bancom international Ltd., Hong Kong) and an offshore joint venture (asean investors Group, Ltd.) serve as regional staging areas and conduits for financial engineering and development technology being documented, stored and programmed c H a P T e r 1 – B a n c o m aT i T s 1 0 T H Y e a r

25

for transfer by the Bancom institute of Development Technology (Bidtech), the Technology Mobilizer of the Bancom group. The eight domestic subsidiaries – all principally systems and professional manpower companies rather than physical asset companies – are arrayed according to the totality of a community: the dormitory or living area (Bancom realty and Bancom Farm); the livelihood or working area (Bancom commodities, Bancom systems control); essential services (Bancom audiovision, Bancom Health care, Bancom insurance, Bancom Finance). The parent company (The Bancom Group, inc.), from a total view, orchestrates the whole movement, provides the balance sheet for carrying and managing the assets of the group, sources development funds, and investigates possible ventures and gaps in the small- and medium-scale manufacturing and light industries. The parent company’s total view prevents the cutting up into narrow unrelated specializations the wholeness which is the development task. 1975 was the first full test year for the total development company concept. our corporate vision and collective aspirations were further articulated in these continuing passages from the 1975 annual report: The first order of business for the domestic subsidiaries (whose first full year of operation was 1975) was the validation of their respective viabilities and efficiencies: as an operating unit, positioned in broad industry classifications, surviving against competition and coming to terms with operating conditions. 1975 was an adequate demonstration of validity. at this stage, the parent company more than anything else served a strongly supportive role providing central treasury, controllership, administration, marketing, and corporate services, and all backroom work that fledgling enterprises in search of bread-and-butter lines normally need. The second semester of 1975 brought an opportunity to test and crystallize the development thrust of the Bancom group of companies through the sab-a Basin project, contracted from the national Grains authority by Bancom Farm. The sab-a Basin project provided all Bancom operating units with their specific roles in the total development mission. BGi would provide the orchestrated synergy and dovetailing of specializations for an integrated approach. From this point and into the future, the parent company’s role will graduate from the purely supportive role (that characterized the probative stages in the corporate lives of the domestic subsidiaries) into the raison d’etre of its corporate existence: the orchestration of the various specializations, specific technologies, particular business lines of the various Bancom units into a synergetic and total developmental thrust. in 1965, investment banking was “ripe”. in fact, this look back into Bancom’s history offers an opportunity to examine this precise point: when does a particular juncture in macroeconomic, financial and business evolution become a micro business opportunity for the right entrepreneurial initiative and what factors determine that “ripeness”? is it fair to describe Bancom’s rise and fall

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Bancom memoirs

as a sequence of a timely entry into a phase of financial evolution but an untimely and premature attempt to grow into the total development company that may have been responsible for its demise? The concept of a total development company is so right, however, for the country’s development imperatives even today, that it is equally important to determine why Bancom did not succeed. By 1975, the Bancom Group had evolved into a conglomerate that was unique in the Philippines and probably in asia, and rare in the world of private enterprise. Bancom had teams of professionals who were at home in the Board rooms of makati talking sophisticated corporate finance deals. it had an army of traders that dealt in Treasuries, commercial paper, and foreign exchange, and arbitraged between the stock exchanges in manila and new York. other Bancom specialists organized barefoot farmers into cooperatives in villages of remote provincial towns, provided health care services, insurance, and estate management, and packaged agrarian reform projects for farmer beneficiaries and the government agrarian office. Bancom’s vision was to have a full range of product, professional, technical and financial service lines that would suit the needs of local communities at every stage of development, under-development or over-development, in every corner of the country. in its tenth year of operation, except for a few still inchoate lines, it was, by and large – a private and profitable total development company. it had recruited and trained by that time a choice assembly of brilliant and dedicated, young, technical and managerial Filipinos, and created a culture that nurtured innovation and personal development. For their outstanding performances, many of the top managerial people in the organization had become chosen at different years and awarded recognition from the Junior chamber of commerce as among the country’s Ten outstanding Young men (ToYm) awardees. But the superstructure was built on the assumed financial strength and sustainability of the investment bank flagship, Bancom Development corporation. By the turn of the new decade in 1980, changes in laws and regulatory postures of the government, countervailing forces taken by the commercial banks, and internal human resource problems, both political and psychological, had already eroded Bancom’s capacity to sustain this burgeoning superstructure.

c H a P T e r 1 – B a n c o m aT i T s 1 0 T H Y e a r

27

chapter 2 BTco and cBTc, Bliss and Barcelon in the u.s. in the 1960s, american banks that had been primarily domestic or had confined their international operations to europe were being pushed to follow the lead of First national city Bank and Bank of america and reach out for a presence in asia. The opportunities were seen to be in the developing countries. entry into Japan was rendered unattractive by the tight surface tension of Japanese culture and restrictive governmental regulations. and the newly independent countries no longer freely entertained granting licenses to new foreign banks. u.s. banking legislation had provided a new avenue for entry. under the edge act, u.s. banks could create subsidiaries that were authorized to enter into joint ventures with foreign banking institutions. Bankers Trust company of new York (BTco) was formerly part of the morgan Group. it developed primarily as a domestic wholesale bank and trust institution catering to blue-chip corporations and high net worth families. it had established its edge act subsidiary, the Bankers international Finance company inc. (BiFc). a top-ranking executive of the institution was George Davies of the Theo H. Davies business family that had owned and operated the Hawaiian-Philippine co. sugar mill in the Philippines since the commonwealth period. a potential banking presence here was naturally interesting to Davies.

Bliss, SyCip and Barcelon He assigned the task of exploring the possibility to his 35-year-old VP, richard m. Bliss, and suggested that he get in touch with an old acquaintance of Davies in manila, Washington sycip, for expert assistance in locating an appropriate local partner. Dick Bliss was typical of the privileged class from which Bankers Trust recruited many of its officers. Dick was a true blue yuppie – Phillips exeter for prep, Yale for his B.a. major in literature, and then nYu for business administration, a varsity tennis player, and a dedicated jogger who ran the new York marathon as a regular. in the Philippines, the best-known accountancy firm was Washington sycip’s sGV. He received a letter from Dick expressing BTco’s interest in finding a suitable partner in the Philippines for a finance company joint venture. This was 1964. Foreign exchange trading was liberalized in 1962 and there was more open competition among domestic commercial banks. newer banks had been established. The madrigals

28

Bancom memoirs

set up consolidated Bank in 1963, Hadji Kalaw and his group came in with Bank of asia, George Ty with metro Bank, Damaso Perez with republic Bank, al Yuchengco with rizal Bank, Vincent recto with merchants Bank, and so on. i think it was fairly evident to Wash sycip that among Philippine banks, the commercial Bank and Trust co. (cBTc), a ten-year-old bank that ranked among the Top 10, had the shareholder composition that would match Bankers Trust’s blue-blooded character. cBTc’s leading shareholders were the soriano family of san miguel, the landed Tuasons, the Yulos of canlubang. it was run by conservative veteran bankers manuel marquez and augusto Barcelon, who both had established their sterling banking reputations previously at the Philippine national Bank. Wash tested the waters with Gus Barcelon, without yet disclosing the identity of the u.s. bank. The older local banks saw partnerships with foreign banks as a way to retain their competitive superiority in the face of a rapidly expanding banking sector. Wash sycip’s information was a timely development, and Gus Barcelon expressed immediate enthusiasm.

An idea is born on march 10, 1964 sycip wrote back to Dick Bliss, informing him about cBTc as a prime prospect and that marquez and Barcelon were interested in the idea of a joint venture financial institution as proposed by Bliss, although the name of Bankers Trust had not yet been disclosed by sycip to the cBTc officials. He mentioned that Barcelon was scheduled to travel to new York before the midyear and that might be the opportune time for a personal meeting. on march 23, Bliss replied to sycip acknowledging the positive news and authorizing him to disclose the BTco name to cBTc. His letter conveyed the state of the thinking, and the enthusiasm, at the BTco side: We have put a fair amount of thought into the dollars and cents aspects of this proposition, but of necessity our thinking has had to be rather academic pending the practical discussions which will now be possible. it would seem to me that those discussions could begin when mr. Barcelon is in new York this spring, at which time mr. Davies will also be back in the office. Provisionally we had assumed that the company would operate profitably on total resources of $3 to $4 million, but our thought was to be as flexible as possible, starting on a small scale with capital and debt subscriptions to be called as needed. We had also assumed that our position would be that of a substantial minority interest, with control and top management in the hands of our Filipino partners. We would of course expect to play a role on the Board of Directors in line with our percentage ownership and would want to put a man on the staff of the company to assist management to implement its goals and policies. We agree with you that leverage brings with it problems of foreign exchange exposure if borrowings are in dollars, and that on the other hand, peso borrowings may be difficult under today’s tight money conditions. it was our preliminary thought to limit this foreign exchange exposure by doing as much of the company’s early borrowings as possible locally and limiting cHaPTer 2 – BTco anD cBTc, BLiss anD BarceLon

29

its dollar borrowings to something around one-third of its assets. it is preferable, we think, that this whole subject of capitalization be discussed across the table and we believe that this is an area which can be explored directly in conversations with mr. Barcelon when he is here. The main point that i would like to make here is our desire to move ahead on this project and our willingness to be flexible in the light of the future discussions that you propose. if the talks with mr. Barcelon reveal continued interest, the next step, it would seem to me, would be for one of us to go to the Philippines to work out further details as soon as practicable thereafter. But if for any reason mr. Barcelon’s plans change we would be ready to move up our trip and have our discussions in manila. Barcelon’s new York trip, however, did not push through and so Dick Bliss and another BTco officer, Dan seitz, came to manila in may and June of 1964. i was not yet involved in these proceedings up to this point, but the man who actively assisted Gus Barcelon in the series of discussions with BTco happened to be my younger brother, andres roxas. at the time, andy was a Technical consultant at cBTc and tasked to organize an economic research and investment research capability, in preparation for the bank’s expanded entry into the diversified trust business. The outcome of the BTco-cBTc discussions was a draft memorandum of agreement that would be the basis for obtaining Board approvals from the respective parties. it was Dan seitz who thought up the name Bancom, by taking the first syllables from the names of Bankers Trust and commercial Bank and Trust. The “Development” part of the name, i think, came from me at a later stage. BTco through BiFc was to put up 40 percent or P2 million out of the initial target capital of P5 million and would also provide Dollar debt financing in proportion to their percentage ownership, initially up to the maximum of $1 million. The exchange rate at that time was P3.90 to $1. The balance of the capital would be contributed by the major Filipino shareholders of cBTc, since banking laws prohibited cBTc itself from making the direct investment. a letter of Dan seitz to Gus Barcelon on June 24, 1964 informed him that the Board of Directors of BiFc had approved their participation in accordance with the draft memorandum that Bliss and seitz had brought back. Gus Barcelon recounted his own recollection of those 1964 events that led to the formation of Bancom, when he was interviewed for the Business Day supplement on “The Bancom story”, published on march 9, 1979: most psychologists claim that man does his best thinking early in the morning. if this is true then Bancom could well be one of the most well-conceived companies around, because Bancom, according to augusto Barcelon, is the product of many a breakfast meeting. “it was about the middle of 1964,” reminisces the affable Bancom chairman of the Board, “when Washington sycip of sGV (sycip, Gorres, Velayo and co.) came to me with an offer from a yet undisclosed american bank to put up a finance company on a joint venture basis.”

30

Bancom memoirs

Barcelon was then senior Vice President of commercial Bank and Trust co. (cBTc) with manuel marquez as President. He continues: “i told him we were interested and that was the start of a whole series of meetings between Wash and myself. But since we were both busy, we could only meet during breakfast.” The american bank involved, it turned out, was Bankers Trust which, at that time, wanted to have a presence in the Philippines. Barcelon was particularly happy to learn of this “because cBTc already had a correspondent banking relation with Bankers Trust, so we knew the bank very well.” THe YounGer roXas. Barcelon was equally happy to have as his assistant a young man named andres roxas who was then head of cBTc’s department of economic and corporate research. says Barcelon: “i told andy (andres) of this offer and to my surprise he produced a study on the finance companies’ operations in the country. He was actually doing research on the subject.” This was the time when finance companies were the most lucrative businesses in town. as a consequence, finance firms were being set up right and left. roxas’ study, however, showed that given two or three more years, these companies would not perform as well because of the growing competition, the burgeoning cost of money and the rising costs of operations, particularly in the area of collections. Barcelon says: “i went back to Wash and informed him of andy’s findings. However, i told him that we were still interested in having a tie-up with Bankers Trust one way or another.” sycip then arranged a meeting between Barcelon and the Bankers Trust representative who was in town to look into the possibility of the joint venture. Barcelon recalls that meeting: “i gave the man a copy of andy’s study and gave him my recommendations for possible alternatives to a finance company. We finally narrowed them down to an investment house. The Bankers Trust man went back to new York with our recommendations. shortly thereafter, Bankers Trust expressed its agreement.” sTocKHoLDers. Then it was time to choose the would-be stockholders, Barcelon says: “Wash and i held another breakfast conference during which we decided on five business groups: the sorianos, the Yulos, the Tuasons, the escalers and the cBTc shareholders. at that time, commercial banks were not allowed to invest directly on undertakings of this sort. it’s only recently that they have been permitted to do so.” Both sycip and Barcelon felt they had arrived at the ideal composition of shareholders for their investment house. Barcelon explains why: “We both felt that these were the logical groups to invest in the company because their own businesses would have need for investment banking services and their very prominence in the business world would attract others to follow suit.”

cHaPTer 2 – BTco anD cBTc, BLiss anD BarceLon

31

Barcelon talked to the prospective stockholders, all of whom agreed to invest. Bancom started with a paid-up capital of only P7 million. Bankers Trust international corp., provided 30 percent leaving approximately P5 million for the Filipino groups to raise. says Barcelon: “it was not so difficult to convince these people to invest, especially since the amount involved was not so large.” The shareholders issue behind them, Barcelon, sycip and even the shareholders themselves turned their attention to the task of looking for “the right chief executive officer.” recalls Barcelon: “it was not easy to look for a ceo. all of us knew a lot depended on him. While the company we were putting up was not going to be the first investment house, at least, on record, it was going to be the first ‘true’ investment house in so far as activities were concerned. and being a first is never easy. We had to find the right man to head the operations.” enTer sKr. in 1964, sixto K. roxas iii had just resigned from the chairmanship of the national economic council (the predecessor of the national economic Development authority) and was serving as consultant to Private Development corp. of the Philippines. Possessed of an impressive track record in the field of business and economics, roxas was receiving offers from various quarters, including the World Bank which was asking him to head an economic mission to Latin america. Barcelon and his associates were convinced that he was the man they were looking for. chuckles Barcelon: “of course i had a slight edge over the others because i had andy, Ting’s (sixto roxas) younger brother, and because Ting himself was my neighbor in Paranaque. i asked andy to convince Ting to accept our offer and, to follow up andy’s lead, i made it a point to drop by Ting’s house almost every morning. Whenever i was there, he’d ask me if i had breakfast already. i’d say no, join him for breakfast and proceed to sell him on this new baby.” Finally, after a number of similar breakfast meetings, roxas accepted. To help formulate the new company’s general policies and procedures, richard Bliss, vice president of Bankers Trust international came over to manila. Together with roxas, he laid the foundation of the company. on october 19, 1964 an agreement was executed between cBTc and s. K. roxas and associates, under which the latter would assist in the promotion and organization of Bancom Development corporation with the commitment that at startup i would come in full time as President and ceo. Thus was constituted the team that would design and organize Bancom. Gus Barcelon and andy roxas on the cBTc side, roly Gapud and myself, and on the Bankers Trust side, Bob Howe.

The idea is refined But first we had to define very clearly what our business was. When Dick Bliss, Dan seitz, Gus Barcelon and andy roxas first discussed the concept, it was initially thought that Bancom might be a private development finance institution like the recently-created Private Development corporation of the Philippines (PDcP), relying for leverage on term loans provided from some development assistance

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Bancom memoirs

program (Peso loans from u.s. Public Law 480) and from government financial institutions such as Gsis or sss. Later as we pursued our discussions i favored an investment bank. The two prototypes defined the ends of a spectrum: one end was to be a balance sheet institution that would intermediate by borrowing and relending and earning an interest spread; the other would be primarily a dealer in debt and equity instruments, primarily buying and reselling them without recourse for a trading spread. The Philippine market was familiar with the first type. it knew commercial banks and thrift institutions, and also at this stage, sales finance companies. it was not very familiar with the second type. The country had a stock exchange since 1927 and understood the stockbroker’s function but not really genuine dealership and the “market-making function”, not even in corporate stocks and not at all in corporate debt instruments or government bonds.

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chapter 3 ripe for investment banking The macro developments in the country and in the international economic and financial spheres created opportunities for, and posed competitive threats to, local and international businesses, financial institutions here and abroad and investment groups in the country. The strategic plans of these corporations and groups needed to respond to those opportunities and threats.

Decontrol Decontrol measures introduced between 1960 and 1964 had a three-fold effect: First, the hold that commercial banks had as agent banks of the central Bank in administering the system of exchange and import controls over the older and more traditional trading companies and producers of exports and over the newer import-substituting industries was considerably diminished. second, the whole financial service industry became more competitive. Government dominance had considerably diminished in the commercial banking sector. new non-bank financial institutions had begun to garner a larger share in control and disposition of the flows of national savings. insurance companies and pension funds had larger appetites for portfolio investments. They had grown in size and the new sales finance sector had multiplied in constituents and in total resources. and with the entry of the Private Development corporation of the Philippines, private development finance had emerged with resources to potentially match the dominance of the government development banking sector. Third, the impacts of the exchange rate adjustments on the commercial and industrial sectors were generating new financing needs larger in unit scales and more specialized in modes and in maturity and risk imperatives. There was an increasing demand for financing tailored to overall balance sheet structures and cash-flow configurations rather than simply tied to specific assets.

The banking and financial system in brief, the financing business was no longer simply a matter of credit. it was demanding the financial engineering skills of corporate and project finance professionals. it was demanding innovation in the design and merchandising of financial instruments and the systematic development of open market institutions. The professional development of specific individuals in the financial service industry provided the kind of exposure that prepared them precisely for entrepreneurship in these lines. Four generations

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of Filipinos drove the evolution of the real and financial service sectors of the economy in the post World War ii period. When WWii broke out, local Filipino companies had a very minor participation in the local banking and finance industry. The Bank of the Philippine islands was a carryover from the spanish times. British banks had branches here, Hongkong shanghai and the chartered Bank. The largest bank was the government-owned Philippine national Bank (PnB) that was established in 1916. The catholic church had three banks: monte de Piedad, Philippine Trust, and large holdings in Bank of Pi. But PnB accounted for more than half of the resources of the entire banking system. The evolution of the banking and financial system may be viewed from the perspectives of the worldviews, and training, of the succession of generations emerging from their education in the periods from 1945 to 1965. The spanish philosopher-historian, Jose ortega y Gassett, depicted the historical drama of each period in history as the polemic between two age groups living contemporaneously: the generation in control – those between the ages of 45 and 60, and the incoming new generation between the ages of 30 and 45, those learning to operate in a world created by their elders. it is a dialectical process in which the younger incoming generation, after learning to operate and run a world that is not of its making, turns critical and begins to work for changes which the older generation opposes. This is true in the world of ideas and practical affairs, political, economic, religious, social. This was true of the banking and financial system of the Philippines in the decades following the end of World War ii.

The new bank “ilustrados” a first wave of young Filipino professionals, managers, scientists, business men and women and entrepreneurs took their places in the leadership ranks of Philippine society. They came from three sources: Filipinos who as students were caught by the outbreak of the War while in the u.s., returning after Liberation to the newly independent Philippine republic; young Filipinos of wealthy families, either high school graduates going abroad for college or college graduates going for specialized graduate studies in schools in the u.s. and europe and returning after a few years abroad; and the batches of graduates of the local colleges and universities that opened after Liberation, the religious institutions like ateneo, La salle, Letran, san Beda, usT, silliman, san carlos, Holy spirit, assumption, st. Theresa’s, maryknoll, and the secular schools like the uP, Feu, ue, Lyceum, mapua, etc. The older local banks were the PnB, BPi, Philippine Trust, china Bank, Philippine Bank of commerce, and Peoples Bank, and the foreign banks, HsBc, chartered Bank and the FncB. The first wave of new generation bankers got their training here and then promoted new banks with local investor groups.

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Washington sycip was among the first batch returning from the u.s. after the war. in the field of economics, there were armando Dalisay and Leo Virata. about the same time, Jobo Fernandez, aurelio montinola Jr., edgardo Kalaw, Larry Henares left for the u.s. to take up studies in Fordham, Harvard, miT. From local universities, we had Barcelon, Willie Tecson, chester Babst. The commercial Bank and Trust co. was organized by marquez and Barcelon who had their experience with the PnB, and got for their investors the old business families, the sorianos, the Yulos, the Tuasons. Jobo Fernandez was with the Philippine Bank of commerce under Felix de la costa and the cojuangco family, and then he started Far east Bank with the del rosarios, the Visayan sorianos, the cacho families, and the escalers. Willie Tecson was with china Bank and then joined the madrigals to start consolidated Bank. chester Babst was with PnB and then joined the roxas-chua sugar trading family, to form Pacific Bank. Vincent recto was with Philippine Trust and started merchants Bank. These were some of the first echelon postwar generation active in the late 1940s and 1950s. my generation followed this, graduating from college and graduate school between 1950 and 1955. some of my contemporaries were Ting Jayme, Tito Guingona, Boy Tuason, Geny Lopez, nene almeda-Lopez, Francis moran. Then the third echelon, which included the ranks of andy roxas, ray ilusorio, roly Gapud, Louie Villafuerte, Danding Yotoko, ramon del rosario Jr., oV espiritu, archit Bartolome, Francis estrada, etc. We define these waves in terms of the persons who entered the 15 to 30 age bracket and the 30 to 45 brackets during the period 1945 to 1960. Bancom emerged from the convergence of three streams of historical developments: the evolution of industry, commerce and financial institutions in the country, the institutional marketing strategies of domestic and international banks, and the professional development of specific individuals who came together to form the Bancom team. The evolution of economic and financial institutions created market opportunities that opened up for the financial service industry. These were of two categories: one, opportunities created by the peculiarities of regulatory and statutory ground rules that opened up niches offering profits not really related to authentic social and economic services. more in the character of “rent” opportunities – profits created artificially by regulations or by special privileges acquired by political means, rather than by genuinely enhanced product or service productivity. Two, opportunities for profits arising from needs that had a substantive developmental and productivity-raising function. The personal philosophies and value orientations of the persons that converged to form Bancom were such as to create an inherent tension between these two markets in the directions of development and growth that the institution would pursue: the merely opportunistic pole and the authentic development pole.

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These were not, of course, simply black or white choices. The trouble lay in the shades of gray inbetween.

A changing market Bancom developed itself as an investment bank in response to these market opportunities, and the early dynamic tensions in its growth to maturity. The aftermath of exchange decontrol had spawned both needs and opportunities based on substantive development possibilities. There were three categories of these needs: There were the companies that remained viable but needed a restructuring of their balance sheets because the new exchange regime had thrown debt-equity ratios and current ratios out of kilter. short- and medium-term debt had to be refinanced to push maturities out or to refinance fixed debt with equity. Then there were the companies whose operations would not be viable under the new exchange regime without a fundamental reengineering of their operations, their business, their product lines, and their balance sheets. Lastly, there were the opportunities for new project promotions requiring different forms of financing, from venture capital to project finance. The increased market for producer and consumer hardware had created demand for new finance lines. Finance companies providing installment financing for consumer durables had already multiplied to the point where the sector was considered overcrowded. But new forms of equipment financing were emerging, like sale-leaseback arrangements, operating and financing lease arrangements, etc. The new, more liberal and openly competitive atmosphere had exposed the banks to competition from non-bank institutions in their product lines on both the sources and the asset sides of their balance sheets. The system of overdraft lines, combined with the regulations setting ceilings on the deposit and loan rates the banks offered and asked, exposed them to disintermediation. at the same time, the national government was under pressure to find non-inflationary sources of domestic borrowing and substantial foreign financing to cover the growing demand for economic and social services and to provide a new impetus for an economy suffering the adjustment throes of decontrol and more open competition. an institution’s birth is marked at the point of time when it assumes its formal, legal and organizational shell. it lives, thrives and makes its mark on a country’s landscape because a soul, a spirit, a life makes that shell a living organism. That soul, spirit and life originate from historical and biographical streams that took shape before the institution’s formal birth. Those streams are formed by a convergence of the historical sequences in the development of individuals and of the whole society in which the institution takes its place, plays its role, does its thing. cHaPTer 3 – riPe For inVesTmenT BanKinG

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Bancom’s formal birth was november 4th, 1964, when it was incorporated and, as it were, assumed a local habitation and a name. it assumed its role in the financial system of the Philippine economy, in the business community, and in Philippine society of the mid-1960s. What impelled its formation and gave it its form and spirit were the life streams of several people and institutions coming together at a juncture of the evolution of the system in which it took its place. in 1965 financial intermediation was almost exclusively a balance sheet operation. institutions borrowed from the public, private businesses and government-owned institutions in the forms of various kinds of liabilities: demand, savings and time deposits, promissory notes, bonded indebtedness, insurance of risks... and in turn invested these in various loans. There was little secondary marketing of negotiable financial instruments. and so there was no real money market to speak of. in the 1960s an interbank market for bank funds had begun to develop through which banks ending the clearing day with excess reserves could lend to banks ending with deficits. This was the equivalent of what in the u.s. is called Fed Funds (for Federal reserve system funds). it was negotiated directly by bank treasuries and cleared through debit and credit advice at the central Bank. The financial marketplace was relatively unsophisticated. The household market was confined to high net worth families in metro manila and key cities like cebu, Davao, Bacolod. in the business sector, corporate treasurers dealt principally in deposits, overdraft and credit lines. Treasurers of multinational firms were, of course, somewhat more sophisticated. But in the Philippines, even they had relatively simplistic ideas of cash management and asset-liability matching techniques. The removal of exchange and import controls in 1962 had made it possible for corporate treasurers to manage their foreign exchange spot and forward positions with greater flexibility. management of a eurodollar position to hedge future payments for imports was now possible. But having lived so long in an environment of regulations, very few local treasurers had the familiarity with interest and exchange arbitrage instruments and Dollar-Peso swap arrangements.

“Creative destruction” The entry of Bancom into the market at this juncture was quite opportune. in the evolution of economies and financial systems, countries at early stages offer a lot of gaps naturally. But this is not the crucial question. The staging of fresh developments is crucial. if they are introduced too early, innovators can lose their shirts. if too late, then most of the profits from innovation have already been garnered by those who came in at the more opportune time. The gaps are niches for profitable business only when the right configuration of conditions and circumstances make them ripe. only then are they real business opportunities. in 1965, investment banking was ripe. But the fledgling institution had to find its legs immediately and hit the ground on the run. in november and December of 1964, even before its doors were officially opened for business it was drawn into business discussions with private corporations and with the national government.

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in order to become an investment bank, Bancom had to perform a developmental and educating function in order to create the market for its services. The strategy it adopted from its inception was articulated in Bancom’s introductory brochure, as follows: Bancom was established to be an investment bank as the term is understood in the more developed capital markets. it is an intermediary between sources of loan and investment capital and their users. its primary business therefore is not lending or investing its own funds but merchandising various types of financial instruments. it was recognized at the very outset, however, that the immediate opportunities for an investment banking-type operation in the Philippines would lie in assisting companies in organizing or reorganizing their financing into feasible packages that might be distributed in an orderly fashion among different sources of loan and equity funds. in many instances, a large portion of the financing might be in promissory notes, mortgages, deferred equipment credits and some equity, rather than corporate securities. The nature of Bancom’s role in the refinancing effort would then take on the character of serving as financial consultant, handling negotiations for client companies and effecting private placements of debt and capital instruments with institutional and other sources. in some instances, Bancom would have to take a position as creditor or investor in order to make its role as financial middleman more acceptable in a business community not as yet accustomed to the purely intermediary role of an investment banking institution. Bancom’s activities would be strictly developmental, therefore, both in the money as well as in the capital markets. it would need to promote greater sophistication in company financial planning and fund management and gradually induce corporate entities to look to the open market as a regular source of financing of both short- and long-term needs. Bancom would then need to join its own efforts to those of other institutions in the field for developing a more efficient money market, help generate more readily transferable money instruments and stimulate active secondary trading in these instruments. The expansion of the investment banking business would necessitate, finally, the further development of the market for long-term securities, generate a more regular flow and a wider variety of high-grade corporate issues, build up more outlets and work with the stock exchanges in processing secondary trading in investment-grade securities. at the outset, Bancom divided these business lines among three units: 1) an investment banking group to handle underwriting, syndicate management, private placements and participations; 2) a financial consultancy group to service the financial planning and corporate finance requirements of private and government clients; and 3) a money and capital markets trading desk. Later on a fourth unit would be added: an investment advisory service group to provide portfolio management services. The operational responsibilities were divided among five initial members of the Bancom team aside from myself: roly Gapud to handle financial consultancy, Bob Howe (seconded by Bankers Trust) to handle investment banking, ray ilusorio running the money and capital market desk, Louie Villafuerte to handle legal engineering for all the product lines, and elmer aguilar for backroom, accounting and cashiering support. in addition, Gus Barcelon’s team composed of andy roxas at cBTc provided support in research and portfolio management advice. cHaPTer 3 – riPe For inVesTmenT BanKinG

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Bancom’s early development as an investment bank up to the time of its break-up with cBTc in 1968 gave rise to its incipient attempts at establishing a synergy with a commercial bank in order to achieve the character of a one-stop financial service institution, that it called merchant banking. The emerging vision was to form what in today’s language we would describe as a “virtual” merchant bank – a system that would offer all the combined services of an investment bank and a commercial bank without violating the provisions of legislation that confined these functions to separate legal corporations. The commercial banking law prohibited banks from acting as dealers in negotiable financial instruments or as underwriters of securities. They were prohibited from guaranteeing credits of client corporations except through the issuance of Letters of credit. non-bank financial institutions could be formed to do that business. But the law prohibited them from calling themselves “banks”, a term confined to commercial and savings institutions licensed under the General Banking act. Banks were essentially passive and conservative establishments that accepted deposits and provided financing solely in the form of loans. They could not invest in the common or preferred stocks of companies. in the Philippines at the time, loans were granted normally against the security of existing assets, principally real estate or marketable commodities. Very rarely did they lend against chattel mortgage on machinery and equipment. The exchange controls and the policy of import substitution precisely stimulated investments by textile mills in spinning, weaving and finishing machinery and the construction of plant, metal working companies, chemical plants, cement factories, veneer and plywood factories. all this required a wider spectrum of services and new modes and terms of finance. at the Philippine national Bank, the Department of economics, research and statistics which i formerly headed was made responsible for the processing of industrial loans requiring the appraisal of project feasibility studies and validating the soundness of financial plans submitted by proponents of industrial projects. This was beyond the capacity and experience then of the traditional credit Department. This was the need i sought to fill in advocating for the establishment of the economic Development Foundation (at about the same time that Bancom was also being organized) as a team of technically competent and independent consultants who could prepare objective and technically and financially reliable project feasibility studies. Based on this, an investment bank would specialize in the financial engineering and financial planning to tailor-fit financing packages both to the requirements of specific projects and the demands and criteria of financing sources. Then, going beyond this, it must have the capacity and the credibility, and the connections, to source the required financing. and, ideally, to be so certain of this ability to source as to actually guarantee the sourcing through a firm underwriting commitment, which in effect says to the promoters and sponsors of the project... If we cannot place the financing instruments with third parties, we will provide you the resources from our own balance sheet. But unlike a development finance company, an investment bank is not established with the balance sheet resources large enough to end up becoming the investors in the projects of clients. its viabiity depends on its success in developing what is called placing power or the capacity, connections and credibility to successfully sell off the financial packages they design for client projects.

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chapter 4 Founding eDF What was my situation when we were having those breakfast meetings with Gus Barcelon and he was persuading me to take on the Bancom project? This was during the months of July and august in 1964.

Returning to the private sector in February of that year i had resigned from my position as chairman of the national economic council (nec) and concurrently Governor of the Land authority. my immediate staff, roman cruz Jr., Fe Villafuerte, and Peping antonio resigned along with me. Drag avramovic was a World Bank economist who had been assigned to us when i was still heading the Program implementation agency, forerunner of today’s Presidential economic staff. avramovic had taken on a major new assignment, to address the newly emerged crises of Third World countries – the external debt problem. He recruited Fe Villafuerte to work with him on the first major external debt rescheduling in Brazil. Jun cruz decided to spend a few months of rest. The long working hours we kept during our stint in government had taken a heavy toll on his health. He was having blackouts. Peping antonio stuck with me as my personal secretary and assistant, in which position he remained for the next nearly two decades, until the end of my american express tour. my immediate task upon resigning was the promotion and organization of the economic Development Foundation. one of the institutions attached to the national economic council at the time of my chairmanship was the industrial Development center (iDc). This was the local unit of the asian Productivity center, established some ten years before, with joint funding from the national government and usaiD. it was a government-supported industrial consulting service to promote the establishment, expansion and development of industrial processing plants in the country. its early programs helped build up the processing of forest products, mainly plywood and veneer plants, that were encouraged to get some backward integration from our large and rapidly growing log exports. usaiD financed the contracts with u.s. consulting firms to provide technical expertise for these processing plants. at the time i was in service, the new thrust was the promotion of the metal working supply chain and the rationalization of the iron and steel industry and the downstream engineering industries, towards the much needed and timely development of a capital goods sector. cHaPTer 4 – FounDinG eDF

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The original concept for iDc upon its formation was that the unit would eventually build up its consulting line and its capacity to sell its services, and then be spun off and privatized as a viable, independent, technical consulting company. The trouble was that over the years, instead of moving towards privatization, it had become just another government bureaucracy which was increasingly dependent on annual appropriations from the national government. When i joined macapagal’s cabinet in august 1962 to establish the Program implementation agency, the new usaiD Director appointed by President Kennedy to the Philippines was James ingersoll. Jim was a member of the “tycoon” ingersoll family of ingersoll rand and Borg-Warner founded by his father, roy ingersoll. He was a volunteer, one among those recruited by President Kennedy in his Operation Tycoon recruitment program that challenged top executives of u.s. corporations to serve with his new administration and help administer u.s. aid to developing countries. Jim was a graduate of Dartmouth college. my wife, Bing’s, “foster father” in the u.s., uncle charlie, was on the Board of the Dartmouth alumni association. When Jim was appointed to the Philippines, uncle charlie wrote us to please “take care” of him. so we became the local family of Jim, his wife nan, and their children. i was still in Filoil when they arrived and we had become very close by the time President macapagal asked me to join the cabinet to administer the implementation of the FiveYear Plan. This document, which our economic Development consultants (with my classmate narciso Ferrer and my brother andy roxas) had written, was formally submitted to congress by macapagal as his economic Program. it was Jim who finally persuaded me to accept macapagal’s offer. His pitch was, “Ting, i gave up my job to serve in your country. You certainly cannot do less.”

Re-inventing IDC one of the key result tasks Jim and i agreed on was the privatization of iDc. it had a staff of 26 and contracts with u.s. technical consulting firms to provide specific consulting services to machine shops and metal working companies in the country. The national budget provided P12 million a year in appropriations for its support as counterpart for the usaiD grants. in addition, iDc ran productivity workshops. i submitted a plan to abolish the office and in its stead establish a private foundation funded by private Philippine corporations as a counterpart for a one-shot soft loan from the national government. These funds were to be placed in an endowment trust as a capital fund. except perhaps for sGV which, although primarily an auditing firm, had a management services unit that provided management consultancy, there were no independent private consulting firms in the country. Private investment groups, such as PHinma, did feasibility studies and various other consulting jobs for companies, but they were not independent in the sense of not being owned or attached to any single profit-seeking investment groups. The economic Development Foundation (eDF) was to be strictly an independent consulting firm with no production or marketing or financing operation of its own that could be in competition with its clients. However, a startup company that must rely entirely on consulting fees, in a country not accustomed to the need for the services of strictly independent consultants, would have trouble covering its overhead costs particularly in its early stages.

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This was the justification for an endowment fund. eDF was to rely primarily on consulting fees it collected from clients for the technical consultancy services and the feasibility studies it performed for clients. But the earnings from the capital fund could be used to cover periodic deficits. The capital fund was to have a life of 15 years, over which time eDF was expected to be totally self-supporting. The soft loan from the government and the capital fund contributions from private corporations would be retired within that period. over the next few months during the second quarter of 1964, we formed the economic Development Foundation. i recruited manny Lim Jr. to head it as its first managing director. other early recruits were Tinggoy Bonoan, who had worked with me in Filoil as manager of the Pandacan Terminal, cesar sarino, nene syquia, Dave arcenas, Buenaventura ocampo and a team of young engineers, accountants, and finance people who were challenged by the idea of forming themselves into a partnership of consultants that could rely on the earnings from a capital fund for fifteen years while they built up their client base. major Philippine and multinational corporations came through with contributions of P15,000 each, either as outright donation or as a soft 15-year loan to the capital fund at no interest. usaiD through the nec matched the private sector contributions with a P3 million long-term soft loan, but with the prospect of being freed from the P12 million annual funding that it took to support iDc. The Board of Trustees was formed out of the ranks of the private companies that contributed to the capital fund and representatives from nec and usaiD. since major corporations had contributed, we had a blue-chip Board that included Jim ingersoll from usaiD, Larry Henares from the nec, Leo Virata of Philamlife, Jobo Fernandez of Far east Bank, Filemon rodriguez of Filoil, Bert Villanueva of Trans-Philippines, Tony Delgado of Delgado Bros, emilio abello of meralco, manuel marquez of cBTc, Yao shiong shio of Yss Labs, ian Bruce of shell, and stan Fisher of amcham. i served as a pro bono President. sGV had to include in its audit certification every year that i had received no compensation, otherwise i would have been open to prosecution under the anti-graft law. eDF was not going to be a source of financial support for my growing family. eDF was to become a major player in the consulting business in the country. its former managing directors such as manny Lim, martin Bonoan, and cesar sarino would go on to leading positions in private corporations and government.

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chapter 5 organizing PDcP While i was at Filoil, the international Finance corporation (iFc), the World Bank’s private financing arm, was pursuing a program of establishing private development finance companies in the developing countries. a special division under William Diamond had been established for the purpose.

The concept The formula involved finding a source of a very soft loan to place as an attractive seed for inducing major private investors from the country to become shareholders of a private development finance company dedicated to providing loans and equity for strategic development projects. These institutions then served as conduits as well for World Bank loans and equity from iFc. such institutions had been established in Taiwan and Thailand.

Promoting the idea an iFc team came to manila early in 1961 to promote the idea of a private development finance company in the Philippines following the Taiwan and Thailand pattern. The major Philippine investment groups gathered for the presentation and a promotions group was formed which included most of the same groups we would later tap for eDF: emilio abello. Leo Virata, Jobo Fernandez, Paquito ortigas, monching del rosario, enrique Zobel, al Yuchengco, Baby Ysmael, charlie marquez. i was invited from Filoil to serve with the technical working committee. The iFc mission received a favorable response from the Philippine investors and wanted to take the promotion to the next step. However, the timing for further work was deferred until after the upcoming november 1961 Presidential elections. The elections that catapulted macapagal to the Presidency changed my career path and put me in the positions of chief economic planner, author (with my team composed of narciso Ferrer and my brother andy roxas) of the Five-Year socio-economic Development Program, assistant executive secretary for economic affairs overseeing the implementation of the Plan, and then chairman of the national economic council and concurrently Governor of the Land authority implementing the agrarian reform code. in my responsibility as implementor of the development program, completing the task of establishing the proposed Private Development corporation of the Philippines (PDcP) became part of my Key result areas. The chief hurdle now was to find a source of a seed loan with terms so attractive that private investors would not hesitate to becoming shareholders of the new institution.

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Making virtue out of necessity From my strategic position in the government, i found the source. among the several official grants to the Philippines that had remained unused was a military grant for the construction of barracks of P26.5 million. There was no programmed usage. i explored with Jim ingersoll of usaiD the idea of returning this to the u.s. government on condition that it be converted into a soft loan to PDcP. He checked and later said it was doable but we would have to negotiate the conversion with state Department in Washington, D.c. shortly after my appointment as assistant executive secretary for economic affairs and our setting up of the Program implementation agency (Pia), i flew to Washington to negotiate the soft loan for PDcP. i thought it would be a simple enough matter that would take only a couple of days. it turned out to be much more complicated. in Washington, i discovered, the position of the foreign aid negotiators was strongly influenced by their most recent experience with a loan that had turned sour. in this case it was a very soft loan given to Libya. i do not remember the terms but they were extremely soft. But shortly after Libya had availed of the credit, the country struck oil and became awash with foreign exchange. The u.s. congress took note of Libya’s prosperity and then saw this very soft loan that had been granted to Libya. an investigation was launched to examine why the u.s. government would grant such a loan to a country that had dollars flowing out of its wells. We had proposed that the grant money we were returning be lent to PDcP on very soft terms: 30 years maturity, 15 years grace period, and in the event of liquidation of PDcP before the loans were paid, its claim on PDcP’s assets would be junior to that of the shareholders. Viewed by itself and apart from its history, this was extraordinarily soft. But we felt it would take this kind of incentive to attract investors into a development finance institution that would take higher risks with start-up companies undertaking developmental projects. The negotiations in Washington, D.c. took a whole month. What finally clinched it was our appeal to state Department that this was in effect not a soft loan, but since it was originally a non-repayable grant, it had become a very hard grant! There were a few other hurdles that required creative and imaginative solutions. There was the matter of the World Bank lending to a private corporation. The World Bank charter required any country loan to have the sovereign guarantee of the government. But Philippine law did not permit the national government to extend sovereign guarantees for foreign loans to private Philippine companies. i had to deal with a similar problem previously in negotiating the coface (the French export credit agency) guarantee for Filoil’s purchase of refinery equipment. The French law had designed the program for what it called public procurement of French machinery. Public was interpreted to mean a direct purchase by a government or a government-owned entity or a private firm with a government guarantee. The only way to qualify the Filoil purchase was by showing that the Filoil obligation had a sovereign government guarantee. The Philippine national Bank was a governmentowned bank and its charter provided national government guarantees for its obligations. since cHaPTer 5 – orGaniZinG PDcP

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PnB had consented to be a member of the syndicate that provided the revolving Letter of credit to guarantee Filoil’s French procurement, its guarantee qualified in the interpretation as a government guarantee. The trouble was, the syndication made PnB’s guarantee joint but not joint and several, which meant it was answerable only for its prorated share in the total obligation. We solved it by playing on the ambivalent translation of the French term solidaire which according to the Larousse dictionary could be translated as joint or joint and several. since the operative loan document in France was the French version of the Letter of credit and the operative document in the Philippines the english translation, we used solidaire in the French version and joint (not joint and several) in the english. We did not have to resort to this in the PDcP case and it probably would not have worked in the World Bank negotiation anyway. We simply structured the loan as a direct foreign exchange project loan to the Philippine national Bank, and the project was financing of PDcP. We had to insist as a matter of national policy that PnB consider itself purely a conduit and completely pass on the liberal World Bank terms to PDcP as the beneficiary. The package proved to be extremely attractive and PDcP was able to raise the private capital subscriptions. The World Bank had recruited an american by the name of Kirk Paulding who signed a three-year contract to run PDcP up to 1965. among the Board members of PDcP were Paquito ortigas, Bert Villanueva and Jobo Fernandez. When news of my resignation from government came out, these three gentlemen offered me the job of taking the ceo position at PDcP upon the expiration of Kirk Paulding’s contract.

Deus ex machina This suited my circumstances well. The anti-graft law prohibited my taking a position with PDcP until a year after my resignation from the government, since i had been deeply involved in securing resources for it as part of my duties in government. i could, however, be permitted to serve as a retained consultant. The arrangement was then for me to serve as consultant for a year and then take over as ceo after Kirk Paulding’s contract expired. i had established sKr management consultants and advisors after leaving the government. it happened as well that roly Gapud had just returned from the u.s. He had taken an m.s. in the economics of information systems at miT. He was the nephew of Fanny Garcia, then the Director of economic research at the central Bank with whom i had worked during my nine-month stint in the department, and we had since become very close friends. she recommended her nephew and since i had this contract with PDcP, i needed an assistant. so roly and i worked together to prepare the strategic business plan for PDcP in the months of 1964 following my resignation from government. an unexpected turn of events changed my situation. Kirk Paulding decided he liked it in the Philippines, and he wanted to extend his contract for another year.

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Vicente Jayme was a classmate at ateneo and a very close colleague. We graduated together and we worked together in the labor movement in 1950 and 1951. When i joined PnB and became manager of the Department of economics, research and statistics (Ders), Ting Jayme was the personnel manager at caltex and i persuaded him to resign and join me as assistant manager of Ders at the PnB. He took over as manager after i left to join Filoil. Then when i organized the Pia he was seconded from the PnB to work with us. He was in PnB at the time i negotiated the PDcP financing. By the time i left nec, he had already joined PDcP as the no. 2 executive. Kirk Paulding lobbied with iFc to support his bid for an extension of his contract and with members of the PDcP Board who were not very close to me at the time, al Yuchengco and Baby Ysmael. Kirk also said that if i was no longer available after another year, they had a ready successor anyway in Ting Jayme. at about this same period, Bill Diamond of iFc came to me with an offer to join the iFc and head a mission to Latin america to promote the establishment of development finance institutions. so this was how things stood at my end when Gus Barcelon started talking to me about taking on the Bancom position. Gus and andy roxas then arranged for Dick Bliss to meet me and “look me over for himself.” Which he did sometime in august or september. The PDcP Board was yet to decide on Kirk Paulding’s request for the extension of his contract for another year. i committed to Gus and Dick that if the PDcP Board extended Paulding’s contract, then i would accept the Bancom position. and that is what happened. With iFc’s recommendation, Kirk Paulding’s term was extended for another year, and i agreed to take on the Bancom position.

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chapter 6 childhood, ateneo and social action Before anything else, let me recount some of the earliest and most important influences in my upbringing and education, which shaped my worldview and prepared me for my future stewardship of Bancom.

Nature and nurture i have followed in my own life a cycle of thought, realization and action, passing from intellectual discovery and awareness to passionate action – never content with the mere comprehension of theory, but wanting to see theory pass into practice. This trait was passed on to me from my father, manuel Luz roxas. my father was passionately devoted to the task of bringing the country into the 20th century through the application of modern technology to its farms and to the processing of its farm products. He was acknowledged to be the father of sugar technology in this country, having educated most of its early sugar chemists at the small training sugar mill in the chemistry Department of the u.P. college of agriculture in Los Baños. Later he tried to get the government to promote food technology through the national Development company. and when politics prevailed over technical competence, he decided to show the way himself by pioneering in the first modern food packing company, the rose Packing company. But let me briefly go back to the very beginning... a few hours before dawn some four score and five years ago, i came howling into this world and breaking the mountain stillness of Malaking Bato, a foothill barangay of mt. makiling within the campus of the u.P. college of agriculture in Los Baños, Laguna. Baptism a few weeks later, in the parish church of Los Baños town admitted me into the catholic faith taking the name of sixto, after Pope sixtus ii, whose feast the church calendar celebrated on august 6th at that time, before they moved it to the day following by putting the Feast of the Transfiguration of our Lord in its place. in the roxas family i was sixto iii, since my uncle and my grandfather were both born august 6th and also named sixto. i was born into a richly endowed catholic and intellectual life condition, a deeply religious mother and an intellectual father, into a clan of natural scientists and doctors on one side, scholars and political scientists on the other. i had my education with the Belgian nuns in grade-school, and then with the Jesuits through primary and secondary, through my Bachelor of arts and master’s in economics.

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Born in the times when families were large, i had six sisters and for most of my growing years the only son with five elder sisters. i do not know what the implications are for one’s formation. But my mother was mainly kept busy bringing up the girls. i was pretty much left to myself and in the charge of older male cousins. Papa took me in hand taking me with him on occasions when he could, particularly on hunting trips and his field inspection tours. i recall very early mornings in the Lipa house, Villa rose, with papa having very black and bitter Batangas coffee as we prepared to set out for rosario to go hunting snipes on the rice fields. all excited, i would be as early as i recall about nine years old. This was the age when i got my first real gun, a .22 caliber rifle, graduating from my air rifle made in Lipa by Kapitan Tiong, the famous air rifle and balisong artisan. This would be about 4 o’clock in the morning. We would then drive about 30 or 40 kilometers to the town of rosario, south of Villa rose in Bgy antipolo of Lipa. We would stop by the roadside and farmers and their young sons would meet us to serve as our guides and retrievers. The Wilson snipe (Galinago delicata) is a migratory bird of the sandpiper family, flying in to escape the winters in china and the Western hemisphere countries. They are worm feeders with long bills that would dig into the muddy fields for worms. They are ground birds, and starting about september they come down on the fields that are still muddy after the harvest or newly plowed and watered for the next crop but before they are flooded to control weeds. Hunting them meant walking along and balancing on the mud dikes, marking out the rice paddies, with shotgun at the ready. The snipe feed on the muddy fields hidden by the grass or stubble of harvested rice stalks, and flush off in a flutter of wings at the hunter’s approach. The hunter raises the shotgun, flicks the safety button, swings the shotgun to follow and lead the flight path, fires, and hopefully catches the bird in the pattern of no. 7 or 8 sized pellets. my father had been deaf from youth and it is only now i appreciate how sharply he had to hone his instincts to react properly without the benefit of hearing the burst of wing-flutter, and the croak of the frightened fowl. Because he was quite a skilled hunter, he always came home with a decent bag of the lovely, delicious, dappled birds. Before i was 12 years he had gotten me my first shotgun, a 20 gauge over-and-under double barreled shotgun and i could work my own stretch of rice paddies to bag my share of the catch to take home for my mother’s snipe-adobo dish. no activity bonds more effectively than hunting. i was, for many years, until my brother andy was born eight years after my youngest sister carmelita, the only boy among six sisters. Papa took me in hand, not just on the hunting trips but also on some of his field trips for the government. i got to visit fish ponds and fish canning factories, textile mills, and sugar mills. at an early age, while we were living in the Bureau of Plant industry’s official residence in the Bureau’s compound on san andres street, i walked around in the laboratories and curiously saw and smelled the trays where they were experimenting with the fermentation of coconut and pineapple mash to form the translucent nata. Papa, even as a high government official, never stopped being the “professor”. Presiding at our dinner table, he would instruct and test his children by posing teasing questions like: If you put c H a P T e r 6 – c H i L D H o o D , aT e n e o a n D s o c i a L a c T i o n

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ice in a glass of water so it fills up to the brim, as the ice melts, will the water overflow or recede? answer: recede because water expands in volume when frozen, and recedes back when melted. on these field trips, Papa would describe what they were doing to demonstrate the effectiveness of fertilizers on crop yields to convince the farmers. He would explain the use they made of actual field demonstration plots where they would show, through adjoining plots in the farm areas, the contrast between the yields of unfertilized and fertilized plots. my father was well known for his “hands-on” teaching method. at the college of agriculture in Los Baños, the professors recounted how on my father’s return from his training in sugar technology at the massachusetts institute of Technology, he built a centrifugal raw sugar mill with tin cans and assorted junk equipment he scrounged from the university warehouse because there was no budget for a demonstration mill. most of the sugar technologists that manned the country’s growing industry learned from this demonstration mill. These i well remember about my father: he was deeply concerned about the hunger of our people – both overt in starving poor families and hidden in the malnourishment of those who were supposedly adequately provisioned. For Papa a balanced economic development meant an adequate and balanced diet for all Filipinos. He dreamed of an agrarian society of educated farming families supported by and supporting a thriving food industry linked in what today we would call well designed supply-chains. He wanted these farm families to have milking animals, cows, carabaos or goats. He liked to say, nothing builds rigorous farming discipline better than dairy animals that demand to be milked early in the morning every day. accompanying him on field trips in the country’s rural hinterlands, i would listen in fascination as he described his dream of organized support systems for the country’s agrarian – farming and fishing – communities to bring post harvest facilities, storage, transport, processing and effective rural credit and agricultural extension services. at age 21 in my senior year in a.B. at the ateneo, the united nations agency for education, unesco, conducted a nationwide essay contest for the application of science to national development. i put my father’s dream into an essay titled, Science and a Golden Harvest, which won First Prize in 1950. my essay proposed a holistic approach to agricultural extension to bring the Filipino peasant into the 20th century.

Faith although raised in a deeply catholic family and by a mother devoted to the sacred Heart of Jesus and to His Blessed mother, and educated by the Jesuits, Papa returned from his three years of study in the u.s. not quite an atheist but at best a tepid catholic. Positive science and its implicit metaphysical assumptions raised doubts about certain doctrines of the catholic faith and the scholastic Philosophy he had studied in his Bachelier course.

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He remained a sternly moral and, in his own way, deeply spiritual person. But he was hard put particularly in reconciling the old Testament’s creation account in Genesis with Darwinian evolution and the origins of the universe as explained by modern physics. During his active years in government and later in business, the intellectual problem merely receded to the background of his attention, to crop up again later in his life. if i recall right, Papa’s conversion back to the faith occurred during the episode of our Lady’s appearances in the carmelite convent in Lipa to Postulant Teresing castillo starting on september 12, 1948, the Feast of the Holy name of mary. in some 18 appearances, our Lady called herself, mary, mediatrix of all Grace. During this period and until november of 1948, the appearances were accompanied by showers of rose petals, inside the convent at first and then later outside in the presence of devotees. The carmelite convent is situated right beside our farm in Lipa, Villa rose, the convent only a few hundred yards away from our house. Papa was among the crowd that witnessed the shower of petals and he became a believer. one of the carmelite nuns with whom i had conversations through the panel was the sister of Fr. Tony cuna s.J., so we had direct information from inside on what was happening. as far as we were concerned, these were authentic appearances. We in the family were believers. Papa returned to the sacraments and became quite devout. in the face of that conversion, the catholic doctrine and the scriptural accounts became a problem that he still needed to resolve in his own mind. Was Genesis to be interpreted literally? That the entire universe, the stars and the planets, all the living creatures were created in six days? modern physics said it took several billion years and plants, and sea creatures and land reptiles, birds, mammals, insects and humans evolved over that period. What is day that Genesis mentions – a sunrise and a sunset before there was a sun? Was original sin really the eating of a forbidden fruit? or are these to be interpreted as allegorical symbols and not taken literally? These were real problems for my father, the modern scientist. and he deliberated to find answers that could reconcile his faith and his science. He spent part of his final years reading, reflecting, and writing notes looking for works of scientists and catholic thinkers who had sought answers to the same questions. When i first read Teilhard’s Human Phenomenon in the late 1950s, i recall thinking how unfortunate it was my father did not live to read it. He had died in 1958 before Teilhard’s works became available.

A legacy to emulate as i look back on Papa’s 72 years on earth and my own 85, i am struck by the continuity of our life stories. i did not achieve the tremendous contributions he had made to the country’s early efforts at agricultural and industrial development and the high recognition he gained. early in his c H a P T e r 6 – c H i L D H o o D , aT e n e o a n D s o c i a L a c T i o n

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career when he was barely in his mid forties the university of the Philippines selected him as one of the two graduates among the 6,000 they had turned out since it was first established 24 years before, in 1908, whose accomplishments in their field and contributions to the country deserved the university’s highest recognition. The university President, rafael Palma, presented the Gold medal of merit and a Diploma of Honor during the march 21, 1932 commencement. The citation read: MANUEL L. ROXAS, Doctor of Philosophy, native of Lipa, Batangas, graduate of the College of Agriculture, University of the Philippines and of the University of Wisconsin, Professor Emeritus of Chemistry, University of the Philippines, pre-eminent sugar technologist, Vice-President of the International Association of Sugar Technologists, Director of Plant Industry, contributor to Philippine science and agriculture, a thinker and a writer – to you MANUEL L. ROXAS, in accordance with the commendation of the Board of Regents, the President of the University of the Philippines awards you a Medal of Merit and confers upon you a Diploma of Honor for distinguished achievement in the field of science. In testimony whereof I now present you with this diploma of honor and place on you this gold medal. This diploma and this medal will serve as the token of the community’s recognition of, and gratitude for, your unselfish diverse labors in the field of agricultural science, your deep insight into the life problems of your fellowmen coupled with the capacity of working them out into the realities of everyday experience, and of your practical outlook toward the affairs of the country and your vision of a great economic future for the Philippine nation. my father was appointed the first Filipino Bureau Director in the american regime and had been in office some two years when the u.P. recognition was awarded in 1932. in January, 1934 he was appointed second undersecretary of the Department of agriculture. under the setup the secretary, rafael alunan, and the First undersecretary, Jorge Vargas, were political appointees. it was the second undersecretary who was acknowledged to be the senior technical cabinet member. Papa’s selection was universally acclaimed as glorifying the recognition of technical excellence, and widely praised in the english and spanish newspapers in the country of that period.

Honing the intellect in my formal Jesuit education, i took more strongly to the intellectual process than to the esthetic and emotional elements of the ratio studiorum: philosophy, theology, mathematics and natural science. i had intended to pursue a medical career. my mother had always wanted a medical doctor in our family. For this reason my concentration at ateneo was a.B. Pre-med, and not the social sciences. at Junior Year a.B. at the ateneo, i was elected head of the social order club. its organization had been inspired by the social encyclicals of Popes Pius iX, Rerum Novarum, and Pius X, Quadraqesimo Anno. This was very much the atmosphere of the ateneo in those years. Fr. Joseph mulry had been the inspiration of the ateneans of the previous generation: Horacio de la costa, Leon ma. Guerrero, soc rodrigo, Jess Paredes, narciso Pimentel, manuel manahan, and the younger members, raul manglapus, Johnny Tan, and Jerry montemayor.

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Fr. monaghan, Fr. Delaney and Fr. Walter Hogan were our mentors in our years. This was the age of catholic action and particularly, social action. We were just getting over the age of apologetics when the polemics of the reformation seemed to be the burning issue. scholastic Philosophy supplied the intellectual lessons and symbolic Logic and modern Philosophy were the enemy. chesterton and Belloc, Jacques maritain and etienne Gilson, the schoolmen, were our models.

Stirring one’s social conscience after World War ii communism and socialism were the new threats. They had beguiling answers to the needs of the peasantry and the working class. The catholic church, still busy fighting the heretics of the reformation, was losing the war by default. it had ceased to be relevant because it was not responsive to the needs, especially in this country, of the common tao. This was the problem that the ateneo social order club sought to address. The social order club immersed me in a whole new reality – not about individual, physical illness but the pathology of the body social – the poverty, the social injustice, the misery, the cruelty and inequity, the inhuman treatment of men by other men. after graduation in march of 1950, i joined Fr. Hogan’s institute of social order, and helped him, Johnny Tan and edmundo nolasco organize the Federation of Free Workers with funding assistance from the Papal nuncio, monsignor Vagnozzi. Trade unionism seeks to increase the share of labor in the gross values added in industry through effective collective bargaining. The ultimate weapon of collective bargaining is the strike. its effectiveness as a weapon depends on its success in stopping the operations of the company. our experience, however, was that in a country with a large reserve pool of unemployed labor desperate for employment, the strike becomes a three-cornered struggle. Between the employing enterprise and the striking workers, and between the strikers and other workers eager to move in and take the strikers’ places. Poverty was not simply a problem of social justice or a maldistribution of incomes. it was primarily a problem of production and inadequate total incomes. This dawned on me more as we gained experience in organizing unions, negotiating on their behalf with managements, having in the end to use the ultimate weapon, the strike. i felt that i needed to understand the process of income generation more deeply. my shift from medicine to economics was not quite as dramatic as alfred marshall’s. But the process was somewhat similar. Working as a labor educator, journalist, union organizer, spending nights and days with workers on the picket line, attending hearings in the court of industrial relations to fight for recognition of rights of workers to back overtime pay, and against union-busting tactics of companies and their highly paid lawyers, made the plight of the laboring mass starkly real for me. But i also became aware of a larger problem. The existence of what Karl marx called the large reserve pool of labor. migration of families from the rural villages to metro manila had increased the numbers seeking urban livelihood far beyond the capacity of urban enterprises to hire them. and c H a P T e r 6 – c H i L D H o o D , aT e n e o a n D s o c i a L a c T i o n

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for every one hundred workers with jobs standing on a picket line to bargain for improved wages and better working conditions, there were several hundred unemployed hungering to take their places. our problem on the waterfront was created precisely because the union had a roster of 3,000 members when stevedoring required only about 300 each day. Workers were quite willing to have the union take a slice from their day’s pay for the opportunity to work on that day. We had thought that the solution would be to have the company pay the workers directly and not through the union. But this was no solution. The power of the union to select who would work each day gave them the power to collect their cut. (on the san Francisco docks, Harry Bridges solved this by a system of automatic rotation that removed from the union the power to decide who would work each day.) But the deeper and broader problem was the lack of jobs. What determined the pace at which a town, a city, a country in fact could multiply the opportunities for work? even as a student, my hunting trips had brought me to the countryside. We shot snipes, flushing them from the rice fields as we walked along the rice paddies. Guides and retrievers that we hired were from the families of the rice farmers. Hunting for ducks meant the wetlands and lakes, and local fishermen served as guides and boatmen. When we went for deer and wild boar, we traipsed up the mountains and had members of the indigenous tribes to guide and serve as our carriers. in this way i got first hand knowledge of the lives of our rural population. i saw their poverty and how their lives compared with ours in the towns. The plight of the poor somehow touched a soft spot in me. i had originally decided that in medicine i would want to be a general practitioner working in the province like my uncle simeon Luz who was practicing in the barrio of Balete by the Taal Lake and getting his services compensated with fish, fruits and vegetables from humble fisherfolk and farmers. Working in the labor movement i began to see an illness that was wider, deeper, and more fundamental than individual ailments. a pathology of society, whether by reason of unjust acts of employers, or errors of policy, or just plain unschooled plodding, but causing the ills that come with poverty, hunger, infant deaths, malnutrition, and miserable living conditions. in 1952 i left the labor movement and, with my nephew Bong Tanco, left for the united states to take up graduate studies in economics at Fordham university, new York.

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chapter 7 my development as an economist What was the state of economic science at that time, when i was arriving at Fordham for my graduate studies? Pure theory was neoclassical. Hicks’ Value and Capital was the basic bible of marginal theory in microeconomics, and for the mathematically literate, samuelson’s Foundations of Economic Analysis. The college text most widely used was Paul samuelson’s Economics which was in its second edition at the time. John maynard Keynes’ revolutionary contribution, The General Theory of Employment, Income and Interest had come out in 1936 and Keynesian economics was very much in vogue. The national Bureau of economics at columbia which Wesley mitchell had founded and where simon Kuznets was active had been publishing its series of studies of income and Wealth measurement and its Business cycle indicators. The theory of the Business cycle, the alternations of prosperity and depression, was still a preponderant concern of economists. Keynesian analysis rendered operational by the advances in national income accounting was a key analytical tool for the cycle. in the u.s. government, the employment act of 1946 had created the office of the council of economic advisers to prepare annually for the President of the united states the economic report that had to be submitted to congress under the act. This was the closest the country had come to economic planning. many of the economists teaching in the universities in the u.s. had worked during the war in the office of Price administration and so there had been practical experience with planning and the administration of economic controls. economics had been strongly influenced as well by the emigration of european and russian economists and social scientists, such as Joseph alois schumpeter, Wassily Leontieff, Jacob Viner. Finally, the united nations, the international Bank for reconstruction and Development and the international monetary Fund focused concern on the twin problems of economic development and monetary stability in the developing countries. Development economics was in search of formal analytical tools and precipitated in the economics profession the search for the new “general theory” or the “generalization of the General Theory”, reflecting the ambition to discover the revolutionary new theory of economics to duplicate the Keynesian revolution. cHaPTer 7 – mY DeVeLoPmenT as an economisT

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in Latin america, raul Prebisch had launched the critique of the theory of comparative advantage and the intellectual foundation of the international division of labor that justified the colonial trade pattern. in this environment, i immersed myself in economics to understand its preponderant issues, learn its conceptual tools and language, and generally become familiar with its paradigms. To firm up my own grounding, i accepted the job in my second year, of teaching freshman economics at Fordham, using samuelson’s textbook. i wrote my master’s dissertation on the topic of Economic Change, Development and Growth in Underdeveloped Countries, marshalling the theoretical and measurement tools for understanding these three processes, applying those tools to the history looking specifically at the industrial revolutions of england and Japan. my intention was to use the same framework then to launch into a longer term study of the development process in the Philippines, but always with an eye to the handles for strategic intervention in the process. my interest was not simply to understand the process, but to see what might be done to accelerate it and direct it towards the welfare of the common man.

More than economics i had spent many years trying to understand the processes by which communities and nations achieve the improvement in life quality that is subsumed in the catchall term development. at Fordham, having decided that i would no longer go on to Harvard for a doctorate, i settled for a master’s degree. i wrote my dissertation on the processes by which poor nations become wealthy. i studied some of the principal historical examples of the process: the industrial revolution in england in the 18th century, the commercial and industrial developments in europe and north america, and the industrialization of Japan in the 19th century. not one but at least three processes could be sorted out in the transformation of an underdeveloped into a developed nation. The tools of economic analysis were applicable to only one of these – growth. The others required sociology, political science, psychology, anthropology, history, all the other social sciences. i entitled my thesis, Change, Development and Growth of Underdeveloped Economies. it was an attempt at constructing an interdisciplinary model of the process that would somehow reflect the rigor and conceptual precision of economic analysis, as Joseph schumpeter used the term. His History of Economic Analysis (1954), much awaited, had finally been published just as i finished my dissertation. But i was familiar with schumpeter’s other works, which proved invaluable in helping me to see economic science in the larger perspective of the overall social sciences. This quote from the introduction of my 1954 dissertation articulates my objective even then: The problem of the ‘underdeveloped’ country involves much more than the manipulation of a few economic indexes like per capita investment or percentage of income saved. it is a matter of producing a whole socio-economic complex, new patterns of thinking and behavior, new social institutions – in truth, a whole new civilization – and of doing this at the same time with a minimum of the social dislocation and human suffering and degradation the western countries had to endure.

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To bring this about, two things are required: first, understanding and second, efficacious control – understanding of the factors and processes that operated in the western and westernized countries to bring about the tremendous increase in their economic productivity, and of the causes responsible for the social dislocation and distress that followed in the wake of the economic movements in those countries; and then the efficacious and enlightened control by various public and private agencies of the factors necessary to bring about the most orderly development possible. The purpose of this dissertation is to fashion an analytical tool that will help the understanding and guide the effective policy. in order to serve this purpose, this tool must be geared to explain dynamic processes within the economy. Then it must take account of changes of the economic system itself. This character of our apparatus we may call ‘evolutionary.’ Finally, our tool must be statistically operational. That is to say, it must ask questions that statisticians will be able to answer. This was written when i was 27 years old.

Another serendipitous turn marriage to Bing escoda in new York in June of 1953 interrupted my intention to pursue a doctorate at Harvard. i returned to the Philippines in 1954 armed with my master’s degree and twenty crates of books, and bent on finding the strategic staging area to pursue a lifetime study of the development process in the country. in the Philippines, ramon magsaysay had been elected President and a whole new spirit of reform was in the air. i returned to manila immediately after i had finished and submitted my thesis, not waiting for the formalities of graduation. i was eager to pursue the actual research and accumulation of experience that would flesh out the bare framework of the system i had set up and the concrete modes for reducing it to a practice. Looking back on it, i realize now that this has been the burning obsession that has driven my whole life. one other concept influenced that life plan: the original idea of the professional. The english historian r. H. Tawney in his book written in 1920, The Acquisitive Society, described the original distinction between the tradesman and the professional. The old idea then was that people who professed a specialization had rights because they performed a function. in fact the distinction between the professional and the mere tradesman that gave the tradesman a lower ranking was precisely that the tradesman pursued his occupation primarily for profit rather than for service; whereas the professional performed the service primarily to perform the social function, for which he earned material support from the community. Without realizing it explicitly, i was searching for the social function of the development professional. The search naturally had to start from the existing occupations and industries. i realized that whatever that was, it had to be made to evolve from the occupations and sectors actually existing in the country at the time of my return. i had to find the most strategic starting point and staging area. cHaPTer 7 – mY DeVeLoPmenT as an economisT

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as i look back on it, at no time in my life have i thought of work in terms of the conventional “looking for a job”. it was always seeking an occupation that would be a strategic staging area for practicing this idea of a development professional. not being wealthy, i was fully aware that making a living out of the practice was or had to be an essential part of the profession. But it was always secondary to the function i could perform. i had a sort of blind faith that if i structured the function properly, its performance as a professional occupation would, at the same time, produce a living for me and my family. ironically, the study of economics had not made me an economic animal, nor had the study of the capitalist system transformed me into a real capitalist. The pursuit of my goal to be a practicing economist required three steps: 1) establish a base from which to undertake the systematic research and study to understand the development process itself, and the Philippine realities; 2) identify and select the most strategic position from which to practice effectively the profession of a development entrepreneur; and 3) Work myself into that position. The steps seemed fairly clear and simple. and like the brash 27-year-old idealist that i was at the time, i proceeded to do it. step 1 was the research and study that working for a doctorate would have accomplished. That opportunity now lost, i thought the next best thing was to simply do it on my own. The options were to enroll in a university or work in an economic research office. i was married and had a daughter now. i opted for working in a research office.

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chapter 8 Practicing economics at central Bank and PnB The most prestigious economic institution in the country during the 1950s was the central Bank of the Philippines. The central Bank started in January 1949 under Governor miguel cuaderno. Governor cuaderno himself enjoyed world-wide respect for his performance as governor of one of the earliest central banks in the newly independent countries of the world. He had a formidable economics team. Dr. andres V. castillo earned his Ph.D. from columbia university and his doctoral dissertation, Spanish Mercantilism (1930), was cited in schumpeter’s History of Economic Analysis. Leo Virata had returned from the united states where he had been stranded by the war. He had his degree in economics from Harvard university and he had organized the research department. it was the rallying place for the country’s professional economists whose numbers were, at the time, quite few.

The entry my father armed me with an introduction to Dr. Horacio Lava who headed the department after Leo Virata had left the bank to join the Philippine-american Life insurance Group. i saw Dr. Lava in his office. His assistant then was Dr. Fanny cortes-Garcia. i had an interview with both of them in Dr. Lava’s office. i mentioned my interest in doing research based on the design set out in my master’s dissertation. Dr. Lava asked for a copy which i left with him and arranged for me to see them again after they had had a chance to go over my work. When i saw them again they proposed that my best bet for continuing my work was to join their staff. He offered me the job of assistant economist. i agreed and started working in september 1954 with an acting status since i had to take and pass a civil service examination to be given a Regular status.

The state of play and my role my first assignment was to analyze the impact of a bond issue of one billion pesos on the domestic and international stability of the Peso. When the department was organized in 1949, there were few professionals who had degrees in economics. The department had to be manned largely by people who had degrees in commerce and accounting. The initial job of the department in any case was to establish the statistical series needed to administer the charter of the central Bank: consolidations of money and banking statistics, money supply, price series, indexes of physical volume of production, international trade and balance of payments data to match the standard definitions established by the united nations and the international monetary Fund. The department had also pioneered in the country’s national income accounting. These were data needed to supply the empty boxes of united nations tables that were used by their economists to do inter-country comparisons.

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econometric analysis was in a very crude state. analyses emanating from the central Bank consisted largely in explaining the movements in the economic and financial indicators through accounting rather than strict economic analysis. The movements were explained in terms of the changes in the components of an indicator. There was little statistical correlation work or factor analysis. and the theoretical framework was extremely elementary. as i look back on the econometric model we used for the analysis, i am embarrassed at the elementary structure of it. it was a simple income multiplier analysis. We avoided the sticky problem of relating the analysis of stock monetary aggregates to the flows of income and expenditure by assuming that the one billion bond issue would be an increment in government expenditures. We confined the analysis to the short run, limiting the analysis therefore purely to the expenditure effects and ignoring the changes in productive capacity. any increase in demand would have to be met with existing productive capacity or imports. so the expenditure multiplier was limited by the marginal propensity to save and the marginal propensity to import. We assumed some unused capacity, which permitted some physical production growth after which further expenditure expansions would be met by combinations of domestic price increases and international reserve losses. For the calculations – this was before the age of the microcomputer – we had to mobilize members in the staff who had mathematical rather than accounting backgrounds. Gabriel itchon was a young researcher then who had finished engineering. He became my assistant in the project and was later to become one of the first econometricians in the department. The central Bank was to send him to Yale to study econometrics with James Tobin. simple as it was, the econometric work turned out to be a pioneering job in the department. The memorandum was submitted to the monetary Board and caught the attention of Leonides Virata. This was the beginning of a lifetime friendship. i was at his deathbed in Houston, Texas many years later.

End of CB, beginning of PNB experience my career in the department was cut short by an unfortunate incident. Horacio Lava had incurred the ire of american advisers because of the fervent nationalistic policies he was pushing in the monetary Board, specifically in the administration of import and exchange controls. a few months after i had joined, he was summarily dismissed. The grapevine said that it was on pressure from the americans. i became disenchanted. it happened at this time that President magsaysay had appointed arsenio Jison as President of the Philippine national Bank. Jison was a columbia university graduate in banking and finance who had studied with professors like the famous monetary economist, Parker Willis. Willis was the first President of PnB at its inception. Jison was anxious to revitalize the Department of economics, research and statistics at PnB. He had asked Tomas aguirre, who was one of the pioneers in the central Bank Department of economics, to come in and first reorganize the economics unit and then move on to become a Vice President in one of the operating line departments. Tommy was looking around for an assistant manager who

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would take over from him when he moved on. He asked me. in my disenchantment over the firing of Dr. Lava, i was no longer interested in continuing at the central Bank. i accepted. The staff at the department gave me a wild send-off. in the short nine months i had been there, i had formed deep friendships.

Differing economic perspectives in my studies of the Philippine economy, i had compared the period of the 1950s in the Philippines to the transition between the age of mercantilism and Laissez-faire Liberalism in europe. The issues were the same – between protectionism and free enterprise, between controlled and free foreign exchange markets, between quantitative controls and direct allocation of resources and the operation of free markets. The media for the polemics were the same: pamphlets and popular articles in the newspapers, public speeches, testimonies in congressional hearings. The level of analysis was about the same. most of the argumentation was conducted by practical men of affairs rather than by academic economists. most of the literature was of the same level of analysis as the popular treatises in england of the late 17th and early 18th centuries. The central Bank and Governor miguel cuaderno were institutionally the champions of mercantilist policy, the defenders of controls and of the maintenance of the prewar exchange rate of Two Pesos per u.s. Dollar. on his side were the importers and the new industrialists who had emerged in the protected environment of exchange and import controls, the overvalued peso, and the windfall that was built into the grant of foreign exchange allocations. Together with them were many of the commercial bankers who counted these importers and new industrial class as their clients and shareholders. By and large, the urban public in metropolitan manila sympathized with the mercantilist position. Their position was natural for a consumption society whose interest was really favored by what the foremost student of mercantilism, Heckscher, called the staples policy. arrayed on the other side were, of course, the producers of export products – particularly, the sugar planters and millers, the coconut producers, the loggers and plywood manufacturers, the mining companies. The PnB was a principal banker of the sugar industry. arsenio Jison was a sugar planter, an active member of the national Federation of sugar Planters. it was natural that he would be a principal opponent of the mercantilist policy of Governor cuaderno. His position suited me intellectually. i viewed a freeing of the exchanges and the transfer of more decisions to the free market as favoring a genuine industrialization of the country. it would support a policy that would make the generation of domestic added values far more attractive than a policy that perpetuated an overvalued currency and a built-in subsidy on imports. These, i felt, were strong disincentives to the backward integration of industries and the expansion of local content in manufactures. i was strongly a neo-classicist then, and marshalled all the classical arguments for the efficiency of free market decisions against the irrationality of administrative allocation and its proneness to corruption. i studied all sorts of transition modes for the gradual transfer of allocating decisions to market mechanisms such as auctions leading to eventual decontrol. i reflected these in the speeches that i helped write for c H a P T e r 8 – P r a c T i c i n G e c o n o m i c s aT c e n T r a L B a n K a n D P n B

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arsenio Jison, who became the most articulate advocate of decontrol and devaluation. The debate raged in a struggle to win the favor of President ramon magsaysay and it ceased only after the untimely death of magsaysay in 1957 and the succession of President carlos Garcia. shortly thereafter, arsenio Jison resigned and eduardo romualdez became President of the PnB. President Garcia came out strongly in favor of keeping exchange and import controls. He launched his Filipino First policy, which required that direct administrative allocation of resources continue as the most powerful instrument of nationalism. During my years as economist in the central Bank and the Philippine national Bank, i pursued my public advocacy to launch the country on to a sound, inclusionary, and sustainable development course. This was long before the terms sustainable and inclusionary were in fashion. But i had shifted to economics to understand how to solve poverty in the country’s rural and urban communities and remained steadfast in my life objective: to understand more thoroughly the whole development process, and to find the appropriate staging areas for making a meaningful contribution to the process.

Other roles aside from my duties as chief economist of the Philippine national Bank, i served as head of the technical economic staff of different government commissions studying the minimum wage law, evaluating the central Bank’s performance, studying the country’s foreign exchange and international trade policies. i taught courses in several schools, the ateneo graduate school in Padre Faura, the university of the Philippines in both manila and the college of agriculture in Los Baños. i contributed popular articles in the Sunday Times Magazine, maintained a daily column in the Manila Chronicle and engaged in debates against what i believed were economically unsound prescriptions. i was ghost writer for speeches of the bank’s executives and used the opportunity to voice my own ideas. i accepted speaking engagements to express directly my own economic diagnoses and prescriptions.

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chapter 9 corporate finance at Filoil at this time of President Garcia’s new administration and as part of the policy, the opportunity was given to a Filipino group to enter the petroleum business and become the first Filipino petroleum company. The license was given to the PHinma Group of Filemon rodriguez and ramon del rosario to establish a small petroleum refinery with a capacity of 17,000 barrels of crude per stream day. The project was at the time the largest to be undertaken by a private Filipino group although it required only ten million u.s. dollars. it was also the most exciting piece of financial packaging. The Filoil company was to be a joint venture with the Gulf oil company of Pittsburgh, one of the companies of richard mellon. it would require the mobilization of international and domestic capital. it would use every form of sophisticated financing modes, from equipment credits with export credit insurance to purchase leaseback arrangements with domestic insurance companies. Don Filemon rodriguez was chairman, ramon del rosario sr., President and ceo. Their Board included Leo Virata, Jobo Fernandez, ernie escaler.

Hands-on i joined the project as the chief Filipino finance officer. i had decided it was time to move from economics and banking to hands-on industrial management. in 1958, before i had turned 31, i resigned from the Philippine national Bank and became the Financial Vice President of Filoil refinery and marketing corporation. The financing of industrial projects was not an entirely strange field for me. While at the Philippine national Bank, one of the missions of my department was to perform the evaluations and feasibility studies for term loans for industrial projects. in the Philippines, bank lending was basically asset lending. The idea of lending on the basis of earnings and cash flow forecasts contained in a project feasibility study was unheard of. The department thus became the industrial loans unit of the bank. But we had not done anything of the scale and complexity of an integrated petroleum refining and marketing project. it was an exciting new project. it involved international negotiations with the highly seasoned teams of a world class oil company, with major process contractors of oil refining and marketing equipment, and with the major european and u.s. banks. Providentially, the Filoil opportunity also represented a chance to further my quest and enrich my experience as an economic development practitioner through hands-on, private corporate management, in the role of chief financial officer of the most exciting new project on the Philippine horizon at the time, a Filipino petroleum company. c H a P T e r 9 – c o r P o r aT e F i n a n c e aT F i L o i L

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Politics and opportunity While he had shot down the advocacy of the exporters to remove exchange controls, President Garcia’s political cunning launched his Filipino First policy from the national economic council under the chairmanship of a prominent sugar-bloc leader, Dr. Jose Locsin. Garcia appointed Locsin as chairman of nec after the President had decided against giving in to the exporters and supporting instead Governor cuaderno and his policy of maintaining the cheap dollar policy and the exchange controls it required. The timing was perfect for a new venture that the Philippine investment and management company (PHinma) established by Don Filemon rodriguez and ramon V. del rosario was contemplating – a Filipino controlled and managed petroleum refining and marketing company. it was a bold entry into an industry controlled worldwide by the giant american, British and Dutch oil companies like standard-Vacuum (stanvac), caltex, shell, Tidewater. and in asia there were as yet no oil companies controlled and managed by asians. in the Philippines, under the regime of exchange controls, the government had pushed caltex to build a refinery and process crude oil in Batangas. This was followed by stanvac in Bataan. shell had built a smaller refinery in Batangas designed to maximize the extraction of gasoline, since in the Philippine market gasoline accounted for the largest percentage of the petroleum product-mix. The fourth multinational petroleum company operating in the Philippines was Tidewater which had too small a market share to warrant its own refinery. The investment climate created by exchange controls and a regime of cheap dollars stimulated the emergence of a whole corps of Filipino entrepreneurs. The four brothers of the del rosario family, mariano, ramon, Jesus, and Francisco, thrived in this environment. They went into the local assembly and manufacturing of consumer durables and into installment finance.

The entrepreneurial mentors ramon, the second brother, had been an executive of iBm Philippines and then joined earl carroll in Philamlife, the local subsidiary of c.V. starr’s aiG. He was the ultimate entrepreneur, eloquent and persuasive, innovative, and had in abundance what Keynes called the animal spirits of the entrepreneur. He also had a keen instinct about choosing the right partners. Don Filemon rodriguez, on the other hand, was the model of the development technocrat. He had been the architect and developer of the country’s energy program, a brilliant engineer, a totally dedicated patriot and nationalist, and a devout christian. He had served long years in the government as head of the national Power corporation, serving with brilliance, effectiveness and unquestioned integrity. The two constituted a formidable team. i was extremely fortunate to enter the private corporate world under their tutelage. They needed a finance man to complete the team and they invited me to be the project’s chief financial officer. The timing was perfect. The Garcia administration wanted a dramatic first project under the Filipino First policy. What more dramatic than the first Filipino and asian petroleum company? among the

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multinational oil giants, Gulf oil corporation, the company of the mellon family of Pittsburgh, had no presence in the Philippines. The Filoil proposal gave them a chance to establish a presence as the minority shareholder of a refining and marketing company, providing the technical expertise and the international petroleum connections. Gulf had played a major role in the early development of crude oil production in Kuwait and was a founder and partner with British Petroleum in the Kuwaiti oil company. This link assured Filoil a source of crude: middle east oil from Kuwait. PHinma submitted a proposal to form a joint venture with Gulf oil corporation to establish a refinery with a capacity of 17,000 barrels of crude per stream day and a marketing company for the wholesale and retail distribution of petroleum products. Gulf would be a minority stockholder but would provide technical and managerial services in the design, promotion and construction of the refinery and the technical training of its operating staff. and, most importantly, would assure a supply of crude oil from Kuwait. PHinma was confident it would not need Gulf people for the marketing and finance as there was enough Filipino capability to handle those aspects. The project would require authorities to pursue the negotiations with commitments that the necessary foreign exchange allocations would be provided by the central Bank for the capital and operating budgets of the project. since the construction of the refinery would take about three years, the marketing company would have to be established right away and have the allocations to establish the terminals and retail service stations to be able to bring in finished products to market while the refinery was being constructed. This was needed so that when the refinery started operating, the marketing infrastructure, retail network and organization was in place to move the products. The prior development of a market for the particular mix of petroleum products that the refinery would turn out offered a very particular challenge. Philippine consumption of some 100,000 barrels a day equivalent had a pattern typical of a country that was still in the very early stages of industrial development. Gasoline for transport fuel, and kerosene for the rural communities and urban poor families. industrial consumption was largely for diesel and some light fuel oil. The Philippine refineries of the oil majors used largely indonesian crude which had a low sulfur content and was based on paraffin rather than heavy asphalt. Filoil was going to use middle east crude which had a high sulfur content and the residual base was a heavy asphalt, so that in the distillation process the residual oil was what was known as bunker fuel, with heavy viscosity and a high sulfur content of some 4%. in the economics of refining the lighter products were more highly priced than the heavy. To produce the lighter fuel oil that the Philippine market used, the process would have to cut part of the diesel into the fuel oil, which meant mixing a higher valued product into a lower valued fuel oil. marketing had to begin cultivating the market for bunker fuel. and a way had to be found to reduce the sulfur content of the product to the low fraction in the fuel available from the competition.

The team monching del rosario’s charismatic leadership in the marketing world and the nationalistic appeal to Filipinos working in the multinational companies enabled Filoil to compose a powerful management team. Benjamin de los reyes from shell came in as marketing Vice President and general manager, c H a P T e r 9 – c o r P o r aT e F i n a n c e aT F i L o i L

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with Jose chuidian, a senior finance man of shell. From caltex Domingo chanco came in to run retail sales with Jose Javier from esso. Don Filemon brought in from national Power his star technical manager, Jovy Jovellanos, eventually to assume the managership of the refinery operation. among my classmates at the ateneo, carmelo Quintero and David Daza joined the marketing team. They were to die with Benny de los reyes in the tragic PaL plane crash in which they were riding back from cebu. They left as widows Tessie Villegas Daza, daughter of my Tia Lilay, mama’s sister, and Peewee syquia Quintero, a close family friend. my task as chief financial officer was to prepare the financial plan and handle the financial aspects of the negotiations for the company. Gulf fielded a team headed by Dave Bonner, with technical and marketing specialists. The finance person was an older, experienced senior Vice President from the Gulf Treasury, Walter Wilds, who was assigned as adviser. it was for me an experience more than equivalent to an mBa, more even than a Harvard doctorate in economics. The business plan was a full scale financial modeling of a complex petroleum refining and marketing operation. The technical design and the feasibility study was prepared by united oil Products, the world’s leading international supplier and licensor of petroleum refining processes. They had pioneered in the “cracking process” which maximizes the extraction of gasoline from crude petroleum. The process was catalytic cracking, in the development of which Gulf oil had a key role as well. it suited the Philippine consumption pattern where gasoline had the major share. in consultation with the Gulf team and under Don Filemon rodriguez’s and monching del rosario’s guidance, the business strategy was formulated. There would be three corporations: Filoil refinery, Filoil marketing, and Filoil consolidated. The first, to build and operate the refinery; the second, to handle inventory management of the terminals, wholesale and retail sales, and credit and collection of receivables; and the third, to own the real estate for the refinery site in rosario, cavite and the marketing facilities, terminals and service stations. since the construction of the refinery would take some three years, marketing would start immediately and build up the markets and the sales and delivery infrastructure for the mix of products that would be coming out of the refinery. They would do this with imported refined products for that period until the refinery started turning out the products. The partnership of Don Filemon and monching del rosario was a perfect fit for the functions. Don Filemon having the technical engineering background in the energy field would oversee the refinery corporation. monching del rosario would oversee marketing and sales operations. it was decided that the construction of the refinery would be bid out on a turnkey basis, with each bid combining both the construction cost and a committed financing of the capital requirements.

Organizing and financing FilOil We therefore had to include in the invitation to bid, the documents showing the prima facie financial viability of the whole project, which our financial team had to turn out. We had to take the technical process data and translate them into capital, sales, production, inventory, human resource budgets, do the financial engineering, reduce them to pro-forma balance

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sheets, income statements and cash flows, and demonstrate capacities for debt service and returns to shareholders over the depreciation period. This was before microcomputers and the numbers had to be crunched with mechanical desktop calculators! The negotiating mission for the project headed by Don Filemon included monching and ernie escaler, the PHinma top management, and also Leo Virata, Don emilio abello, and Jobo Fernandez. Working round the clock my team finished the financial feasibility studies, and were rewarded by the compliments received from the negotiating team. Don Filemon and Leo Virata, who had been involved in past negotiations for large government projects, mentioned the favorable reaction received from the executives of the financial institutions they had called on who expressed surprise that “the Philippines could turn out such a sophisticated financial modeling document for a complex technical project.” The winning bidder was an american company sourcing the hardware from France with a French export credit facility covered by the French government’s export credit guarantee scheme called coface.

The French cachet Walter Wilds and i were charged with negotiating the export credit financing in France. We travelled to Paris in april 1960 for the negotiations. Walter was with his wife Bonny. We were booked at the Hotel Bristol on the Rue du Faubourg Saint-Honoré, perhaps Paris’ most expensive row of shops. it was my first trip to Paris, to anywhere in europe in fact. Walter and Bonny knew Paris well and loved the city and French culture. i was fortunate to be under their tutelage on this trip. representative of my cultural education was learning how to eat artichokes. at my first dinner in the elegant Hotel Bristol dining room with Walter and Bonny, going over the menu they recommended i start with artichokes. There was served this bouquet of what looked like large petals that i was supposed to eat. i cut off one of the petals and tried to chew on it. it was tough and stringy and i thought, I am supposed to eat this for a start? Walter and Bonny politely ignored my predicament, simply peeled off a petal, dipped the edge in the butter sauce, and simply literally scraped off with their teeth, but delicately, the bit of vegetable flesh from the edge and put aside the rest of it. after stripping the bouquet of petals, there was a meaty core left. They poured sauce on it, picked up fork and knife, and cut through what they told me later was the “fond” or heart of the artichoke. There were more substantive elements in my education: cultural, French drama at the ComédieFrançaise, Friday black tie dinner at maxim’s, the chansonnier in the French bistros, dinner on the Bateau Mouche on the river Seine.

Napoleonic legal framework But best of all was the experience gained from understanding the intricacies of the French export credit financing and the exciting challenge of solving problems raised by the need to propose terms that would reconcile French government requirements with Philippine legal constraints. in France c H a P T e r 9 – c o r P o r aT e F i n a n c e aT F i L o i L

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at the time, financing was governed by an old napoleonic Law that decreed that promissory notes to be valid had to have three signatures and a maturity no longer than 90 days. in order for French equipment suppliers to provide financing terms of ten to fifteen years, special institutions were established to render promissory notes generated from the sale to conform to the napoleonic Law. They provided a third signature and kept 90 day promissory notes floating for the 10 or 15 years required. ciaVe, the Compagnie Industrielle et Agricole pour le Vente Exterieure was a specialized institution established by the Banque Worms and Banque de suez Group, which were selected by the winning american bidder for the refinery construction contract. it was with ciaVe that Walter and i had to negotiate the terms of the French financing. The negotiations kept us in Paris for nearly a month. i recall two instances of problems that challenged our creativity. The financing of the refinery equipment coming from France required a French government guarantee so the suppliers could discount the Filoil receivables with the syndicate of banks headed by the Banque Worms and included the Banque de suez and the morgan Bank. The program was established to cover primarily an official government purchase of the importing country. This was to ensure that the credit had at least the character of a sovereign government obligation but construed somewhat more loosely than the strict interpretation required by World Bank loans. The problem: Filoil was a privately owned company. How to structure the purchase as a public purchase in the French meaning. The interpretation would qualify the purchase if the credit of Filoil had the guarantee of a government bank. But in the Philippines the two government banks that qualified had never participated in a syndicate guaranteeing the loan of a private company. By present standards the amount of $10 million does not seem large, but in 1959 it was the largest project financing deal that Philippine banks had yet undertaken.

Problems and solutions Furthermore, while the DBP as a development finance institution could directly issue guarantees, commercial banks could not issue guarantees except through commercial Letters of credit. These Lcs were originally designed for financing imports. They were adapted to finance installment payments for imports of equipment by making them Standby Letters of Credit covering each installment payment with a commitment of the banks automatically to reinstate the credit to cover the next after each installment was paid. Private commercial banks had formed syndicates to cover equipment imports of private Philippine firms for smaller transactions. under the banking laws, commercial banks could not assume any single credit risk that exceeded 15% of the bank’s unimpaired capital and surplus. at the time, these single borrower’s limits, so called, were relatively small. The $10 million credit required by Filoil required 10 banks. But to qualify the equipment purchase from France for coface guarantee we needed to have the government banks as members of the syndicate. For the Filoil refinery we took Jobo Fernandez’s

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Far east Bank and the commercial Bank and Trust, in which ernie escaler was a shareholder, to be co-managers. We managed to persuade my old boss, eduardo romualdez of PnB, and Greg Licaros of DBP to take the historic step of joining a syndication. Then we ran into another tough problem. To qualify the purchase as a public purchase, the guarantee of the government financial institutions had to be construed from the French perspective as covering the entire $10 million if it became necessary. on the other hand, from a Philippine regulatory perspective, the Letter of credit had to be merely joint, meaning each bank had a limited risk to stay within its single borrower’s limit, and not joint and several, which would have meant that each bank could be held accountable for the entire $10 million if it became necessary but which would have violated the rule on single borrower’s limits. negotiating in Paris, we grappled with this problem. The whole issue hinged on a single term, joint versus joint and several. in the interpretation of the terms among the French banks, the operative legal document was the French version. in the Philippines the operative document would be the english version. i discovered an interesting piece of information from the Larousse dictionary. Both terms were translated by the same French word solidaire which in France was understood as joint and several and in the Philippines could be translated as simply joint. We agreed in France to the French version and then brought back to the Philippines the english version as the document to be signed by the Banks. another interesting feature. The project finance provided a certain percentage to be used for local currency costs of the project. This also was to be covered by the guarantee. But since the portion was denominated in pesos but had to be repaid in u.s. dollars the French banks wanted an exchange rate adjustment provision to cover the exchange rate risk. The central Bank charter defined devaluation as a change in the official parity under section 49 of the central Bank act. i was aware that the central Bank’s foreign exchange regulations dictated exchange rates that departed from the legal parity without actually invoking section 49. in the wording of the agreements, we made a change in the parity under section 49 as the trigger for any adjustment in the conversion rate of the Philippine peso obligations into dollar repayments. as it turned out, the government’s decontrol program that took place in January 1962 increased the pesodollar exchange rate but without an actual change in the legal parity under section 49, thus saving Filoil the added cost that would have resulted.

Financial engineering Back in the Philippines, we devised further new financing instruments to cover the investments in the construction and outfitting of service stations all over metro manila and suburbs, initially. outstanding examples were Purchase-Lease-Back contracts with Philamlife. The financing did not increase the outstanding liabilities of Filoil because the service station land and equipment were technically sold to Philamlife and then leased back to Filoil with lease rates that fully liquidated the notional principal and interest over, say, the 5 or 10 year period.

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The perks as i said, my learning experience at Filoil was worth more than an mBa or a doctorate. and for my family, this phase of my career as a corporate executive opened up the amenities of the modern metropolitan elite life. monching and Don Filemon believed in executive perks, particularly club memberships. i received as part of my perks first as Vice President for Finance and later as executive Vice President, membership shares in the manila Polo club, the Baguio country club, and since its facilities were practically next door to our offices, the casino español. earl carroll offered for Philamlife to give us financing to build a home in Forbes Park, i did not want to go that far in our change of lifestyle. We opted to stay in Parañaque, a display of reverse snobbery. But the family learned to enjoy the facilities of the Polo club. my wife Bing, particularly, because she could socialize with her “crowd”. she was in her element there. Being a Batangueño, i also enjoyed the horses and took up riding seriously, equitation as an art, teaching myself dressage out of books, and jumping. i even acquired a beautiful white mare from enrique Zobel, Gray Fox, a Peninsular breed. The Peninsulars are so-called because they were bred in the iberian Peninsula originating from the andalusian spanish horse and raised in both spain and Portugal. sometimes we had Filoil planning meetings in the Polo club and i would preside in my riding breaches and boots, after i had exercised Gray Fox around the polo field.

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chapter 10 economic planning under macapagal President carlos P. Garcia of the nacionalista Party was bidding for a second term in 1961. His opponent was Vice President Diosdado macapagal, who was running for the Liberal Party with manny Pelaez as his running mate. The electorate shifted the control of the government to the Liberal Party.

A fresh breeze Particularly when the new President-elect is from an opposing party, he is not given access to government staff until after he takes his oath of office. nonetheless he is expected to deliver his inaugural address at his oath-taking and a couple of weeks later, his state of the nation address outlining his program of government. He then needs to tap an informal group to assist him in these difficult preparations. macapagal had run on a platform of major reforms in government and financial economic policy and he needed a program that would change major directions of policy and changes in government organization to eliminate the sources of corruption. During my different previous positions in government and my role in the promotion of the first Filipino oil company, i had taken a somewhat visible profile. i had run a daily economic column in The Manila Chronicle, contributed articles in The Manila Times and its Sunday Times Magazine and wrote economic reports in the yearbooks of publications like the Fookien Times. i did not know it then, but it seems one of my ardent readers was Diosdado macapagal who was now the Presidentelect. along with him in the Liberal Party were prominent alumni of the ateneo, the new Vice President manny Pelaez and senate topnotcher raul manglapus.

A call to serve Whether on his own or with the recommendation of the ateneans, macapagal asked me to prepare his economic program. it would have been an impossible task to complete in the few weeks we had before his assumption of office, except that we had a staff in a company we had formed after i left PnB, the economic Development consultants (eDc). For the past couple of years eDc had been working on a project under a subcontract from robot statistics of George cohen. George’s group had a contract with the u.s. Department of agriculture to do the Philippine portion of a global survey to assess the impact of development of third world countries on their demand for agricultural commodities, specifically those where the u.s. was the major source.

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This required primary household consumer surveys which was the main expertise of robot statistics. But the results had to be assessed through a more sophisticated economic analysis model. George asked eDc to undertake this aspect. The analysis required the collection of precisely the data and the construction of the economic analytical model that one needed for the formulation of a comprehensive and integrated national development plan. so i readily agreed to help macapagal. it was a tremendous opportunity actually to implement the policies i had long been advocating, and the ultimate application of the tools of development economics. With narciso Ferrer and my brother andy doing the excellent yeoman’s work, we worked round the clock to complete what became President macapagal’s Five-Year socio-economic Program in time to present to the Fifth congress in the state of the nation message of January 22, 1962. The first step in the program was to remove the system of exchange controls that had governed the disposition of foreign exchange for over a decade. This meant transferring the pricing and allocation of the country’s foreign exchange earnings and import/export transactions to the workings of a free market, with the central Bank acting as a market stabilizer. To perform this the dollar resources of the central Bank had to be augmented with sufficient credit lines to assure the market that the Bank had adequate reserves to quell any undue speculative activity. Perhaps the best short summary of the program we formulated is seen in the relevant portions of President macapagal’s first state of the nation message before congress, significant historically because it was the first time a President formally submitted to congress his Five-Year economic Program for adoption by the nation. excerpts from macapagal’s sona delivered on January 22, 1962: The second and far-reaching need of the nation is the solution of the problems pertinent to our economic growth and development. it encompasses all our aspirations to attain self-sufficiency in food and a higher standard of living. We must face the problem of economic growth with preferential emphasis. Proper economic development will raise the income of our people and the revenues of the government. it will thus produce the additional funds and facilities necessary for effectively discharging the other functions of government and for meeting the needs of our population. We must ever bear in mind the fundamental fact that it is through the adequate advance of the national economy that a higher standard of living can be attained by our people. We must accelerate the coming of that day when this country shall be not merely the exploited domain of the privileged few but a land where the common man shall stand erect, the equal of his fellow men, able to protect his rights and possessions, and sharing in dignity and freedom in the task of building an ever greater nation. in February 1962, i was made a member of the economic mission to Washington to negotiate for the stabilization loans required by decontrol.

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Decontrol required a foreign exchange stabilization fund to support an orderly adjustment of the exchange rate in a freed market. since the central Bank had already instituted administered devaluation that had brought up the selling rate of the u.s. dollar closer to the black market rate of P3.00 per u.s, dollar we did not anticipate too much of a fluctuation and so we estimated that a fund of $300 million would be adequate support.

Raising transformation financing on my recommendation, a negotiating team was formed to go to Washington to meet with the imF and World Bank and with the u.s. government to raise the stabilization loan. The team was constituted by Fernando e. V. sison who was going to be Finance secretary, Dr. andres castillo, Governor of the central Bank, charlie marquez, President of the Bankers association, Jesus cabarrus for private industry, and myself as head of the technical staff to speak for the decontrol program and the 5-year Development Plan. The negotiations took a couple of weeks in Washington D.c. but we succeeded in putting together the required fund and the decontrol program was launched forthwith. The negotiating committee was converted into an advisory committee. The members, myself included, returned to our private sector positions. i went back to Filoil having been promoted to executive Vice President, charlie marquez back to commercial Bank and Trust and cabarrus to his mining companies. as it turned out that was not the end of it. in June of 1962, the World Bank sent a mission to assess the progress in the implementation of the macapagal decontrol and development program. The results of the review were dismal. not only were projects not being generated, old projects were withering on the vine. The World Bank advised macapagal that he needed someone to assume responsibility for making the system work to implement the targets committed in the plan and to the funding agencies. This was the judgment of the World Bank team headed by economist Dragoslav avramovic and confirmed by James ingersoll, the head of the usaiD in the Philippines. Both recommended to the President that i be recruited to perform this task.

Government service in July 1962, i was summoned by macapagal and offered the position. His offer was for me to come in as assistant executive secretary for economic affairs. This way, he said i would have authority to sign orders within the realm of economic affairs with his authority. it was to be a technical and non-political position. The mission was to energize the executive machinery to implement economic reforms and the economic development program. The executive branch of the Philippine government had, on paper, one of the most sophisticated structures not only among developing nations but even when compared to more developed wealthy countries. it had a performance budgeting system installed even before this was adopted by the u.s. government. its economic planning office, the national economic council, was established in 1936 as commonwealth act no. 2. it had an organization and methods office, assigned functions provided only in the most advanced organizational structures. c H a P T e r 1 0 – e c o n o m i c P L a n n i n G u n D e r m a c a Pa G a L

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Program Implementation Agency But none of these was working properly. What was needed at that point was not still another organization or reorganization plan to shuffle organization units around, but a unit under the President as chief executive, to energize and make the units work in effective and synchronized fashion to achieve development targets and goals. Thus, my first task was to organize the Program implementation agency (Pia). in this task i recruited a crack team of economists and management professionals in what became the first assembly of technocrats in the government of the republic. We put together a whole team of young economists, tested corporate managers, bright men and women skilled in accounting, finance and engineering, agriculturists – graduates from the best local (u.P., La salle, ateneo, silliman) and foreign (Harvard, columbia, Wharton, etc.) universities, as well as the cream of the young civil servants experienced in different aspects of the government service and government corporations. We convened the group and the President hosted a dinner to challenge them to come and help the government address its problems. The philosophy and style of Pia operations were carefully defined. The unit was not to assume the powers that were directly the responsibility of the executive offices created by the constitution or by positive legislation. invoking the supervisory powers of the President as chief executive, it was to work with those offices to activate their powers and their resources to carry out in an efficient and coordinated mode the processes required to accomplish the targets and goals of the Five Year Development Program. These activities were divided into tasks and the tasks classified under two groups of categories: programming tasks and project tasks. Programming tasks were resource-allocating decisions while Project tasks were resource-producing tasks. The Programming tasks were divided according to the nature of the resources being allocated: Government Budgetary Funds, Funds of Government financial institutions (labeled capital Transfer Funds), Physical capital equipment of Government, Human resources. Project tasks were infrastructure Projects, commodity Producing Projects, Government services Projects, etc. Pia organized “task forces” from the formal government offices concerned to focus on themes and issues and priorities dictated by the Five Year Development Plan. capital Transfer Funds programming was the concern of a Loans and investments council formed with the heads of the government’s financial institutions. capital, operation and maintenance Budgets were taken up with the Budget commission. issues and concerns on priorities and efficient infrastructure construction and maintenance issues were taken up primarily with the Department of Public Works, etc. ad hoc concerns were handled by organizing short-term task forces. Longer-term planning, programming, project development, and project management concerns were tackled by long-term task forces formed by secondment of the appropriate technical persons for the departments in charge. The model for this procedure of secondment was the style of planning and implementation adopted by the French Commissariat Generale du Plan.

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one of the key planning tools we developed in Pia was the “operations room”. We had taken a beautiful old bungalow on arlegui street right across from malacañang as our office. it was an elegant structure with a huge living room from which a circular staircase led to the mezzanine and three large bedrooms. We converted the living room into the war room and placed the viewing seats in rows up on the mezzanine leading to the bedrooms that we converted into offices so that the set up was like a small amphitheater. The centerpiece of the operations room was a large three dimensional topographical map of the Philippines and we mounted along the walls of the living room the charts and tables showing the projects and budgets and targets, etc. alex melchor, who was a graduate of the u.s. naval academy in annapolis, was stationed in Washington D.c. as naval attaché. on one of my trips i persuaded him to resign and join us at Pia to take over the management of the whole operations room and information system. so the set up was designed like a War room. There was no other place in the entire government where one could get as complete a picture of what was going on in the whole country. it was our intention precisely that this would become the main center where one could get a proper briefing on the whole government’s programs and a progress report on all its projects. The plan was tremendously successful. The President found the Pia War room the ideal place for briefing foreign visitors on what was going on in the country.

The end i organized the Pia from august 1962 but after fully organizing and staffing it, internal intrigues in the President’s office caused my being kicked upstairs to become chairman of the national economic council, and armand Fabella who had been my deputy became head of the Pia. The defeat of most of President macapagal’s candidates in the mid-term senatorial elections in 1963 told me that the last two years of his administration would be very political. i submitted my irrevocable resignation in February of 1964. after some discussion, the President consented. He conferred on me the Presidential award of merit for my services.

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chapter 11 shaping the development vision Looking back on my experience in government, i can appreciate how it further defined my picture of development for the country, which i then brought with me to Bancom.

Historical context The Philippines of the late fifties and sixties offered rich opportunities for a “development practitioner” to accumulate experience. emerging from the war in 1945 vastly damaged, the country had more or less completed reconstruction and restored the prewar economy by the beginning of the decade. independence from american rule since 1946 meant it had to build a government machinery without direct u.s. fiscal support. a central Bank of the Philippines, established in 1949, assumed responsibility to ensure that Philippine currency maintained its domestic purchasing power and its ability to pay for imports and other foreign obligations. its first Governor, miguel cuaderno, took that to mean that the Philippine peso should continue to be worth half a u.s. dollar. That this could not be done without introducing extraordinary and severe controls on the country’s import and export trade became the most dramatic symptom of a stark reality. The restored prewar economy could no longer sustain the postwar Filipino nation. Fifty years of american influence, education and exposure to Hollywood movies and commercial advertising had already shaped it into a consumerist society before war’s outbreak. Four years of austerity enforced by Japanese occupation merely built up a huge pent-up appetite that the mere restoration of prewar structures and capacities could not satisfy. Directly suppressing the Filipino’s appetite was not a sustainable solution. The economic structure had to change. economic development was the resounding cry. The Philippines was not unique. Decolonization was the global phenomenon of the post World War ii era. newly independent nations in asia and africa were faced with the same problem. economic development was the imperative. economic restoration was not enough. To move ahead, whole nations had to find the path to development. it was a course for which there were no generally accepted maps. History was the store of actual experience. But histories are written, documented, analyzed, diagnosed, from a wide range of perspectives reflecting differences in analytical paradigms, ideologies, political, economic, social,

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racial, scientific, religious beliefs and biases. The different perspectives offer courses of policy and action with different visions and utopias as destinations.

The JapaNIES development model in the late 1970s and 1980s a label became popular to refer to these late-industrializing countries (which by the way did not include the Philippines): “nies” for newly industrializing economies. The Japanese social scientist, mushakoji, coined another term, JapaNIES to distinguish those that followed the Japanese pattern of development – specifically Taiwan and south Korea. The strategy started with an effective agrarian reform program. This meant a deliberate program to establish as the basis of its agrarian economy communities sustained by a system of small, owneroperated, commercial farms raising diversified products that included food, feeds, dairy, poultry, fishery in farm systems marked by intensive agriculture and husbandry. intensive culture of diversified crops and animals generated high value-added per hectare of land and raised farmer incomes so they became markets of each other’s products and for tools and farm equipment and consumer durables that the new import-substituting enterprises manufactured. at the same time, the flow of food products to the town markets brought food prices down, making it possible for real wages to rise without added costs to employers. The generation of rural incomes created a large domestic market so industrialization in these countries could look to home-based markets for their primary viability, enabling firms to grow and eventually raise their productivity to be able to compete in the export markets. This combination of agrarian reform and industrialization as a national strategy has in fact been stated as a national policy in section 1, article Xii of the present Philippine constitution which says: The state shall promote industrialization and full employment based on sound agricultural development and agrarian reform, through industries that make full and efficient use of human and natural resources, and which are competitive in both domestic and foreign markets.

Taiwan’s agrarian reform i witnessed the dramatic impact of this strategy in Taiwan in 1963. That was, i believe, about the 10th year of their agrarian reform program and many of the farmer beneficiaries were completing their amortization payments on their land. i was on an observation trip as guest of the government, invited in my capacity as the first Governor of the Land authority, the entity created by ra 3844, macapagal’s agrarian reform code, to oversee the implementation of the program. The transformation of the lifestyles of the rural families in Taiwan was evident in the quality of their homes, concrete structures and the furnishings complete with consumer durables (which in our own country were found only in the homes of middle class urban families). They housed farm equipment in their barns, the power tillers and small utility vehicles. i realized then that these were the markets for the industrial companies, the cement companies of the Koo cHaPTer 11 – sHaPinG THe DeVeLoPmenT Vision

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family, the petrochemical and plastics conversion plants of Y. c. Wang, the appliance fabrication of T. s. Lin. rural prosperity had transformed the large rural population into a home-based mass market. also significant was that the old Taiwan family that owned the cement companies, the Koos, had been among the largest landowners. The land to the tiller process effected through the intermediation of their Land Bank swapped Taiwan government shares in Taiwan cement for agricultural lands that were then sold to their tillers. in its time, Bancom gradually began to build up the capability to intermediate deals that would accomplish these combinations under ra 3844, including the provision of complementary services that would make small farm agriculture economically efficient and profitable for the farm families – the supply of appropriate farm equipment such as power tillers, threshers and the efficient storage, processing, trading and marketing of farm produce. The key to success in a rural system of small, owner-tilled farms is in the so-called integrators: the traders, processors, the suppliers of farm inputs. These integrators are more efficient sources of farmer credits than banking institutions, because the credit transactions costs are loaded on product turnover rather than on interest charges. Thailand, eminently a nation of small farmers, offers a glowing example of rural integration in the famous charoen Pokphand. This company is an integrated broiler chicken producer, supplying dayold chicks from their hatcheries and feed from their feed mills to contract growers, purchasing back the broiler-size chickens, and processing them for the consumer markets. What made them unique was that, by choice and deliberate business strategy, they made farm families in the rural villages their primary contract growers. some years back, at a time the World Bank affiliate, iFc, was arranging financing for them, iFc Vice President Judvir Parmar was describing with admiration the key to their success. He said their effectiveness hinges on a corps of young (30-year old) rural area managers who supervise the grow-out contractors, really in effect serving as integrators to ensure proper feeding, veterinary and overall care and thus to maintain low mortality and healthy growth. They are thoroughly trained and well compensated with handsome success bonuses. While at the start farm families could safely handle as small as 300 birds per cycle, eventually their capability was built up to a point where they could handle several thousand. The business became a very important source of rural incomes and there were areas where as many as 3 out of every 5 farm families relied on this contract- growing scheme for their primary income. The efficiency of Thailand’s small-farm agriculture explains why food is so cheap there compared to the Philippines. The ample supply at reasonable prices of food and the other wage goods is a prerequisite of development and industrialization.

The Macapagal development program The key elements of President macapagal’s Five-Year socio-economic Development Program were these:

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1) restore the allocation of dollars to the free market so private investors no longer crowd into projects that rely on the premium offered by the black market over dollars covered by central Bank allocations. create a climate that makes genuinely developmental projects attractive. 2) Through genuine and integrated agrarian reform, develop a productive agricultural sector based on the intensive cultivation by small-scale owner-tillers, and supported with adequate financial, technical and infrastructural facilities. at the same time that this ensures a flow of food and primary materials to food processors and consumer markets, the program converts the majority of rural families into a mass market by raising their incomes and purchasing power. 3) systematic industrialization emphasizing the intermediate and processing facilities that convert primary production from agriculture, fisheries, forestry and minerals into the products that account for the largest portion of household budgets. 4) undertake a systematic infrastructure program that provides timely support for these agro-industrial development projects. 5) synchronize the management of the fiscal, monetary, banking and overall financial policies with the requirements of these programs. These elements were formally embodied in the program submitted by President macapagal to congress in his first state of the nation message delivered on January 24, 1962. it was also the program we presented earlier to the World Bank, the imF, and the u.s. state Department when we negotiated for the credit lines to support the Decontrol Program.

Sources and uses of power a few months later in 1962, a World Bank mission came to review the implementation of the program. When their investigation showed that implementation left much to be desired, another door opened for me – the opportunity to play an important role in actually executing the program we had recommended. as assistant executive secretary in the President’s office in charge of economic affairs, i was given the primary responsibility for mobilizing the whole executive machinery of the government to carry out the strategy that we had laid out in the Five Year socio-economic Program. The task was primarily a massive organization development process. it entailed not so much the creation and establishment of new structures as the energizing and coordination of existing institutions, to use their existing legal powers and resources, and to synchronize their respective roles in the execution of the development strategy. The whole thing was really merely an aspect of the President’s function as chief executive. We simply created a staff agency under the executive secretary’s office that we called the Program implementation agency (Pia). We recruited, to staff its project supervision and resource programming offices, a handpicked group from the private sector and other units of the government. Their high-powered qualifications were such as to earn the label of technocrats. cHaPTer 11 – sHaPinG THe DeVeLoPmenT Vision

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The process was later to be studied by academics as the development of technocracy in the country. in order to insulate the office from political interference, particularly from legislators, the organization was not funded from the executive department’s budget that was subject to legislative approval. We funded the Pia from contributions of government-owned and controlled financial institutions. as head of Pia i had a separate title, but the real statutory authority came from my appointment as assistant executive secretary for economic affairs, which enabled us to exercise the supervisory powers of the President as chief executive. We could thus coordinate the policies and operations of the Departments under the cabinet secretaries – agriculture and natural resources and Fisheries, Trade and industry, Public Works, Labor, Finance, the government-owned and controlled corporations, Budget Bureau – invoking the Presidential authority. our method followed a pattern that we saw in the operation of the French planning system. The Commissariat Generale du Plan had only a core staff but they formed task forces, recruiting the technical people from the line agencies and from the private sector industries, to formulate plan objectives into sector programs. They had the key sectors not only participate in the planning but sign commitments to perform their assigned roles in the agreed plans. The process included preparation of needed legislative proposals to submit to congress. since agrarian reform was a key element, Pia headed the Technical Task Force that designed the program, drafted the legislation and then submitted it to congress through the legislators within the ruling party, in this case the Liberal Party. i had the task of working directly with the sponsors of the Bill which passed the lower House, and then with senator raul manglapus in the senate to get the upper house approval. in the floor debates, i actually had to sit directly behind raul so he could consult me on questions and arguments that would come up in the floor debates. i remember one particular point that was raised on the senate floor. it concerned the mode of payment to the landowners for the agricultural land expropriated and then sold to the tilling farmer. it had been explained that no nationwide, large-scale, land reform could involve actual cash payments to land-owners. This would create money in circulation without a corresponding increase in physical goods produced. it would cause inflation. The purchase from the land owner had to be paid with a long-term government bond. The question raised was, does this not violate the constitution’s requirement that expropriation had to be with due compensation? is a long-term government promissory note due compensation? i slipped a quick note to him saying, “ask him to pull out a peso bill and read out what it says.” i think at the time the inscription was in english stating, “This is an obligation of the national Government of the republic of the Philippines.” What you call legal tender or cash is only another debt obligation of the national government. The fact that it is usable for liquidation of an obligation or legal tender is only a difference in the maturity of the obligation. The government bond we proposed was not a demand but a term obligation.

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Agrarian reform The Bill was passed with amendments that substantially weakened it, but with enough of the original design so its implementation would represent a substantial improvement over the past attempts at land reform. What became republic act 3844 of august 8, 1963, was largely patterned after the very successful Taiwan agrarian reform program. it gave powers to declare void contracts of tenancy which called for percentage sharing of crop production between tenant and landowner, and in place of it to require a lease agreement where the farmer paid a fixed annual rental set by law on the basis of an average of three years’ production. This way, the farmer was the sole beneficiary of increased production yields. The law, however, contemplated that the conversion would not be decreed simultaneously all over the country. it recognized that the farmer had to be prepared, and facilities and services first had to be put in place to replace what landowners themselves provided under the tenancy system. The law authorized a massive reorganization of existing agencies of the government that provided land tenure administration, farm service and agricultural extension, promotion and regulation of cooperatives, provision of farm credits, with a head count of some 10,000 men and women. These were consolidated into an integrated cluster administered by the Land authority, which was charged with the administration of the whole reform program. i was appointed the first Governor of the Land authority and chairman of the national Land reform council charged with implementing the program. We formed the task forces for reorganizing all the agencies involved, under the umbrella of aLros, the agrarian Land reform organizing staff. The work entailed redefining the functions and responsibilities of agencies integrated into the program, the changes in organization structure and in the staffing patterns, classifying and evaluating the human resources, and determining optimum reassignments, etc. We recognized that the reform in tenure arrangements that had existed for many decades, indeed over centuries, would involve complex problems not easily overcome. The law provided for the division of the country into agrarian reform Districts. Before declaring the law fully operative in any district, intense preparations were required. When the council was satisfied that the preparation and installation of support facilities and services were adequate to ensure success, only then would it certify to the President that the law could be proclaimed operative in the district. at that point all contracts of tenancy would be converted into contracts of leasehold as the first step in executing reform. The next phase, the land-to-the-tiller transfer, would follow. The program envisioned that the land expropriation and transfer would accomplish two objectives: the conversion of the farmer from being a lessee to a tilling land owner, and the conversion of the landowner into an investor in processing, storage or other service facilities linked to agriculture as part of the local, regional or national supply-chain. We built into the charter of the Land Bank the powers to intermediate and facilitate these combinations. as aLros designed and implemented the reorganization, we formed a technical field team to select a cHaPTer 11 – sHaPinG THe DeVeLoPmenT Vision

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district that would serve as the model for the implementation. We considered this a critical first step, because we could test the tools provided by the law in one district and flush out all the problems we would face before the law was made to operate over a larger area. For this purpose, after much discussion the team recommended as pilot area the municipalities in the angat watershed area of Bulacan. it was served by the angat national irrigation system, had fairly sophisticated farmers, and was conveniently close to manila. This was originally part of what we needed to do with the Pia as the staging agency. after Decontrol, agrarian reform was an essential next phase in carrying out the five elements of the five-year program. But forces were already at work to ease me out of the Pia. even without explicit statutory authority, the Pia was being viewed as the most powerful unit in the executive Branch. Power invites political intrigue. some members of the cabinet who wanted to use their offices as stepping stones to political power, more specifically in electoral offices, saw the Pia in a non-political posture as a threat. as the Pia demonstrated its effectiveness and attracted public notice, it became inconvenient to have it headed by someone who was too independent and was not deemed a “team player” in the political game. in september 1963 (before the mid-term elections) i received a new appointment as chairman of the national economic council. President macapagal presented it to me as a promotion, since the nec was a formally legislated creation that went back to commonwealth act no. 2 of 1936. it included congressmen and senators as members. But he knew how i really felt about the nec. it had prestige and on paper was the official economic planning arm of the government. except for its direct administration of the foreign aid programs and Japanese reparations, however, it had no real influence on the mainstream decisions that drove overall development. i knew i was being, in effect, “kicked upstairs”. i confirmed that by sending the President a memo to suggest that with the appointment, a new executive order be issued transferring to the nec the responsibilities given to the Pia for implementing the Five Year socio-economic Program. He did not respond to my recommendation. i remained concurrently Governor of the Land authority and we continued the work of organizing the land reform agencies. But i decided then with my immediate staff that moved with me from Pia to the nec that the game plan of the President had changed. He was preparing for his re-election bid. The november 1963 mid-term elections showed that he had lost much of the electorate’s support. We did not want simply to abandon the agrarian reform program. We wanted at least to be able to ensure the success of the pilot district in Bulacan. after my staff had done the necessary survey and studies, we negotiated with the Taiwan government for them to send a team to study our program and offer their assessment and recommendations. Taiwan’s new Premier, c. K. Yen, responded by sending a truly top-notch team to assist us. it was headed by the leading technical director of their agrarian program, T. H. shen of the Joint commission on rural reconstruction (Jcrr), assisted by two senior specialists from the Jcrr. The other

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members were the President of the Taiwan Provincial chung-Hsing university, the Director of the Taiwan Provincial Land Bureau, and a Board member and research fellow of the research institute of international affairs. The evaluation of this team was of tremendous importance for the actual implementation. While we had modelled the system after Taiwan’s agrarian reform program, we were keenly aware that there were pre-responsible for the program’s success there. many existing institutional, cultural and organizational structures in Taiwan of those were not present in the Philippines. We needed to know the most critical of these lacks. The team members arrived on January 3, 1964. We briefed them thoroughly on the design of the program and of the implementing organization that would be formed from the reorganization of the existing agencies and reassignment of the personnel. They took a quick tour to get an idea of the varied conditions of the areas to be covered. Then they concentrated on the angat pilot area. The Taiwan team immediately spotted the most obvious and crucial of the problems: the state of cadastral surveys. of the country’s 30 million hectares of territory, only 27% had been surveyed, and with the government and private capacity at the time it would take 20 years to do the other 73%. “registration of titles is necessary,” their team report stated, “in determining the status of land ownership without which adjustment of the tenant-landlord relationships would be difficult.” among the legacies left by Japan’s colonization of Taiwan were detailed land records based on comprehensive surveys of physical details of tenure and use. every family in Taiwan had a designated domicile and all its records were filed in the local registry of its domicile. so the records of the total land owned by a family everywhere in the country were filed in its domicile. This made it possible to enforce any legal provision limiting the size of land a person could retain. The team’s report confirmed the wisdom of a careful, phased approach to application: as agricultural reform and development in any country is a rather slow-process and expensive program, and in view of its far-reaching social and economic impact on the nation, the Philippine government has wisely chosen to carry out its land reform firstly through demonstration and only in a limited area where field operating procedures will be tested and all problems identified and solved before the program is undertaken in a wider area. on the selection of the angat district as a pilot, the team agreed: Judging from the geological and agricultural features of angat area and the well-coordinated plans and preparations being made under the able leadership of the national Land reform council, the chances of success of the pilot land reform in south angat are good. The team then went into a detailed study of the progress in the government’s preparations for the angat pilot district, spotted critical lacks and gave incisive recommendations. i hoped that with the Taiwan team’s recommendations to guide future implementation, i could, in good conscience, relinquish my participation in a program we considered an absolute prerequisite for the future of the country. cHaPTer 11 – sHaPinG THe DeVeLoPmenT Vision

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chapter 12 entering the money market The introduction to Walter Bagehot’s Lombard Street, his classic treatise on central banking that also described the workings of the money market, begins with these words: i venture to call this essay ‘Lombard street,’ and not the ‘money market,’ or any such phrase, because i wish to deal, and to show that i mean to deal, with concrete realities. a notion prevails that the money market is something so impalpable that it can only be spoken of in very abstract words, and that therefore books on it must always be exceedingly difficult. But i maintain that the money market is as concrete and real as anything else; that it can be described in as plain words; that it is the writer’s fault if what he says is not clear. Lombard street, in the financial district of London that locals call, simply, The City, houses the institutions that make up London’s and, at one time, the world’s money market center. i thought it significant and somewhat amusing that Lombard was what ray ilusorio and his early Bancom team called their first trading room. Wrote Bagehot, “The objects which you see in Lombard street, and in that money world which is grouped about it, are the Bank of england, the Private Banks, the Joint stock Banks, and the bill brokers.” in Victorian england at the time he wrote this in the 1870s, they were all privately owned, including the Bank of england, nicknamed the Old Lady of Threadneedle Street, although it operated as england’s central bank, the cornerstone of the whole financial system.

Lombard Street to Makati after attending graduate courses in business and economics at Fordham and at michigan, ray obtained his master’s in economics at new York university. He came out of graduate school with an obsessive interest in the financial markets where different currencies and credit instruments were traded. ray trained in new York with Bankers Trust and in London with a bill broking firm, as well as with major money center banks in Paris, Frankfurt, and Zurich. along the way, he must have formed a vision of a Lombard street in the Philippines. only a young 23-year-old when he returned to join Bancom, ray curled his dreams around that vision. in Bancom, we gave him the power to live that dream. The development of a genuine money market was a prerequisite for the sustainable operation of a viable investment bank. Why so? Bancom’s task was to create a new mode of intermediation between sources and users of money – between savers and investors. The old and traditional, also the basic, mode was through banks that gathered big and small sums

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as deposits to pool into large funds that they loaned out to merchants, farmers, manufacturers and other enterprises for their working capital and operating needs. Deposits are direct obligations of the banks. Loans are at their risk. even if the loans are not repaid when they are due, the banks still have to pay out the deposits whenever the depositors want to withdraw their money. The bill brokers (also known as discount houses) in Lombard street typically bought promises to pay of merchants and other businesses at a discounted price from their maturity value and sold them with a markup to investors which were primarily the banks. The investors looked to the expertise, connections, and tested experience of the bill brokers for assurance that the promissory notes (called bills connoting a self-liquidating claim of very short duration) were solid credit risks and would be paid on maturity. Typically, the bill brokers sold them without providing any obligation to pay the bank if the debtor who signed the promissory note failed. The sale was without recourse to the bill broker. since they did not assume a residual risk on the bills they sold, the bill brokers could afford to work with very narrow margins, be capitalized far more modestly than banks, and support a much larger ratio of total borrowed funds to their capital. They did not have to provide substantial reserves for credit risk and, had they been operating in the Philippines, would not be subject to a tax on interest income since the financial assets they carried were inventory rather than investment. in the British system the reserves that back up the deposit obligations of the banks were deposited with the Bank of england. although a private institution, the Bank of england had been made, by custom and tradition, as the banker of last resort, a function that later would be performed by publicly owned central banks. in Lombard street at the time, the bill brokers would buy a merchant’s promissory notes backed by customer receivables from sales with short credit terms like 30 days or usually up to 90 days. The customers were billed for their purchase and they acknowledged their payable by “accepting” the bills with their signature. These were called trade acceptances. The merchant then sold the accepted bill to the bill broker at a discount and with their own guarantee. so the bill looked both to the customer’s acceptance and the guarantee of the merchant, making it in effect a two-name paper, the credit quality of a prime promissory note with two co-makers. Bill brokers might actually purchase these bills outright at a discount and hold them as inventory, which they marked up and then sold to the banks. so the bill brokers would have a stock of bills which needed financing. The Bank of england then provided a lending facility for these bill brokers by either lending with the bill inventory as security, or buying the bills at a discount from the maturity value. The price at which these bills were bought and sold in effect determined the equivalent rate of interest that the ultimate buyer who holds them to maturity would earn, from the time he bought the bill to the time he collects at maturity. The higher the price (which means the lower the discount from the maturity value of the bill) the lower is the equivalent interest the bill offers to the one who holds it to maturity. The lower the price (the higher the discount from maturity value) the higher the yield the bill offers. To give an illustration: Baguio Veggies inc (BVi), a dealer in vegetables from Trinidad Valley, sells sm super market (sm2) P1 million worth of vegetables, issues a bill for the amount due in 60 days cHaPTer 12 – enTerinG THe moneY marKeT

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say on november 30, which sm2 accepts. The bill is now a trade acceptance with both sm2 and BVi as signatories making it equivalent to a two-name promissory note payable on november 30. suppose BVi sells the bill to Bancom Discount House (BDH) on october 1st, at a flat discount rate of 2.5%, called in the trade 250 basis points. The inventory value of the P1 million bill in BDH books is P975,000. if BDH held to maturity it would have earned P25,000 from an investment of P975,000 for 60 days, an equivalent annual yield of 15.4% (based on a standard 360-day year). But BDH is not in that business. it resells the bill the next day to an investor who is willing to take a risk on a 59-day bill with sm2 as a signatory at a prospect yield per annum of 10.5%. so BDH sells the bill for P983,083 and makes P8,083 on the quick turnaround, or 83 basis points (a bit under 300% p.a. on a one day investment). This assumes BDH is able to turnaround the inventory as quickly. But if it takes an average of 25 days to turnaround the inventory and BDH had to carry the equivalent of 25 days sales and each day’s sales amounts to say P10 million, then average inventory would be P250 million for which financing would have to be secured. in Lombard street this financing was available from the Bank of england, which also held the primary reserves of the banks and provided short-term discounting or lending facilities on a day-to-day basis to the banks that lost in the clearing and required financing to replenish their primary reserves. The interest rate at which the Bank of england provided these facilities was called the “Bank rate”, which was a key to the fluctuations in the overall money market rates. in the British system the banks did the normal lending business but they could also deal in bills and government securities like consols. and at times the bill brokers provided guarantees for the bills they sold, particularly when they are introducing new names in the market. in the u.s. there was a strict separation (a sort of Chinese wall) between commercial banking and the kind of business that bill brokers and British merchant banks did, dealing in securities and underwriting their issue. This separation had been introduced by legislation after the crisis of 1929 by the two principal legislators who authored the Glass-steagall act in 1933. This governed the whole financial and banking system of the u.s. for over 60 years until its repeal by the GrammLeach-Bliley act of 1999. The General Banking act in the Philippines followed the u.s. policy and required the separation between deposit banking and investment banking in the country until the passage of the universal Bank Law in 1980.

Originator, underwriter and dealer Bancom was established to be an investment bank in the u.s. sense, an underwriter and dealer in all classes of financial instruments issued by government and private sector businesses, although under the law it could not call itself a bank. on the Lombard street model, Bancom was to be a bill broker more than a merchant or joint-stock bank. starting with capital of a mere P7 million, its capacity to carry risk assets was absurdly small. it had

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blue chip shareholders, however, which gave it tremendous credibility. But at the start, it was still deemed important to rapidly build up the Bancom balance sheet, a concession to a public mindset that was accustomed to ranking financial institutions according to their balance sheet size. This meant raising leverage funds – doing direct borrowing and lending to build up liabilities and carry loan assets, which was fine as long as we picked absolutely prime borrowers. The strict ground rules that governed commercial banking operations at the time gave us the opportunity to do just this. commercial banks were governed by upper limits on interest on deposits and on overdraft advances. corporate accounts at the time were given overdraft lines, permitting them to simply over-draw on their checking accounts; the resulting negative balance would then be considered as the loan amount.

Playing the inside spreads of the banks But the spread between deposits and overdrafts exceeded four or even six percentage points; thus, we had a wide margin band within which to set inside spreads. ray ilusorio was in his element, he could operate not just as a bill broker but as a merchant bank. He launched the Bancom Bill – a borrowing and a lending bill. in fact, he felt he could operate like the Bank of england by setting the Bancom Rate as the prime indicator of the money market yields on bills of different maturities. There was a rich population of prime clients among the multinational companies as well as the leading ranks of local corporations who had current accounts with the Philippine banks and the local branches of foreign banks. Bancom held “seminar cocktails” for corporate treasurers to show them how they could become income centers. corporations could shift positive deposit balances to the Bancom borrowing Bill and earn better than the bank savings deposit rate. and corporations on overdraft could shift their borrowing to the Bancom lending Bill at rates lower than the overdraft rate. Just on the basis of weekend days a year, they could earn or save interest points on 104 days of the year. Bancom’s activities promoting the Bancom Bill had a tremendous impact on the inter-company market, the first sub-sector that truly seeded the gradual development of the Philippine money market. and by calling the instrument a bill, what in effect was a balance sheet borrowing and lending operation took on the esoteric air of money market dealing. But it established Bancom as an innovative, aggressive, path-breaking new player on the Philippine financial scene. it roused the commercial banks to protest what they called disintermediation. in his vision of a Lombard street in makati, the role ray viewed for Bancom was not that of a mere bill broker, but something ambitiously approaching a mini-Bank of england – with Bancom being the issuer of the main money market staple, the Bancom Bill, and the key indicator of market rates, the Bancom rate. The central Bank was not quite clear on what was happening, but internally they were surely asking the question: Is Bancom doing banking business in violation of banking laws? Tactically, we figured this would work for a start, but we would need to establish the sustainable elements of a real money market. realistically, in the long run the staple could not be the Bancom Bill but a Philippine government issue – the Treasury Bill. cHaPTer 12 – enTerinG THe moneY marKeT

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chapter 13 creating the Treasury Bill market This was 1965, the last year of the macapagal regime. Fenny Hechanova was the secretary of Finance. i approached him with the idea of a domestic debt management strategy for the national government to open up non-inflationary sources for government borrowings, ranging the full spectrum of maturities from short-term Treasury Bills to medium- and long-term Treasury notes and Bonds.

Efficient markets and debt management He responded positively and sent me a letter of invitation, dated February 24, 1965, for Bancom to submit a proposal. We prepared a detailed proposal that involved the formation of a joint governmentprivate sector team under Bancom’s direction to examine the whole domestic public debt structure and formulate a master strategy and a debt management program. The program would aim to have an orderly structure of maturities that would systematically lengthen the average maturity of the debt and open up the domestic money and capital markets as a noninflationary source of financing government programs. We finished the proposal and submitted it to secretary Hechanova and to the monetary Board on april 14, 1965. i presented the program to the monetary Board on may 4th where it was favorably received and was subsequently approved. in July, we signed a three-year contract with the central Bank to formulate a domestic borrowing strategy and program for the entire Philippine government and to develop the local financial markets. i had been heard to be advocating, for some years previously, for a more systematic study of the development of the securities market for the sourcing of non-inflationary finance for government’s fiscal needs. in macapagal’s term when rodrigo Perez Jr. was the secretary of Finance and i was in the President’s office establishing the Program implementation agency, andy roxas, my brother, had prepared a memorandum dated December 4, 1962, outlining the design for such a study. “The objective of the study,” he had written, “is to find ways and means with which to develop the securities market from three standpoints: a) From the standpoint of increasing non-inflationary sources for government borrowings, b) From the standpoint of providing the central Bank with more effective instruments of monetary control through open market operations, and c) From the standpoint of developing a money market in the country in order to tap the maximum of domestic savings available and to channel these savings into the most productive of uses.”

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The design emphasized the need to tailor the issuances of government securities to “meet the maturity needs of the money market” and to time “the phasing in of new issues to even out the maturity schedules of outstanding government securities.” The memorandum cited the experience in other developing countries wherein the introduction of short maturity instruments started off the orderly development of the money market. To quote from the memorandum cited: in this connection, the adoption of a tender system of issuing Treasury bills is perhaps the only way in which a market rate of interest on short-term loans, fluctuating from week to week and month to month in response to conditions prevailing in the market may be established – as many countries, from canada to Thailand, have found. such a system can be handled with relative ease with little administrative cost, and at the same time, it provides a means whereby the current market conditions may quickly and clearly reflect themselves in the rate of interest at which the bills are taken up. Furthermore, by adjusting the amounts of Treasury bills for which tenders are accepted, the authorities can even out fluctuations in the overall volume of bills outstanding, or adjust it upwards or downwards in accordance with the current needs of the economy. other priorities had put this proposed program on the back burner while i was in the government. But in 1965 before macapagal’s term ended and Fenny Hechanova was the new secretary of Finance (secretary rod Perez had died while in office), we finally got the chance to implement a plan of long standing. The three-year contract we had signed with the central Bank in July commissioned us precisely to study the entire government’s domestic borrowing program and to recommend the steps needed pretty much to accomplish the same three-fold objectives that andy had cited in his memorandum to secretary rod Perez of three years before.

The Bancom team We formed a team combining selected persons from the government, Bancom staff from the money and capital market unit headed by ray ilusorio and the legal division headed by Louie Villafuerte, and new recruits like Vic macalincag. Vic would later rise in the ranks of fiscal officials to become national Treasurer and undersecretary of Finance. Bankers Trust sent Herman Frenzel from their bond trading division to share his experience with the Treasury Bill tender system in the u.s.

What we found our findings, in brief, was that the government was too dependent on bonds that nominally had longterm maturities but, in order to make them salable to other than the central Bank, the terms made them encashable with the central Bank on demand. Fifteen year bonds were not really 15-year debt but demand obligations. The primary need was to lengthen the real average maturity of government borrowings and to develop a market other than the central Bank and government-owned banks and financial institutions. c H a P T e r 1 3 – c r e aT i n G T H e T r e a s u rY B i L L m a r K e T

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Concept The strategy was what, in his memorandum of 1962, andy had cited: start with floating at regular intervals issues of 91-day Treasury bills through a tender or auction system with a formally organized and accredited group of government securities dealers who would also operate a secondary market for the bills. The short summary of our approach was paradoxical. Lengthen the average maturity of the national debt by substituting 91-day Treasury bills for 15-year bonds!

Politics yet again macapagal lost his bid for reelection in the 1965 polls. marcos had moved from the Liberal Party to become the nacionalista candidate, and his victory brought in a nacionalista regime. since our contract was with the central Bank, the regime shift in politics did not affect our contract. We submitted our report and the launching of the Treasury Bill auction system was scheduled for the end of the first quarter of 1966. marcos appointed as his secretary of Finance, eduardo romualdez, who had been my boss during my last few months as assistant to the President in the PnB. Governor castillo remained as central Bank Governor until the end of his term in 1967. i recall an interesting sidelight of the project. The T-bills were non-interest bearing and would be priced at a discount from maturity value and taxable with no special features so they would be of the same value to any buyer.

Market discipline and credibility one of the main features of government borrowing was to be prompt payment on maturity date, brooking no delays, because in the pricing of short maturity debt, cash on maturity needed to be assured for the proper valuation of the instrument. in other words, good funds on maturity, since every day’s delay would affect the effective yield computations. establishing the ability of the bureaucracy to ensure this was a problem. creditors had had past problems with collecting on receivables from the national government on their due dates. This had to be assured to the satisfaction of the market. We designed the T-bill so that at maturity it became equivalent to a Treasury check drawn on the government and could be directly deposited and treated as a clearing item in the banking system along with all the checks cleared on that day. This assured holders of good funds on maturity.

TABs We used this feature later when we designed the special issue of Tax anticipation Bills (TaBs). at the time there were two income tax payment dates each year. Private and business taxpayers would accumulate balances to meet payments due on april 15 and July 15 of every year. so bank balances and drawings would spike seasonally on those dates.

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The TaBs were designed to give taxpayers an earning instrument for accumulating the balances to meet those two payment dates. The special TaBs would be offered with maturities of april 30 and July 31 but would be accepted for tax payments at full maturity value on the 15th of those months, giving the holder who used them the two-week interest bonus. When we were designing this, the lawyers of the Bureau of internal revenue posed an objection. The law prohibited the offsetting of a tax receivable of the Bir with any receivable from the government unless specific legislation authorized it. i asked the lawyers what were considered acceptable instruments for tax payments. could the Bir accept checks? The answer was yes, of course. Well then the Treasury Bills on maturity became checks drawn on the government and accepted by the banks for deposit cleared on the maturity date. The Bir lawyers after much discussion agreed that the TaBs on the explicit terms of the issue could be accelerated to be due at maturity value on the 15th of the april and July months of their maturity.

The T-bill: pride of authorship ray ilusorio and his money market team were assigned to prepare the procedure for the Treasury Bill system of weekly auctions. indicative of the fierce sense of independence and pride of our Bancom team was the reaction to the offer of Bankers Trust to send a bond trader “expert” to provide technical assistance. our team, and particularly ray and his people, felt they did not need any outside technical assistance. But i was aware that Bankers Trust would want some mileage out of the glory of designing such a significant program for a sovereign government. i could not refuse their sending someone. Herman Frenzel was one of their star bond traders with long experience in T-bill trading in the u.s. Bankers Trust got the mileage they wanted in the Fortune magazine article on Bancom’s role in establishing the whole Treasury Bill program of the government in the Philippines. To quote from the article in the December 1966 issue of Fortune: “Prominent in launching the Treasury-bill program was Bankers Trust co., which found itself in a sort of private technical assistance project... because its Philippine affiliate, Bancom Development corp., of which it owns one-third, was selected as adviser to the government.” The article then went on to explain how Bancom acquired the position. To quote: ‘Ting’ rings the Bell. one reason it does [i.e., why Bancom “swings more weight than its $2-million capitalization indicates”] is its president sixto K. (Ting) roxas, thirty-nine, has held a number of top government economic posts, including that of economic adviser to former President macapagal. Because roxas had been a catalyst in the generation of the whole idea of Philippine financial development, in July 1965, the government gave Bancom a five-year contract to devise a financial program. When the government accepted the idea of starting with Treasury bills, Bancom brought in Bankers Trust in the person of Herman Frenzel, sales and trading manager of the bank’s government-bond division. c H a P T e r 1 3 – c r e aT i n G T H e T r e a s u rY B i L L m a r K e T

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Frenzel masterminded the exact proposals and a manual of procedures, while Bancom and government people did a lot of spadework.

The real score This. of course, was quite inaccurate. Bancom did the masterminding and Frenzel merely gave the work more credibility in the market. understandably, the Bancom team deeply resented the article’s giving Frenzel the credit for work they had mainly done on their own. in fact, when word first came that Frenzel was scheduled to arrive, ray and his team worked round the clock to finish the design. By the time Frenzel arrived, the whole scheme was finished, and with some differences from the u.s. model. For example, the pricing of the T-bills would be on the basis of true discount rather than the conventional bank discount method. But Frenzel was extremely helpful in making our team credible “trainers” when we ran training sessions for our competitors to teach them how to participate in the weekly auctions, how awards were determined and how to set the secondary dealing conventions for quoting bid and asked prices of T-bills of different maturities. in a bank discount rate of 15%, a P100,000 non-interest bearing note maturing in one year is sold at the beginning of the year for P85,000. But the true yield to maturity of the investment is really 17.65%, because the investment is not P100,000 but only P85,000. This higher rate is the true discount rate. T-bills in the u.s. were priced at bank discount rather than true discount rates. in the Philippines we recommended pricing at true discount rates. Bancom prepared a large table for the use of market traders showing for particular nominal yields, in percent per annum, what the true discount rates would be. The combined government-Bancom team prepared the procedural manuals and conducted workshops for the central Bank and Finance Department personnel who would be involved in evaluating the tenders and determining the awards. it also ran workshops for the prospective dealer institutions who would form the national association of Government security Dealers on how to price the bills and prepare the bids. This projected the strange scene of a company giving seminars to teach its own competitors how to play the trading game.

Launch The formal roll out of Treasury Bills was made in may 1966 with the floating of the first series of 91-day T-bills amounting to P5 million. This marked the beginning of Phase i of the program which involved the auction of P5 million of T-bills to be issued every other week for the first 26 weeks. Phase i, which ended in november 1966, was an unqualified success, and thereafter 91-day T-bills were offered on a weekly basis. Phase ii involved the issue of weekly 182-day T-bills starting november 1966, with each issue amounting to P2.5 million. This phase lasted for another 26 weeks, after which the outstanding T-bills amounted to some P130 million.

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Phase ii also featured the issue of Tax anticipation Bills (TaBs) on march 1, 1967 involving two series: the first was for P25 million maturing on may 2, 1967 but made eligible as payment at par value for income taxes due on april 15th; the second series was for P15 million maturing on July 31 but eligible for tax payments on July 15th. The first series of TaBs fetched an average yield of 4.464%, at that time the lowest in the history of interest bearing, fully taxable, non-supported government debt issued to the private sector. a second cycle of TaBs was issued on February 21, 1968 geared towards the april and July tax payment dates for that year, also worth P40 million. These two cycles of TaB offerings were also deemed as unqualified successes, the first cycle being close to spectacular. The primary market machinery for T-bills involved monday announcements of offerings of government securities by the central Bank, followed by a competitive auction the next monday, and further followed by actual issuance of the T-bills to all winning tenders the following monday. The primary market was thus successfully established to serve as an efficient issuing device, and generated strong interest among market participants. as of July 31, 1968 total outstanding government borrowings from the private market in the form of short-term Treasury Bills amounted to some P219.5 million, with weekly maturities evenly spread over a 26-week period. Bancom completed its undertakings under the contract in July of 1968 and on september 24, 1968 submitted its completion report to Finance secretary romualdez as chairman of the Financial Policy committee. The report outlined what it had accomplished in the three-year period, its observations on the remaining problems in the way of a rational domestic debt policy, and its recommendations for the future. significant highlights of the Bancom completion report may be gleaned from the following excerpts: in the area of government securities, the first accomplishment is that a staple has been created, introduced and accepted by investment fund managers in the form of the Philippine Government Treasury Bill. The amount that has been floated so far attests to this. The Treasury Bill has reached a position where it can serve as the least common denominator in unifying what were previously disorganized and scattered financial sub-markets... During the last two-and-a-half years, we have also established the orderly and efficient machinery for the issue of Treasury Bills at public auction... The primary market machinery so established has also meant for the government a permanent debt device, to the extent that maturities are rolled over. it also enables the government to borrow funds of much longer maturities at the interest rates applicable to short-term maturities. We have also established the framework for an orderly and efficient secondary market for government securities. The secondary market centers on a group of eight dealers who are members of the national association of Government securities Dealers (naGsD). it is a function of these dealers to make markets for government securities, to be prepared to buy them from and sell them to investors. They then constitute the distribution network as well as the liquidity buffer between Philippine Government and the private market. This buffer was c H a P T e r 1 3 – c r e aT i n G T H e T r e a s u rY B i L L m a r K e T

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intended to ensure the liquidity of Treasury Bills so that investors do not have to go back to the central Bank when funds are required... We have increased the state of investment sophistication among market participants. The participants consisting of the government, commercial banks, insurance companies, pension funds, educational institutions, corporations and even individuals have been provided instruction on the operations of a money market and on the ways that they can best use such facilities, including Treasury Bills, for their investments... Having detailed the achievements in the government securities program, we shall now proceed to achievements in the area of the overall debt management strategy for the government. The first and foremost achievement in the area of debt management strategy is the creation of the Financial Policy committee, whose members are: the secretary of Finance (chairman), the Governor of the central Bank, the chairman of the national economic council, the commissioner of the Budget and the Director General of the Presidential economic staff... at this point, it is sufficient to say that a high level policy making committee has finally been organized to analyze the public debt of the Philippines, to set the guidelines for public debt management, and to see to it that the policies are carried out. The second major achievement in the area of debt management is the establishment of the unquestionable credit of the government, primarily in the form of Philippine Government Treasury Bills. There is now no doubt in the mind of the investors that publicly floated government debt instruments can be liquidated promptly and efficiently at maturity. The third major achievement in the area of debt management is the substantial increase in government non-demand borrowing from the private market. as of July 31st, total government borrowings from the private market in the form of non-supported Treasury Bills amounted to P219.465 million... [which] represents that much in non-inflationary finance for the government. The fourth accomplishment is the reduction in the amount of government demand debt, with a corresponding increase in the amount of term debt, thus resulting in the lengthening of the average maturity of the public debt. admittedly, we are still far from the situation where all or a predominant portion of government debt is of term nature, but the Treasury Bill program is a great stride in that direction. The fifth accomplishment is a relative reduction in intrasectoral government debt and a relative increase in privately held government debt. This is evidenced by the fact that a sizeable portion of the outstanding Treasury Bill float is held by non-government entities. The spreading acceptability of government credit, as reflected in the increased demand for government securities, together with easing tendencies in the money market have resulted at times in substantially low interest costs to the government... The low interest rates privately proven for government borrowings is the sixth major accomplishment of the debt management strategy.

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The seventh major accomplishment is the achievement of interest savings on some phases of government operations. For instance, the issue of Treasury Bill, Gold subsidy series, which are non-interest bearing and which were intended to mature anywhere from 74 days to 402 days after their intended issue results in interest savings to the government since the government will not have to pay cash until maturity... The eighth major accomplishment in debt management was the creation of the environment for the birth of open market operations. involving the actual purchases and sales of government securities by the central Bank with the private market, open market operations in its developed phase symbolizes monetary policy executed through “fine tuning”. The tools of monetary policy have therefore been buttressed by an additional tool for the control of day-to-day bank reserves... Today, one may say that the Treasury Bill market has continued to thrive through the years and has by now blossomed into full maturity as an important and permanent fixture in the Philippine financial system. and in its institutional history, the memory of Bancom’s role and accomplishments will always have a secure place.

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chapter 14 advising on external debt management shortly after the end of our three-year consultancy contract on the domestic debt program, we received a new letter from secretary of Finance eduardo romualdez again inviting Bancom to provide another vital consultancy service to the government.

A new challenge This time, the focus of interest was to be the country’s external debt situation. instead of a deliberate institution-building effort like designing the Treasury Bill program, the role we were now being asked to undertake was to serve as the emergency problem-solver for a looming national external debt crisis. The november 22, 1968 letter of invitation of secretary romualdez sounded much like an ominous call to duty for Bancom and offered us virtually carte blanche terms. it left us no other real response than to immediately accept the challenge. Here are interesting extracts from the romualdez letter: in my capacity as chairman of the Financial Policy committee of the government, i am requesting you to submit to the committee a consultancy proposal to assist us in the creation of a concrete and viable external debt management program for the government. at this stage, the committee is of the opinion that the government should formulate a rather detailed and feasible strategy which will establish the Philippine credit in foreign financial markets, thereby giving the government access to these markets. at the meeting of november 21, 1968 the committee approved the proposal that we seek professional advice on the formulation of such an external debt strategy. more specifically, the objectives of such a strategy should be: 1. To identify the problems that will confront the Philippine economy in servicing its external debt over the next five years; 2. To determine the appropriate blend of external finance and its magnitude as a result of the anticipated rate and pattern of economic growth that will be pursued by the Philippine economy over the same period; 3. To develop for the government the positions it must take and the policies it must adopt in relation to all the sources of international finance, including the multilateral financial institutions, capital market and sources of foreign aid; 4. To assist the government in implementing the external financing strategy which is finally adopted for negotiations of the government with multilateral and bilateral financial institutions

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and performing the investment banking services for establishing the Philippine credit in specific financial markets and in actually tapping these markets for financing. The end product of all such undertakings is for Bancom to come up with an overall external debt plan and specific programs for tapping various sources of foreign financing. since such undertaking by Bancom would require the cooperation of the government agencies represented in the Financial Policy committee, it is necessary for Bancom to delineate quite clearly the overall scope of responsibility of the following members of the committee: Department of Finance, central Bank of the Philippines, national economic council, Budget commission, and Presidential economic staff. it would also be appreciated if Bancom could define the contractual relationships between itself and the members of the committee as a group and as individuals and to suggest the operating procedures which should be established so as to facilitate the completion of this undertaking. it would also be further appreciated if Bancom could include in its firm proposal the fee it proposes to charge and the billing procedures as well as an estimate of the completion time. Due to the nature of the professional services that have to be rendered, it is understood that the committee shall seek the necessary clearance from the General auditing office to forego public bidding for this particular undertaking... on november 26 i sent my reply to secretary romualdez to formally accept his invitation, indicating therein our proposed consultancy terms and work plans. Fe Villafuerte, who had worked with me in the Department of economics, research and statistics of the PnB and subsequently in the Program implementation agency and national economic council, had just returned from her World Bank assignment with Drag avramovic in the first major developing country external debt rescheduling exercise. she was perfect for this complex project and we contracted her to be my principal assistant.

The problem What was the nature of the country’s external debt problem; what were its metes and bounds, so to speak? in 1968-69, the Philippines was experiencing a combination of balance of payments deficits, inflationary pressures, and national government budgetary deficits. it appeared at first like a recurrence of a chronic tendency of the system, a disease that recurred at every Presidential election year. Bancom’s analysts spotted a difference in this one. The loss of international foreign exchange reserves was not due to a typical trade imbalance. The deficits were showing primarily in the capital accounts. This was because external debt service was far in excess of new inflows from foreign loans. The country was reducing its external debt prematurely and no one was noticing it. The reason was that in 1962, when the controls on foreign exchange transactions were lifted, the system for recording cHaPTer 14 – aDVisinG on eXTernaL DeBT manaGemenT

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external debt stocks and flows was dismantled. no one knew how much was the country’s foreign debt outstanding, both public and private. Bancom undertook to tabulate the external debt in mid-1969. The first stage of our consultancy work, which involved a statistical and analytical process of establishing the accounting facts of our country’s outstanding external obligations and which was completed in october 1969 just before the Presidential elections, presented an exact and comprehensive picture of the problem setting. The total external debt of the Philippines had increased from about $595 million in 1961 to $1,448 million as of mid-1969. The size of this debt was not considered as worrisome, given the stage of the country’s development and GnP growth. in fact, if the economy were to continue to grow at the annual rate of 6 to 7.5 percent, the size of the debt might be expected to further increase. However, what was disturbing was the recent bunching of short-term debt during the past few years. out of the total external debt of $1,448 million as of mid-1969, some $492 million or a good onethird represented short-term obligations which were falling due in 1970. another $147 million out of the medium- and long-term debt was also maturing in 1970. These scheduled debt payments due in 1970 would be equivalent to more than half of total export earnings for the year. Beyond the lopsided term structure of the debt, the terms of foreign borrowings had also deteriorated for the country. The average interest rate on debt outstanding had risen during the same period that the average maturity had fallen. international reserves held by the central Bank were at very low levels at a time when the country was still projected to run current account deficits without sufficient long-term capital inflows to compensate for such deficits. Thus, the huge bunching of maturing short-term debts precipitated a serious liquidity crisis. The central Bank was forced to institute selective stop-gap measures, such as partial postponement of payments for invisibles like royalties, dividends, airline remittances, film rentals, etc. But these stopgap measures were not sufficient to balance the foreign exchange disbursements with the receipts, and selective exchange controls had to be reimposed in november of 1969. We also observed that the Philippines could not resort to borrowings on a project basis, in order to fill the financial gap, because there was a paucity of viable projects in the pipeline. The country had been importing its requirements of capital goods largely on cash basis and had neglected project development.

Re-schedule or else We reached a grim conclusion, after analyzing all the data, that unless an acceptable rescheduling program can be worked out with our foreign creditors, particularly the u.s. and european commercial banks, then the country would be forced to go into default. We submitted a preliminary report on the first phase of our consultancy work to the Financial Policy committee on october 31, 1969. in our report we outlined certain urgent steps that needed immediate action. We followed up with a memorandum on november 8, to spell out more fully a

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preliminary program and a strategy for its implementation. Both the program and the strategy were approved by the Financial Policy committee on november 13. The approved strategy for immediate implementation called for Bancom to handle the exploratory negotiations with foreign banks and governments who were current creditors of the Philippines or were being targeted for particular terms and forms of new credits. our basic task was to determine what credit proposals might be feasible based on the policies and capabilities of the creditors, and later submit the official requests that would be the subject of official negotiations. The arrangements had to be made immediately if the country was not to default on its maturing external obligations. But it was a bad time for negotiating with creditors. Presidential elections, with marcos running for his second term, were in process. Foreign creditors do not like to negotiate with a government leadership whose term is expiring and where those speaking for government covenants and commitments had no clear mandate as yet from the electorate.

The first “roadshow” Bancom was therefore commissioned to make the rounds informally and unofficially in order to apprise creditors of the situation and to lay out understandings in principle that could be formalized by the appropriate official negotiations as soon as the elections were over, and a set of government leaders with clear electoral mandates was in place. strange tasks for a private enterprise company! To equip us for our role in these exploratory talks, Bancom was deputized as an official agent of the Philippine government through the transmittal of official notes by the Department of Foreign affairs to the embassies of the countries where discussions would be undertaken. a Note Verbale was sent by the Department of Foreign affairs to each of the ambassadors of australia, canada, Germany, italy, Japan, Great Britain, and the u.s.a. The designated Bancom officials authorized for the talks were Fe Villafuerte and myself. at the suggestion of secretary romualdez, Gabriel itchon of the central Bank was also attached to the Bancom team. Before flying out to these destinations, i made the rounds of the embassies and conferred with the ambassador or chargé d’affaires of the countries to be visited in order to brief him and provide the working papers concerning the matters for discussion. These papers were then sent by diplomatic pouch to the respective foreign government officials in our itinerary. it was decided that i should proceed alone to conduct talks in rome, London, Bonn and Frankfurt. Fe Villafuerte and Gabby itchon flew directly to new York to introduce the program to the syndicate of u.s. banks and to lay the groundwork with the iBrD and imF in Washington, D.c. and with the canadian government in ottawa. From europe, i met up with our Bancom team in ottawa during the u.s. Thanksgiving holidays and then we travelled together for follow-up discussions in new York with the u.s. commercial banks, and in Washington, D.c. with the u.s. government, the iBrD and the imF. The team would then stop by Tokyo on the return trip home for talks with the Japanese government and Japanese commercial banks. cHaPTer 14 – aDVisinG on eXTernaL DeBT manaGemenT

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The international setting i recall that the timing of my travel mission was not very auspicious due to the difficult internal situations prevailing in some of the countries to be visited. italy was mired in domestic labor unrest and capital flight had caused the government to clamp down on external lendings by the private banks. The German economy was experiencing transitional adjustments, after the recent Deutsche mark revaluation and surges in capital outflows required the Bundesbank to make drawdowns on the imF. canada was pursuing severely restrictive monetary policies while the government was reformulating its foreign aid policies for the next decade. in Japan, a national election was the major preoccupation. as i went through my itinerary, certain creditor countries voiced their sentiments about the perceived lack of resolve on the part of the Philippine government to undertake proper disciplinary measures necessary to address the fundamental causes of the country’s economic problems. some bankers were loudly critical about the indiscriminate peddling of DBP-guaranteed paper in the european and u.s. financial markets. it was felt that the credit standards on such DBP guarantees did not inspire market confidence. others noted also that the Philippine national Bank oftentimes seemed to exempt itself from uniform regulations governing private banks, creating potential leakages in the strict administration of foreign exchange policies by the central Bank. in light of such criticisms, the consensus that eventually emerged among the countries was for the multilateral agencies to undertake an independent evaluation of the Philippine economic situation.

Enter IMF The creditors expressed a willingness to accept our proposals but only on a multilateral basis under the auspices of the imF for the short-term proposals and of the iBrD for the medium- and long-term proposals. accordingly, both the imF and iBrD were asked to evaluate the Philippine program and the two institutions agreed to send their respective missions to the Philippines in January of 1970. The propitious presence of secretary romualdez in new York and Washington, D.c. during the December 2-11 discussions there enabled us to get his immediate decision on the key elements of the program, which had evolved from our assessment of the limits, constraints and policies that were expressed by the various creditor countries and banks we had met. Thus, our unofficial recommendations were quickly transformed into official requests and negotiations, thereby facilitating the most crucial first steps in the entire debt-restructuring program.

The proposition Without getting too much into all the technical details, i should briefly summarize the main components of our recommended strategy.

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For the short-term measures, our main thrust was to move for a rescheduling of some $200 million owed to u.s. and european banks and to stretch out the maturities over a period of five years beginning 1971. This was premised on a package of stabilization measures to be imposed by the central Bank, which would cut back imports, as well as certain invisibles, by some 35 percent starting the second quarter of 1970 and would fundamentally improve the balance of payments outlook for the near term. We recommended that amortization payments due to the iBrD, the u.s. export-import Bank, and the Japanese export-import Bank should not be deferred in order that the Philippines could avoid a complete rescheduling of debts on a multilateral basis like the experiences of Brazil in 1964 and indonesia in 1967. We felt that such drastic action was not yet warranted by our country’s financial position. We further recommended that the central Bank should strive to repay the $27.5 million second credit tranche from the imF as soon as reserves are available. our goal was to dampen the speculations about a devaluation of the Philippine Peso. such speculations would be encouraged for as long as the possibility of drawing on the third credit tranche was left open. For the medium- and long-range measures, our strategy called for the mobilization of trade and project credits. We identified some $380 million worth of producers’ goods imports in the next two to three years coming from the u.s., Japan, Germany, the u.K., and italy, for which the country should seek appropriate financing, ideally for tenors of 15-20 years, so as not to cause undue burdens on debt servicing. We had noted that foreign borrowings at commercial terms with maturities tied to estimated asset life were simply not sustainable. From Japan we sought a liberalization and acceleration of reparation payments so that normal commercial imports may be charged against reparations without applying the tight procurement procedures. in this way, reparations receivable from Japan might be counted as forming part of our foreign exchange resources. most importantly, we pointed out the need for the government to improve its institutional capabilities in project identification and development, so that project loans can begin to assume a significant place in the mix of future foreign borrowings. on a personal level, throughout these negotiations what i was constantly trying to avoid was precisely the usual approach of the imF and the creditor Bank syndicate (headed by Tris Beplat of manufacturers Hanover), which invariably involved a devaluation of the currency. my point was: You do not solve a debt service problem with a devaluation! The nature of the debt problem was typified by our situation with the u.s. export-import Bank. in effect, our amortization and interest payments were already in excess of new loan releases, which is what happens when you do not feed new project loan applications in the pipeline. The fact was the country’s imports were no longer for new equipment for entirely new projects, but for replacement parts and intermediate components for assembly lines and semi-processed materials. These were financed with import credit lines and not with project loans. cHaPTer 14 – aDVisinG on eXTernaL DeBT manaGemenT

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i indicated this to the imF, the World Bank and the syndicate but could not get Tris Beplat to understand and could not get romualdez to insist, and he ended up giving in to Beplat’s insistence on a standard imF-led “stabilization” mission. What i had wanted was a credit consultative Group headed by the World Bank instead of the imF! Finally, this entire episode was capped with a touch of irony when President marcos subsequently appointed Gregorio Licaros, who as DBP Governor was partly blamed by the international bankers for the deterioration of Philippine external credit, as new Governor of the central Bank to officially negotiate the external debt restructuring. The external debt management consultancy engagement enabled Bancom not only to provide an invaluable service to the country at a time of crisis, but also to gain notice and recognition for itself in international financial markets.

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chapter 15 Forming a virtual merchant bank in retrospect, one might surmise that cBTc, having brought its own shareholders together with Bankers Trust to form Bancom, should have assertively dictated the modes of operation that could create synergy – instead of allowing any competition – between the commercial bank and the fledgling investment bank. unfortunately, things did not turn out that way. The ground rules governing commercial banking in the Philippines laid any commercial bank vulnerable to competition from a virtually unregulated institution. early in the game Bancom’s money market traders discovered the achilles heel: the wide gap between the bank’s deposit rates and its lending rates, both of which were regulated by central Bank rules and by the cartel agreement among members of the Bankers association. Bancom’s money traders quickly spotted the weak spot that offered a ready opportunity to wean away from the banks a good portion of the treasury business of prime corporations. They focused on blue chip clients, especially multinationals such as the drug and the oil companies. Through “cocktail seminars” for corporate treasurers, Bancom opened their eyes to the chance to shave points from the interest rates they were paying when short, and to gain on what they were earning when long on funds. For Bancom, there were two ways of attacking this opportunity. as the prospective participants were all prime companies, we could have induced the corporations that needed to borrow to issue some negotiable instrument such as commercial paper, charging them at rates lower than the bank lending rate. Then have Bancom, as a pure dealer, sell the paper at rates higher than the bank deposit rate to those corporations that were long in funds. This would have been truer to Bancom’s proper business as an investment bank. But this also would have been more complicated and would require time-consuming preparatory and promotional work. The easier and quicker way was for Bancom to directly borrow on short maturity from the companies that were long on funds at better rates than the bank deposit rate, and likewise directly lend at lower than the bank lending rate to the companies that were short. That was not only simpler but, at this stage of Bancom’s entry into the market, it also suited the game plan to quickly build up Bancom’s balance sheet to a respectable size well beyond its small starting capital of only P7 million. ray ilusorio and his team implemented this with characteristic style. They launched the Bancom Bill, for borrowing and lending, and quoted their offered and asked rates based on the Bancom Rate, thereby evoking the ring of Lombard street’s the “Bill on London” and the “Bank rate”! cHaPTer 15 – ForminG a VirTuaL mercHanT BanK

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Disintermediation The small capital posed no problem because companies were swayed by the blue chip ownership of Bancom and the persuasive panache of its traders. The program caught fire instantly and started what the commercial banks termed in alarm as massive disintermediation. While the campaign was aimed largely at the big clients of the local branches of the international banks, it was not long before even the clients of our own partner, cBTc, joined the exodus towards Bancom. This was to the consternation of marquez, the chairman, and old guard conservatives among cBTc’s senior management. of course, it also caused great embarrassment to Gus Barcelon and his young assistant, my brother andy, who were known to be among the original architects of Bancom. andy was not to be outdone in creative imagination. in late 1967 he designed cBTc’s counter offensive. amidst much internal controversy, he was able to obtain Board approval to originate short-term commercial paper issues, initially by esso standard eastern and meralco. Both of these firms were eager to have their names gain visibility and their reputations enhanced as pioneers in the prime commercial paper sector of the emerging money market. soon, a busy commercial paper dealership unit was established within the cBTc Treasury. although cBTc suffered a marked decrease in the level of volatile large deposits, this was compensated by a larger increase in the float of commercial paper from which substantial trading spreads were gained. in time, i believe we would have found a way to make this commercial paper dealership a joint business, with cBTc originating and selling with recourse or extending standby credit lines to issuers and with Bancom serving as the dealer to place the paper and providing secondary market support.

The human factor Why it did not happen is a matter of conjecture. speculation offered two reasons, combined or alternatives. at the top level, personal friction had developed between marquez and Barcelon, that had to do with marquez’s taking his time to relinquish the presidency and ceo position in the bank to Barcelon until he was compelled by the cBTc pension fund rules on compulsory retirement age. He then used the irritants between cBTc and Bancom as a cassus belli against Barcelon, causing the latter to resign and andy to also resign along with him in late 1968. The second conjecture had to do with amor propio at the next level: personal rivalry between ray ilusorio and andy, so that ray viewed cBTc’s launching the commercial paper route as an aggressive competitive move against the Bancom Bills. Fortunately, the conflict did not carry over to the level of the Boards and stockholders of cBTc and Bancom. our relations had established a secure bond and when we broached the idea of finding another commercial bank with which to establish the synergy, which at this stage we considered possible and of immense advantage, our Board went along.

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By the second half of the decade of the 60s, the pace and pattern of development of the Philippine economic and business structure had generated demands for a wider range of more sophisticated financial services. Traditionally, business was dominated by multinational corporations serving the local market with petroleum products, modern pharmaceuticals, household consumption staples like cooking oils and cosmetics, and utilities like electricity and gas, or exporting primary products like mineral ores, coconut products like oil and desiccated nuts, raw sugar and molasses.

The banks and their customers These were the prime clients of the local branches of foreign banks like First national city Bank, Hongkong shanghai, and chartered Bank, and the older local banks like Bank of Pi and Peoples Bank. There was also a substantial chinese clientele among traders in commodities such as sugar, copra, rice, and a good number of medium and smaller establishments dealing in hardware, imported food products such as wheat flour and assorted canned and packaged foods. These were the prime clients of the chinese commercial banks, principally china Bank. among local banks, the government-owned Philippine national Bank established in 1916 was the largest and accounted for half of the resources of the commercial banking system and had the most number of branches all over the country.

Sugar – the value chain PnB was the principal banker of the whole sugar industry, the planters and millers. sugar in the country was uniquely organized to facilitate ready bank financing because it was dependent on the american market where annual importation was administratively limited by quota allocations since the american imports were priced substantially above the world markets for the benefit and protection of the local growers of beet and cane sugar in the u.s. countries like the Philippines and cuba were given fixed export allotments to avail of this market. Domestic production in the Philippines was territorially divided into growing and milling districts, each district being given an allotted percentage share of the u.s. quota. The total share then had been allotted by percentages to individual accredited sugar planters. as a result, the whole industry was governed by a quota system regulated by a government sugar Quota administration office. There were only fifteen milling districts and all the cane was milled in these centers where the output of raw sugar was distributed in contracted percentages between the mill and each of the sugar cane planters. The processed sugar was stored in the warehouses of the districts, against which warehouse receipts called Quedans were issued to the owners. The control of the flow of the cane and the finished sugar and the storage covered by warehouse receipts made the financing and collection quite manageable. no other agricultural crop was similarly organized and so a major portion of loans to agriculture naturally gravitated towards sugar. rice, corn and coconuts account for most of the planted hectarage cHaPTer 15 – ForminG a VirTuaL mercHanT BanK

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in the country. not structured in the same way as the sugar industry, their growers do not have anywhere near the same access to formal bank financing.

Commercial bank dominance central Bank control over foreign exchange transactions gave banks a privileged position as agent Banks of the central Bank in administering the whole foreign exchange allotment system. all legitimate foreign exchange transactions had to be coursed through the commercial banks, visible and invisible export receipts and import payments. This gave the commercial banking system a tremendous edge in serving the financial service needs of the entire formal business sector in the country – their deposit and incoming and outgoing payments services, and their financing requirements. Personally, my four years in the PnB as chief economist heading the research department, and as Vice President and assistant to the President gave me valuable experience in all the aspects of commercial bank management. President arsenio Jison coursed all matters reaching him through my office for analysis and recommended action, including liquidity and overall balance sheet management matters as well as credit transactions requiring Presidential or Board approval. so i had a thorough exposure to the management of the largest domestic bank in the country accounting for half the resources of the entire system.

The commercial bankers i also realized the particular character of the organizational culture and perspectives in which commercial bankers are formed and molded in their excellence. The deposit and credit services necessarily breed a more cautious and conservative type of personality. in the older tradition it was not considered appropriate for a model banker to be overly aggressive and competitive. That would not engender faith and confidence in depositors and investors particularly those entrusting their savings and the custodianship of their estates. in the days when financial statements were not readily available, or when available, of dubious faithfulness to reality, and when certified public auditors were rarities and in their early stages, credit managers drew their information from direct personal contacts and by tuning into the rumor circuits and what was known in early Philippine business as the “bamboo telegraph”. The icons of the commercial banking industry were the star credit managers whose batting average was derived from their vast knowledge of the players, their family linkages and associations, their personal habits, virtues, weaknesses and vices as well as the operation of their businesses and the condition of their finances. The role models were those who navigated their banks with impunity through the mysterious and arcane passages of business in the chinatowns of manila and cebu. Go Kim Pah at equitable was the one i easily recall. The PnB also had an old and venerated credit man but whose name i cannot now remember.

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The cultural divide There was a world of difference between the staid and conservative commercial banker and the aggressive, competitive and more outgoing qualities of the investment banker, who had to demonstrate not just technical competence, but imagination, creativity and agility of mind. The manifest virtue of commercial bankers even when still young was precocious wisdom, the virtue of older men. That of investment bankers even when somewhat aging was the energy, aggressiveness and creativity of youth. i was aware of all the services that a commercial bank license could provide. i appreciated the tremendous power and potential of a commercial and investment banking combination. its financial strength ultimately was the substance and size of its balance sheet and its capital that answered for the liabilities that it assumed as the very substance of its business – its Letters of credit, its deposit services, its custodianship of other people’s wealth. early on, i appreciated the wisdom of those two categories of financial services – balance sheet power of commercial bankers and the creative excellence of originators and dealers of financial instruments – requiring to be offered in two different and separate organizations. But if these two different sets of services were better produced and supplied from two separate organizations, i also saw the potential and power of being able to offer and deliver them in complementary packages. at the delivery end, the wisdom of having a one-stop shop. This was the logic behind our concept of the virtual merchant bank that we never really had a chance to seriously implement with cBTc. But having missed the boat there, we pursued the search for an alternative commercial bank partner with even greater vigor.

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chapter 16 Functional merger with rcBc in hindsight, for what we had wanted to form, a bank that had already built up its balance sheet and its clientele of blue chip corporations would naturally have been cautious about an arrangement that involved disintermediation – losing profitable deposit and loan business even to a partner investment bank. We had to find instead a smaller bank that had everything to gain from raiding the clientele of the bigger and longer established banks. The al Yuchengco Group had done business with Bancom through their House of investments and their finance company operations. The Group controlled a small commercial bank, the rizal commercial Banking corp. (rcBc), no. 22 in the rankings by total resources, whose shareholders included a number of mindanao logging companies and a multinational pineapple packing company, Dole. our feelers had a positive response and we opened formal negotiations.

The partnership my letter to al Yuchengco dated march 24, 1969, outlined the terms of partnership between rcBc and Bancom that we agreed upon. First, we agreed to a more balanced redistribution of the equity structure of rcBc among the Yuchengco Group, the Bancom shareholders, and the incoming management group led by Gus Barcelon. second, we entered into a Pooling agreement to unify the voting power of the 3 groups and to stipulate a formula for allocating Board representation. Third, we agreed that Gus Barcelon would lead the new management team and be designated as ceo. Gus replaced the retiring Fernando e. V. sison, a former secretary of Finance, as President of rcBc. andy roxas was appointed as the new executive Vice President.

The concept When we joined forces with rcBc we agreed on the kind of institution we wanted to build. it would be a merchant banking combination offering over a single counter the services of a fullfledged commercial bank and those of an investment bank. We were confident that the consultancy services, underwriting and placing power of an investment bank could draw into a commercial bank substantial banking business immediately and provide instant growth. it would still be necessary, however, to build a solid retail banking base. The most expeditious way of acquiring this base would be through a merger with another commercial bank. The growth and development of rcBc during its tie-up with Bancom had borne out the assumptions of our understanding.

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Phase I From may 1969 to July 1970 our group was preoccupied with reorganization, cleaning up the balance sheet of the bank and consolidating our position. The merchant banking combination did not really get underway until after July 1970, which marked the end of Phase i in our strategy and the beginning of Phase ii.

Tragedy it was around this time that these corporate events and our personal lives were jarred by the sudden death of my brother andy, who perished in a plane crash on may 7, 1970 together with Boy Tuason, our Director at Bancom and rcBc, and four others, among them our good friend Peggy Lim, wife of P. L. Lim. Their light plane bound for Baguio malfunctioned and crashed a few minutes after takeoff from manila, leaving no survivors. Given this tragic turn of events, i found it necessary to assume andy’s position as eVP at rcBc, while concurrently serving as Bancom President.

Phase II The essence of Phase ii was to a) use the domestic and foreign placing power of Bancom to put rcBc in a position to bid for the business of the large export-oriented clients and derive substantial foreign exchange business, and b) negotiate for the prime Philippine companies term credits from abroad that would then come into rcBc as circular 304 deposits. With an enlarged share of the export business, rcBc would be able then to expand its correspondent lines. The dramatic growth of rcBc’s resources first from P147 million in July 1970 to P232 million in December 1970 (or a 58% increase in a period of five months), and then all through 1971 to a yearend level of P537 million (or a 131% increase during the year) was the result of this strategy. Foreign exchange borrowings accounted for 63.2% of the growth in resources during 1971. This increase in resources, in the loan portfolio and in foreign exchange business resulted in a corresponding near-doubling of net profits from P4.7 million in 1970 to P8.3 million in 1971. it was the combination with Bancom that made possible the growth in income and produced a yield of 20.1% on equity in 1970 and 28.7% in 1971. Despite the spectacular success of rcBc, or perhaps because we were further encouraged by such success, Gus Barcelon and i continued to strongly espouse the idea of a merger with another commercial bank. We wanted a larger capital base that could permit the bank to enlarge its carry potential for risk assets, and we needed a faster way to branch out nationwide for retail deposits. We examined a couple of merger candidates. eventually we narrowed down the choice to one bank that looked like a perfect fit for rcBc. The candidate bank we had selected was Jobo Fernandez’s Far east Bank and Trust co. Jobo was a close friend and business associate. While i was still starting out as an economist, first in the central cHaPTer 16 – FuncTionaL merGer WiTH rcBc

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Bank and then in the PnB, Wash sycip had introduced me around. Leo Virata put me on the Board of commonwealth Foods. and when Wellington Koo Jr. came and partnered with Jobo to establish the first open-end mutual fund, the Filipinas mutual Fund (FmF), Jobo invited me to come in with the group. Far east Bank was also my own personal banker and when i joined macapagal’s cabinet, Jobo gave me an overdraft line to sustain me during my stint. my private working notes about the merger merits contained these entries: Based on the reliable information, the operating results of the proposed merger have been examined. a summary of these finds follow: a) Based on December 31, 1971 statements, the total resources of the two combined will be P908 million, which will make it the largest private domestic bank in the country. net worth will be P69 million and the combined loan portfolio will be P537 million. The combined 1971 net income will be P16.6 million. Total deposits will be P550 million. b) in terms of branches, there is also a lot of complementarity. The other bank has a good coverage in Luzon and Western Visayas regions. if its present branches are compared to the needed branch coverage, rcBc will have to open only some five (5) branches to obtain the proposed network. c) There are few client-overlaps between the two institutions. Thus, the proposed merger will result in immediate expansion of clientele for the merged institutions. d) organizationally, the preliminary findings is that there will not be too many overlaps of manpower so that there is no strong need to weed out people. Given the present statement of condition of the other bank, and assuming that the merged bank will be operated on a merchant bank basis with the investment bank, it is estimated that on the first year of operations, the combination will generate additional net income of P5.5 million, over and above the sum of their respective 1971 net incomes. Thus, the projected net income of the combination is estimated to be P22 million, or 30% increase from the sum of individual net income of P16.6 million. The stockholders of rcBc stand to gain in two ways: a) an increase in per share earnings, and b) an increase in the valuation of their shares. our valuation is that after the merger each share of the rcBc stockholder will be worth P585.00. To explore the merger possibility, Gus Barcelon and i arranged to have a meeting with Jobo in Bangkok where we reached a tentative understanding before we formally broached the idea to al Yuchengco. The numbers looked so good, we felt it was a course al and rcBc could not refuse.

Chemistry trumps growth But we had not reckoned with the personal element – How al felt about Jobo and the persons in his group.

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Bancom had achieved new heights of power and prestige in 1972. The functional merger with rizal Bank was a formidable combination. But in that very year, forces were already at work to change the ground rules so as to thwart the very combination that had proven so powerful. anticipating this, Bancom sought to consolidate its position by seeking to merge rizal Bank with Far east. if that had succeeded, there would have been no stopping it. This move had not reckoned with al Yuchengco’s long-standing, strong dislike of Jobo Fernandez and his group, which included the del rosario brothers. When al got wind of it and of the fact that the Bancom shareholders had managed to get a majority of the shares of rcBc, then all hell broke loose. Yuchengco marshalled the legal forces to counter our merger moves to the point that Bancom would have been faced with unproductive legal battles for years to come. in the end the buy-out route became the most expedient. and Yuchengco’s group brought in continental Bank of chicago to buy out the shares of the Bancom Group in rcBc.

Bancom lost RCBC. We moved into Far east Bank with Gus Barcelon taking over the Presidency from a very willing Jobo. For many reasons, however, it was not possible to achieve the same synergy with Far east. The Bancom Development corporation of 1975, while still at the head of the pack – a position it would continue to hold until the eve of its crisis – was facing internal and external problems. on november 24, 1971, when the Bancom-rcBc combination was a blazing meteor on the financial horizon, the central Bank and the international monetary Fund formed the cB-imF Banking survey commission to look into reforms in the financial system. Their report was submitted and a year later, on november 29, 1972 Presidential Decrees nos. 71 and 72 were promulgated amending the General Banking act and the central Bank act. The declaration of martial Law in september of that year and the abolition of congress, had established a government run by the technocracy. The ground rules in the financial arena were changed radically by a mere stroke of the President’s pen in response to the recommendation of the technocrats. Legislation through Presidential decrees under martial Law established new rules for quasi-banking and the tapping of money market funds through so-called deposit substitutes.

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chapter 17 asean merchant banking network at about this time, Bancom was making its presence felt around southeast asia. indeed, Bancom established the first asean merchant banking network. although it covered only four of the five countries forming the regional association at the time, it was well on the way to completing a regionwide network, which had brought together prime parties in each of the countries, sharing a genuine asean nationalist sentiment and vision. By the end of 1980, on the eve of the Dewey Dee crisis, we had completed an international structure that combined a most impressive array of institutions and private and government supporters in southeast asia in a network of local and regional financial service corporations.

Thailand in Thailand, Bancom established and staffed the first investment bank of that country in 1969, the Thai investment and securities co. Ltd. (Tisco). This was made possible with the powerful support of Dr. Puey ungphakorn, the venerable Governor of the Bank of Thailand, and Khunying suparb Yossundara, his deputy for economic affairs who later became the first woman executive Director at the World Bank. They had linked Bancom with the Thai Farmers Bank owned by one of the leading families of Thailand, the Lamsams, and headed by Bancha Lamsam, the senior family head at the time. We signed our formal memorandum on Thursday evening, January 23, 1969. Bancom and Bankers Trust on one side and Thai Farmers Bank on the other agreed “to form an investment bank in Thailand” to be registered under the Thai company act and capitalized at us$1 million. The shareholder structure was to be 60% Bankers Trust, 20% Thai Farmers Bank, and 20 % Bancom. more important than its capital contribution, Bancom was committed to provide the initial management for the venture and the training for its permanent staff. This meant sending ray ilusorio for at least six months to start up the money and capital market trading in Bangkok, as well as assigning Louie Villafuerte for a shorter period to design the legal instruments and define the operating procedures which would be feasible within Thailand’s laws. We also agreed to arrange for the prospective managing director of Tisco to train in Bancom for a 4-5 month period in all the aspects of our manila operations. ray and Louie went the first week of February to establish the initial contacts, survey the areas of operations and map out the initial operating strategy, which they completed in a couple of weeks. They returned and then ray moved to Bangkok later in march of 1969. Tisco proved to be quite successful as the first investment bank in Thailand.

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Bancom’s partnership with Bankers Trust developed problems that were too fundamental to be resolved. The ownership structure of Tisco became the testing ground. in Bancom both management and ownership were in Filipino hands. We felt that, as a matter of basic philosophy, this should be true of our joint ventures in the other countries of southeast asia. But Bankers Trust did not agree. in fact, instead of having Bancom train a Thai ceo to take over from ray, Bankers Trust designated its own officer, stellan Wollmar, for the position. and it became clear that over the long run Bankers Trust had no intention to relinquish ownership control to the Thai Farmers Bank Group. We decided on a parting of ways and eventually on august 1, 1972 Bancom sold its 20% interest in Tisco to Japan’s Dai-ichi Kangyo Bank. it was not long afterwards that Bankers decided to divest from Bancom as well. on may 3, 1973, Bankers international sold its 29 percent share in Bancom to american express. This transaction was facilitated by the transfer of Dick Bliss from Bankers international to the american express international Banking corp. Based on its demonstrated creativity, competence and nationalistic philosophy in the development of financial markets, Bancom became a partner of choice for the nationalistic leaders of the region, particularly malaysia and indonesia.

Malaysia my close friendship with Governor Puey and Khunying suparb was a key factor in my developing close rapport with Governor Tun ismail bin mohamed ali of the Bank negara malaysia, Governor radius Prawiro of Bank indonesia, and michael Wong Pakshong of singapore’s monetary authority. We were demonstrating our success in the development of the money markets and investment banking in the Philippines, and had succeeded in introducing the process in Thailand in the two years of operating Tisco. There was keen interest in the other three asean countries, malaysia, indonesia and even singapore, where the money markets were at elementary stages. The discussions first matured into actual joint venture institutions in malaysia. The malaysian government had assumed a strongly nationalistic policy. it had restricted further entry into malaysian merchant banking to limit further Western influence on the financial system. But it still wanted assistance in developing the local market. i had been talking to Governor ismail since 1968 and during his manila visit in February 1969 we had given him an intensive briefing on Bancom operations. in november 1974 Bancom and malaysian partners formed asiavest Holdings (malaysia) sdn Berhad. malaysians carefully selected by Governor ismail owned 70%, and included prominent Bumiputras: Tengku razaleigh, Datuk syed mahmood, Datuk syed Kechik. in accordance with a design we formulated to institutionalize the asean nationalistic policy, the 30% was owned not directly by Bancom but through a corporation called asean investors Group (aiG), incorporated in Vila, new Hebrides. This was initially owned 50-50 by the malaysians and Bancom. However, the idea was that as ventures were formed in the other asean countries, aiG would be owned equally by each of the five asean country partners. cHaPTer 17 – asean mercHanT BanKinG neTWorK

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The malaysian holding company received a merchant banking license February 1975 and incorporated asiavest merchant Bankers malaysia Berhad as a wholly owned subsidiary . This was followed in august of the same year by the grant of a discount house license and asiavest Holdings formed a second wholly owned subsidiary, asiavest Discount House (malaysia). The two institutions started dealing in the money market, the former primarily in trade bills and the latter in Treasury Bills. The team of Bancom expatriates we fielded in malaysia was headed by mike Goco.

Indonesia although Governor radius Prawiro had brought in Bancom earlier than in malaysia, the first efforts to form a joint venture fell through. Bancom established a specialized management and consulting joint venture, P.T. Panca Bina esa (PaBesa) in partnership with P.T. Bina usaha indonesia, a holding company owned 50% by Bank indonesia and the balance, equally, by all the state banks, which then accounted for 80% of the banking system. Then undergoing consequences of the massive 1974-75 Pertamina crisis, the state banking system was quickly accumulating substantial non-performing assets. We proposed that PaBesa should assist the state banks to turn-around their temporarily distressed but rehabilitatable customers, as well as promote new joint venture projects. Bank indonesia agreed, and we authorized Kaiku Licuanan and Francis estrada to proceed and establish the joint venture. aiG came in with 25%, PT Bina usaha another 25% and the balance was shared by the three major development finance institutions of indonesia, iDFc, PDFci and BaPinDo (the government development bank) and Bank Bumi Daya with 12.5% each. PaBesa would naturally require execution skills beyond traditional investment banking. Hence, people like nonoy reyes (former manufacturing manager at P&G), Jing alampay and narayan menon (both bright mBm graduates from aim) and Willy Tirona (former P&G Brand manager), among others, were deployed to this initiative. While not a major money-maker in itself, PaBesa gave Bancom stature and important friends in the indonesian banking system. Thus, a new opportunity opened up in June 1975. The indonesian central Bank had sponsored the establishment in 1973 of a development finance company called PT First indonesian Finance and investment corporation (FicorinVesT) as a joint venture of PT Bina usaha indonesia and ten foreign banks – during a period when consortium banking was in vogue, primarily in London where such institutions like orion, inter-alpha and many others operated. This proved unworkable primarily because the consortium structure gave little substantive economic interest to each of the overseas shareholders. This put the investment low on the “radar screen” of the investor, with the attendant consequences in terms of management attention and resource/talent allocation. on hindsight, this was quite fortuitous for Bancom.

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FicorinVesT had established itself in an elegant old colonial house as its head office, presided over by a european ceo who lived in elegant style but did nothing to speak of. as Governor rachmat saleh (who succeeded radius Prawiro) later told me with a naughty twinkle in his eye: “We should have known, if you want to make time with a woman, do not ask ten of them out at the same time.” Bank indonesia bought out the shares of the foreign banks, ending up being a 50% owner of FicorinVesT. Governor saleh asked me if Bancom would be interested, since he had already brought us in as consultants to Bina usaha. on June 21, 1976 we signed an agreement to purchase a 25% equity interest and provide management. Following recommendations contained in the FicorinVesT rehabilitation Plan requested of Bancom, us$ 1 million in fresh capital and us$ 1 million in additional liquidity lines were provided FicorinVesT (25% of which was provided by Bancom via Bancom international Ltd. from Hong Kong). The ownership structure of FicorinVesT was accordingly modified as follows: Bank indonesia, 61%; Bina usaha, 39%; and Bancom, 25%. The plan was to ultimately transfer Bancom’s interest in FicorinVesT, as well as its interests in Thailand, to aiG – a plan that was overtaken by crisis events. Francis estrada from Bancom was assigned as managing Director of FicorinVesT and was made chairman of the money market committee of the indonesian investment Finance corporations Working Group. His team consisted of Joey crisostomo (subsequently replaced by Boyet Barlis) in markets and Treasury, ike Bernardo in investment Banking, and narayan menon and Jing Warren in the Financial engineering unit.

Growing nationalism and regional identity The institutional developments were driven by a growing feeling of asean regional solidarity. it was evidenced further by the move initiated by Governor ismail in malaysia to wrest from British control a large international trading company incorporated in 1928 in singapore, sime Darby. one of the largest plantation companies in malaysia, sime Darby generated substantial revenues from its malaysian plantations, as well as from its manufacturing and trading operations in singapore, Hong Kong and elsewhere. its shares were traded in stock exchanges in London and singapore. The malaysians, led by Governor ismail, had established a special company, Permodalan nasional Berhad, as the investment vehicle for malaysian nationals (primarily indigenous or ethnic Bumiputra) in companies operating in malaysia but formerly owned and controlled by foreign capital. Permodalan nasional acquired control of sime Darby in a sensational “dawn raid” in London, and in 1978 Tun ismail, the chair of Permodalan nasional, decided to exercise its stockholder rights to change the governance of sime Darby. sime Darby’s Board had in the past been controlled by British management, the majority of the Board having been members of the corporation’s management. Tun ismail wanted to see the Board perform a real check and balance function on management, representing the interest of shareholders. at the same time, he saw an opportunity to transform sime Darby into an asean corporation. cHaPTer 17 – asean mercHanT BanKinG neTWorK

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at the December 1976 stockholders meeting, 3 new and independent members of the Board were nominated to replace the english members from the management: a malaysian from a private malaysian plantation company, a singaporean banker, and myself from the Philippines.

Re-establishing a Thai presence in 1978, Bancom got back into Thailand. mr. sunthom arunanondchai was early in his career in Tisco, training for a management position. He moved up over the years as he developed professionally, and in 1978 he headed Thailand’s largest finance and securities company, asia credit Limited. He had always acknowledged his early training and never lost his affection for us at Bancom and he sought ways of getting Bancom back in Thailand. He decided then that asia credit needed offshore finance expertise and he arranged for Bancom to serve as consultant not only for specific deals but to provide advice on strategic directions for asia credit. Bancom recommended that asia credit enter into the asean partnership and form a joint venture with aiG and the saha-union Group, a large industrial and trading group founded by my dear friend, Dr. amnuay Viravan, and anand Panyarachun (cambridge-educated former diplomat and Foreign affairs minister, and later on twice Prime minister of the country). The result was univest Development company, owned 51% by the Thai group of saha-union and asia credit, and 49% by aiG. michael T. skully, author of some 15 books on the development of financial markets and institutions in various regions of the world, wrote a comprehensive account, in his volume on the asean, about our aiG structure in place on the eve of Bancom’s crisis. He noted: “Thus by 1980 Bancom had established operations in malaysia. indonesia. Thailand, Hong Kong and the new Hebrides as well as the Philippines and had only to open in singapore to achieve its goal of full asean representation.”

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chapter 18 some key asian central bankers The circumstances that led to the formation of our asean network is a fascinating tale. over the years, i had the good fortune to form close friendships among the banking officialdom of the countries that formed asean.

The network – where it all began The encounter that opened the doors started when i married Bing escoda in new York. Bing and her brother Tony were enrolled in the u.s. in recompense for the martyrdom of their parents by the Japanese military for their activities in the underground resistance during World War ii. in the u.s, the young escodas were placed in the care of charles and susan Griffith living in Glen ridge, new Jersey, who had known their escoda parents. uncle charles and aunt susan had been frequent visitors to the Philippines before the war. He was an executive of silver Burdett Publishing, which published the music textbooks used in elementary grades in the Philippines. uncle charles was a violinist and aunt susan a pianist, and they gave concerts when they came on their trips. i presume they covered other countries of asia as well. When World War ii broke out, uncle charles was assigned to u.s. intelligence covering southeast asia.

Patriot-technocrats at the time of war’s outbreak, Puey ungphakorn who became Governor of the Bank of Thailand in marshall sarit’s regime in 1959, was a young man of 25, who had just finished his Ba in economics at the London school of economics (Lse), university of London, where he had enrolled on a Thai government scholarship in 1938. Graduating with “First class Honors” in 1941, he was awarded a Leverhulme studentship that allowed him to work toward a doctorate without first finishing a master’s degree. in the same year of his scholarship, an 18-year-old Thai lady from a noble Thai family that later on gave her the honorific title Khunying, suparb raktaprachit, enrolled in the Birmingham university in england earning her Bachelor in commerce degree in July 1942. The following year, she married Prachitr Yossundara, a fellow Thai student stranded with her in war-torn england. The War had caught all of them in england but they refused to be repatriated because Thailand had declared itself an ally of Japan. Puey and some fellow Thai students organized the Free Thai movement in england. Young suparb Yossundara joined the movement. in august 1942, Puey volunteered for the British army Pioneers corps intending to establish contact cHaPTer 18 – some KeY asian cenTraL BanKers

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with the resistance movement they believed would be formed in Thailand. a contingent of the group was sent to india to establish communications and recruit members in Thailand. Young suparb was assigned as a translator-announcer on the Thai-Language Programme at all india radio in Delhi. after training in guerrilla warfare techniques in Poona and calcutta, india, Puey was air dropped into Thailand but he was captured by the Thai police and questioned by the Japanese but was kept in the custody of the Thai police in Bangkok. other Thais smuggled in through various routes were caught as well and soon the police had a group of Thai freedom fighters in custody. Fortunately, the Thai police turned out to be sympathetic to their cause and permitted them to continue with their organizing work while in apparent confinement. With the clandestine cooperation of the Thai police, Puey and his companions succeeded in recruiting prominent Thais and eventually placing recruits in all branches of the siamese armed forces. Puey was finally smuggled out in a catalina flying boat and in June 1945 he became a major and was decorated as an mBe (member of the British empire) for his service. as a u.s. intelligence officer assigned to the region, uncle charlie was familiar with the key members of the Free Thai movement in india including Puey and suparb.

After the war after Japan’s surrender, Puey had gone on to finish his doctorate in england. He married an english classmate, margaret smith, in 1946, finished his doctorate in 1949 and returned to Thailand to serve as economist in the comptroller General’s Department. He was sent to the u.s. to train with the World Bank and in 1952 rose in the ranks of civil servants to become Technical assistant to the Permanent undersecretary of Finance. concurrently, he taught applied economics to the fourth year chulalongkorn students. The Yossundaras had also returned to Thailand. suparb (who was later to earn the title of Khunying; Lady would be the British equivalent) joined the Bank of Thailand in February 1947. she started in the exchange control Division and was transferred to the research Division the following year. Dr. Puey would not head the Thai central bank until marshall sarit’s coup that deposed Pibulsonggram as dictator. in 1953, Puey was moved from the ministry of Finance to become Deputy Governor of the Bank of Thailand. His uncompromising integrity was bound to collide with the corruption that power breeds. This took the form of a scheme by military members of Pibul’s cabinet to take over a commercial bank. Deputy Governor Puey vehemently opposed it and he became an inconvenience and had to be removed. Puey requested a leave of absence to take up a research post at chatham House in London with his former professor, Frederick Benham. The ministry of Finance offered the alternative of appointing him economic and Financial attache at the royal Thai embassy in the court of st. James, charged with promoting foreign investments in Thailand among investors in europe and the u.K. and cultivate markets for Thai’s exports of tin and rubber. He eventually represented Thailand in the international Tin council and was elected Vice-chairman of it for the years 1958-59.

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While in the u.K. Puey wrote a book, The Economy of Thailand published in october 1955. suparb Yossundara was listed as his co-author.

The Thai economy in turbulent times in late 1957, while i was in Bangkok at the time working with ecaFe, Field marshal sarit Thanarat staged a coup overthrowing Pibul’s government and sending him in exile. new laws enacted in 1959 created the position of Budget Director and set up a national economic Development Board (neDB). Puey was considered ideal for any of these positions. But in June that year a scandal forced the Finance minister who was concurrently Governor of the Bank of Thailand to resign. Puey was appointed to take his place as Bank Governor. in January 1960, suparb Yossundara became Director of the Bank’s Department of economic research and in may 1966, she was appointed assistant to the Governor, covering the fields of international relations and economic policy. From this strategic staging area, over the next dozen years, Governor Puey and Khunying suparb exerted their benign influence far beyond Thailand’s monetary policy but over the broader social and economic development directions as well. Their exemplary services received ample recognition in Thailand with decorations from the King. in 1965 due international recognition was accorded Governor Puey by the ramon magsaysay award Foundation which gave him that year’s award for Government service. i had been impressed with Governor Puey’s formation as an economist, which was an unusual blend. at the London school of economics, he studied under three social scientists of quite different persuasions. Lionel robbins represented a highly abstract view of economics. He defined it as “the science of allocation of scarce resources among alternative uses” which made it almost a branch of mathematics. Frederick Hayek was the neo-classical economist who was the inspiration of the whole chicago school that bred the likes of milton Friedman. Harold Laski was a socialist economist who advocated the welfare state. out of that combination, Puey ungphakorn emerged as one who would be best described as a humanist economist and who integrated Buddhist precepts into his practice of economics. suparb Yossundara was outstanding as a professional, a competent and devoted civil servant. she died at the young age of 54 on march 26,1974. in her honor, Thai economists put out a commemorative volume of essays in 1975 that included Governor Puey’s paper for the Per Jacobsson meeting, which he had introduced with a touching “Dear suparb” letter.

The link suparb had become like another daughter to uncle charlie and aunt susan and practically a stepsister of Bing escoda’s – an older sister, since she was seven years older than Bing. Governor Puey and madame suparb were very popular and influential members of the small circle of southeast asian central bankers which constituted a close community. When i was chief economist of the Philippine national Bank, i would be invited to participate in economic and banking conferences convened by the united nations in Bangkok where the u.n.’s cHaPTer 18 – some KeY asian cenTraL BanKers

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economic commission for asia and the Far east or ecaFe, the old name of what is now escaP, the economic and social commission for asia and the Pacific, was headquartered. Whenever we visited in Bangkok, suparb was family and when she was in manila, we were her family. Later as a member of the economic cluster in President macapagal’s cabinet, i became a regular member of the Philippine delegation that would attend the annual meetings of the imF and World Bank. This gave me a chance to cultivate relations with the central bankers and economic ministers of the other asian countries. once one gets on the official invitation list of the imF and World Bank for these annual meetings, he remains on it even after he has left his government position. as a former cabinet official, i attended the annual meetings of the imF-World Bank group which were held in Washington D.c. and in different capitals of the member countries in alternate years, from 1962 and all through the Bancom years. These meetings were attended annually by the most senior financial and economic ministers of almost every country of the world and by their principal private and government bankers. These relationships proved to be extremely valuable for Bancom’s entry into the other countries of asean and in drawing its partners from the cream of the business and political community in those countries. in 1969 when we formed a partnership in Thailand with Thai Farmers Bank to establish Tisco, suparb’s advice and introduction was the big factor in our choice of partners. The head of the Bank, Bancha Lamsam was an old family friend of suparb’s. The Lamsams were a distinguished “heritage” family like the raktaprachits, suparb’s family.

Tun Ismail The course of lives weaves fascinating patterns. The first malay Governor of the country’s central bank, the Bank negara malaysia, was a 20-year old student at cambridge university reading economics in the same years that Governor Puey was in the London school and suparb was in Birmingham. They were all stranded in england by World War ii when the Japanese forces wrested malaya and singapore from the British. ismail bin mohamed ali spent his years of exile reading for the Bar in one of the inns of court in London at middle Temple and became a barrister. The British colonial civil service had formally established the malayan civil service (mcs) in January 1921 but eligibility was open only to “natural-born British subjects of pure european descent on both sides.” When Tun ismail returned home in 1946 the eligibility had become open for malays and in the period of the malayan union, malay officers in the mcs only numbered 21 out of a total count of 230 mcs officers. Tun ismail became one of the earliest malays to become an mcs officer when he returned in 1946 and rose to be assistant selangor state secretary in 1948. The Young cambridge economist and barrister moved rapidly through the ranks of the mcs in Treasury, the ministry of commerce, in the malayan Foreign service as minister in the embassy in Washington D.c. where he was concurrently executive Director of the World Bank, and finally

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returning to Kuala Lumpur to become Deputy Governor of the Bank negara in 1960. in 1962 he became the first malay Governor of the Bank holding the post for 18 years until 1980. i first met him through suparb and Governor Puey, i believe, at a cocktail party given by the southeast asian delegations in a World Bank meeting. We got on very well, sharing common ideas on development and visions for our countries, as well as interests in the development of financial systems. at the World Bank meeting in 1968, i had occasion to talk about Bancom and the work we were doing to develop the money and capital markets. He expressed great interest and offered the possibility of our tying in with one or another of the Kuala Lumpur stockbrokers for a merchant banking venture. He was coming to manila in February the following year. He agreed he would save a day or so for a briefing similar to one we had given to madame suparb previously. That meeting would result some years later, in our establishing a merchant banking joint venture in malaysia with partners handpicked by Governor ismail.

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chapter 19 asia’s star economic planners i count it one of my great blessings in life to have known and become close friends with the two economic planners responsible for the two most dramatic economic transformations in asia: Japan’s post-World War economy, and Taiwan’s Transformation into an industrial economy. i like to think it of great interest and significance that neither was educated as an economist. saburo okita was the principal planner of Prime minister ikeda Hagato on rebuilding Japan’s postwar economy in the decade from 1947 through the 1950s. He was educated at the Tokyo university and practiced for several years as an engineer. K. T. Li was the planner brought in by the council for u.s. assistance (cusa) to work with Premiers chiang Kai shek and chen cheng to design and build Taiwan’s economy after the Kuomintang evacuated to Taiwan from the chinese mainland and established the republic of china. His graduate study was at cambridge, u.K. in Physics where he worked with the famous physicist, nobel-laureate ernest rutherford, who developed the half life measurement.

Saburo Okita i do not recall when or where i first met saburo. While at the Philippine national Bank i had made several trips to Japan in connection with the administration of the Japanese program and took a great interest in the planning of the Japanese economy. saburo was the Director General of Japan’s economic Planning agency from 1947 to 1957. Because her parents had been executed by the Japanese during the occupation, my wife, Bing escoda, would not let me entertain any Japanese after the war. she met saburo socially in manila during one of his visits when he was already a close friend of mine and saw what a charming, decent, intelligent person he was. He was the very first Japanese guest we entertained for dinner at our home after the War. saburo moved on in the Japanese government to head Japan’s Foreign aid ministry and then became a member of the cabinet as minister for economic affairs. He never could get my nickname straight; as late as 1977 when the news came out of my appointment as Vice chairman of american express international Banking corporation, he wrote me a congratulatory letter addressing me “Dear Tim”.

K. T. Li i met K. T. Li in 1963 when i was with President Diosdado macapagal as assistant executive secretary for economic affairs and secretary General of the Program implementation agency (Pia). K. T. Li was the chief economic planner of the republic of china and came in this capacity as member of Premier chen cheng’s party on his state visit to the Philippines in early 1963. The

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economic members of his party were the minister of Finance c. K. Yen and K. T. i was designated his counterpart and assigned to pursue more detailed discussions on possible joint projects with china. What i found most fascinating in our discussions was how he looked at the planning of economic development. We did not discuss macroeconomic models, and savings-investment budgets, and incremental capital-output ratios. instead, we discussed areas where we could undertake complementary industrial projects, in particular, in the steel and engineering industries. He discussed the possibility of Taiwan and the Philippines combining forces in complementary steel production, where Taiwan would specialize in one set of specifications of special steel and the Philippines in another and we would both produce in enough volumes to fill our joint requirements to get enough volumes. He spoke in concrete and technologically specific terms exhibiting a mastery of the technical details of manufacturing processes, equipment and the microeconomics of steel manufacturing. i was thrilled to meet a planner with this approach. i had made an effort to get into this field previously by teaching a course on the economics of manufacturing, to familiarize myself with different processes and the understanding and analysis of production flow charts. so he and i got on to the same wave lengths. at the time, one of my responsibilities was to guide the preparation of the bill on agrarian reform. Premier chen cheng was the architect of Taiwan’s Land reform program and had written the authoritative book on it (in chinese, however). But when he found out that we were working on the design of the program he insisted that we visit Taiwan to observe the workings of the program in practice. The macapagal comprehensive Land reform code was passed by both houses in august 1963. it created the Land authority as the overall administrator of the program, faced with the task of reorganizing agencies of the Philippine government with a head count of some 10,000 persons. The President appointed me the first Governor of the Land authority. in this capacity i accepted the invitation of Premier chen cheng to visit Taiwan and observe the implementation of the chinese program then in its 10th year of implementation. With my wife Bing accompanying me, we scheduled the visit for later in the year, late november and early December 1963. This was of interest because of another coincidence. one of the social occasions of that visit, the evening of December 16, 1963, was a dinner tendered by minister of Finance c. K. Yen at the social hall used by the Finance ministry for its entertainment. During our dinner, our host, minister c. K. received an urgent phone call and had to leave. But he returned shortly before the dinner ended to resume his seat at the head of the table, looking somewhat excited. He stood to explain his sudden departure and return. That evening, Premier chen cheng announced that he was retiring as Premier. and he had recommended, and gotten approval of the President, that minister c. K. Yen be named as his successor. We all immediately stood up and i offered a toast to the new Premier of the republic of china, c. K. Yen.

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as an aside, we also paid a courtesy call on President and madame chiang Kai shek. His aide at the time, by a happy coincidence, was Former ambassador to the Philippines, Patrick Pichi sun. in the 1950s, sun’s little daughter acted as a child star in our radio Play group under Fr. reuter, The cathedral Players’ Guild, which included celia Diaz and mitos sison. Patrick ushered us first into one reception room, and then a second, and finally into the inner sitting room where we were seated. The door opened and two huge German shepherd canines romped into the room followed by the trim and elegant figure of madame chiang and President chiang striding behind. We stood and the first thing he said to me as we sat down was, “Have you visited Quemoy?” i said “no, Your excellency, should i?” He said, “Your ancestors were probably from there. You have the features of a south chinese.” in December 1964, Bankers Trust circulated the information to their clients of the formation of Bancom and my appointment as President. K. T. received this and wrote me a letter dated the 19th of December 1964. His congratulations included the flattering note, which i quote: “as a practicing economist, your name has extended far beyond the Philippines and it is only fitting that you should be nominated to this important post. i have no doubt that under your brilliant leadership, the corporation will play a dominant role in furtherance of the Philippine economy.” That was a high tribute coming from a person whom i admired and esteemed immensely.

ASEAN planners i met the planners of the asean countries at a conference organized by the east West center in Honolulu in 1964. i had resigned my chairmanship of the national economic council in February, but the conference had been planned for some time and was scheduled for later in that year. The meeting was designed for economic planners of the developing countries of asia to compare their experiences and insights into the problems of planning and managing the development process in their countries. The top economic planners attending were Go Keng swee from singapore, snoh unakul and amnuay Viravan from Thailand, and the senior Planning assistant (a malay chinese whose name i cannot now remember) of Tun razak of malaysia. i had been invited as chairman of nec but when i resigned, the invitation was changed for me to attend as President of the economic Development Foundation and former economic planner of the Philippines. it was a very senior group: Goh Keng swee became Deputy Prime minister and Defense minister of singapore, amnuay became Finance minister and snoh, central bank Governor of Thailand. after Tun razak succeeded Tungku abdul rahman as Prime minister of malaysia, his assistant in the Planning office became chief Planner. But Tun razak is well remembered for instituting in malaysia the system of local operations rooms and the multicolored books of plans at each level of government, from the village to the township and municipalities, states and Federation. The Honolulu conference was a great bonding opportunity and the participants came out of it with close personal bonds of friendship and shared experiences. When Deputy Prime minister Goh was

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invited by President marcos to come on an official visit as minister of Defense, he made a special request for me to organize a dinner for him with the economic and finance personalities of the country. He did not want to confine his visit to the Defense and military establishment. Before becoming Thailand’s Finance minister, amnuay took over from snoh as Planning minister sometime in the late 1960s. The asian Development Bank had commissioned a number of studies of southeast asian economies in preparation for the 1970s decade: a comprehensive agricultural survey and a Transport survey by the stanford research institute, among others. The Japanese government sponsored a conference of southeast asian Planning ministers in 1971 to be convened in Bangkok with the Thai government as host. although it was a strictly government affair, amnuay commissioned me as a private economist from the region to do my own study of the prospects for southeast asian development in the coming decade. He included my presentation as part of the conference agenda. The Japanese sponsors objected precisely because they did not consider it proper to have a private sector economist participate formally. amnuay insisted and compromised by making my interventions part of the Thai government’s inputs into the meeting. i prepared and presented a paper entitled, an ecosystems approach to southeast asian economic integration. The Thai government published the study as an official publication and amnuay’s introduction of my study read: This book is created from a series of issue papers prepared under the direction of Dr. sixto K. roxas, President of the economic Development Foundation, inc., republic of the Philippines, for presentation at the regional meeting of economic Planners on southeast asian economy in the 1970s held at Bangkok in april 1971. His important contribution to the deliberation of the meeting was made possible by the generous financial grant from the Ford Foundation. The decision to put it in a book-form grows out of the belief that his brilliant foresight in introducing and incorporating ecological factors in future thinkings on southeast asian economic development, not only at the national but also at the regional level, would capture the minds and imaginations of policy-makers and scholars of the present generation who are directly or indirectly involved in development planning. The main purpose, however, is to instill an awareness among southeast asian nations that “man does not live by bread alone.” Higher income does not mean higher happiness in as much as higher level of economic development does not mean higher level of economic welfare. in Dr. roxas’ own words, his work is intended to present, “broad policy consideration that need to be submitted to the respective government for deliberation and decision.” i wish also to take this opportunity to express on behalf of the meeting our heartfelt appreciation to the Ford Foundation which also generously contributes toward the cost of publication of this book.

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chapter 20 my american express interlude in late 1976 i received an invitation from Dick Bliss, who was then President and ceo of american express international Banking corp. (aeiBc), to help reorganize the commercial banking operations of the american express corporation (amex). Jim robinson had resigned as chairman of the aeiBc first to become President of amex, as the chairman Howard clark prepared to retire. Then Jim was slated to take over as company ceo after the retirement of clark. in 1977 Dick Bliss moved up from the Presidency to become chairman and ceo of aeiBc. He invited me to come in as his Vice chairman.

The family in New York Because our children susan, Ditchay and Butch had to be enrolled in schools and we had to find a suitable apartment in new York, my wife Bing and the 3 children left ahead. our eldest daughter ming was living in our apartment in London and son manoling was settled with his family in manila. mark Feer’s wife, sue, had a lovely, spacious apartment in midtown manhattan that she had vacated after marrying mark. she offered the family to stay there while we were looking for a place. The deal with aeiBc included financing for an apartment in new York conduited through Bancom international, our Hong Kong deposit taking company. i settled the family there in september and returned to finish work in manila. our other daughter ching and i re-joined the family in new York in november and we spent our christmas 1977 in sue’s apartment on 56th street and amsterdam avenue.

The key Amex players Jim robinson assumed his position as ceo of the flagship american express corporation in 1978. Historically, amex was focused on the credit card and Travel services, providing travellers with accommodations and currency remittance facilities. over the years amex had secured banking licenses in different countries in the world but primarily to provide encashing and deposit services for their client travellers. as the major american banks extended their services worldwide, there was a competitive race to open branches or secure banking licenses in the developing world. amex already had licenses in quite a number of these countries but had not used them to expand into the conventional commercial banking business. Jim robinson had been recruited from White Weld to mold amex’s network of branches into an international banking organization. He arrived in 1970 as executive Vice President of aeiBc and then was elected President in 1971. in 1972 Jim recruited Dick Bliss to be his executive Vice President.

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since 1969 Bankers Trust in a policy shift had decided to divest from the joint ventures where they had a minority position. upon arriving at aeiBc, Dick negotiated to purchase BTco’s 30% share in Bancom. american express then became our partners. in 1977 when i left for new York, Dick Bliss was chairman, James Greene was President, and William Beam was the executive Vice President of aeiBc. i was to complete the team as Dick’s Vice chair beginning January 1978. Jim Greene had been senior Vice President supervising credit and money management in manufacturers Hanover Trust’s international Division. Bill Beam was a Harvard Law school graduate, a no-nonsense sort of person, who reminded me of Humphrey Bogart... not good looking but something of a ladies man. When Dick Bliss took over as aeiBc chair and ceo, the task fell on him to complete its reorganization into a full service international commercial bank with branches in some 40 countries of the world. We had demonstrated our capacity in Bancom to organize an international network successfully in Hong Kong and three of the asean countries, and we had started work with Dick to set up a money market operation in Beirut, the emerging financial center in the middle east awash with Petrodollars. He decided i could be the person to help him complete the structuring of aeiBc’s international banking network.

Why? Looking back through all these years, i can’t help wondering why i was quite ready to leave Bancom for a few years to join Dick. and to do this at a time when Bancom was facing the fresh challenge of maintaining its top gun position in a fighting environment where the ground rules had changed. This would happen in 1977, the twelfth year of the marcos regime, five years under his dictatorial rule. Bancom would be in operation over the same period. Why was i quite disposed to leave Bancom and take on this new assignment in a different country? i am as certain now, as i was at the time, it was not because i ever entertained the thought of becoming an expatriate seeking a career in international banking. my commitment to total Philippine development remained undiminished. my personal mission remained unchanged: to understand more deeply what it took to help liberate our people from their poverty, to acquire the scientific and managerial tools that were required, and to find the platform to make as much of a contribution as any one person can accomplish in his lifetime. it was in fact not a good time to leave Bancom. We had lost rcBc and had entered into a new partnership with Far east Bank. But the government had changed the ground rules and we had to invent a new mode to achieve the synergy we had briefly enjoyed with rcBc. i was obsessed with the idea of the total development company with the capacity to supply the package of services that would respond to the needs of every community for driving its development along a path that was optimally suited to its endowment of natural and human resources and its state of underdevelopment. cHaPTer 20 – mY american eXPress inTerLuDe

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Drawing lessons from matrix management During that period the conglomeration fad was transforming large business groups into multi-business combinations called conglomerates. commercial banks were trying to achieve the same sort of diversification in financial service lines. some of the big banks were experimenting with a structure called the matrix, that divided the whole organization into three main groupings: the product line divisions, the marketing divisions, and the backroom operations including accounting and treasury divisions. i was intrigued by the possibilities offered by this structure for our concept of a total development company. The combination required a range of service products that spanned the diverse needs of communities at different stages of evolution for consumer and capital goods and services. But marketing and the delivery system required a totally different background and discipline: it needed what in our post-modern era analysts like robert reich have called problem identifiers. Persons who could analyze their market and identify what products and services suited the market they served at their current stage of development, in what combinations and in what sequential orders. i had in mind recommending the matrix structure to aeiBc for the reorganization of the commercial bank and synchronizing it with the total financial and travel services of amex. Just before i left for new York in november 1977 to join Dick Bliss in aeiBc, i introduced the radical change in the organization structure of the Bancom Group of companies.

Bancom, IAD and matrix management it became known within the organization as my iaD obsession, my vision of Integrated Area Development. The effectiveness and efficiency of the system hinged on the quality of the problem identifiers – the merchandisers, marketing, sales, and delivery agents of the entire organization who specified to the product managers the precise problems that they had to respond to with the appropriate specifications and mix of products. although they were agents of the company, they were supposed to take the viewpoint of their markets to make sure the right products were being offered and delivered in response to their development stage. This was the problem. The conventional business organization did not systematically produce such individuals. The conventional business instead developed sales persons who were committed to push specific products that were carried by the company. They did not identify problems and then turn around and negotiate with product specialists to get the specs and combinations that met the problems. They were committed to specific products to begin with and then it was their job to find the niches where they could push the sales. The long-term viability would be assured when developments in the different market areas raised incomes and lifestyles to widen and deepen the markets across the board for the group’s product lines. During the build-up period, however, the capital and cash flows would have to rely on a basic bread and butter income generator. in our case at Bancom, we were looking to the continued profitability of the investment banking and commercial banking combination – the virtual merchant bank.

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i set up the new organization, described how it was to work, and then left the executives of the Bancom Group of companies to make it work. needless to say, i left them in a state of confusion. it is interesting on hindsight to view the strategy i attempted to implement in the banking subsidiary of american express in 1978-79 against the backdrop of our earlier success in forming a virtual merchant banking combination with rcBc from 1969 to our breakup in 1973, and then the later program adopted by Jim robinson for the parent american express company, after Prudential insurance’s entry into investment banking with the acquisition of Bache to build a one-stop total financial service company (Pru-Bache).

Amex banking game plan my strategy for aeiBc was outlined in a study i prepared in 1977 and submitted to Dick Bliss in a memorandum dated December 5, 1977. in it i detailed out what i had in mind and suggested what my own terms of reference and key result areas might be. my memorandum was entitled “operation Worldwide merchant Banking.” Dick had formalized the offer for my joining aeiBc in a letter dated september 12, 1977. i was to have a two-year assignment covering 1978 and 1979. i defined the end product of my contract as follows: “The terminus of the assignment is an organization fully operational by the operating year 1980.” That organization was to be designed and installed in three stages, as i explained in my memo: stage i contemplates an operating plan to catch the budget year 1978 using the immediately mobilizable resources with only moderate modifications in the present organization. stage ii envisions a partially developed organization designed and tested and subsequently worked out to be included in the 1979 budgets prepared in the fall of 1978. stage iii will represent the full-blown organization to be included in the 1980 budgets (prepared in 1979). The memo explained the basis for the staging: The staging is calculated to maintain and even accelerate the pace of merchant banking business generation during the time when a new organization structure is being designed and installed. in this manner, the design work will have the full benefit of market testing before it is finally adopted and put in place. The approach also ensures that the reorganization will be strongly market-oriented and functionally operational. as starting points, i have taken: First, the objectives and priorities embodied in the company’s Five Year Plan approved this year (1977). second, the 1978 budgets with the targets and marketing plans as they stood prior to the Zurich meeting. (i do not have the revisions since the Zurich meeting.) cHaPTer 20 – mY american eXPress inTerLuDe

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Third, the configuration of the aeiBc organization as it stood at the end of october 1977. in appraising the current business of aeiBc, the Bank Five Year Plan cites its geographic coverage as a ‘principal strength’. its branches in europe, The middle east and asia give it a strong basic network. it has yet to develop, however, presences in Latin america and africa. The Five Year Plan sets six key result areas for the bank in the coming years: First, the development of wholesale banking business and of specialist services through a suitable extension of the commercial banking network and through an aggressive expansion of the merchant banks. second, the rationalization of treasury on a global basis. Third, expansion of the network into new locations that promise growth opportunities. Fourth, achieve closer coordination with the other divisions of american express where such is mutually reinforcing. Fifth, develop new products within reasonable guidelines related to the group’s ability to understand and manage them. sixth, promote the quantum expansion of the balance sheet through acquisition. as the organization is geared to these objectives, the management system will need to become more responsive to the new demands. The Five Year Plan points to two imperatives that are critical: the evolution of functional specialization and the integration of functional activities with regional or territorial responsibilities. These really defined the twofold directions which will need translation into concrete steps. The study then set out the main variables and coefficients defining the aeiBc business model to highlight the critical parameters and variables that needed to change. Given the limited time i had to implement the program, i had to hit the deck running. But there were the initial formalities of getting to know the Board and top management of the amex and aeiBc, and the staff of the commercial banking division and the investment banks. i was familiar with amex Bank in London because i had been serving as Board member for several months already and attending the monthly Board meetings and we had had dealings with Gilbert Gargour and his team in the middle east. in the head office, the President Jim Greene and the eVP Bill Beam were more conventional commercial bankers (Greene from manufacturers Hanover and Beam from chemical Bank). The more flexible team members were those Dick had brought in, his fellow Yaley Bill Gridley and Leigh miller. and then there was the hard-nosed trader Bob savage for whom the important game was making your spreads on each deal and who had little patience with the complexities of organizational concepts.

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Implementing the plan We scheduled several series of sessions with the commercial bank departments using the 1978 budget targets as starting bases for discussions and going on from there to explore reactions to the future directions indicated in my December 5 memorandum. The targets and performance standards were set on the basis of the formal corporate divisions according to the formal balance sheets and income statements. The matrix concept made functional divisions rather than the legal corporate personalities the relevant units for defining targets, responsibility centers and performance criteria. since the formal, legal accounting system recorded balance sheet and income statement performance according to corporate entities, the proposed system would base performance on shadow figures. apparently past attempts to integrate operations across formal corporate entity lines had met with opposition from the managers because the actual performance results were footnotes or memorandum entries and not formal accounting entries reflected in the official statements. The corporate culture respected what were termed as real revenues generated as bases for performance ratings and incentive schemes, and frowned on judging management performance according to shadow revenues recorded only as footnotes or memorandum entries. This was particularly relevant to commercial banking business generated by the investment bankers or investment banking business originated by the commercial bank people – for example, in London crediting business done for amex Bank by the branch or branch business generated by amex Bank. The matrix structure of a one-stop Financial Service Operation contemplated superimposing on the legal accounting a management accounting system that integrated the financial service supply function into a consolidated unit classified by service lines, and the service sales and delivery unit classified by geographical and customer categories. accounting and performance criteria would be based separately on product profitability and area and customer profitability. accounting for value adding chains was, unfortunately, a much later development as Value stream accounting, but at the time that was what the system was attempting to approximate. implementing the system in the aeiBc head office and country branches and the investment banking subsidiaries faced three problems: 1) first getting the system understood and appreciated, 2) designing and installing the management accounting system it required, and most difficult of all, 3) transforming the organization’s culture to suit the new system. Problem no. 2 was the easiest hurdle. micro-computers had barely graduated from the prototypes developed and assembled in garages. radio shack in new York had a model and the apple ii operating on the Basic program and with its 512K ram had been introduced by steve Jobs who was still developing the macintosh. But the iBm minicomputers had been in operation for some years and were more than adequate for the management accounting job. and iBm was working on its own personal computer model. cHaPTer 20 – mY american eXPress inTerLuDe

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i was intrigued by the possibilities offered by the micro computer. i acquired an apple ii for our new York apartment and another model called the commander. Later when american express bought a company that was promoting a “paperless system” with intelligent cards, and its President and i went on a road show, he would introduce me as the first person to have a “two-computer” apartment, playing on the older term, a “two-car garage”. Problems nos. 1 and 2 were the real hurdles. We mounted a dog-and-pony show to make the rounds of the commercial bank departments and branches and the investment bank offices to explain the matrix organization. To accelerate the education process, we produced a television video where the four of us, chairman Bliss, President Greene, exec VP Beam and Vice chair roxas presented the whole concept and discussed how it would operate. i recall being quite impressed and amused at how the production of this short internal program required a process akin to the making of a full-length Hollywood movie. We had script writers, rehearsals, and the actual shooting required directors with megaphones, movie cameras mounted on cranes and wheels and we had make-up specialists, the whole works! The matrix structure was described in my December 5, 1977 memo to Bliss as follows: in the matrix, the [investment banking] unit is viewed as a group of vertical profit centers specializing in specific professional service lines. its business is to sell these professional manhours to clients at a price that covers the direct and overhead costs. The peculiar character of its business, however (what differentiates it from pure consulting) is that these man-hours are packaged with the raising of finance partly from the group’s own balance sheet mainly from outside placing power. its fees are collected largely from a percentage of the financing arranged. The system flanks the formalities of corporate personalities and classifies the whole group into two categories: the investment banking group consolidating all the off-balance sheet feeearning financial services and the on balance sheet geographically – and customer-based units – basically the commercial bank offices and the merchant banking corporation offices and the account officers for personal banking and wholesale corporate banking services. Profitability is classified in two “shadow” balance sheet and income statements consolidated respectively for the investment banking product lines and the geographical and customer units respectively. in 1999 we recorded a focus group discussion with Dick Bliss, Danding Yotoko and myself in which we discussed, among other recollections, our experience attempting to install the matrix organization in aeiBc. Dick’s candid appraisal many years after is quite interesting. Bliss: We launched a major reorganization based on the matrix without bringing along the people on the day to day basis. They felt to some extent, this was pushed down their throats, which it was. i think the matrix was an interesting concept to get people on board for investment banking, or corporate finance or whatever. But it was also fraught with the pitfalls of two

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bosses. it never worked in american express and i think, truth be known, was probably quite harmful. People like savage and others thought it was crazy. i was too willing to risk the negatives without having thought through the overall impact. i think that was a negative... i totally believe, and i only think different now and then, that it didn’t take a matrix to do it. i totally believe in the concept of, whether its branches, or joint ventures or whatever various locations, them feeding the mainstream building up core businesses. i think our metaphor of the cable business – once you wired the fundamental contacts, in this case, households, then you can run anything you want through that cable. You can sell this service, that service, or some other service. i felt that american express had a tremendous amount of services to sell, the card, traveler’s checks. it didn’t do enough of running these services through a financial network. so, matrix, no. But some of the concepts of the matrix makes me think, yes. sKr: i remember part of the problem was getting booking credits; who would get the credit for the business? The line officers, the profit centers didn’t want any footnote in the statement saying that they have earned this business. Bliss: Well you dealt with an enormous amount of overhead to fuel the machine that wasn’t going to right direction. We build up a regional management - that was one level of cost. Then we matrixed that on top of it which is another level of cost. You weren’t producing your supporting business to make that work. sKr: it’s very interesting in the light of the present trend towards flattening of organizations. eaY: in Bancom it was implemented in 1977. sKr: Yes that’s right. eaY: i was on my way out so i never got involved in this. sKr: The 1977 annual report was the only annual report that showed the matrix operation. although 1979 newspaper supplements, they were based on the matrix. Bliss: Well the one lesson that all of this certainly teaches one is that if you’re going to do the type of business that we were trying to do between two organizations with different degrees of ownership, etc, etc – you got to have enormous discipline. There’s got to be a very strong follow up. You just can’t throw people out and say go develop this and develop that without having very specific ground rules on how they are going to operate. We tended, i think, to not paint as clear a picture, perhaps for obvious reasons, as we should have. sKr: The problem is that the system does not produce area managers, they produce product line managers, or functional managers. They produce credit people, or money market persons, or in our case, tractor salesmen. When you made them area managers, they just stuck to their product line. i think that was true all over. citibank had the same experience. You really didn’t have a system for producing area managers who were of a totally different type. They were much more entrepreneurial and much less committed to products. They were much more market people really. cHaPTer 20 – mY american eXPress inTerLuDe

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Bliss: citibank was light years ahead of the others. it made mistakes and learned from their mistakes and was on the road selling services. i was fascinated by the way Bankers Trust profit position was almost ran out of the bond department. The line divisions in those days, when i first came into the bank, were not really tied to any profit incentives. nobody paid much attention to what we were earning. The method of measurement was level of deposits which we got from XYZ or commissions for letters of credit, that type of thing. Decisions were not made on the basis of P and L in a general sense, they are made in the basis of relationships. Where a client is a big customer, or viewed as a big customer. That was the important thing in deciding whether one supported them or not. i was fascinated. i did a survey of that period, about 1957 or 58, as to the relationship between profit earned from any particular customer and the rates we were charging. There was no correlation whatsoever. seemingly people who were doing nothing for bankers were doing great rates. People who were doing a lot of things were getting poor rates. as i say a good example of a profit problem was Bank of america – in those days kept enormous balance, clearing balances with Bankers Trust for their new York operation. We were very proud about the fact we had 100 million or 200 million or whatever it was. But if you actually looked at what was good money – Zip! as a matter of fact probably a negative in many cases. They were getting a free ride of the relationship. sKr: in effect the idea of the customer relations man, you had account officers who managed the accounts in effect, and then tried to push as many product lines into those accounts. Bliss: in those days, individuals were working for customers not for the bank. The old Bankers Trust in spite of that, did pretty well. i was to have worked with Dick and his team to install the system from 1978 to 1980. But i never got to work on my assignment.

The call from home i got Gus Barcelon’s frantic s.o.s. and had to return to the Philippines in 1979, to attempt the rescue of the Bancom Group. Looking back over the years, i still feel that the system did not work in Bancom and in american express for much the same reason – the failure to find the suitable area managers who were problem identifiers. conventional business simply did not breed such individuals.

Subsequent developments at Amex as a postscript, it is interesting to view this episode against the later history of american express company and the attempt of its ceo, James robinson iii, to transform the entire corporation into a one-stop financial service institution. The earlier conglomeration trend was more horizontal in character, a sort of random diversification through acquisitions that were not really based on any architectural design for achieving synergy in product lines. sandy Weill was the legendary master of this game and his build up of a small stockbrokerage partnership into a giant conglomerate was the phenomenal example. The game was

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really one of establishing a high P-e multiple for a company stock in the new York stock exchange and then using the stock to acquire companies with substantial cash flows. analysts trace the shift in trend from horizontal to vertical conglomeration to the purchase by Prudential insurance of the investment bank Bache & co. with a view to building a one-stop financial service conglomerate. This was in 1981. monica Langley’s book, Tearing Down the Walls: How Sandy Weill Fought His Way to the Top of the Financial World... And Then Nearly Lost It All marks the turning point dramatically, in chapter 3, with the title: “into the WasP nest”. sandy, in Hong Kong visiting shearson Lehman’s branch, nearly chokes on his cigar over the news flashing on the Dow Jones news service... The news on this morning of march 20, 1981: Prudential insurance corporation of america, a financial titan, was going to buy Bache Halsey stuart shields, the well-known securities firm that had been a pillar of Wall street for a century. The deal suddenly changed everything. until this moment the consolidation of Wall street had been horizontal as securities firms bought their competitors in a frantic effort to become bigger and more powerful... But Prudential acquiring Bache: This was vertical! With his acquisition of shearson Loeb rhodes, sandy Weill did not consider Bache a real threat – as a stand-alone brokerage. But backed by Prudential’s huge balance sheet and “its thousands of insurance agents with their millions of customers,” the prospect boggled his mind. The chapter shifts the scene across the world to the new York headquarters of american express company where its ceo, James robinson iii, fussed uncomfortably at the scheduled management meeting in reaction to the same news. The resonant reactions across the world led to a strange alliance between the blue-blooded WasP and the Brooklyn Jew, with amex’s acquisition of shearson Loeb rhodes in 1981, a partnership that street wags labeled the “odd couple”. after some struggle, sandy Weill gained the title of President of american express company in 1983, but with powers so severely limited that he often complained, “i have nothing to do!” in time he resigned and went into hibernation. But not for long. But the american express company would continue its drive to become the largest financial service supermarket.

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chapter 21 radical reorganization and BiHL i cannot recall exactly if it was in late 1978 or in early 1979, while i was in new York with american express, that i received a confidential letter from Gus Barcelon with an urgent tone. He said that Bancom was in trouble and that he felt i should return home. i spoke to Dick Bliss about it and we agreed that i should first go back to assess the situation. i flew back in 1979 and spent a month in manila to analyze the position.

The problem Bancom had a manifold problem. The subsidiaries of Bancom Group, inc. (BGi) were not earning enough on their operating assets to meet the high cost of funds borrowed from the money market. some, like G.a. machineries, inc., were actually accumulating operating losses and the others were not making enough so that all the subsidiaries as a group were losing money after covering the heavy costs of borrowings. in addition, the new ground rules on quasi-banking imposed a gross receipts tax on carry income on all paper carried in Bancom’s balance sheet. This had the effect of forcing Bancom to roll over paper on which issuers had defaulted so as to place them back into the market and out of our balance sheet. other investment houses found themselves in the same position, so that the quality of paper outstanding in the market was deteriorating.

The perceived need The Bancom Group needed new capital, quite substantial new capital, somewhere in the order of P200 million to relieve the group from the hemorrhage of high borrowing costs. The closing years of the 1970s was not a propitious time to raise capital. The political situation was unsettled, capital was in flight, and Gus Barcelon advised me against even attempting to raise it from our own shareholders. i returned to new York and reported this to Dick Bliss. His reaction reflected both a friend’s touching personal concern for me and a discouraging fatalism about Bancom. His curt advice: “it’s going to be messy, Ting. Don’t go back. Just stay with american express.” i smiled appreciatively, but replied: “Dick, you know i can’t do that.” although my contract had been extended for another year to the end of 1981, american express in effect gave me leave while still under contract to return home and address the Bancom problem.

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Returning home i left the family in new York because the children were in school and my daughter ching was undergoing treatment for a rare affliction, myasthenia gravis. it was a neuro-muscular problem springing from roots not yet determined by medical science at that point in time. mt. sinai Hospital in manhattan had done quite advanced research on its treatment. ching was under special treatment and the subject of some of their new treatment protocols. Back in manila, i faced a different and graver health problem: the Bancom corporate condition.

Getting the facts and developing the solution We mounted a task force to do a thorough audit and analysis of the whole Bancom domestic and foreign condition, in order to pinpoint the problem areas and identify the options for remedy and reorganization. We proceeded to construct a “shadow” balance sheet for the consolidated position of Bancom and all its subsidiaries. our objective was to project forward the reorganized and rehabilitated consolidated BGi balance sheet before the end of 1980, say, by october 31, 1980. This meant cleaning up the individual balance sheets of all the subsidiaries, uploading net assets and liabilities to the holding company, BGi. Without additional equity injection, after merely cleaning up the balance sheets, writing off accrued losses and revaluing the asset values, offsetting intercompany borrowings and lendings and due to/due from accounts, the consolidated position of the Philippine companies would by october 31, 1980 result in these major accounts: current assets of P201 million and investments in subsidiaries of P121 million, supported by current Liabilities of P223 million plus adjusted equity of P96 million, with net miscellaneous items accounting for the differential in footings. although the resulting estimated balance sheet structure did not appear to be too weak, the current liabilities were entirely high cost money market funds floated either by the subsidiaries or by BGi, and kept floating by continuous roll-overs. i felt it was an unsustainable situation and which eventually, sooner or later, the cB examiners would declare unsuitable for the market. We estimated that some P200 million, or at the very least P160 million, in additional equity should be required to remedy the situation. and we would have to raise this before the end of 1980. since there was no way this amount could be raised in the Philippines, as advised by Gus Barcelon, i had to seek it from abroad.

Tan Yu Here i would like to pay tribute to the loyal friendship and support of the person who had became a close friend and my compadre, Tan Yu. His eldest daughter became my god-daughter and she formally adopted my family name, Bien-Bien roxas. i went to Taipei to seek Tan Yu’s help. He agreed to do his best efforts and raise the $20 million of fresh equity. c H a P T e r 2 1 – r a D i c a L r e o r G a n i Z aT i o n a n D B i H L

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at that time, Tan Yu may have looked like a most improbable “white knight” to come to Bancom’s rescue. He was generally shunned by conservative bankers and the manila business elite, looked down upon as an unsophisticated upstart who spoke broken english haltingly with a chinese accent. But i could sense that Tan Yu was very astute and he saw great promise in allying himself with the Bancom name. many years later, Tan Yu prospered greatly in Taiwan, and would be ranked by Fortune among the richest billionaires of asia. since we could not directly invest that large amount in the Philippines without throwing out of kilter the whole ownership structure of Bancom, we structured an international holding company that would become the parent of the whole Bancom Group of companies, domestic and foreign. We created the international parent company, the Bancom international Holdings Ltd.(BiHL). my terminal report of January 2, 1982 addressed to the Board of BiHL describes the rescue plan of 1980 that really became an ambitious international expansion plan which was widely acclaimed and supported by our loyal partners in asean. i quote from the report: The imperatives were: 1. The balance sheets of the Bancom companies had to be cleaned-up of non-earning and noncollectible assets. 2. at least P160 million of new capital had to be raised. 3. The reorganization had to be undertaken without giving the appearance either of a major “bail-out” or of a sell-out of control. This was important particularly for the preservation of our asean posture. items 2 and 3 were critical to the accomplishment of item 1. The raising of capital was necessary at a time when the Philippine market was experiencing a massive flight of capital and no one, not even our existing shareholders, was prepared to put up additional capital. The situation was aggravated by the fact that the market had for some months been replete with rumors of deep trouble in the Bancom companies. and time was of the essence. What mr. Barcelon and ourselves feared most was a liquidity crisis in the financial group that would cause us to default on maturities of fund placements. This was the spectre which we sought to avert at all costs. The plan we adopted was as follows: 1. since capital could not be raised in the Philippines, we had to seek it from off-shore sources. 2. We could not, however, raise foreign capital for an all-Philippine risk. Therefore, we proposed

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an international expansion to hedge the additional Philippine exposure with an expansion of our other asian business. 3. The vehicle we used was BiHL. We sought to increase the capital of BiHL to us$20 million and then double the capital of our Hong Kong deposit-taking company, BiL, to us$20 million so as to expand our non-Philippine portfolio. 4. We hoped then to be able to put us$10 million into the Philippines to shore-up the Bancom Group’s flagship, on the grounds that the international reputation of the group depended vitally on the continued viability of its Philippine business. 5. We had to do all this, at the same time, without giving the impression that the original Bancom shareholders had to “sell out” in order to get “bailed out” of their condition. it was in the light of all this that the undersigned invited mr. Tan Yu to come in. He consented to do this in addition to try and raise the full balance required to bring the capital of BiHL up to us$20 million.

Saving Bancom We intended to complete the restructuring and launch it by the end of october of 1980. When we had raised $16 million of equity for BiHL in July, we decided to proceed with the incorporation and financial adjustments and announce the launching of the new internationalized Bancom Group of companies. The Business Day issue of october 3, 1980 carried a story entitled “Bancom group’s intricate new structure – a means to build up capital”, written by Jose P. ompoc Jr. it depicts how the plan was publicly projected. These are extracts from ompoc’s article: Bancom international Holdings Ltd., a Hong Kong-based holding company owned by investors in Bancom firms, has invested $6 million in Bancom Philippines Holdings, inc. which has bought the assets of most firms under Bancom Group, inc. in turn, Bancom Group, inc., the original holding company of all Bancom firms, owns roughly 50% of Bancom Philippines Holdings, although it does not own any of the Bancom subsidiaries since these have been purchased by Bancom Philippine Holdings. confusing? Yes, but following the latest re-organizational changes in the Bancom Development corp., an investment house founded in 1965 – the first Bancom company has evolved into an intricate corporate structure after 15 years. according to Bancom officials, the changes are intended to beef up the capital structure of the various Bancom companies, particularly those in financing, in the light of recent changes in banking laws which permit any financial institution to become a “financial supermarket” offering all kinds of financial services under one roof... c H a P T e r 2 1 – r a D i c a L r e o r G a n i Z aT i o n a n D B i H L

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Bancom Philippine Holdings, formed this year, has become the domestic flagship of almost all the firms that fell under BGi. it is capitalized at P210 million, of which about 50% is owned by BGi. some $6 million (about P45.4 million) or 21% is owned by Bancom international Holdings Ltd. another holding company based in Hong Kong. Bancom international Holdings, although owned by the same investors in BGi and Bancom Philippine Holdings, is independent of any Philippine Bancom firm. it was established last year to be the flagship of all Bancom international operations. one-third of its $18 million paid up capital is invested in Bancom Philippine Holdings. Bancom international Holdings Ltd. also wholly owns Bancom international Ltd., a merchant bank also based in Hong Kong. This merchant bank is capitalized at $18 million. ForeiGn Firms. Through this complex exercise, Bancom officials have come up with a formula to allow more foreign investments in the Bancom group of companies. under its old structure, BGi, the original holding company, had almost reached the 40% ceiling for allowable foreign investments. of its equity, american express international Banking corp. held 27% and Philippine american insurance corp. and asean investors Group 5% each. Foreign investments are expected to flow from Bancom international Holdings to Bancom Philippine Holdings, which can then distribute the funds to the various subsidiaries. meantime, BGi, the original holding company, will remain an investor in Bancom Philippine Holdings. company officials said other non-financial lines may be established for BGi, to pave the way for foreign investors who may want to join the Bancom Group but do not want to invest in the finance subsidiaries. Bancom is also in health, civil engineering, movie production, manufacturing, professional services, and other activities. company officials are confident that through the complex network the group will continue to expand during the next decade.

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chapter 22 Dewey Dee and the end of Bancom We completed the reorganization of the Bancom Group in the last quarter of 1980. my compadre Tan Yu had organized a group of chinese investors from Taiwan and Japan to come in with $19 million in fresh capital. We upstreamed the Philippine ownership to the new holding company we organized in Hong Kong. We recapitalized the group, brought in Tan Yu’s new investors and strengthened Bancom Philippine Holdings with fresh equity from the Hong Kong holding company. i was confident that given three or four years of stable operations, we could rebuild our capital, thoroughly clean up the balance sheet, and resume our growth. What i could not foresee was the abscondment of Dewey Dee in January of 1981. Dee was a flamboyant, high profile chinese businessman who had a reputation as a wheeler dealer and “high roller” in Las Vegas casinos. He was also perceived to be a substantial borrower from various banks and money market institutions. He managed their family-owned continental manufacturing corp., a substantial operator in the textile industry. Dewey Dee’s sudden flight to canada, according to the grapevine, was due to his admitted inability to repay his debts and face his many creditors. Very rapidly, a classic bank run situation fell upon the money market, with investors demanding pre-terminations of their placements in all forms of commercial paper. Bancom, together with the other leading money market operators like atrium capital and state investment House, had no other recourse but to run to the central Bank for emergency relief. in the midst of this first-time ever market crisis situation being faced by Bancom, i discovered more bad news. i had not counted on an item buried in our balance sheet that the audits had not disclosed. Bancom had issued a strange underwriting agreement in favor of continental manufacturing to cover a foreign exchange loan from an international bank. normal underwriting agreements contained an escape clause that protected the underwriter up to the eve of the security offering it covered: that in the event of a change in the circumstances of the issuer, or a change in the market conditions, the underwriter had the option to back out. But this discovered commitment had the very reverse of an escape clause. it provided that in the event continental could not pay the foreign loan, for whatever reason at all, Bancom was firmly committed to underwrite a commercial paper issue of continental manufacturing in the peso equivalent of the foreign exchange loan. since this was a contingent obligation, it had not entered into the balance sheet and the audit made no mention of its existence even as a memorandum entry or as a note on the balance sheet. cHaPTer 22 – DeWeY Dee anD THe enD oF Bancom

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Governor Licaros’ term as Governor of the central Bank had ended on December 31, 1980. President marcos did not reappoint him, but placed Jimmy Laya as the new Governor, Within the next two weeks, Dewey Dee fled the country for canada, leaving behind him large credits he had personally guaranteed. among these credits was the foreign exchange loan to continental manufacturing. it was not clear if and how the two events were related, but there was much speculation in the market about the closeness of Licaros’ relations with Dewey Dee. The default on a whole string of credits triggered cross-default provisions and the international bank called its loan. Dewey Dee’s brother Donald came to see me to apologize for Dewey’s caper but also to call on the Bancom underwriting commitment. The rumors in the market flew faster and thicker, accelerating the rash of preterminations of placements with all the institutions that were rumored to have substantial exposures with Dewey and his companies. it was well known in the market that Bancom had close transactions with the so-called “three musketeers”, ramon sy Lai, Philip ang, and Dewey Dee. in fact, Bancom had purchased the security Bank in the Philippines and redwood Bank in california in partnership with the three. When i came back and as part of the reorganization, i required roly Gapud to sell Bancom’s shares in the two banks to the three who, it appeared, might have been fronting for marcos. it was on this issue that Gapud and i eventually parted ways. He resigned to assume the Presidency of security Bank. Dee’s departure precipitated a fatal run on investment houses. Bancom’s achilles heel were the outstanding commercial paper issues of the Bancom holdings and its subsidiaries that carried joint and several guarantees under the Bancom name. From day to day as we liquidated the paper of our most bankable issuers or arranged for getting emergency credits from the central Bank against their security, we approached the day when we would be holding mainly paper of the holding company and our subsidiaries, Gami particularly. at that point we would run out of eligible paper. i think it was on Jimmy Laya’s suggestion that i negotiated for additional equity from sss and the Land Bank but they came in on the basis that the stocks of the old shareholders would answer for the first losses of the group. as the penalty interest rates on emergency cB loans accumulated accrued losses against the private equity, Bancom became increasingly a government-owned company. it was decided that continued central Bank accommodations would only be available if we converted into a commercial bank. Bancom owned a savings bank that had been purchased from the Katigbak family, the union savings and mortgage Bank. We merged Bancom Development corporation into union Bank with the latter being the surviving corporation, and when we applied to become a commercial bank now substantially controlled by the two government-owned institutions, we had no problem getting central Bank approval.

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chapter 23 The total development company components at the start of 1980, one year before the havoc wrought by the Dewey Dee crisis, the Bancom Group of companies seemed like a business conglomeration that had decided to go into everything. it had started simply enough in 1965 as a financial institution, dealing in government securities and corporate debt and equity instruments, underwriting corporate issues, and raising finance for projects.

Bancom on inception and in 1980 But now, Bancom was building low- and middle-cost houses, developing commercial property, managing farms, selling tractors, renting out cranes, managing hospitals, reclaiming land, making movies, trading in farm produce, operating joint venture institutions in indonesia, malaysia, Thailand, Hong Kong. There seemed no limit to what it was prepared to do, nor logic to what it did do. That was how it might have appeared to the casual observer. But to my mind, then and now, there was method to this “madness”... indeed, a driving philosophy in its evolution, a tremendous consistency in the path of its development, a profound sense of mission in its direction. That mission, couched in the passages persistently iterated in Bancom annual reports, may have sounded like the usual high sounding rhetoric that corporate relations officers like to put into company publications. in the case of Bancom, it was taken with deathly seriousness. The mission assumed a dual responsibility: play a creative role in Philippine development through an authentic form of entrepreneurship, and at the same time, fulfill the corporate obligation to show profit for our shareholders.

The Holy Grail The vision was, it bears repeating, to be a total development company. This meant a company that profited mainly from creating sustained income streams for its customers. in an era before value chains and value streams had become business buzzwords, the Bancom Group already couched its mission in the realities these words were trying to define. as the leader of Bancom’s evolution, i knew i also needed to be its guardian, ensuring that the company will not slide into the antithesis of that vision – the opportunistic business predator that watched for easy opportunities to dip into values it had no part in creating. opportunism would have meant conveniently confining our operations to those areas where development had already been created by the initiatives and entrepreneurship of others. c H a P T e r 2 3 – T H e T o Ta L D e V e L o P m e n T c o m Pa n Y c o m P o n e n T s

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Part of the vision was to build the technical capacity and creativity to uncover new niches in old markets where fresh values could be created and exploited. Furthermore, we sought to wield the developmental acumen and drive to be able to identify the most strategic points for viable and eventually profitable entry in markets that were still too undeveloped for the opportunistic corporations to consider. This meant offering product lines of such a wide spectrum that one could always form a package to fit the needs and wants of any community at any stage of development or underdevelopment. This was what the Bancom Group intended by being a total development company. in an age when linear, reductionist, and narrowly partial views were the ruling perspective, when Shoemaker, Stick to Your Last! was the counsel of ultimate wisdom, the Bancom Group sought to be many things to most people.

Almost, but not quite in 1980 it was as close to being there as anyone might be who was even crazy enough to try to get there. Bancom was nearly there and almost pulled it off. Because the reason it ultimately failed had really little to do with the inherent possibility, feasibility, and practicability of the concept. But the point of the story for our times, its contemporary interest in the present post-modern age of information and communications Technology, is that... what with heroic effort and luck might have been accomplished in the 1970s is terribly needed in the country now and is eminently doable in the present environment and the new technology. a company whose essential product line was development – total and sustainable development – that was our goal. Development is an elusive term that defies simple apprehension. it had become wornout by constant use in a rhetoric that gives it every meaning that suits the special interest of the user. We were determined at Bancom to give authentic substance to the title. over a lifespan of 17 years, the Bancom Group incurred developmental costs in its pioneering efforts to play out its vision to build the total development company. some of the investments failed to yield reasonable returns and thus were set aside as part of the price of entrepreneurship. in late 1980, it was determined that the Bancom Group was ready to proceed to the next stage in its evolution, given an infusion of fresh equity occasioned by the successful launch of the new offshore parent, Bancom international Holdings Ltd. (BiHL). The next game step would have been to consolidate and redirect the group’s financial companies in the context of changes in the regulatory environment in the Philippines, requiring a commercial banking capability, but to steadfastly pursue the objectives of a total development company. unproductive assets in various Bancom subsidiaries were determined to amount to P320 million with a realizable value of 50 percent. This haircut represented the cost of entrepreneurship. The old Bancom Group, inc. (BGi) then segregated those operations which were considered relevant to the group’s long-term vision and sold these to a new domestic holding company, Bancom Philippine

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Holdings, inc. (BPHi), at a price of P400 million on a cleaned up basis, meaning net of unproductive assets. BPHi, in turn, attracted fresh equity from BiHL on the merits of its investments which were projected to earn over P42 million in the next five years. at this point in time, therefore, the Bancom Group was effectively transformed from basically a Philippine group with regional partnerships and operations into an international company, with an investment in a diverse Philippine operation. This transformation was formalized through the activation of BiHL, the Group’s overall offshore flagship, and its investment in BPHi. These grand expectations, however, would not come to pass, as they were nipped in the bud by the turbulent events of the infamous Dewey Dee crisis in early 1981.

The TDC components Below is a lineup with profiles of 24 Bancom subsidiaries and affiliates that were formed or acquired in the Philippines over the course of 17 years. nineteen of these companies were expected to continue operating as viable businesses under the newly reorganized Philippine parent, BPHi. Four companies were set aside for termination, spun off or mothballed, either for uncertainty of business viability or due to unavailability or shortage of competent line managers. one company was structured as a non-profit institute to serve as an in-house support group, with a mandate to document, catalog, and communicate the learned experiences of the total development company.

Bancom Philippine Holdings, Inc. (BPHI) incorporated on september 15, 1980, BPHi was the new holding company promoted by Bancom Group, inc. (BGi) to serve as the professional management vehicle for directing and integrating the mobilization of resources and operations of 19 Philippine-based subsidiaries and affiliates. The Bancom Group of companies in the Philippines consisted of: a) a cluster of financial companies, including an investment house, a finance company, an insurance broker, a stockbroker, a currency broker and a savings and mortgage bank; b) a set of countryside companies in agricultural equipment and implements, agri-production inputs trading, custom services in land preparation and management, farm consultancy in crop diversification, agri-business management and agricultural credits; and c) a set of non-financial companies in construction and development, metal fabrication and civil works, print distribution, movie distribution, microcircuit assembly, venture development and developmental planning and consultancy. Through the branches and offices of its subsidiaries and affiliates, BPHi had a nationwide presence involving 94 strategic outposts throughout the archipelago from Laoag, ilocos norte in the north to Gen. santos city, south cotabato in the south. c H a P T e r 2 3 – T H e T o Ta L D e V e L o P m e n T c o m Pa n Y c o m P o n e n T s

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The manpower complement of the Bancom Group of companies numbered 4,990 as of year-end 1980. With P500 million as authorized capital and total paid-in capital of P185 million as of 31 october 1980, BPHi’s total resources as of year-end 1980 stood at P1,504 million. Gross revenues of about P522 million were registered during 1980. BPHi was to serve as the flagship for the Philippine-wide operations of Bancom international Holdings Limited.

Bancom Development Corp. (BDC) over seventeen years, BDc’s major areas of financial operations included: 1) underwriting of equity and bond issues; 2) packaging/arrangement/syndication of medium- and long-term debt, both foreign and local; 3) project development and project financing; 4) financial advisory services which include formulation and implementation of a comprehensive financial plan, mergers and acquisitions; 5) money market dealership; and 6) investment portfolio management and advisory services. BDc played a key role in at least 20 equity underwritings, which raised approximately P300 million in equity for new as well as established companies going public. at least P10 billion in bond issues and medium-term debt were arranged. money market fund level as of end-1979 had exceeded the P2 billion mark, representing the value of outstanding commercial paper and other short-term debt instruments held by BDc and its clientele in the money market. Funds under investment management amounted to some P509.5 million at end-1979. in terms of market reach, BDc had a large coverage of the top 1000 corporations in the country. a steady 178 or 18% of these top corporations were BDc clients. among those companies with assets of P500 million or more, about one third were stable clients. This market coverage was significant considering that Philippine corporations dealt primarily with commercial banks and only a minority traditionally called on investment banking services. BDc operated 12 provincial branches dispersed in key cities throughout the archipelago, offering money market dealership and investment management services nationwide.

Bancom Finance Corp. (BFC) BFc performed an important role within the context of the Bancom Group’s vision of total financial services. in combination with Bancom Development corporation and other financial companies in the group, BFc provided the particular link to the middle income brackets (through its consumer finance lines), to medium and small scale corporations (through its receivable discounting, inventory financing, equipment leasing, and other wholesome finance lines), and to the medium-term requirements of geographic markets outside metro manila (through its 10 provincial branches).

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BFc’s total revenues (net of financing costs) amounted to P11.7 million, yielding a net income of P2.3 million in 1979.

Bancom Insurance Brokers, Inc. (BIBI) organized in 1973 as Bancom insurance underwriters (agency) inc., BiBi was renamed and transformed in 1977 into an insurance and reinsurance broker. its spectrum of service offerings included brokerage services in general insurance, surety and life, general insurance consultancy, risk management services and reinsurance broking. in its seven years of operations, BiBi had built up its client base to more than 400 business establishments it had a manpower complement of 34 as of 1980. as of year-end 1980, BiBi had total assets of P8.7 million and annual gross revenues of P2.3 million.

Barcelon, Roxas Securities, Inc. (BRSI) on march 3, 1975, the name of the stockbrokerage house Tuazon roxas & Torres, inc. was changed to Barcelon, roxas securities, inc. The firm’s services continued to be effecting for the account of others, as broker, transactions related to stocks, bonds, debentures and other securities. it likewise had the capability to handle stock transactions, service foreign accounts, offer research, margin facilities and block handling expertise. Brsi had link-ups with James capel & co. Ltd. (a prominent London stockbroker) and Guiness mahon (sea) Ltd. Brsi had acquired its own internal research staff and handled the weekly stock market column in a principal chinese newspaper. Brsi had correspondent offices in makati, Binondo, san Fernando (Pampanga). naga, Legaspi, iloilo, Tacloban, cagayan de oro, Davao and Zamboanga. its manpower complement as of 1980 stood at 25. as of year-end 1980, Brsi had total assets of P8.3 million. it posted annual gross revenues of P3.0 million. Brsi was a member of the manila stock exchange.

Bancom Currency Brokers Corp. (Bancur) Bancur, a wholly owned subsidiary of BPHi, was engaged in deposit-broking as intermediary between borrowers and lenders of funds in the international financial markets (i.e., Hong Kong, singapore, London) and planned to go as well into foreign exchange broking. it also provided its clientele with upto-date information on currency movements and the latest developments affecting money markets. in august 1978, Bancur established an operating tie-up with Guy Butler (international) Ltd. via an agency agreement. Guy Butler was a well established London-based brokerage house that provided c H a P T e r 2 3 – T H e T o Ta L D e V e L o P m e n T c o m Pa n Y c o m P o n e n T s

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services to the banking community in foreign-denominated certificates of deposit, eurodollar, and other eurocurrency deposits. Bancur maintained a network covering the major financial centers in the world. it was serviced via a lease-channel conference line centered in Hong Kong connecting manila, Hong Kong, singapore, and London on a single telex. The arrangement allowed Bancur to provide its clients with prime rates at least cost. Bancur’s local clientele consisted of 16 offshore banking units, 17 foreign currency deposit units, and 13 so-called “343” banks (local banks with large foreign deposit clients). Bancur generated gross revenues of P536,000 in 1980. it had total assets of P1.1 million as of yearend 1980, with a manpower complement of 11.

First Countryside Credit Corp. (FCCC) in the context of the Bancom Group vision of total financial services, Fccc was the direct link to agricultural and countryside markets and farm households. although the other financial companies in the group (BDc and BFc) had provincial branches, the operations of the Bancom units were more urban than rural and hence appropriate for the regional and market centers where financial systems approximated the sophistication of metro manila and other urban centers. Fccc, a pioneer in its line, specifically addressed rural credits. Fccc’s original business had been based primarily on the receivable sales of G.a. machineries, inc. (Gami), a member of Bancom’s non-financial group of companies. Fccc, however, was being geared not only for the financing of Gami product sales but for the whole range of rural credits, including production and crop loans (for fertilizer, seeds, etc.), farm development, rural household requirements, etc. it was envisioned that as Fccc grew in experience in the particular requirements of credit evaluation, supervision, collection and loan administration in the rural setting, it would be able to provide a synergistic link for the other financial companies of the group so that rural credit could be carried in balance sheets other than of Fccc. Fccc, in its first year of operation, already had 11 branches, but with the potential to expand immediately to the number of Gami branches (numbering 26 as of 1980) which could be used as base operations.

Union Savings and Mortgage Bank (USMB) The Bancom Group acquired ownership interest and management control in usmB in 1978 to establish a retail banking capability for wider fund mobilization.

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as of year-end 1979, usmB had total resources of P67.5 million, while total deposits amounted to P54.2 million. net income after tax amounted to P404,765. The increase in total resources was attributable to the substantial growth in deposits coming from six branches, opened during 1979. Bancom memoirs

Because it had a banking license, usmB became the quick and convenient merger partner for BDc in the final solution scenario, which enabled the central Bank to extend stable and continuing emergency assistance to otherwise ineligible non-bank institutions and to restore confidence in the money market, in the aftermath of the Dewey Dee crisis.

Bancom Audiovision Corp. (BAVC) originally established in 1973 “to apply the art of business to the business of art”, eurasia arts, inc. was renamed in 1975 to Bancom audiovision corp., confirming the Bancom Group’s commitment to establish an enduring presence in the arts, media, and entertainment field. in its probative years, BaVc undertook the publication of special interest books such as Piloncitos to Pesos and the Culinary Culture of the Philippines, and produced stage presentations like Ang Kiri and Gypsy. since early 1978, BaVc concentrated largely on local film production to contribute its professionalized structure in the development of this far-reaching medium of entertainment. among BaVc’s movie productions, whether single or jointly produced, were Bakya Mo Neneng, Aguila, Jaguar, Brutal, Up from the Depths, and Cinq et la Peau. BaVc’s product lines were film distribution and production, lobby display manufacturing, cinema booking services and production management. it had distribution outlets all over the country. BaVc had a manpower complement of 22 as of 1980. its assets stood at P20.4 million at year-end 1980. Gross revenues amounted to P8.4 million for the year.

Bancom Health Care Corp. (Bancare) Bancare was organized in 1974 under the leadership of Dr. alfredo r. a. Bengzon, who later served as secretary of Health during the cory aquino administration. Bancare’s pioneering aims were to identify the problems, explore solutions, analyze the market alternatives, and implement innovative systems in the field of health care delivery. Bancare was generally acknowledged as the first health maintenance organization in the country. among Bancare’s early projects were the design and management of a health care delivery system for the canlubang sugar estate in Laguna, master planning for the proposed Philippine medical center in Diliman, organization of the hospital system for the Heart center for asia, and the renovation and management-upgrading of the Lopez memorial Hospital in iloilo. Bancare was transformed into the integrated Health care services, inc. (intercare), and prospered well beyond the Bancom years. it was eventually merged with the college assurance Plan (caP) Group in the 1990s.

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Bancom Realty Corp. (BRC) Brc was created to primarily engage in the planning and construction of low-cost housing, in support of the government’s shelter program. Brc took over the mass housing function formerly assigned to a sister subsidiary within the Bancom Group, the Land and Housing Development corp. Beyond mass housing, Brc also engaged in various real estate projects such as the Harrison Plaza commercial center in Pasay city, the 180-hectare ecoland properties in Davao, the opal houses design for BF Homes, and the factory building at the Food Terminal complex, among others. in 1979 Brc surpassed the 4,500 unit mark in houses constructed for middle and low income households. it had successfully launched its Bahay-agad Program, offering 12 models of low-cost housing units to its target market. at the start of 1980, Brc was intensifying its efforts to diversify into project management, land use planning, architectural and engineering design services to complement its mass housing line. Brc’s gross revenues in 1979 amounted to P33.6 million.

Land and Housing Development Corp. (LHDC) originally organized as a domestic land development corporation to promote and develop local mass housing, LHDc since 1967 had evolved into a fully integrated infrastructure construction and overseas manpower recruitment company. serving as Bancom’s horizontal construction company, LHDc stood at the front line of public works projects, particularly in the areas of roads and water infrastructure systems, and was a major participant in the Philippine overseas manpower recruitment and deployment industry. LHDc’s major services were infrastructure development, public works construction, subdivision land development, and overseas manpower recruitment and sub-contracting services. LHDc had a reservoir of skilled and semi-skilled workers for potential placement in the international labor export market. it had a manpower complement of 15 at year-end 1980. in 1980, LHDc generated total revenues of P1.5 million. its assets at year-end 1980 stood at P13.0 million.

Bancom Estates Development Corp. (BEDCO) BeDco was incorporated in 1978 as one of the pioneering newtown and urban development management corporations with the end in view of providing the requisite technology to meet the increasing demand for integrated public and private human settlements for government projects in the country.

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Through its capabilities in economic and market research, land-use and site planning, newtown and city planning, pre-engineering surveys and designs, final engineering designs and total project management, BeDco’s corporate thrust was also directed at giving impetus to the government’s regional dispersal program. BeDco’s first and sole project was its ongoing involvement as the overall management and marketing agent of the Public estates authority for the development of its cebu Port centre, a 169-hectare reclaimed area in cebu city, into a new and modern business district and port complex in the Visayas region. BeDco had offices in makati and cebu city.

Philippine Crane Rental Corp. (PCRC) a joint venture between Bancom and crane rental and rigging (Hong Kong) Ltd., Pcrc was formed in 1979 to provide specialized services to the local construction and real estate industries. Pcrc offered construction equipment leasing and lifting services to the domestic construction, shipping and transport industries. in 1980, it started its equipment leasing services with the arrival of its first fleet of truck-mounted cranes with capacities ranging from 25 to 125 tons. Bancom held a 70% interest in Pcrc. its foreign partner in this venture, crane rental and rigging (Hong Kong) was a joint venture between sime Darby Berhad and richards and Willington of Great Britain.

Bancom Ohsaki Construction Company (BOCC) in December 1980, Bancom intended to enter the field of high technology construction with the establishment of a new and pioneering corporate entity, Bocc. The joint venture corporation was to offer its capabilities in the specialized areas of pressurized tunneling work, construction of LnG and LPG underground storage tanks, reclamation projects and other horizontal construction, underground soil work, and specialized foundation work and high-rise construction. a pioneering concept in the Philippine construction industry, Bocc was a joint venture between Bancom realty corporation and ohsaki construction company, Ltd. of Japan. Through Bocc, Bancom hoped to meet the demand for high technology construction in the domestic, asean and middle east markets.

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G.A. Machineries, Inc. (GAMI) established in 1953 by the Gregorio araneta family, G.a. machineries, inc. became a part of the Bancom Group in 1976. During its twenty six years in the business, Gami had developed from primarily an organization that engaged in agricultural development projects to the leading agricultural equipment trading company in the country. it had acquired a most extensive product range and had set up the largest branch network, in addition to developing an organization possessing the latest technological knowhow, after-sales capabilities, extensive local/international contacts and familiarity with the countryside markets. Gami’s primary business was trading in agricultural machinery and equipment: tractors, implements, agricultural processing equipment, engines, generating sets, pumps, irrigation systems, parts and services, and marketing and distribution of hybrid seeds. in the second half of the 1970s, Gami also went into the business of custom services, farming, automotive trading and real estate development. it carried the distribution franchise on the following brands: country, Howard, ransomes, sagana/ Kaneko, Kongskilde, Berkely Pumps/rainbird, Lombardini, cLaas, sperry new Holland, Pacific and Koneko seeds. Gami had 26 branches and sub-branches spread all over the country from Tuguegarao to Gen. santos city. Found in these outlets were whole goods/parts inventory, service shops, vehicles, office space and display areas. These were manned by Gami’s total manpower complement of over 611 employees. in 1980, Gami maintained its overall market leadership, capturing 44% and 20% of the standard tractor and compact tractor markets, respectively. it had total assets of P163.4 million and total revenues of P82.7 million as of year-end 1980.

Bancom Commodities Services, Inc. (BCS) established in 1974 as one of the earliest diversification ventures of the Bancom Group, Bcs was a specialist trading unit created to develop an international trading network capable of providing comprehensive marketing services to clients. its early years were focused on streamlining its internal working systems and on gaining experience and expertise in a few product lines with promising long range potentials. By 1979, Bcs had forged a tie-up with Toshoku Ltd., Japan’s leading food and agricultural commodities trading firm, which strengthened its capabilities in handling export-import transactions. Bcs also widened its client base by concluding major deals with twelve establishments in the dairy, grains and feedstuff subsectors. it imported milk powder, feedstuff, wheat, wine and activated clay and initially exported six domestic products: castor seeds, cuttlefish, pilinuts, fresh pineapple, coconut milk, and shirts.

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Bancom Farm Services Corp. (Banfarm) Banfarm was created to address the small farming community’s needs in the efficient management of space and land use. it sought to study the interrelationships of elements in the ecosystem and provided management expertise through a coordinated framework. Banfarm had employed as integrating points a tractor pool, control of centralized marketing and processing, and water resource management. in 1974 Banfarm started by operating a tractor pool for a cluster of managed compact farms in Licab, nueva ecija. it also formed a consortium of corporations to help them comply with General order 47, which required companies with 500 or more employees to produce rice for their own consumption. The following year, the provincial government of Leyte commissioned Banfarm jointly with the national Grains authority to develop the sab-a Basin, a large tract of wasteland in Leyte. Banfarm undertook to deliver 10,000 hectares of developed land for grain production and to produce a master plan for the development of 125,840 hectares of the Basin. This was the first field project of the Bancom Group applying the integrated area Development (iaD) approach. in its final years, Banfarm deepened Bancom’s developmental involvements through a contract from the ministry of agrarian reform for a macro design for the evaluation of World Bank-funded resettlement projects in the provinces of agusan, Bukidnon and capiz. The evaluation task included frameworks for pre-design, design, implementation and post-project. The outputs were to be used by the ministry in the development and testing of methods for the optimum exploitation of public lands as resettlement schemes for small farmers.

Bancom Systems Control, Inc. (BSCI) Bcsi was engaged in the business of systems and management engineering, industrial and technical consultancy, venture development, project development, and high technology systems. in its early years, Bsci implemented fuel and energy conservation and optimization programs, technical appraisals, and cost-saving/profit improvement using value analysis techniques. Venture development activity included projects in areas like tourism, hotels, textiles, printing, pharmaceuticals, food processing and metal foundries. Bsci was the southeast asia representative of the italian soTecni Group. it actively pursued largescale projects of the government in the fields of railways, highways and integrated area development.

Semiconductor Devices (Phils.), Inc. (SDPI) a joint venture between Bancom and semiconductor Devices Ltd. of Hong Kong, semiconductor Devices (Phils.), inc. was established in 1974 primarily to engage in the manufacture of semiconductors. c H a P T e r 2 3 – T H e T o Ta L D e V e L o P m e n T c o m Pa n Y c o m P o n e n T s

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sDPi’s business was the contract assembly and packaging of semiconductor devices and electronic models including the manufacture of plastic transistor and integrated circuits, hybrid integrated circuits for export, and the assembly of high frequency quartz crystals also for export. in 1980, sDPi successfully set up a zero-defect line for a major Japanese customer, acquired a new captive line of consigned equipment for a huge american telecommunications company and registered further headway in its metal can and cerDiP assembly capability. sDPi had a manpower complement of 2,346. as of year-end 1980, it had total assets of P56.5 million and gross revenues of P91.4 million.

ASEAN Fabricators, Inc. (AFI) asean Fabricators, inc.’s beginnings can be traced to Gami industries inc. (Gii) which was earlier the manufacturing division of G.a. machineries. in 1976, Bancom acquired controlling interest over Gii. in april 1977, Gii’s name was changed to asean Fabricators, inc. aFi’s main product groups were manufacturing of steel-based standard and custombuilt products, engineering and construction environmental protection systems, and special products. aFi had major ongoing projects in metro manila, northern Luzon, southern Luzon, Visayas and mindanao during 1980. as of year-end 1980, aFi’s total assets stood at P41.8 million and gross revenues amounted to P36.6 million. it had a manpower complement of 489 as of 1980.

Metallogen Asia Corp. on June 25, 1980, metallogen asia corp. was founded to engage principally in the manufacture of welding products for sale and distribution in the Philippines and abroad. Bancom’s involvement here was in line with the venture development aspect of its manufacturing operations. Bancom held a 30% interest in metallogen asia corp.

Print Diffusion Pacific, Inc. (PDPI) incorporated in 1974, PDPi’s business was the importation and nationwide wholesale distribution of foreign magazines, periodicals and selected books.

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in 1980, PDPi further consolidated its market leadership with the acquisition of the distributorship of Time magazine. along with its magazines line expansion, PDPi also formed during the year a full-scale library service division to undertake the supply of foreign technical journal subscriptions and highly specialized library reference materials to libraries nationwide. as of 1980, PDPi had a manpower complement of 164. The company had total assets of P12.3 million and generated gross revenues of P10.9 million.

Lahing Pilipino Publishing, Inc. (LPPI) LPPi was incorporated in 1977 to assume from the Hamlyn Group of australia and the strait Times of singapore all publishing and marketing rights over Filipino Heritage, a 10-volume series of encyclopedias on Philippine culture and history. Together with Felta Books, inc., a marketing arm for educational materials, and Vera-reyes, inc., a quality color printer, LPPi had published the 10 volumes of Filipino Heritage and was able to expand its market domestically and overseas. as of year-end 1980, LPPi had gross revenues of P769,000 and total assets of P1.6 million.

Bancom Institute of Development Technology (Bidtech) Bidtech was organized in 1975 to institutionalize the housing of distinctive Bancom technologies and to effect the transfer and expansion of Bancom expertise to professional personnel and to the community at large. aside from its documentation functions (procedural manuals, systems flow-charting, etc.), Bidtech was tasked to develop effective communications tools and techniques to impart Bancom-learned technologies for all future applications. For its initial undertaking, Bidtech handled the detailed project-by-project documentation of a wide range of rural development activities pursued by the Bancom Group at its integrated area Development pilot project at Licab, nueva ecija.

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chapter 24 a changed life-world The end of Bancom meant for me a sea change in both my personal and professional lives. Looking back on the change in my personal and family life, i am not as ready with an explanation. But that is another story. The change in the circumstances of my professional life did not mean a change in my life-purpose. on the contrary, it represented a total dedication to the pursuit of the alternative paradigm of development theory and modes of intervention that i had tried to apply to the Bancom group philosophy and operating mode on my return from my american express stint. When Bancom was merged with union Bank and the latter as the surviving entity was converted into a commercial bank in the aftermath of the Dewey Dee crisis, the losses from the penalty interest rates charged by the central Bank on emergency liquidity loans wiped out the private ownership, such that union Bank became a government-owned commercial bank. it became obvious to me that the time had arrived for me to resign as President. in a way, the forced conversion of Bancom into a commercial bank, majority-owned by the sss and the Land Bank, had liberated me from the commitment to an enterprise mode. Far from being devastated by the end of an organization we had built up in 17 exciting years, i shifted to the new mode with enthusiasm and renewed vigor. of that i am certain, as i look back.

SKRMA and FCOMT after my resignation from Bancom, i then proceeded to establish both a consulting company, sKr managers and advisors inc. (sKrma), and a non-profit foundation, The Foundation for community organization and management Technology (FcomT). our objective was to launch an initiative for sustainable development based on the insights i had gained from my Bancom and american express experiences: a vision of an economic order where the basic unit of organization was the human community, defined as the settlement of human families on its territorial habitat viewed as an integral ecological system and habitat. my reflections on those failed attempts to implant the matrix organization at Bancom and american express had generated a tremendous insight. in corporate strategic planning sessions, the first key question planners need to address is: What is the basic and strategic unit of organization? it is usually defined as the profit center that performs the basic business and is the principal generator of profit for the shareholders. in the culture of the corporate organization, the positions responsible

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for the operations of that strategic unit are the choicest, and most prestigious, in the organization. But for a matrix organization to work, the product profit motivation must be balanced by a perspective that gives primacy to an optimum and longer-term welfare of the ultimate customer. When that is defined holistically as the integral and sustainable development of the customer and her community, then it is nigh impossible to visualize this perspective being adopted by a career employee of the business enterprise, an agent having the enterprise as his principal. it can only become the ruling perspective of an agent who considers, as his principal, the customer and her community. in what form of an economic order is the market systematically operated with professional and career agents of the communities negotiating with the agents of the profit-seeking business enterprise? That is ultimately the matrix structure that would work. This should mean an economic order where the basic community units are the strategic units of organization! and if the sustainability test of development encompasses the three domains of economy, ecology, and sociality or communality, then the definition of community as the strategic unit of organization must encompass both the human settlement unit and the minimum significant unit of an integral ecosystem as the habitat of the community. We leased an office for sKrma and FcomT on Perea street in makati, near aim, which had been previously occupied by a malaysian company dealing in petroleum products during the years following the petroleum boom of the 1970s. it had been partitioned and furnished with beautiful narra panels and heavy office furniture. it was ready made and we purchased the improvements and furniture from the former owners at a bargain cost. The staff from Bancom that had been working on the integrated area Development (iaD) process, ren Garcia and Peachy Forbes, formed our basic team. We had initial contracts to support us, both with the commonwealth Development corporation of u.K. to undertake community consulta for a palm oil project they were planning, and with Joly Benitez at the Human settlements ministry of imelda marcos. Joly had been one of our early co-advocates of a human settlements approach to development. He commissioned FcomT to formulate the rigorous theoretical and practical framework to operationalize the system.

EDMS in 1984, sKrma documented the combined results of research and field experience in a manual on the economic District management system (eDms). The introduction to that manual explains the roots of this approach: This brief presents a community-based organization and management technology developed by sKr managers and advisors, inc. ...as synthesized from its more recent experience as a consulting firm engaged in development projects funded by the World Bank (e.g. Design and implementation of an evaluation and monitoring system for an integrated area Development Project), multi-crop outgrowers project of the commonwealth Development corporation in u.K. (e.g. socio-economic survey of a cHaPTer 24 – a cHanGeD LiFe-WorLD

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prospective project site, communications Programme and entry strategy), agribusiness Loan Program of the overseas cooperation Fund of Japan (e.g., formulation of program strategy for livelihood generation particularly among small farmers and artisanal fishermen), etc. ...as culled from the combined professional experience of its key personnel recently within the consulting firm of sKr m & a; and, before that, from their individual experiences as senior managers and staff in various development-oriented private and public institutions (notably sixto K. roxas, sKr m & a principal, who was formerly chairman of the Philippine national economic planning body, chief executive officer of a group of companies engaged in development technology experiments, etc.). To accord its continued development a proper and exclusive emphasis, this community-based organization and management technology has been transferred to the Foundation for community organization and management Technology – a non-stock, non-profit organization whose primary purpose is “to identify, understand and promote the organization and management processes by which communities as human organizations (from basic unit such as the household to the more complex such as the country) effectively, efficiently and viably determine goals and targets, establish priorities, reach decisions on the deployment of resources, direct behavior to achieve those targets, appraise and evaluate performance (its own and others) to establish new targets, correct deviations, learn new technologies, achieve growth and reproduction with the fullest and widest participation of the communities’ constituents.” We launched an advocacy campaign for what we considered a new paradigm and fresh approach to development planning and management, mainstreamed in economic thinking and governmental policy. The opportunity to pilot test the system in full did not come until after the eDsa i revolution toppled marcos and installed corazon aquino as President. in reorganizing local government units, she appointed young Bitay Lacson as Governor of negros occidental. of all the potential testing areas that we scanned, negros occidental seemed to be the toughest. if we could make the system work there, we felt we could make it work anywhere in the Philippines. and Governor Lacson was the ideal person to support a radical innovation. Young, idealistic, and eager to find new approaches to development, he found eDms intriguing. “i love the concept,” he said, and he was willing to give it a try. in operationalizing the system, we formulated the concept of an economic ecological district for purposes of planning and managing sustainable development. The territorial base was to be the watershed wedge, going from the municipal waters from 15 kilometers offshore, the coastal areas, the lowland alluvial plains, the mid level dry agricultural lands along the main river up to the highland montane areas. The historical pattern of human settlement formation in the country formed clusters of villages and towns on these watersheds so that the country naturally divides into some 225 of these clusters outside of the metropolitanized areas and large cities. We did a scan of negros occidental and classified the towns and cities into some six economic districts. We submitted a proposal to organize these districts into eDms units over the term of Governor Lacson’s governorship.

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Lacson was favorably disposed but his Provincial council composed of hacienderos was understandably opposed to the idea of establishing a system that glorified small, owner-cultivated farms. Governor Lacson had explicitly expressed a desire to follow the Taiwan model of development based on land reform and local industrialization.

The laboratory The Provincial council then agreed to giving us a contract for one district, and we selected the Bago city district with the four satellite municipalities around it: salvador Benedicto up in the mountains, Valladolid and Pulupandan on the coast, and murcia at mid levels. We named the district Salvapul Bamur, combining the first syllables of each of the component units. The team was headed by Peachy cuenca Forbes, an experienced community organizer. Then followed about 10 months of intensive organizing of the households into clusters, training cluster leaders, holding cluster meetings, training facilitators and computer workstation operators. at the end of this phase, nearly 30,000 households in five towns were organized into over a thousand clusters, had conducted their planning and self-assessment sessions, built up the community data bases for the community accounting, raised their hopes and articulated their visions, and readied themselves for the operating phase. on a sunday evening to announce to the country that they were organized, by way of a political statement, over a thousand adjoining neighborhoods, from the coastal towns up to the mountains, lit “bond fires” that streamed a stream of flames glowing in the night from the coast up to the mountains of salvapul Bamur. The installation process required a continuing program. The installation phase required the mobilization and training of community organizers and trainors who were motivated and driven hard to conduct organizing sessions all over the district reaching out to the remotest barangays, traveling long distances and conducting sessions far into the nights, night after night, fired with great enthusiasm.

Important lessons But after the organizing phase, as the system entered into the operating phase, a different type of leadership and management was required: project managers, commercial agent types to promote, organize and operate production and service projects. The original design intended that as this phase ended in one district, the organizing teams were to move to start that phase in the next district while the operating teams were assigned to take over the operating phase. However, the Provincial Board had aborted the plan for a succession of districts. We had to stop with salvapul Bamur. The question was: what to do with the organizers who had devoted long hours, days and weeks to build the organization. We could not just dismiss them and then bring in an entirely new group to run the project. somehow we had to try to convert organizers into project managers and commercial agents of the community.

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That does not work very well. community organizers generally do not good commercial agents make. There was no local financial infrastructure in place to support local projects. micro finance was only beginning to be discussed. Dependence had to be placed on government financial institutions to finance the different elements of the supply chain – the farm and fishery projects, the broiler raising systems, the dairy and cattle dispersal programs, reforestation, upland slope agriculture, fabrication of simpler farm tools and equipment such as sprayers, etc. The community expectations had had to be raised for the community organizing to succeed, and the gestation of actual projects had to be shortened so the communities would not feel their hopes had been betrayed. This was not to happen, however. reforestation projects for salvador Benedicto were started. Working with the cattle dispersal and fattening program of monterey, we launched community based projects and commercial deals were closed involving sale of piglets for lechon dealers in manila. But project approvals were slow and financing from government came in trickles. The household clusters also had problems with project managers who lacked training and commercial savvy. in the end there was a severe letdown from the high hopes that had been built up during the organizing phase. occurring in a total provincial environment that was eager to see the program fail, with severe critics from government and even local nGos and some persons in local academe, and as the funding that kept FcomT presence possible ran out, the program began to sputter and lose steam. as the organizing phase of salvapul Bamur approached completion, FcomT attempted to make up for the aborted next projects in negros occidental with new installation contracts in negros oriental and in catanduanes in Bicol. all these projects were started before the passage of the Local Government code which did not become law until 1991. Funding for installation provided support for only one to two years. We realized that the build up of the system required a far longer sustenance and the handholding for the local organization had to extend far beyond the two year project period. This is something we should have known from the start. But we reckoned only on the formal establishment of the institutions of the system, the cluster organizations, the trained leaders and the local cooperative management agency, and did not realize the far longer needs for the cultural, attitudinal and behavioral transformations that success required.

Advocates’ reflections The recollections and reflections of the key persons who were deeply engaged in the piloting of the system in the three areas provide valuable insights. Peachy Forbes and her husband, canadian Greg Forbes, were in the negros occidental project. Peachy headed the team and Greg, while not directly and officially involved, observed the process closely. Philip camara, the managing director of FcomT, was closely involved in the negros occidental project, and directly managed the negros oriental and catanduanes projects. in all of them, Butch ragragio was our economist and had charge of the design and construction of the social accounting matrix that served as the community

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accounting system. Bert David, who had been a communist rebel with the new People’s army (nPa), was initially a volunteer in the negros occidental project, and then became an installation Division manager, particularly for the catanduanes project since he was a Bicolano. Philip camara recalls how we promoted the concept following the eDsa i revolution: sKr would give a speech on area management to an audience which would include governors. Those interested in the system would approach sKr and discuss applying the system to one part or to the whole of their province. FcomT would take a look at a particular district and come up with a project proposal to install eDms in that district. The local government would look for the appropriate funding agency. Preparatory work undertaken by FcomT would take 6-8 months starting from the first visit to the province, gathering primary and secondary data to coming up with an installation plan. The installation plan became the project proposal that the province submitted directly to a funding agency. The funding agency would ask FcomT for a presentation as to what were the objectives, activities, budget and expected output of the system. FcomT acted therefore like a service provider to a governor. once the funding agency was on board, prior to any organizing or installation, FcomT would prepare a (10-year) development plan for the whole province. The existing resources and economic activities were examined so FcomT could come up with what livelihoods might make sense in the area. The output of that development plan was converted into easy-to-understand materials which were then presented to provincial level officials, other institutions like the church, business community and the rotary. after the presentation, local people interested in eventually becoming members of the Board of the community management corporation (cmc) were identified. The installation really meant creating a new institution (cmc) that would act as the management agent of the community after the consultants left. in general, the conditions in the areas chosen were marked by idle lands, idle people and idle and/or degraded resources. The poverty rate was very high and there was a pronounced lack of infrastructure. it was therefore not surprising that the community response to eDms was good mainly because eDms was an economic initiative. in contrast, other programs by development agencies would have as their key point health or education. eDms meant organizing people so they could take stock of their skills, household assets and the common resources available to them in order to plan livelihood activities. The approach of eDms (household-oriented rather than sectoral) naturally attracted the interest of mothers/women and people who looked to better the welfare of the family. it resonated very well in the community with barangay leaders, mayors and everybody in general. The difference between FcomT and other development planners is that in coming up with a development plan, the former sees the area as an economic and ecological district defined by infrastructure (roads that connect places together) and the hydrological flow (connecting river system). The eDms concept was to integrate activities from the upland down to the coastal area. in negros occidental, the 5 towns of salvapul Bamur with around 100 barangays were considered as 1 district. cHaPTer 24 – a cHanGeD LiFe-WorLD

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Peachy Forbes describes and details the eDms process of organization: The eDms approach was holistic and natural. The salvapul Bamur towns were contiguous areas interconnected in three ways. ecologically: water flowed from the upland forested area of salvador Benedicto down to the midlands of murcia, to the coastal areas of Valladolid and Pulupandan and to the alluvial plains of Bago city. Politically: the 5 towns all belonged to one congressional district with one congressman responsible for policies and laws. economically: Bago was the commercial center of activity where products from the other areas were brought for trade. This district was treated as one system small enough to be managed effectively but large enough to create an economic impact (critical mass). The organizers went to barangays and held consultations or consultas where the community was asked for their vision for the barangay (visioning process). a barangay sociometry was also conducted to find out who the natural leaders of the community were. These were then invited to be trained as household leaders (leaders of 4-5 households). The eDms training center was set up in Bago city. a local mass-based leader was recruited as the trainer. He also helped design the curriculum along with sKr. Training was conducted in ilonggo for household leaders who were usually women. it took 8 months to train all the household leaders of the five municipalities. each training session lasted 30 days in-house and was divided as follows: 1st week: Purpose in life; connection to a higher being (spiritual dimension); analysis of negros and its role and history in the Philippines. 2nd week: economic systems; identification and analysis of structures and institutions in negros; economic theories. 3rd week: Political systems. 4th week: environmental systems. out of that 30-day experience, a purok leader was chosen by the organizers. The purok leaders then decided who among them would be the municipal coordinator who had the crucial role of relating with the mayors and the governor. While most of the household leaders only reached grade 2 or 3 or had no schooling at all, they were able to understand the lessons as the training design was very practical and adapted to the local setting. among the things they learned during the training was how the sugar industry affected the culture of the people and promoted strong dependency on the planter and how plantations were akin to forts and not communities. in addition, eDms organizers worked closely with the Department of agrarian reform (Dar) and agrarian reform communities to bring about land reform. it was unsurprising that the planters felt threatened and opposed eDms. There were, however, some planters friendly to their cause and even joined the eDms team. They learned to do community organizing, to treat their sugar workers fairly and were

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made aware that the old system had to go. some even donated hectares of their land. aside from opposition from the right, eDms also faced hostility from the nPa who thought it was a ploy by the World Bank or imF. The rebels were eventually won over and worked with the eDms consultants, thanks in large part to the assistance of Bishop Fortich, his VicarGeneral Vic rivas and the head of the nGo negros economic Development Foundation, mr. Gallardo, whose brother was the head of the nPa at the time. The focus of the team was both on training and research. after 8 months of training household leaders, the action research portion of eDms commenced. a survey was conducted at the household level with participants asked to fill up a questionnaire based on Kita (income), Gastos (expenditure), production and assets. The process was very consultative with organizers discussing the results with the households. (Why is your income small? Why is he better than you? How can you make it better? How come you owe so much money while your neighbor doesn’t?). The results were consolidated by the household leader, brought to the purok level for consolidation, brought to the zone then municipal level until they were consolidated at the district level. mr. Butch ragrario would then conduct the social accounting by coming up with an input-output matrix. in addition to household leaders, computer workstation operators, research assistants and community organizing trainers were also given training. each barangay (1,000-2,000 households) had one computer, one trainer and one researcher. The level of organization did not stop at households. Trainings were also conducted for the five mayors who had very different personalities (from conservative planter to nPa sympathizer). They were made to meet and cooperate. it was important for them to be connected with the provincial government, the provincial planning officer and the provincial administrator as they would be the ones to provide resources. The organization of people’s organizations in the district also took place. This was done separately from the organization of nGos as the people’s organizations were usually mass-based while nGos were composed mostly of planters. eDms organizers also had regular sessions with the congressman, Governor Bitay Lacson, Bishop Fortich, Vicar General Vic rivas and the line agencies. aside from Dar (previously mentioned), the Department of environment and natural resources, the Department of Trade and industry, the Department of science and Technology and the Department of agriculture also partnered with eDms on specific projects. Butch ragragio was the eDms economist. He oversaw the construction of the community social accounting matrix from inputs systematically brought out by deliberate facilitation from the cluster meetings of households. He recalls the process: The overall idea of a community-based management system such as the eDms is to isolate an area with diverse resources. similar to ecosystems-based management, eDms takes into consideration how the whole range of land resources relate to each other (e.g. how the uplands are related to the midlands and lowlands). eDms veers away from the traditional economic cHaPTer 24 – a cHanGeD LiFe-WorLD

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model in that the focus is on households instead of the enterprise. enterprises, although present in the community, are usually not locally-based and the issue of sustainability is often overlooked. The primary goal/expected outcome of eDms is a community where inequality is minimized by organizing and empowering households to develop their own production units and to choose the kinds of linkages they feel are more relevant to their basic production systems. as the system is smallholder- and community-based, the people will be more concerned about their own environment, health, standard of living and way of life, thus covering the three aspects of sustainable development. The main economic indicator used is total land productivity per hectare. apart from the product directly produced by a certain piece of land, the linkages generated are also valuated. Butch ragrario summarized the whole eDms system in a chart called the social accounting matrix. His descriptive account: While in the traditional input-output matrix, columns represent the standardized classification of sectors, the social accounting matrix instead had columns that represented the economic system of households and grouped those involved in a certain production system (e.g. palay farming, coconut farming, manufacturing, service). While eDms deals with estimated values, it is still able to give an idea of how the political and social economy of a community really functions by tracing the inflow and outflow of wealth in the area. With this, economic gaps become apparent. The matrix can also be used as an analytical tool to decide between different industries and systems. The eDms goal of an empowered community where social justice prevails, the local environment is accounted for and economic inequality is minimized can be achieved when the outflow of wealth and natural resources is staunched and reversed. Bert David’s recollections provides the perspective of a former rebel. even before eDms, Bert was already interested in economic development models. He was therefore intrigued by the prospect of a small-scale social experiment: eDms was the concept of Dr. sixto K. roxas who saw the Philippines as a conglomeration of ecosystems. He came up with the idea of the economic district – an ecosystem with ecological unity that coincided with congressional districts. an investigation would be conducted into the objective reality of an area: river systems, forest systems, farming systems and economy input/ output. a demographic study of past, present and projected development of demography would be carried out. Development work for and with the communities would be undertaken while keeping in mind the fragility of the Philippine ecosystem. in terms of area management, these ecosystems were small enough for rational management from and for the community while big enough to be productive. The concepts of eDms were more advanced than those in the West which made ciDa and unDP interested in operationalizing the system. in order to organize the community, it is important to first get the key leaders of the area (governor, mayors, bishop and priests) then the leaders of community organizations on board.

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They were easy to convince and helped the eDms team reach out to the households and organize them. The main consideration in community organization was how easily one member of a group could talk to another member. every household would send a representative, usually the mom, to meet with eDms organizers. eDms concepts were explained then trainings and consultations were conducted. community organizers were chosen from the household representatives and were trained along with workstation operators. once neighborhood associations were formed and cluster leaders trained, the eDms team comprised less than 1% of the total organization; the rest were local. The eDms team made use of a customized computer program to input data gathered from community consultations and to keep track of which people within an economic district want to go into what livelihood (e.g. hog-raising). mr. Butch ragrario would then conduct an investigation to see the flow of products in and out of the community. From this baseline, he would analyze and predict future inflow and outflow of goods that would influence the types of physical infrastructures needed. Taking all these into consideration, the Livelihoods systems specialist, mr. Bernie Bacosa, worked on how to create economies of scale. His ideas were refined along the way through discussions with the community.

A continuing influence eDms has been a continuing influence on the thinking of the key persons involved. They have gone on to apply its concepts even though they are not doing the exact same thing. Bert David is now into renewable energy and is exploring sustainable, affordable housing with a connected livelihood programs. He is localized in albay and remains engaged in local communities. albay Governor salceda calls on him for assistance. Lida igonia, an ex-eDms District manager, has become a resident in negros oriental after marrying a local. several communities still operate along the lines of eDms and go to Lida and her husband for advice. no government or foreign funding agencies are involved, but the community has formalized their own arrangement, with Lida looking after the group. Development is an uphill battle. Peachy Forbes notes that some of the concepts used in eDms have by now become mainstream. she gives the example of Theory u by otto scharmer and the writings of Peter senge from the massachusetts institute of Technology, which promote the use of systems thinking in social change. another theory espouses focusing on individuals at all levels (e.g. community and institution levels). Peachy and husband Greg say that these were all incorporated in eDms but using different terms and that we were 20 to 30 years ahead of what everyone else was doing. Philip camara in 1990 he went to his father’s hometown in iba, Zambales and took over the saint augustine sambali Foundation which his father had established in 1966. With only P300,000 of his own money, 2 trained organizers from catanduanes and a framework, he set up eDms in one town. cHaPTer 24 – a cHanGeD LiFe-WorLD

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mount Pinatubo erupted on June 15, 1991 and caused massive destruction in Zambales. There was a need for nGos to help in rehabilitating the area. Philip’s sambali Foundation was one of about 20 nGos that funding agencies could partner with. it was also the only local nGo, as the rest came from metro manila. aside from funding agencies, sambali also ended up working with government agencies in organizing communities for various projects and livelihood systems. By 2001, his initiative reached its peak with 7,000 households involved. Philip believes that the conditions are today better to do eDms: there is more inter-connectivity, more opportunities for applying iT, and the economy is more vibrant and diversified. He is now a Director of the subic Bay metropolitan authority (sBma), where he is applying eDms concepts in a different context. He developed Project unity, which involved the sBma Board paying a courtesy call to their 6 local government neighbors for the first time. Their vision is to become unified with the other towns and for the area to have one integrated budget and an integrated development plan. Butch ragrario believes that eDms is best implemented by investors who are local to the area and who are passionate about eDms concepts. Being from the area, local investors have as big a stake in the environment as the community, have the same mindset as the community members, and could elicit a stronger response in them. He also feels that eDms requires a local government that is empowered. unfortunately, the political economy at the time eDms was implemented was not conducive to its success. eDms was way ahead of its time, but with the current conditions, Butch believes that it could work. The last of our eDms projects ended in 1991. That year as well, congress passed the Local Government code that gave local government larger fiscal and taxing powers. as a postscript, let me mention that our eDms approach has been vindicated in the subsequent writings of other, more famous development thinkers. renowned social activist David Korten in his best selling books has acknowledged our influence in bringing his thinking around to communitybased development. similarly, the celebrated French economic thinker, Pierre calame, has cited our work as a key influence on how he came around to viewing community as the primary and most strategic unit for sustainable development. our advocacy did not change, although its methods over the years took a different tack.

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chapter 25 The sustainable development movement as we look back, it is interesting at this point to bring to bear on what we attempted then, the perspectives, issues and concerns that global events since then have made more relevant today.

Growing awareness Towards the close of the 20th century, two problems became the object of heightened concern worldwide – persistent poverty and ecological destruction. The Philippines seemed prone to being the model for global problems. and it was for these apocalyptic twins. maximo “Junie” Kalaw Jr. was the pioneer in focusing national attention on the environment. He had taken over as President of Haribon society and converted it from merely a bird-watching association to a more total environmental conservation and restoration foundation. in 1983, the u.n. created a commission headed by former norwegian Prime minister Gro Harlem Brundtland to study the world environment problem. The commission came out with its report in 1987, entitling it Our Common Future. The report made sustainable development the buzzword of the following decades. it meant a development that made efficient use of the planet’s resources of natural, human and man-made capital to meet the needs of the present generation of people at all levels without impairing the ability of those resources to meet the needs of future generations. it meant a development that is socially, economically and environmentally sustainable. in the Philippines, the edsa bloodless revolution of 1986 had won the admiration and sympathy for the country around the world. President cory had gone on a state visit to the u.s., was received with great acclaim, addressed the u.s. congress, received pledges of official assistance, and spoke to private business groups eliciting promises of private investments.

Coming together in 1988, a group of Philippine nGos decided it was an opportune time to mobilize u.s. assistance for the nGo sector. an nGo mission was organized with Junie Kalaw for Haribon and the Philippine institute for alternative Futures (PiaF), Philip camara for the Foundation for community organization and management Technologies (FcomT), Gani serrano for Prrm, marietta Goco and Dinky soliman for PHiLDrra, Tina Llamson, and some others. They met with counterparts in several u.s. cities and as a result a Philippine Development coalition of u.s. nGos was established to help mobilize u.s. assistance for Philippine development. one of the results of this was an allocation of $20 million earmarked in the u.s. official aiD program to be channelled directly through Philippine nGos without having to go through the Philippine c H a P T e r 2 5 – T H e s u s Ta i n a B L e D e V e L o P m e n T m o V e m e n T

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government. it was out of this fund that the debt-for-nature swap was financed, which established the Foundation for Philippine environment (FPe). upon returning, the Philippine nGos then formed the Green Forum to promote sustainable development. FcomT served as secretariat for the Green Forum which was conducting regional conferences to discuss how each of the regions understood sustainable development. To serve as the guiding document, Philip camara, managing Director of FcomT, put together a number of my papers on community-based development into a booklet for the Green Forum which they entitled, The White Paper. This was published in 1989. They invited Hazel Henderson, author of several books advocating an alternative to neo-Liberal economics, to write the introduction. in another book entitled, Paradigms in Progress, published in 1991, she called The White Paper “the most highly-articulated plan for the new, people-centered ecological paradigm of Development”. To quote further from Henderson’s Paradigms book: The [White] Paper documents with careful research how the whole macroeconomic, GnPoriented ‘development’ process has devastated the Philippines, and how it continues each day (tied as it is to the inequitable workings of world trade and the current financial system) to marginalize ever more rural Filipinos while destroying the productivity of their land, water and forests... most significantly, the Green Forum White Paper is a carefully tested plan to reverse this decline, re-invest in rural communities, raise agricultural productivity and reduce the rampant poverty which is now tearing the country apart. Kristin Dawkins of miT and Harvard, writing a review, said of the Green Forum document: The Green Forum’s Economic White Paper of June 1991 is a plan for achieving sustainable development in the Philippines, the product of regional consultations held from may to september 1990 followed by meetings with groups from the spectrum of Filipino political interests. Despite its name, the Economic Whitepaper is the most creative and exciting document i have read in several years of pouring through materials about international environmental economics. it is a sophisticated analysis that is so innovative, it makes the concept of natural resources accounting seem old fashioned.

Rio summit in 1992 the world’s chiefs of state, their cabinet ministers, and major foundations convened in rio de Janeiro to address the twin problems of poverty and environmental destruction, recognizing that they had assumed planet-wide proportions. a global agenda came out of the rio meeting that most of earth’s governments pledged to pursue: agenda 21 for the new century and millennium. in the next two decades there would be “summit” meetings to review accomplishments and renew commitments. Rio plus 10 in Johannesburg, south africa reviewed a dismal record of progress toward solving either the poverty or ecological problem.

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a new “Program of implementation” was agreed upon. another summit adopted 8 millennium goals addressing poverty. a Rio plus 20 meeting was held in rio in 2012. Global warming and climate change are now unmistakably with us and most of the world has recognized the problem. Philippine nGos were prominently engaged in the whole rio movement. in the 1992 meeting, while the governments met in the centro of the city, some 10,000 nGo participants convened in Parco Flamengo. Junie Kalaw of the Philippine institute for alternative Futures acted as the overall chair, and Filipinas and Filipinos were the principal facilitators in the sessions. The canadian maurice strong, who was secretary-General of the u.n. conference on Human environment in 1972 (called the Stockholm Conference that preceded rio by 20 years) where the first wake-up call was rung on the ecological problem, was also chosen to be secretary-General of the rio earth summit in 1992. shortly after rio he retired and formed The earth council, a private foundation based in costa rica. He selected Junie to be the secretary-General of the council. When Junie moved to costa rica in 1993 or 1994 he left me to run PiaF and its programs. PiaF had an office on Pajo st. in Quezon city where its library was. i transferred the FcomT office there to run both offices. This gave me a chance to combine our development focus and PiaF’s focus on Human consciousness and the environment. Junie had been the pioneer as well in the new age movement in the Philippines and he sponsored workshops in caliraya Lake, inviting many of the leading advocates and gurus of the movement to conduct sessions in the Philippines. in fact, we introduced some of his programs in our management development programs in Bancom, including esoteric programs like yoga and transcendental meditation. PiaF’s main program here was called Kabuuan, meaning wholeness, and we sought to make Bancom’s executives whole persons and integral thinkers. When FcomT provided the secretariat function for the Green Forum, we were involved in facilitating, and being resource persons, in the regional meetings on sustainable development and so we were swept into the mainstream discussions on how to “operationalize” the concept of sustainable development. our original human settlements approach to development served as a powerful starting point. For us, sustainable development became sustainable human settlements formation. The more popular term was urban development, but our approach precisely sought to avoid the dichotomy between urban and rural. Human settlements to be sustainable had to combine urban (understood to mean non agricultural as opposed to rural agricultural) and rural communities. The more generic adjective is derived from the term coined by a Greek planner, constantinos Doxiades, who derived it from the Greek word for house or home, oikos. The term was ekistic, meaning the generic human settlement as a habitat system. He developed a science around the term, calling oikistike the science of human settlements. For us then, sustainable ekistic development was the formation of sustainable human settlements. c H a P T e r 2 5 – T H e s u s Ta i n a B L e D e V e L o P m e n T m o V e m e n T

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Understanding the dialogue When discussing sustainable development with mainstream economists, we always get hung up when the question is raised: what is the smallest unit of analysis and management that is relevant to understanding sustainable development? in mainstream economics the smallest unit of analysis is the individual business firm, moving up to the industry and then the nation state. This perspective is reflected in the Gross national Product accounting. The accounts start with the income statement of the individual firm. The accounting consolidation technically removes double counting, since transactions among firms are recorded as sales on one side and purchases on another, and incomes of recipients are recorded at the source as costs or expenses. They are consolidated first by industry groups and then further by geographical residence and nationality. The transactions entered into the accounting of firms do not encompass the total impact of the firm on environment and society. Hence, many of the environmental and social impacts are called externalities. and yet they are what are of importance to the question of sustainability. The choice of smallest unit is most important in both the understanding and the managing of sustainability. in the 1970s when we were building up Bancom to be a total development conglomerate, we were very much enterprise-centered. We visualized the structure as a combination of the product lines and the selling and delivery functions of a corporate enterprise. By 1975 we had lined up the commodity and services supplying organizations. in 1977 we experimented with the matrix organization to establish area-based product integrators in different communities who would be responsible for matching product mix to the needs and effective demands of communities according to their level of development. This did not work. at the time, we thought it was because the business process did not develop marketing people who were first analysts of the patterns of commodities and services that would match the development imperatives of their markets at their level of development. charoen Pokphand’s matrix worked beautifully because their area integrators only had to understand how to supervise their contract-growers in a single line, raising day-old chicks to broiler size. We were asking our integrators to be sophisticated sustainable development social scientists! There was a deeper fallacy in the model we were testing. We expected the supplying enterprise to develop and maintain these sustainable development professionals as employees of an enterprise that earned its profits from supplying these commodities and services! it has taken sometime for us to realize the crux of the problem. it lay in the choice of the unit of organization, management and analysis for understanding sustainable development. The smallest unit where sustainable development could be achieved was a human settlement on a territorial unit that could be maintained as an ecologically sustainable habitat. This would be an appropriate ekistic cluster, combining rural and urban settlements linked in symbiotic relationships.

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each ekistic cluster would have to be an integral organization with the capability for making resource allocation decisions in a manner somewhere between a corporate conglomerate, on one hand, and on the other, a cooperative or a labor organization. in fact its manager would be more in the character of a “collective bargaining“ agent. But the interest of the unit as a whole can be as rigorously defined in formal consolidated balance sheets and income statements and the end object of resource allocation decisions expressed in terms of maximization of incomes and net worth subject to the limits of ecological capacity.

Learning from the Bancom experience The concept of sustainable development that came out of our Bancom experience, i realize now, remained quite enterprise-centered, even corporate in spirit. The name we chose for the foundation we established to advocate and apply our model was FcomT, Foundation for community organization and management Technology, to emphasize the o & m focus of the approach to sustainable development at the community level. But the label we coined for the model was eDms, economic District management system. The heart of it was a District management cooperative (Dmc) owned by the community. on hindsight, reflecting on the manner we implemented it, the Dmc was quite corporate-enterprise in character although cooperatively owned by the community. Viewing these recollections of the past, of our efforts to fashion a total development company, and the concepts assumed in the method and the spirit that informed the institutions, i realize how strongly in those years immediately after Bancom, the enterprise paradigm remained with us. How do we now assess the object of our quest under the perspectives of the insights we gained in the three decades since? over that period, the evolution of the concept underlying, and the spirit informing, our eDms model is summed up in the change in the model’s label. no longer economic District management system, we now call the model ecsom, for Ecologically-centered, Community-based, Sustainabledevelopment Organization and Management. What’s in a name? Well, surprisingly, a lot! There is much meaning in a change of name. The focus of the eDms label was on the District management unit and the system by which it managed, quite an “enterprise-centered” perspective. ecsom instead focused on the community and its ecosystem habitat as an organic unit and how, as such, it was to be managed. it is interesting to mention here a further change in label introduced when the half-century-old asian social institute adopted the model as ruling paradigm for its social teaching and community work. They called it csBcom, for Co-creating Sustainable Bio-regional Communities, to underscore the co-creation theme underlying their flagship doctoral degree in applied cosmic anthropology. The problem for everyone coming out of the rio earth summit meeting was how to “operationalize” sustainable development. Particular to FcomT was the human settlements approach to development. c H a P T e r 2 5 – T H e s u s Ta i n a B L e D e V e L o P m e n T m o V e m e n T

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We had defined development as healthy ekistic development. The new focus on sustainability simply added “sustainable” to our definition of healthy ekistics.

Watersheds as communities We had early on defined the ekistic unit as a watershed community. The Philippines being an archipelago, its geography was formed by watershed wedges typically made up of rugged montane uplands originally covered with rain forests, sloping down to midlevel foothills and on downwards to coastal flatlands leading on to the sea. Generally, a river originated from the uplands and ran down to the sea, forming alluvial plains towards the river mouth. Human settlements had historically formed along the shorelines and as population grew and new villages formed, the settlements moved up along the river towards the highlands. indigenous tribes that were food gatherers living on marine life and rain forest flora and fauna originally settled on the lowlands. as rice-growing families in-migrated, the indigenous tribes moved up to the highlands. over the centuries, as villages multiplied and trading among them grew, some villages became centres of trading and became market towns serving satellite farming villages around them. These later became the political units, the municipalities. With growth and commercialization, certain municipalities centrally located in each region grew to become larger towns, and later, small and large cities. The pattern marked out clusters of municipalities formed on a watershed wedge as ekistic clusters occupying an identifiable meso-ecological unit as its habitat. sharing an ecosystem as their territorial habitat, these settlements shared a natural common interest. They were stakeholders of a common ecosystem. in the mid 1980s when we first formulated our eDms model, if we excluded the large cities and metropolitan areas, we identified some 225 of these ekistic clusters in the country. sustainable development assumed for us a concrete definition: the sustainable ekistic development of those 225 clusters, so that each became a community that provided a comfortable lifestyle for all its growing constituents while preserving the ecological integrity of its ecological habitat, so it remained able to support the future generations of stakeholders. if that was ekistic health, what was ekistic disease? it took an equally concrete and stark form: unsustainable urbanization. in more contemporary terminology, it was non-inclusive, ecologically destructive economic growth that enabled a select few to become extremely wealthy from projects that marginalized the greater numbers particularly of our rural people, and sapped the ecological capacity of our lands, waters, and forests. in the more technical realms, methods of measurement were developed to endow sustainability with more precise metrics. in 1992, Professor William rees at the university of British columbia in canada and his assistant mathis Wackernagel introduced the measurement of the ecological footprint. over the years they refined the concept, introducing the measurement of biological capacity as a supply side to ecological footprint on the demand side of human use of natural capital. Today the method

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has been institutionalized in the Global Footprint network which calculates the annual biological capacity of some 150 countries and of the planet, and the use or overuse of that capacity. in 2012, the Philippine government through the commission on climate change officially adopted the ecological Footprint metrics for its use in monitoring the sustainability of Philippine development. The metrics now make it possible to define sustainable ekistic development as well as unsustainable urbanization in more precise terms.

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chapter 26 The Bancom university of experience as i near the end of this memoir, the flood of memories about the wonderful men and women who made up the Bancom organization fills me with overwhelming joy and gratitude. a two-way selection filter operates to determine the pattern of the personalities that make up any organization: one side determines the choice a person makes in selecting what he does and where he works, the other determines the basis of an organization’s recruitment. Here, as well, fate and choice both play a role in setting a pattern, as in the playing out of every person’s Sacred Contract. it seemed when i left my position as economic planner for the government, i was fated to launch two types of development institutions that were to influence the lives and careers of many young Filipinos and Filipinas – the economic Development Foundation and Bancom Development corporation.

The original team These turns merged the lives and careers of the three young men who formed the core of the initial Bancom team: roly Gapud, Louie Villafuerte, and ray ilusorio. The quality of these three young men was honored by the Junior chamber of commerce, naming them together in the same year 1973 (although ray was no longer with us that year), as three of the Ten outstanding Young men (ToYm) of the Philippines. i did not actively recruit these three men. as i have already recounted, they were there at the precise times and phases when their qualities were needed. roly, ray, Louie and myself, the four of us, were the poles around which Bancom later on attracted particular personalities that evolved the Bancom culture and what was referred to as its mystique. in fact, looking back, i do not recall directly recruiting too many individuals for the organization. i left most of the recruiting to these three, confining myself to interviewing key persons they recommended. To a large extent, their selection of people and their management styles formed the Bancom culture. Louie Villafuerte had a brilliant record as a law student in the u.P., having won the President magsaysay gold medal for oratory, and the President carlos P. Garcia gold medal for the most outstanding participation in the national Youth congress. He graduated in 1959, took the Bar in 1960 and could have made his career in one of the prominent law firms in the country. That in the mid-1960s he chose instead to join the economic Development Foundation to practice what we called creative law and later be a “legal engineer” is indicative of his basic quality and values. Louie had the rare combination of practical wisdom, to the point of being street smart, a scholar’s passion for thorough research, and the boldness and audacity to address what seemed like outrageous

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business propositions directly to the top management of large corporations. Louie did the research on the legal ground rules for all our operations. There were no specific laws for investment banking, until after 1972 when laws on “Quasi banking” were passed. There were very specific guidelines for commercial banking and trust operations, with strict prohibition against non-banks performing operations strictly reserved for licensed commercial banks. We had to navigate between the ordinary corporation laws, the laws on negotiable instruments, the securities act, the investment company act, etc. and avoid having our borrowing and lending transactions or our investment management lines construed as doing commercial banking or trust company business. although import and exchange controls were largely lifted in January 1962, controls remained on foreign capital flows and remittances of profits of foreign corporations in the Philippines. Designing financial services involving foreign exchange dealings offered market niches for companies who skillfully managed creative legal maneuvers. Louie’s combination of qualities was ideally suited for this task – the street-smart wile and the scholar’s passion for thorough research were precisely the combination we needed to build up Bancom’s business by discovering untapped opportunities for profitable business within the maze of legal constraints established by the country’s legal structures. He attracted other legal talents that were intrigued by the concept of “creative law” as a field more exciting than litigation, criminal or plain corporate legal work. examples are art Ponsaran, Hiram mendoza, mo Libunao, mar Lorenzo and later Bing Picazo. in 1964, roly Gapud had just returned from the u.s. having finished his master’s in industrial management from miT in cambridge, mass. He might have had a choice position in any of the multinational industrial companies in the country or the foreign banks on the lookout for young ivy League school graduates to develop into future managers. That, instead, he opted to work with me at a time when all i had was a consultancy contract with the PDcP must indicate an entrepreneurial spirit of adventure. roly took a lecturer position in the mBm graduate program of the ateneo where he spotted promising staff members for Bancom. a prime example was sito santillan who was his student and became one of the early recruits to his staff. The analysis, financial engineering and financing of enterprises and new ventures require the rigorous nitty gritty work of spreadsheets and negotiations that roly’s personality suited, and interestingly enough his choice of staff reflected this as well. He chose persons with the strong mathematical and technical grounding. sito santillan, Vic Limlingan and Lito manahan, the leaders of the 3 work teams that roly initially formed at his Financial Planning and underwriting department, all had this sort of engineering background. But no one had actual practical experience putting together investment banking deals, either joining or forming the underwriting and the selling syndicates, negotiating the terms, preparing the contracts, gathering the data required for the registration statements. Louie’s support was in the designing of the contracts and instruments. it involved a tremendous amount of research and study of the structuring of actual deals done in the u.s. and adapting the contracts to Philippine laws. True, the investment banking task did not require the complex, high-pressure, day-to-day navigating involved in ray’s cHaPTer 26 – THe Bancom uniVersiTY oF eXPerience

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domain, the money and capital markets, but each deal entailed learning financial engineering of far greater complexity and rigorous analysis. roly had his own training and style of mentoring, while he himself was learning, that gave the investment banking department its own peculiar “academic atmosphere”. ray ilusorio is my nephew, being the son of my cousin erlinda Kalaw ilusorio. He was hired for Bancom by Bankers Trust in new York where he was training after finishing his ma studies at nYu. He studied with the Jesuits from grade school to college at the ateneo and graduate work in economics at Fordham and michigan. ray’s prototype would be the gamesman, fiercely competitive, glorying in outdoing his elders at anything they attempted whether in sports, hunting, or business. This was his strength, the motivation for his passion for excellence and for developing the persons he selected to work in his team. ray did not join academe like roly. But he converted his department into a virtual school, placed in their office his own personal library and ran a rigorous in-service training program for the staff he recruited. in forming his staff, he preferred to pick bright but green, fresh graduates whom he formed, as it were, from scratch by teaching them himself, and assigning them books to read, and literally requiring examinations to monitor what they had learned. over his stint of nearly 7 years in Bancom, ray developed a team made up of individuals custom-fitted to his thinking and style and strenuous work habits, accustomed to working round the clock when necessary and possessing a fierce personal loyalty to him. Prime examples were celso samaniego and mads Lacuesta, and later Philip ang, archit Bartolome, mike de Guzman, Boyboy reyes, among others. it was not surprising that when ray resigned in 1971 to form his own investment bank, most of his key staff went with him. He left with a very important lesson from his Bancom years. While it is important to give a great deal of leeway to your executives, they must not be able to walk away from errors they may commit and leave the company to bear the loss. Wide discretion for an executive must be covered by a downside risk of personal loss. This was of course the case when investment banks were formed as partnerships. But it no longer was true when they became corporations. When he formed his own investment bank, ray required his key executives to assume financial risks for their decisions and secure the pledge with their personal net worth. in august 1967 Francis moran joined the core group to head the new investment services Department we established to offer fund management and estate planning services for foundations, pension funds and high net worth individuals. Francis was recruited by Boy Tuason and myself. The young Jose “Boy” Tuason Jr. represented the Tuason family on our Board and was an active and involved member of the executive committee. He had graduated from the ateneo aB pre-law a year after me. He and Francis had been classmates in college and they both graduated from the ateneo Law school in 1954. Francis had been a professor in usT and had worked with the ayala Group in insular Life from 1950 to 1967. We knew Francis was not an investment manager, but we decided that what we wanted was

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a somewhat more senior person with a personality that inspired trust and confidence. That Francis had, he had grown venerable looking beyond his years, and was the son of a revered former chief Justice of the country. We felt that the actual investment management could be handled by younger, more specially educated, staff. Vic Kalaw was another nephew, the son of my elder sister, nena. He had just finished at Wharton where he was at the same time that Danding Yotoko, cynthia Picazo, maricel Lopez and Jacky atienza were there. With them also was Bing Picazo, who was doing his post-graduate Law at the university of Pennsylvania. all of them eventually joined Bancom. Vic had trained briefly with Bankers Trust and Lehman Brothers and was originally lined up to join Gus Barcelon and andy roxas in cBTc. But the problems with cBTc were developing and we needed the backup for Francis. Vic’s coming was most timely. He became the technical investment analyst for Francis’s department. Based on his strong analytical capabilities, Vic went on to assume broader corporate planning responsibilities and ultimately served as Louie’s chief of staff when the latter took responsibility for Bancom’s diversification program. The following year we added another financial service line, supplying timely and relevant business information, intelligence and analysis. one of the leading business editors at the time, most respected for integrity and journalistic excellence, was rafael Perez de Tagle of the manila chronicle. reporting on Bancom’s founding, vision and operations, he became an admirer. in 1968 the associated Press and Dow Jones joined forces to put out a business information service that supplied immediate news and analyses through daily transmissions by telex. They were looking for a reputable licensee to be the exclusive distributor in southeast asia. i was close to associated Press because Tony escoda, my brother in law was the head of the asian Bureau. The combination with Dow Jones gave the service quite a standing in the financial world. so we agreed to becoming the exclusive agent of the service and start the distribution first in the Philippines. it seemed at the time a great starting service for a new department, purveying business intelligence and information to the business community. i talked to ralph Tagle about coming into Bancom to head a new Business information Department and becoming the fifth key person in our team to complete our objective of becoming a total financial service company. He came in and we inaugurated the service in september 1968. ralph, at 43 the oldest in our team, started with Philippines Herald as labor reporter then became business reporter and later became business editor of manila chronicle since 1957. as it turned out, the aP-DJ service was too expensive because of the prohibitive per page cost of telex transmissions. it was the fastest mode but the service contained a lot of analytical articles that did not really require the speed of expensive daily transmission. What we had hoped would provide bread and butter revenue for the new department did not work out. We packaged the output of our investment research group to become an additional product line.

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The best and brightest Bancom attracted a corps of intelligent, creative, aggressive and ambitious young women and men fresh out of college or graduate school, locally or abroad, with little experience because it was in its way a learning organization, a center for post graduate education where engineers, accountants, lawyers, mBa graduates, or even college drop outs might learn innovative finance doing real transactions with real money. and later, agriculture graduates, medical doctors, psychiatrists, movie actors and directors and script writers experimented with novel approaches in their art and practice by joining Bancom. in Bancom, this organization of young men and women believed that there was nothing they could not learn to do. They adopted the slogan: The difficult we do right away. The impossible takes a while longer. What in practice we meant was that the simpler tasks we had not done before, we would learn to do right away. The impossible was what no one had done before. This took a little more time for us to learn to do. But nothing was really impossible. Josue camba, when asked what university he came from, used to say... UE, the university of experience. it is interesting to track the evolutionary path over the years of the men and women who stayed to become the management teams of the main divisions of Bancom’s operations, which evolved over the next decade and a half. roly Gapud matured into a master corporate finance person, building up a tremendous track record of public and private placements of major industrial projects in domestic and international financial markets, financial engineer practitioner and, according to the grapevine at least, architect of the intricate structure of marcos hidden wealth. under his tutelage, sito santillan, Lito manahan, Vic Limlingan developed from engineering backgrounds to financial managers and top corporate executives. other key personalities who worked under roly over the years were mon del rosario who had previously undergone training at Bankers Trust, Babes simpao, mike Goco, Tony salgado, Jun narvaez, Judes echauz, among others. evelyn singson, who later also worked under roly’s wing, became a top bank executive and corporate manager and entrepreneur under whose training we had persons like mel alonso, Flor Tarriela, Gabby Lopez, ric Pascua. evelyn had joined in 1969, after finishing her mBa in northwestern university. Her first boss was mandy eduque who joined after graduating from university of chicago. Their unit then was called research and investment Department (riD), preparing industry studies and company reports as a service to the investment management Department. mandy only stayed a few months, and Lito manahan was moved to head riD. Dickie Gonzalez, who also did his master’s at miT, came in 1970 to start the Project Development department. He was also reporting to roly, but was later moved to Louie’s wing during the diversification phase. With their involvements in LHDc, housing, and many other construction projects, the PD group produced experts like chuck Doble, Jun miranda, Willy Hernandez, art Tan, who all became

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prominent in the shelter sector as presiding officers of the Home Guaranty corp. another PD alumnus who also gained prominence but in academe was Fred Pascual, the current u.P. President. after may 1970, following the death of andy roxas, i took over andy’s job at rcBc as executive VP concurrently with the Bancom Presidency, and we effected the functional merger more thoroughly. Bancom’s investment services and rcBc’s Trust Department were combined with Francis moran as head and Lito manahan his deputy. among key players at is/Trust were cynthia Picazo, Gene Bautista, eric mondragon, Jimmy Gonzales and later Vic Tinsay who were BDc account officers. The trajectory of Louie Villafuerte’s evolution from law to top corporate management is not unusual in the business world of the developed western countries. What made it unusual and interesting in Bancom’s history were the particular modes its stages took over the decade and a quarter he spent in Bancom. as Bancom’s internal legal counsel, he became the epitome of the practitioner of “creative law”, designing the legal forms that documented the innovative transactions that Bancom’s money and capital markets managers and traders devised to fill the untapped niches in the country’s financial system and the deals that the financial engineers designed to finance the needs of its corporations. Here the problem was how to navigate through the legal maze and avoid the forbidden areas of the country’s commercial banking laws. internal memoranda from the central Bank’s department of supervision, which we somehow got a hold of, revealed both the suspicions of the regulators that Bancom was treading on forbidden zones and the puzzlement of their lawyers on how to classify its strange legal constructs. managing aggressive young traders in financial markets that are still largely undeveloped requires a particularly delicate style. The best analogy i can think of is from the art of dressage in equitation or the art of horsemanship. The horse’s excellence is shown in the vigor and endurance of its forward motion at a trot or canter. How do you manage and regulate it without reducing the horse’s enthusiasm? The technique is best applied to training a horse to move backward instead of forward. simply pulling the reins back merely forces the horse to move back awkwardly instead of with style and vigor. The manege technique in dressage combines the same forward signal with the rider’s spurs and body motion combined with a firm but gentle backward tug of the reigns so the horse understands he is being urged to move, with the same energy as he uses to lunge forward, but backwards this time. This became Louie’s special assignment vis-a-vis ray ilusorio in the financial markets. To look over his shoulder and make sure he was not treading territories that the central Bank would construe as illicit commercial banking. and to do this with a positive attitude that differs from the posture of our outside counsel who necessarily has to be more conservative and negative as a result. so Louie learned the financial markets business from this perspective. and when ray resigned in 1971 with his team, Louie became the ready choice to take his place. But Louie was aware at the same time that with that background, managing the operation would need another young aggressive foil to his watchdog role. ray had taken with him those he had trained from the early beginnings. Josue camba who had come later, remained. Josue had come in as an accounting/audit person rather than a trader, so he was in his early stages of seasoning as a trader. Danding Yotoko had been with andy roxas and cHaPTer 26 – THe Bancom uniVersiTY oF eXPerience

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had handled the trading in commercial paper for the Treasury unit at cBTc. He seemed the best choice to fill the role Louie had in mind. Danding came in as Vice President to be deputy to Louie in 1972. Louie’s next stage of evolution was driven by his wider interest in the other aspects of total national development. While in Bancom, we had sent him early on for a few months to Washington D.c. and new York to study the procedures and legal documentation of a whole list of financial transactions in u.s. Treasury, sec, ex-im Bank, World Bank, Fanny mae and Freddie mac, and then he proceeded to Geneva at the international Trade center to look into its export development program. over the next couple of years, Louie pretty much left Danding and Josue to run the financial markets, and he focused on building up the non-financial lines that would transform Bancom into a total development conglomerate. By 1974 Bancom had divided into the investment banking and finance related lines under roly Gapud as executive Vice President, with senior Vice Presidents sito santillan heading investment Banking and Danding Yotoko for the Financial markets and international divisions, and the “Diversification Lines” under Louie Villafuerte as executive Vice President, with Vic Kalaw as senior Vice President. By this time, the acquisitions program had also added to the management Titoy Pardo as senior Vice President. Louie’s January 16, 1975 memo to the executive committee recommended the theme for the 10th anniversary commemoration of the Bancom Group: Whether in or out of finance and investment, our First Decade of corporate Life has been marked with one outstanding note: innovative relevance with social responsibility. The financial instruments, sub-systems, business lines we have given birth to have all been innovations relevant to the areas of national concern. The critical path of our diversification development lies in the same direction. We have borne on our corporate shoulders our share of social responsibility through our various involvements. it is therefore fitting that we celebrate our First Decade and begin our second on the same note. centered on a Human settlements Program to be initiated on our tenth anniversary year, the anniversary activities have been purposely tempered into a social Program with low-key, peripheral public relations activities. This was a memo written in 1975, more than a couple of decades before the term Corporate Social Responsibility became a buzzword. Luis r. Villafuerte from Legal engineer, legal fiscalizer to the money market team to help navigate and avoid being considered by cB as illegally doing commercial banking business, had morphed into the architect for the building of a total development company, with staff support from Vic Kalaw, ren Garcia and Vic ordoñez of Bidtech. The diversification thrust of Louie brought into Bancom waves of bright men each with his own specialized expertise. alran Bengzon sought to establish a pioneering healthcare delivery system.

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Derek Brown offered value engineering as a service line. Luis olivares led our ventures into farming systems. ernest escaler, who had apprenticed at several Japanese trading firms, went into commodities trading. Dory Katigbak and Donnie montelibano guided our entry into Gami. of course, Titoy Pardo was also there to help coordinate these diverse efforts. in later years, Jacky atienza came in, first to take charge of traditional investment management services, then soon after to head the Professional services division, under which some of the diversification units were clustered when Louie Villafuerte had left. Backstopping all these activities all along were the invisible heroes of our administrative units, notably rudy Bunda who faithfully served as our chief accountant, and at some point ester Filart who as controller guided our transition into the computer age. and last, but not the least, there was the very talented and scholarly Vic ordoñez who set up our Bancom institute of Development Technology (Bidtech), with the ambitious aim of manualizing our approaches and expert techniques as a total development company. in 1977, Louie resigned to search for a role in government and politics, and subsequently became active in local and then national politics. among the roles he later on played was heading President cory aquino’s Presidential commission on Government reorganization wherein, interestingly, he called upon his former reliable colleagues Danding Yotoko, Vic ordoñez and cesar sarino to serve as his deputies. so Louie had further morphed into an oD practitioner! Very early in the game, Bancom was very sensitive to the regional and international context it operated in. Hence, from the late 1960s, ray ilusorio led a team that helped Bankers Trust make Tisco, its Thailand joint venture with the Lamsam family’s Thai Farmers Bank and then Daichi Kangyo Bank into the country’s leading investment bank. ray and his team executed a number of advisory engagements which i originated, primarily through senior financial regulators who became my friends, in the asian region. This international outlook led to the creation of seascom in Hong Kong, which proceeded to morph into Bancom international Limited a couple of years later. after ray’s departure, those who assisted Danding Yotoko and who took turns to man seascom were nanding Balatbat, Josue camba, Franchit Valencia, and andy Dysangco. The tough travel assignments were often given to nanding Balatbat, who had also begun his career under andy roxas at cBTc, to scout the asian cities for joint venture prospects. Bancom international Limited (BiL) came into existence in 1974 as a Hong Kong-based deposittaking company from the transformation or upgrading of seascom into BiL. it was led by noel escaler and, for a relatively short period of time, Tony Gatmaitan. They reported to Danding Yotoko and Louie Villafuerte. BiL provided Bancom a steady income stream from its so-called “circular 304/343”, foreign exchange and documentary credit services. many now well-known professionals had gone through BiL: manny Pangilinan, who served as executive Director; cynthia Picazo, who served as General manager and later on as executive Director; the Viscount evelyn errington, scion of the fabled Baring Brothers family of the u.K. cHaPTer 26 – THe Bancom uniVersiTY oF eXPerience

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merchant bank, who served also as executive Director; ric Pascua, raffy Bengzon, Vic Tinsay, rollie Gosiengfiao, Tony Valdez, Dennis Goquingco, menow nivera, Bobby atendido, Bing de Guzman, among others. The main HK hires of BiL, William so, John c. P. Li, Dick Yin and Jackson Pau also went on to advance their careers later in other financial institutions. responding to an often unarticulated but growing desire among the asean region’s financial policymakers to spur the development of their respective financial markets, we developed the asean investors Group (aiG). The concept envisioned an asean merchant banking network that could compete with the traditional international financial giants by utilizing superior local market knowledge and therefore wielding superior “origination” capability – hopefully better reflecting, in their financing packages, the local economic interests and aspirations. From inception in the first half of the 1970s, aiG was led by Harvard B-school graduate, Francisco “Kaiku” Licuanan, whom roly Gapud recruited from the Toda holding company, rubicon. in malaysia, the team we fielded for the asiavest Group was initially headed by mike Goco, later succeeded by Tony salgado, and supported by roger cabuñag and eric mondragon. in indonesia, for Ficorinvest and P.T. Panca Bina esa, the Bancom expat team was initially led by Francis estrada, later succeeded by mike Goco, and supported at various stages by Jing alampay, ike Bernardo, Jing Warren, Joey crisostomo, Boyet Barlis, and for specific projects, by Ben Pascual and Titong Tanjuatco. The team for Thailand’s univest was headed by rollie Gosiengfiao, supported by Jing Warren who had come in from indonesia. rollie was subsequently replaced by mike Goco, before proceeding on to indonesia. at various times, Kaiku Licuanan was assisted in his aiG headquarter functions by Jojo Buñag and Gigi montinola. in 1974, international banks were scampering to chase the new-found wealth of arab oil-exporting nations, after oPec caused a Petrodollar explosion. american express, with Dick Bliss joining its banking unit, had taken over Bankers Trust’s shareholding in Bancom. Dick felt that Bancom’s developmental experience in money markets was what amex needed to effectively compete in the Petrodollar chase game. Thus, Bancom expanded its international outlook, all the way to Beirut in the middle-east. To help the american express middle-east Development co. (ameDco) replicate Bancom’s money market success and in the process bolster Beirut’s claim to be the financial center of the middle-east, we agreed to send Danding Yotoko with ric Pascua as his assistant to Beirut. unfortunately, after less than a year of trying, our team and ameDco itself were forced to abandon Beirut due to the escalating civil war in the Lebanon. Despite this setback Dick Bliss still wanted amex to team up with Bancom, and new plans were set in motion to create an amex-Bancom regional merchant bank to be based in Hong Kong instead. But

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Danding Yotoko decided to take a different career path and he resigned from Bancom before the joint venture with amex in Hong Kong could be set up in 1977. Designed to leverage on Bancom’s asian relationships, financial engineering skills and entrepreneurial spirit – and american express’ balance sheet and international credibility, amex-Bancom was established in Hong Kong. it was led by sito santillan as managing Director, three executive Directors – manny Pangilinan, nick Whitlam (son of the australian Prime minister) to originate and do deals, and mike James to run Treasury and Foreign exchange, assisted by ric Pascua as assistant Director. The aiG institutions, meantime, worked with BiL on short-term, documentary credit and more opportunistic transactions and with amex Bancom on larger transactions – primarily in the project finance and syndicated credit areas. at about the same time that all of these international changes were rapidly occurring, i took up my post as Vice-chair of the amex banking group in new York. as Bancom grew over the years, both in financial size and in terms of professional manpower, i must admit that as a practical matter, my personal interactions were mainly confined to the handful of the most senior executives. But the notable exceptions were my executive assistants and the economists who were placed under my office. my first technical assistant was a military man, col. candido Filio who had worked with me in Pia when i was with President macapagal. a professor at u.P. for nearly 20 years, he was a brilliant intellectual and i took him to help formulate a strategy for making Bancom an effective platform for national development, specifically, the human settlements approach or the integrated area Development model. i seconded him to o.D. corpuz who had just established the Development academy of the Philippines to work with him and Joly Benitez on this new approach. He worked with o.D. at DaP all through 1973. The effort culminated in the executive order and eventually the Presidential decree creating the ministry of Human settlements. early in 1974 Francis estrada came in and took the place of Filio as my executive assistant. He spent a year with me and then we sent him off to set up the indonesian operation. as student council chairman at De La salle in 1970, Francis had joined the radical group of chito sta. romana (his predecessor as De La salle college student chairman) and the national Democratic movement. He was among the activist leaders in the student uprising that mounted the historic First Quarter storm of 1970. Francis completed his mBm at aim in 1973 and joined Procter and Gamble upon graduation, from where we hired him. From 1975 to 1980 Francis was Bancom’s country manager for indonesia. under his leadership, Ficorinvest, the central Bank’s then money-losing merchant banking subsidiary, became profitable within a year and became the largest, most profitable merchant bank within two and maintained its industry dominance for more than a decade thereafter. as an indication of their regard, Francis was cHaPTer 26 – THe Bancom uniVersiTY oF eXPerience

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the only foreign banker for whom the central Bank rendered a formal farewell party when he finally left indonesia. art aguilar took Francis’ place as my assistant. at De La salle art had preceded both sta. romana and Francis as student council chairman. in 1972 he finished his mBm at aim and worked for the Ford Foundation as Program assistant for its south east asian regional Grant Program. He moved on to corporate finance, handling euro and asian dollar syndications in singapore with aseamBank, the Bank of america-led merchant banking consortium. He came back in 1974 and joined Bancom as my executive assistant for a year. in 1975 art left for Washington D.c. to be investment officer of iFc, the World Bank affiliate for financing private sector projects. He spent two years handling projects in ethiopia, swaziland, south africa, and Brazil. He returned to the Philippines after that tour in 1977 and rejoined Bancom as Vice President for Project Finance, and then became First Vice President of the Financial services Division. Quinito Henson took over as my executive assistant in 1976. Like art and Francis before him, Quinito was educated by the christian Brothers of La salle. He also took his mBm at aim and came into Bancom initially as a management trainee in 1975. Quinito’s passion was sports, all forms. i do not know what he actually played or how well, but he was a keen and intelligent spectator, becoming a serious sports analyst and eventually a sought-after, and widely-read commentator. He was appointed Vice President after the crisis in 1981 and stayed on as a VP of union Bank for a few more years after the merger. aside from my executive assistants, those who worked fairly closely with me were our economists who were detailed to my office. Vickie soncuya came back in early 1969 from post graduate work at Harvard in economics. she had finished her course work and just needed to write her doctoral dissertation to get her doctorate when she joined Bancom. among her first assignments was to assist Fe Villafuerte on our external debt management consultancy contract. in 1971 she married Kaiku Licuanan, although Kaiku had not yet joined Bancom at the time. Vickie did the comprehensive research for my paper entitled, “an ecosystems approach to southeast asian economic integration” which i presented to the conference of economic Planners of asia on the prospects of southeast asia in the decade of the 1970s. The Thai government published that paper with an introduction by then minister of Planning amnuay Viravan. after Bancom, Vickie joined aim as Professor and proceeded to become Dean of the institute at a time when Francis estrada was President. recommended by Vickie to succeed her, evelyn Go became Bancom’s chief economist from 1974 to 1981. evelyn had an economics PhD from the university of Wisconsin. she had married James Go (John Gokongwei’s brother) in the u.s. and returned to the Philippines with him.

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she took to the task of servicing Bancom, its affiliates and clients with analyses and reports of high professional competence, and the publications emanating from her shop received high compliments both here and abroad. after Bancom’s merger with union Bank she joined the aDB where she authored and co-authored several of their published books and papers. Two other persons who worked closely with me during the final years of Bancom were ren Garcia, who assisted in corporate planning and in the structuring of our reorganization plans, and Kathleen Kho, a trained economist who beefed up our economic staff. regretfully, i have lost track of their biodata files, and all that i could say about them is that they were both my excellent co-workers who unfailingly delivered their assigned work with diligence and great competence. Lastly, there is a group of people i would like to acknowledge publicly who contributed greatly to keeping my life organized. These were the members of my personal office staff who kept up-to-date my appointment book and a social calendar that got increasingly more busy during the Bancom years. They kept Bing informed of all the cocktail parties, dinners and other social functions we had to attend, and coordinated with her on the activities we had to host either at home, in Bancom or elsewhere. They took dictation, kept my work files in order and kept my workday moving in an orderly manner with quiet efficiency, firmness and discretion. i have already mentioned the late Peping antonio who was the epitome of loyalty. He was the fastest typist and took excellent shorthand. in Bancom, after being on my personal staff for a number of years, he transferred to the trading room to train under ray ilusorio and Josue camba. He later moved with ray but came back to be with me at amex in new York. amy abiola recio, mila Yu, maritess Luzuriaga, Leila recio and Thelma ramos all took their turns occupying the desk which was the first stop of anyone coming into the executive offices on the 7th Floor of the Bancom building. Belen Javier, who had been with monching del rosario at Filoil for many years, came to be my administrative assistant and ran my office with intelligence, firmness and efficiency. she took no nonsense from anybody. she and Priscilla Tang, who was Barcelon’s assistant, were a formidable pair. The dedication, discretion, loyalty, intelligence and efficiency of all these people enabled me to concentrate on the work at hand.

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chapter 27 summing up the legacy Looking over my years, mine has been a privileged life. i have wanted for nothing. The paths i took i chose from alternatives that were laid out before me. it seemed each path was laid out for me to take or not. as i look back on my career path, i realize that, except for new York just before i got married, i never had to look for a job. i had thought of working for the american Federation of Labor, but that did not work out. instead i was invited by Fordham university to teach freshman economics. This was the pattern. at each critical juncture of my life course, a door opened to each next phase. it seemed invitations that i considered, but which i was not meant to take, simply fell through. carolyn myss believed every person came into the world with a specific purpose to attain. she called it a Sacred Contract. a Sustainable Development Professional was what i was meant to be. Becoming one entailed proceeding along a dual development track – an intellectual track to understand the concept and a practical one focused on the process: how it is organized and managed, what works and what does not. The learning process started in Fordham university from the formal economics course and the writing of a thesis, but more importantly, from the opportunity, as well, to teach it. Preparing my lectures on freshman economics helped enormously in organizing my thoughts for my dissertation. i had learned a valuable approach to preparing lectures from Fr. mcGinley’s course. He prepared the most comprehensive and detailed outlines that arrayed the concepts and propositions of the subject in tight, logical sequences. i had not known anyone who could pack more concepts, propositions and arguments into a single sheet. The other technique was something i learned from my early frustrations attending the lectures: situating a subject within a comprehensive map of human knowledge. i recall my opening lecture in my freshman class. i asked the students: where is micronesia? The term was not a familiar one at the time. When no one could guess, i asked, what do you do when you want to locate a place? consult a map. What do we need when we start a new subject? Locate it on a map. We need a map of human knowledge. We started with aristotle’s distinction between the material and the formal objects of knowledge, between the subject matter and the aspects of the subject matter. Then Thomas aquinas’s distinction between what knowledge was acquired by purely human reason and what was derived from divine revelation, the difference between philosophy and theology. Proceeding from there, to the hierarchy of knowledge: the branches of philosophy, of the natural sciences and the social or behavioral sciences.

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Those two methods became very much an approach i used all through life: situating a subject in a knowledge map and extracting its basic concepts, propositions and arguments on to an outline. accepting the task of teaching a subject i was only in the early process of learning provided me the third approach that served me through life. The truth of the Latin saying: Qui docet, discit, who teaches also learns. To make up for my not going on to a doctorate, i deliberately applied to teach subjects i had never taken: agricultural economics which i taught at the u.P. college of agriculture, industrial economics which i taught at the ateneo, economic accounting (i had never taken a course even in basic accounting), statistics at the u.P. statistical Training center on Padre Faura, environmental economics and ecological economics, and decades later, a course in ecological social science in miriam’s Department of environmental science. coming to the subject of economic development from the broader view of the social sciences, i realized that the process was too complex to be understood with the tools of only one discipline. There were aspects that could be analyzed with the tools of the economist. But there were other aspects that required the disciplines of the other social sciences: sociology, political science, psychology, history. The history of the industrial revolutions in england, Japan and the united states revealed at least three different processes: change, the recession of old institutions, beliefs, worldviews, culture patterns; development, the emergence of new patterns; and sheer growth in physical scales. economic analytical and modeling tools were applicable only to the growth process. But change and development, the institutional and qualitative transformations, required the other disciplines of the social and historical sciences. research and practical work based on this insight might be the work of a lifetime. That, i decided, would be the subject of my dissertation. The end product would be the research framework for a lifetime of study and application.

A rich Odyssey i entered the field in the Philippines at an early phase of the post World War ii, post decolonization, post economic restoration era. There were ample opportunities for a self-styled “Development Professional” to gain hands-on experience in the research and in the institutional, organizational and managerial aspects of the development process. Fate laid out the paths i was to take on this voyage of discovery and practice. Through academe, research commissions, staff and line management positions in government and private institutions, business and not-for profit organizations, i had the opportunity to explore ideas in the theoretical realm and to test actual practices and gain some insights into what works and what fails in the real world. The paths have taken me on an exciting odyssey. They have led me through picket lines of labor strikers, through the lecturer’s podium of colleges, universities, to the Board rooms of Philippine, asian, american and British companies, to being the chief economic planner of the Philippine cHaPTer 27 – summinG uP THe LeGacY

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government, President of the asian institute of management, founder and chairperson of some of the largest not-for-profit foundations of the Philippines. if the measure of success is the number of institutions that remain as monuments to a man’s life, then i make no claims to being much of a success. The main institutions that i helped to establish, or managed, no longer exist: Filoil, the Pia in government, eDF, PDcP, Bancom. in fact, the two institutions from which the name Ban-com was derived, Bankers Trust company of new York and commercial Bank and Trust company of the Philippines, are no longer around. There is one concept, however, that developed out of this long and varied odyssey that i feel is terribly important and relevant for the country at this juncture: the total development company. We defined this as one with a dual mission – to offer product lines of such a wide spectrum that one could always form a package to fit the needs and wants of any community at any stage of development or underdevelopment, and to be able to deliver this at a reasonable cost and profit. This was what the Bancom Group attempted to be, a company that was many things to most people. Why is it relevant now, at this juncture of the country’s history? How precisely did we visualize that the product lines of the Bancom Group would serve the country’s development strategy? To understand this, we need first to understand what we saw to be the proper strategy for the country’s development. This was based on the insights gained from the long voyage through the world of theory and practice. as mentioned in chapter 11, during the 1980s the Japanese social scientist, mushakoji, coined the term JapaNIES to refer to the newly industrialized economies that followed the Japanese pattern of development. an effective agrarian reform program was the fundamental basis of their strategy. Their agrarian communities had to be sustained by a system of small, owner-operated, commercial farms. The election of Diosdado macapagal in 1961 opened up an opportunity to make the Japanies development model the official strategy of the Philippines. it was the strategy we wrote into his FiveYear socio-economic Program that he submitted to congress. Then i received my appointment as assistant executive secretary in the President’s office in charge of economic affairs, responsible for mobilizing the executive machinery to carry out the strategy stated in the Five Year socio-economic Program. To assist me in my work mission, i formed the Program implementation agency (Pia). i resigned from the government in February 1964 as a result of several reversals, including the angat Pilot agrarian reform Project. it was apparent to me that, following the devastating loss of President macapagal’s Liberal Party in the 1963 mid-term national and local elections, political considerations would drive policy decisions in the future. For the agrarian reform program, our worst fears were confirmed when, in a wild Presidential decision before the 1965 elections, the President declared the whole country a land reform district and made its provisions operative nationwide. This threw to the winds all the caution we had built into the

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bill that became law, ran against the careful implementation plan we had laid out, and ignored the emphatic caveats of the expert Taiwan team. Leaving government did not diminish my fierce desire to be in the forefront of the war against poverty in the Philippines. in fact, frustration in government fired my ambition to continue the war in the private sector. The problem was how to form a private army to wage this war. The task required young, energetic, intelligent, men and women educated in fields ranging across the entire spectrum of technical and managerial disciplines. Vision and high ideals were necessary but not sufficient. They had to be able to make a living while pursuing their ideals, earn enough income to marry and raise a family, and build an estate. in the modern world, the knights and ladies of camelot have to be sustained with a stable income stream. i gave up on government as the platform for making my contribution to the country’s development. as i departed, i took with me an important but non-paying task: the conversion of the former industrial Development center into a private, independent economic and industrial consulting entity. This responded to the third element in the country’s development strategy, an appropriate industrialization thrust. my thought at the time i left the government was that i would position myself in the whole process of industrial project promotion, which was the bottleneck in the country’s development. Two instruments would facilitate and speed up this process: 1) a private consulting firm that would raise the productivity of existing enterprises, and open up horizons for their expansion and linkaging forwards and backwards, as well as catalyze the creation of new ventures by bringing together sources of appropriate technology and entrepreneurs to identify projects that would systematically build up the chain of interlinked enterprises suited to specific locations in the country; and 2) a financial intermediary that would specialize in channelling domestic and foreign savings into these capital-intensive ventures. The establishment of the economic Development Foundation (eDF) from the resources formerly devoted to supporting the industrial Development center was to fulfill the first instrument. The prospect for the second was, at the time i left, the Private Development corporation of the Philippines (PDcP), for which i had raised the soft money that leveraged the private equity that established it. We started the mobilization with the recruitment for the consulting side of the development tandem. abolishing the industrial Development center, the nec spun off a usaiD funded contract with a chicago consulting firm, George Fry and associates. The agreement provided five american consultants in the fields of marketing, industrial engineering and production, accounting and finance with backstopping from their offices in the u.s., Frankfurt, Zurich, madrid, and Vienna. Three young Filipino technical persons served as counterparts, cesar sarino for marketing, David arcenas for engineering and production, and Buenaventura ocampo for accounting and finance. combined, the group formed a unit called PiFsT, for Pre-investment Feasibility study Team. manuel Lim, Jr and cHaPTer 27 – summinG uP THe LeGacY

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martin Bonoan took up the challenge of leading eDF and making it an effective and self sustained independent consulting firm. it was eDF which one of the three who formed the core organization of Bancom first joined, Luis robredo Villafuerte. i first knew the Villafuertes through Fe who was our star research analyst in the PnB’s Department of economics, research and statistics. When i left PnB and went into Filoil, Fe joined my staff that worked on the company’s Business Plan. she remained in my immediate staff when i moved to the government and started Pia. Two other Villafuertes were to work with me, Fe’s sister Lina and her brother Louie. Louie had finished law at the u.P. in 1959 and had passed the Bar examinations in 1960. He was 29. eDF needed a lawyer to be part of the consulting team and for the kind of work we did, he had to have imagination and be creative while knowing the law. Louie fitted the bill, being early enough in his career, so he was not yet “legalistic”. He met precisely the qualities we were looking for – a legal person with a constructive, creative approach to legal questions. at eDF we discovered that one of the main problems we met in designing projects was navigating through a complex maze of legal constraints. This seemed to be the result of lawyers outnumbering engineers in our society. Louie had an exceptional knack for designing ways to finding legitimate paths to get around dysfunctional legal constraints. We called it creative law. He answered our description of the practice. Louie joined us in eDF, as we vigorously demonstrated before our business leaders the technical skills and creative imagination that our consultants brought to their problems. During the interregnum between positions, i spent quite a bit of time working with the eDF consultants on approaches and methods and actively helped in the solicitation of business. When we brainstormed approaches to solving legal problems connected with the business of clients, Louie worked closely with us. i needed a year’s waiting period before i could legally accept the offer to head PDcP. But the lawyers gave the assurance that the prohibition did not include serving as a consultant without line decision powers. a good number of the Board members were familiar with work i had done in the past – like Wash sycip, Jobo Fernandez, Bert Villanueva, Paquito ortigas, Don aurelio montinola. They thought that if i spent a year as consultant of PDcP, then taking over as chief operating officer of it would be a simple transition. it would also provide my financial support during the transition. We agreed that the most valuable area i would work on was preparing a strategic and operating plan to help PDcP meet the expectations of the Philippine government, usaiD and the World Bank that promoted its creation and provided resources with unusually favorable terms. on my side, i viewed the task more broadly as planning the combined strategy for the “development duo”, eDF and PDcP. manny Lim and Louie were working on the eDF role and i on the PDcP. sometime later, a new member joined our team: rolando c. Gapud.

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roly was an a.B. math major at the ateneo, graduating cum laude in 1961. He had gone to miT in massachusetts for his master’s in industrial management and was a research assistant at miT’s sloan school of management from 1963-64. He joined me shortly after his return. He was 22 at the time. He might have chosen to work instead for any number of multinational companies. it is indicative of his more adventurous character that he chose to team up with me. Working in tandem with eDF, we were now a team of five with manny Lim, Tinggoy Bonoan and Louie from eDF and roly and myself. We worked together on the preparation of a strategic plan for what we saw as the development duo that would attempt to do everything it could to implement the plan we could not pursue in government. The PDcP Board had approved my appointment as consultant in February 1964. considering the composition of the Filipino officers under Kirk Paulding, the executive Vice President and coo, i did not anticipate there would be any problem. i was not at the Board meeting where it was discussed, but there must have been some objection from Paulding, because my appointment explicitly provided that i was consultant not to PDcP management but to the Board. i did not pay much attention to the designation at the time. But later events proved i should have noted that strange specification. i received a memo dated February 27 from Kirk Paulding proposing a rather general set of terms. i had a much more specific objective in mind. i submitted my ideas in a memorandum to Paquito ortigas and Wash sycip. my thought was that i would focus on the project development and business promotions function and actually organize a unit that would perform it within the PDcP organization. i drew up a draft consulting agreement with that as the principal deliverable. Following up the February 27th Paulding memo, i formally submitted my proposed terms of reference to the Board in a march 9 memo, and in the april 7th meeting of the PDcP Board, resolution no. 105-64 was passed which gave me as consultant the responsibility “in cooperation with the management of the PDcP” for “the effective performance“ of functions relating to the identification and development of projects and helping prospective promoters to put their projects in forms that would permit their proper evaluation for financing. This arrangement posed the danger of mixing up in the work of the PDcP management the functions of evaluating projects and negotiating the terms of their financing, with the tasks of identifying and promoting the projects and directly assisting promoters in their preparation. in our discussions, i had pointed out the need to have a clear separation between the management’s project evaluation function and its negotiation with clients of specific terms, on the one hand, and project development and promotions, providing counsel and assistance to promoters who might become applicants and clients, on the other, which i was proposing was a serious lack in the country. While we recommended that our consulting contract assign us to establishing a unit to offer this project development and promotion function, it was important to keep this function separate and independent from PDcP’s line management. cHaPTer 27 – summinG uP THe LeGacY

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reacting to the april Board resolution which reflected an opposition to our idea of an actual investment promotions unit operating apart from the line management, we worked on a paper that would more thoroughly discuss a work program to address more directly what we felt were serious gaps in the country’s agro-industrialization efforts. This was contained in the memo dated may 21, 1964 that we submitted to the PDcP Board. This document becomes very relevant to the Bancom story because it reflects the thinking which came out of the work of a team of five persons, three of whom became the original core of the Bancom organization: sKr, rcG, and LrV. our paper cited the economic role contemplated for PDcP by the government and the World Bank, as contained in “the general business policies” agreed to between the steering committee and the World Bank, the first paragraph of which states as follows: The corporation shall assist in the economic development of the Philippines. To this end it will assist in the development of private productive enterprises in the country by providing medium, long term and equity financing to such enterprises, assisting in the development of a wider market for corporate securities, encouraging a wider distribution of ownership in such enterprises... There are, however, a wide range of projects and enterprises which may be considered contributory to economic development. The PDcP is not expected to go into all of them. in selecting from among them, our memo pointed out, “as both a development corporation and a private entity, the PDcP is thus compelled to consider and balance two (2) sets of considerations in developing its investment policies: on the one hand, the development of the Philippine economy and on the other, the satisfaction of the interests of its over nine hundred (900) private stockholders.” The memo went on to discuss the country’s “economic Development imperatives”. it classified into three, the types of projects responsive to the development imperatives: First, those that modernize and improve the efficiency of existing productive plants and expand them to economic size. second, those that tend to fill the gaps and stabilize the structure of the existing production complex represented by forward, backward or horizontal integration of existing industries; and Third, those that bring into utilization Philippine resources not at present utilized such as unused mineral, forestry, land, marine or water resources. The memo went into a detailed listing and description of projects under each of the three categories and then outlined the framework for PDcP’s arraying projects by priorities and selecting those that would fit its portfolio management strategy. We proposed that after “tooling up”, the consultant’s office would undertake four groups of activities: 1) assist investors working on projects already somewhere in the pipeline, citing a nickel smelter, a

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nitrogen fertilizer plant, an automotive rebuilding plant, a cattle fattening and abattoir project and a private mini hydro-electric facility. 2) identify projects that have likelihood of feasibility such as rayon grade pulp, deep sea fishing with purse-seiners, large scale fishpond development with freezing and packing for export, hardwood plants and a few others, and start the necessary investigative and prima facie research immediately; 3) cultivate contacts with actual promoter and investor groups, securities traders, and other financial intermediaries to establish working relations in order to expand the scope of PDcP influence; and 4) collaborate with other government and private entities performing project development work “particularly efforts such as those being exerted now by the usaiD-nec in the establishment of the economic Development Foundation, the work of the George Fry Group, the work of mr. alexander calhoun, the efforts of the stanford research institute to develop projects for the mindanao Development authority, the efforts of the Program implementation agency and the national economic council to develop industrial estates, the program of the united nations for pre-investment feasibility surveys, etc.” The official history of eDF, published on the occasion of its 25th anniversary, made indirect allusion to the work of our team, in explaining the underlying objective for creating eDF: There are those who see the eDF as a part of roxas’s larger vision. under this master plan, a private management consultancy outfit would work hand in hand with a private development bank. “The EDF was conceived to be one of two agencies that would push economic development forward during those days,” manuel Lim Jr., the eDF’s first executive vice-president, points out. “It was supposed to come up with investible – or as they were called then, ‘bankable’ – projects. The other agency was supposed to put together investment funds. The agency Ting conceived to produce the investible projects was the EDF and the one that would fund them was the PDCP (Private Development Corporation of the Philippines).” on the PDcP side, while the chief operating officer recruited by the iFc was an american, Kirk Paulding, the next echelon of management included persons with whom i had close relations, headed by Vicente Jayme, a classmate at the ateneo, whom i had recruited to be my assistant manager in the research department of the PnB, and had been with me also at Pia. He had brought in two other classmates, Luis sison who was my compadre and whose father had been in the cabinet of macapagal, and narciso Ferrer who had been manager of our economic Development consultants, and with my brother andy and myself had worked on the five year plan we submitted to macapagal. so i was quite hopeful we would have a powerful core team to wage the war against poverty. attracted by the financial leverage of P27.5 million pesos from the usaiD peso loan available with a 15 year amortization period after a 15 year grace at an interest rate of 1.5% per annum, private investors in the Philippines invested P25 million in starting equity. The World Bank, through the

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Philippine national Bank as the conduit, provided a starting us$ loan of $15 million with the full sovereign guarantee of the government extended through the PnB. Working on its strategy as a development bank, our team was fully aware then of the substantial resources that PDcP would have in its arsenal for the strategy we were formulating to combat poverty in the country. The financial mobilization arm of the private development duo would have had starting resources of over P80 million and access to direct foreign financing from the World Bank, asian Development Bank and sources of official credits. somehow or other the Board kept deferring action on my pending proposal to activate a project promotions unit. June came and no decision, so i wrote the acting chairman and President charlie marquez (cBTc’s President) to brief him on the work i was continuing in preparation for an approval. July and still no approval. i submitted another report on my activities on august 10. Don aurelio montinola was elected President and chairman of the Board and i wrote him another letter on september 4. When he was elected, he asked me to draft the sort of resolution the Board might pass to take action on my memo of may 21. it seemed the delay was due to objections of Kirk Paulding to the creation of a unit under the consultant reporting directly to the Board. it was a problem because, i realized later, he was considering seeking an extension of his employment contract for another year. He formalized his intention and proceeded to lobby with some members of the Board who were not my close friends, and with Bill Diamond of iFc who had recruited him. Bill came to the Philippines specifically to offer me a position in iFc as an alternative. We had built up hopes for an eDF-PDcP tandem. But it was not to be. We had the eDF to play its role. But the PDcP door did not open. in its place we launched Bancom Development corporation with its P7 million starting capital. With such a small capital, Bancom had to have a different game plan. We realized its effectiveness would depend primarily on creativity, mettle and resourcefulness of the men and women we recruited. The evolution of the Bancom Group into a diversified conglomerate was viewed by many as the source of its downfall. What were we trying to do? What was the game plan? How was it intended to operate? calling Bancom a Development Corporation was not just a concession to current fashion. We intended that it should become precisely that. But for Bancom, stepping up to take PDcP’s place as the finance arm of the development duo and starting with a capital of only P7 million, it seemed like sheer bravado or at best empty rhetoric to call it a Development corporation. True, we had a powerful stockholder group and an aggressive and supportive Board. With the confidence of Gus Barcelon as chairman, and the technical assistance of andy roxas, roly Gapud and i believed that an investment bank intermediating between investing entrepreneurs and sources of capital could perform the role of the financial mobilizer in the development duo. as an intermediary, we were confident Bancom could mobilize the creative and energetic men and women to source sound, feasible, and profitable ventures. it would not have the balance sheet to

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mobilize financing through its own capital and leveraging capacity. it would have to develop the power to sell debt and equity to institutional and personal investors, what in London and Wall street they called placing power. our organization started with just roly and myself when we incorporated in late november 1964. Louie Villafuerte had transferred from eDF to Bancom formally by the time we officially opened for business on January 4, 1965. ray ilusorio returned from abroad in late 1964. He had been hired for Bancom by Bankers Trust in new York before coming home and he joined our team, so that by opening day the heads of our two operating divisions and our legal counsel were in place. From new York, Bankers Trust assigned to us a young english officer, robert Howe. Destiny obliged and over the years Bancom drew to its ranks from the cream of the generation under thirty, scores of outstanding men and women. When we started, roly Gapud and ray ilusorio were in their early twenties, and Louie Villafuerte was 29. at 38, i raised the organization’s average age. By the time Bancom celebrated its 10th anniversary in 1975, it had not only grown in sheer size – in assets and human resources – it had also transformed itself into a total development company. it was well into becoming the company it aspired to be that could package and deliver commodities and services suited to any community in the country at any stage of development or underdevelopment. The Philippines might be said to be composed of three different worlds: the world of the indigenous tribes, the network of market towns and rural barangays, and the enclaves of factory towns, plantations, and the large metropolitan areas which themselves contain a variety of neighborhoods. communities in each of these worlds would be at different starting points in their quest for development. a total development company would have the capacity to help each community at its starting point find the right path to its development and assist it to mobilize the resources to energize its passage along that path. How would a company have the capacity to assist a community, whether it is a dumagat settlement, a mountain province tribal village, a third class municipality, a small or large city, a metropolitan neighborhood? Bancom’s quest was based on a particular view of what socio-economic development entailed. The basic unit of the nation was the family and a community was a cluster of families dwelling in a common territory which was its habitat. The cluster on its habitat was a human settlement. Populations grow in numbers and in their needs and wants. Development means the transformation of settlements to accommodate growth in the numbers and in the demands of their populations. We viewed these settlements as markets, each with its particular needs and wants. in the Bancom organization, our attempt to structure our business so that our product lines and our sales and delivery organization could respond was labelled our iaD approach, for integrated area Development. in the 1970s when we were building up Bancom to be a total development conglomerate, we were very much enterprise-centered. We visualized the structure as a combination of the product lines and the selling and delivery functions of a corporate enterprise. By 1975 we had lined up the commodity and services supplying organizations. in 1977 we experimented with the matrix organization to cHaPTer 27 – summinG uP THe LeGacY

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establish area-based product integrators in different communities who would be responsible for matching product mix to the needs and effective demands of communities according to their level of development. This did not work. at the time, we thought it was because the business process did not develop marketing people who were first analysts of the patterns of commodities and services that would match the development imperatives of their markets at their level of development. charoen Pokphand’s matrix worked beautifully because their area integrators only had to understand how to supervise their contract-growers in a single line, raising day-old chicks to broiler size. We were asking our integrators to be sophisticated sustainable development social scientists! There was a deeper fallacy in the model we were testing. We expected the supplying enterprise to develop and maintain these sustainable development professionals as employees of an enterprise that earned its profits from supplying these commodities and services! it has taken sometime for us to realize the crux of the problem. it lay in the choice of the unit of organization, management and analysis for understanding sustainable development. The smallest unit where sustainable development could be achieved was a human settlement on a territorial unit that could be maintained as an ecologically sustainable habitat. This would be an appropriate ekistic cluster, combining rural and urban settlements linked in symbiotic relationships. each ekistic cluster would have to be an integral organization with the capability for making resource allocation decisions in a manner somewhere between a corporate conglomerate, on one hand, and on the other, a cooperative or a labor organization. in fact its manager would be more in the character of a “collective bargaining“ agent. But the interest of the unit as a whole can be as rigorously defined in formal consolidated balance sheets and income statements and the end object of resource allocation decisions expressed in terms of maximization of incomes and net worth subject to the limits of ecological capacity. The concept of sustainable development that came out of our Bancom experience, i realize now, remained quite enterprise-centered, even corporate in spirit. The name we chose for the foundation we established to advocate and apply our model was FcomT, Foundation for community organization and management Technology, to emphasize the o & m focus of the approach to sustainable development at the community level. But the label we coined for the model was eDms, economic District management system. The heart of it was a District management cooperative (Dmc) owned by the community. on hindsight, reflecting on the manner we implemented it, the Dmc was quite corporate-enterprise in character although cooperatively owned by the community. Viewing these recollections of the past, of our efforts to fashion a total development company, and the concepts assumed in the method and the spirit that informed the institutions, i realize how strongly in those years immediately after Bancom, the enterprise paradigm remained with us.

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How do we now assess the object of our quest under the perspectives of the insights we gained in the three decades since? i close this final chapter feeling profoundly inadequate. i am fully aware of the awe, admiration and thankfulness i bear for the hundreds of talented and loveable young men and women with whom i shared the glories and agonies of the 17 years of Bancom’s existence. i realize, at the same time, that the recollections i recount here neither adequately recognize what they accomplished, individually and collectively, in those years nor fully express my reciprocal feelings for the loyalty, love and respect they accorded me. Bancom had a vision that was high, broad, and complex enough. so young women and men at that age before 30, when one could dare to dream impossible dreams, could each find an aspect of it that could be exciting. Bancom offered a platform where the youth felt they could realize their dreams in the real world. each one who saw him/herself saying “ιδου καινα ποιω παντα, behold, I make all things new”, saw him/herself participating in an organization that had this vision. i consider it my failure to forget, God intended we should do that so His Kingdom would come down to earth. if this effort has any final lesson to offer, it is the truth of our Lord’s words: “οτε χωρις εμου ου δυνασθε ποιειν ουδεν, for without me you can do nothing.”

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Photo Folio

Bancom Chairman Augusto M. Barcelon (AMB) in 1979.

Bancom President Sixto K. Roxas (SKR) in 1979.

A page from the 1965 Annual Report, showing the initial Bancom Board of Directors.

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SKR surrounded by Jesus Cabarrus and a delegation of Philippine brokers at the 1968 listing of Marinduque Mining’s convertible debentures at the American Stock Exchange.

A gathering of VIPs circa 1970. Posing with SKR are Leo Virata, Bong Tanco, Manny Pelaez, Charlie Palanca, Amado Brinas, Pepe Laurel, and Jesus Cabarrus.

SKR and AMB with CB Governor Licaros, Tris Beplat of Manufacturers Hanover, and Mrs. AMB at the blessing of the new Bancom Building in 1972.

SKR and DBP Chairman Leo Virata in London 1972, signing the $50 million medium-term loan for DBP. Flanking them are Mark Feer of Kuhn Loeb and Minister Pedro Araque.” PHoTo FoLio

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Wash SyCip, Ernie Escaler, and Jobo Fernandez in a huddle after a Bancom Board meeting.

SKR introducing American Express banking representative Terence de’Ath. Partly visible in the background is stockbroker Anselmo Trinidad Jr.

SKR, AMB and LRV with Dick Bliss and Amex banking officials during a courtesy call on President Marcos in 1973

1973 TOYM awardees Roly Gapud, Louie Villafuerte and Ray Ilusorio posing with Mr.&Mrs. AMB and Mr.&Mrs. SKR

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The first trading room of Bancom at the old CBTC building.

A view of the big board at the new trading room in the Bancom building.

A busy corner of the Bancom trading room on a typical trading day.

Happy and relaxed after a difficult trading day are: Liquidity Center head Roger Cabunag, flanked by specialists George Sellner and Ben Bernas. PHoTo FoLio

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Louie Villafuerte inspecting the secret, cramped trading room of the International Markets Group.

Noel Escaler (seated at left) presiding at the trading room of Bancom International Ltd. in Hong Kong.

The Viscount Errington looking over Andy Dysangco and the telex bank linking Bancom Manila with BIL in HK.

Consortium of international bankers sign a revolving credit agreement for $150 million, arranged by Bancom and Kuhn Loeb for the Central Bank in 1974.

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A batch of early Bancom expats around Louie Villafuerte. Clockwise from left: Joey Crisostomo, Kaiku Licuanan, Roger Cabunag, Mike Goco, Eric Mondragon, Francis Estrada, Danding Yotoko, and Ric Pascua.”

Louie Villafuerte and sons posing with the legendary Bulls (of the money market department) basketball team, the perennial champions in the Bancom intramurals. EVP Roly Gapud with SVPs Sito Santillan and Danding Yotoko, the top team that managed the traditional investment banking and money market services at Bancom’s peak years in the mid-70s

EVP Louie Villafuerte and his deputies, SVPs Vic Kalaw and Titoy Pardo at the start of the Bancom diversification program.

Earl Kokseng, Bancom Cebu branch head, treating his entire staff to a birthday lunch. PHoTo FoLio

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SKR conferring with a farmer in Bancom’s experimental farm in Licab, Nueva Ecija circa 1975. A young Charo Santos being admired by a boyish Josue Camba at a Bancom Audiovision dinner

AMB visiting Francis Estrada and his crew at Ficorinvest, Indonesia.

3 Bancom SVPs in a chummy pose during the late 70s: Mon del Rosario, Josue Camba, and Evelyn Singson.

At the 2011 signing ceremony for the Bancom book project: Francis Estrada, Manny Pangilinan, SKR, Josue Camba, and Evelyn Singson.

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compendium of recollections and Tribute Pieces from Bancom alumni and Friends A companion volume to sKr’s Bancom memoirs

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contents editor’s note arthur n. aguilar roberto a. atendido rolando s. atienza Fernando r. Balatbat roberto s. calida Josue a. camba Jr.

Ferdinand G. Dysangco ernesto T. echauz John B. echauz noel L. escaler octavio V. espiritu edgardo m. eugenio George Forrai antonio P. Gatmaitan Federico c. Gonzalez rolando P. Gosiengfiao christopher m. Gotanco Daniel D. ibasco eugenio L. Lopez iii

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– – – – – – – – – – – – – – – – – – – – –

“The tragic mystique of Bancom” “My Bancom years” “We were the masters of the universe” “The Circular 304 business line” “Davao branch experience, 1968 – 1977” “The dreaded Revalida ritual” “The Dewey Dee caper and its aftermath” “It was more fun in Bancom” “On the lighter side of Bancom” “Short and sweet” “I am grateful for SKR” “Highlights of my Bancom International story” “The functional mergers with RCBC and FEBTC” “Personal business lessons I learned at Bancom” “Thank you, Bancom, for changing my life” “BIL breakout in the Eurodollar market” “Project Development operations” “Bancom in Thailand” “Sudden shift from Bancom to Union Bank” “My memories of Bancom” “A memorable apprenticeship”

208 209 221 223 225 227 230 231 233 238 240 240 241 242 244 245 246 248 249 251 253 255

Victor c. macalincag angelo V. manahan narayan B. menon Jorge B. navarra midelfio T. nibungco Gary B. olivar ramon s. orosa cristino L. Panlilio Jose T. Pardo ricardo s. Pascua

– – – – – – – – – – – cynthia L. Picazo – ramon r. del rosario Jr. – celso L. samaniego – Tirso G. santillan Jr. – evelyn r. singson – manuel n. Tordesillas – Danilo s. Venida – Jose alfredo L. Villanueva – Delfin L. Warren – eduardo a. Yotoko –

“Working for SKR in the early years” “Bancom Investment Services and RCBC Trust” “From Jakarta, memories of Bancom” “Joining Bancom in midstream” “Musings of a money market trader” “My early BIDTECH days” “Ting Roxas and Bancom” “A tribute to Barcy” “Insights on my Bancom experience” “Beirut adventure” “The bills business in BIL” “A place not for the faint-hearted” “To Bancom, a fond farewell!” “The early years at Bancom” “Musings on my Bancom years” “Candid reflections on Bancom” “What Bancom means to me” “Daring and building: a Bancom legacy” “Conclusion to the PDCP story” “My story as a Bancom expat” “Remembering Andy Roxas”

255 258 260 261 263 263 265 267 269 270 274 276 278 280 284 288 290 291 293 295 298

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editor’s note: about this compendium During the planning of the Bancom book project and through the early stages of its writing, a fretful sKr quite often lamented that his fading memory did not equip him for the task of writing up a factual and richly detailed account. Thus, the idea was for Bancom alumni to submit recollections of their Bancom experiences, from which sKr could selectively draw out details. Fine passages, we speculated, might also be lifted and featured as sidebars to sKr’s main narrative. But early submissions turned out to be well thought out essays, with ample doses of engaging minutiae and nostalgia, and so it was decided that all submissions should be published as intact pieces in this separate compendium. included in this volume are a few pieces about Bancom, or its key personalities, that were written many years ago, well ahead of the Bancom book project. The entries have been presented alphabetically by author, which means topics are randomly ordered. in any case, the reader will encounter familiar names, themes and events, and will be regaled by the variety of experiences and nuanced perspectives captured in these pages. Thanks to our alumni, and especially to the few non-alumni friends of Bancom, who took the time and effort to write their submissions for this compendium.

eduardo a. Yotoko Editor

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arthur n. aguilar This retrospective, painstaking paean to Bancom was written in October of 1982. It was soon elevated into a cult classic, as xeroxed copies were avidly shared around (by hand before the Internet age) among curious Bancom alumni. Art is the President of Global Business Power Corp.

“The tragic mystique of Bancom” Introduction in august 20, 1981 a renowned financial institution in the Philippines and in the asean quietly slipped into oblivion. only room 607 of Bancom i (now union Bank Building) with its wall to wall tombstones of numerous deals is a living but mute witness to its glorious past. its demise came quietly in the midst of tremendous financial convulsions the country witnessed in 1981, the epicenter of which Bancom was disastrously close to. But up to this day, however, people are still talking about it. in its quiet death, it aroused the same amazement as it did during its charmed but tragic life. There are only two, perhaps three people, who could authoritatively give a comprehensive post-mortem on Bancom. This paper makes no such claim. neither is it useful to allocate credit and blame, nor to debate the merits of its contributions to overall economic development. rather it is written in the motivation that Philippine financial history and literature deserves a serious attempt, albeit modest, to document for posterity the lessons brought out by a financial enterprise, which in its life span of 6,074 days had so recasted the Philippine and asean financial landscape that its impact can no longer be calibrated today. The history of Bancom could be divided into four chapters. First, the period between 1965 to 1973 was its best. This was the glorious period marked by growth, innovations and breakthroughs that really built-up Bancom’s reputation as it gained institutional momentum. second, the period covering 1973 to 1976 were years remembered for the attempts by Bancom to preserve its strategic position by outgrowing investment banking and engaging in diversification. The basic weaknesses were starting to show, brought about both by external conditions as well as watershed decisions and indecisions which in hindsight, laid the seeds of financial collapse. Third, the years 1977 to 1980 covered the period where the symptoms undermining viability were apparent but still with inertia, the same self-confidence and daring vision, stayed in business. it even undertook a reorganization of its holding company and affiliates and infused fresh equity. During this period, the benefit of hindsight tells us that in spite of the fresh equity, the house of cards nevertheless finally took shape. it is worthwhile to note that in each of the three periods, one by one, the three pillars of Bancom below the President had resigned. Fourth, the eight months of 1981 was the actual terminal stage, wherein financial scandals and runs on deposits created turbulence too strong for the house of cards to withstand. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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I. 1965-1973: The pioneer and maverick The first period of Bancom’s history was indeed fascinating. it was born out of an entrepreneurial and visionary urge in a developing country in which the age of technocracy was just dawning. most of the senior technocrats now were just a few years away then from their respective graduate schools. The state of the art in national economy management was well past the thinking of the team sent by President Truman in the early fifties. The founder of Bancom himself played a key role in ushering technocracy in government development planning during the administration of President Diosdado macapagal. Development perspectives on the Philippines were approaching significant depth and comprehension as exemplified by the World Bank ranis and cheetham reports in the early seventies. matched against today’s numerous types of financial licenses, the only major private financial institutions then were the commercial banks playing their conventional role envisioned by the Glass-steagal act of the united states. The merchant or investment banks, evolving along new York and London lines were non-existent in the Philippines at that time. Thus, when Bancom burst into the scene, even the government did not know what kind of financial animal it was. Bancom was a prime example of how a new company could capitalize on its distinctive competence. it was known for creating its own market by using methods of financial intermediation that initially paralleled commercial banking. Later on, Bancom would rival commercial banks in the wholesale deposit market. its arithmetic was simple. since it was a broker-dealer in commercial paper/government securities, it kept its operations and balance sheet light. Thus, it was able to work on the inside spreads of the commercial banks. Bancom started with resources of P7 million in 1965 and by 1973, had increased these to P700 million with a money market fund level of P1.6 billion. it was credited with providing the market with a depth of instruments ranging from the first dealer paper, Bancom Bill, to the Treasury Bills and the cBci’s it designed for the central Bank in a formal consulting arrangement to assist the Philippine government in restructuring the national debt. Bancom at this time was also making an impact on equity underwriting. its pioneering efforts in this field provided the practice that allowed family corporations to open up to the public and multinational corporations to Filipinize. These underwriting issues were sold to the investing public that was just starting to shed its aversion to long-term equity holdings. PLDT, esso standard, PicoP, Philippine Petroleum, usiPHiL and Jardine Davies were just a few examples. Bancom had underwritten at least 20 major equity issues totalling approximately P800 million. Bancom also provided the Philippine financial markets with a new dimension in large scale and complex project financing either for domestic credit or for the then budding eurodollar market. in the domestic market, new term debt instruments were successfully placed in the market. For example, in 1966, a 12% serial First mortgage Bond issue for concepcion industries, inc. was made. in 1968, a 12% Guaranteed convertible Bond issue for unimart, inc. came out. in the foreign credit markets, Bancom provided the expertise to government entities so these could successfully tap the eurodollar market. The DBP and PnB initial issues were done by Bancom in the early seventies. in 1974, an issue was made by the central Bank to gauge the international bankers’ reaction to the newly declared

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martial law regime of Ferdinand marcos. This was successfully managed with Bancom taking a lead role. in the area of project finance, most complex project financing advisory deals were handled by Bancom. For example, financial advisory services were provided the nuclear power project, as well as the complex financial plans for marinduque and PicoP, both projects of which were laid out based on energy economics of the preoPec era. The last big one was the copper smelter which was to be the only one in the whole of asean. Bancom arranged at least the combined equivalent of P10 billion bond issues and medium-term credits for at least 30 major deals. But the crowning success of this first period in Bancom’s history was the synergy it created through a functional merger with rizal commercial Banking corporation (rcBc). Through this merger, Bancom placed its investment banking capabilities alongside a full commercial bank, thus creating a very broad spectrum of financial services in 1969 that remained unique until the unibanks came in the eighties. To give an indication of how well the combination worked, in 1969 rcBc had total resources of P145 million. By 1970, these had grown to P232 million, and by 1971, to as high as P536 million. in the space of two years rcBc was catapulted from halfway among 30 odd commercial banks to the top five. The synergy formula was simple enough. Bancom’s clientele automatically became rcBc’s clientele and vice versa. The financing capacity as well as placement capacity of Bancom allowed rcBc to offer financial packages way above its statutory limits. The excess was booked in the investment bank while the commercial bank retained the large collateral business. Furthermore, Bancom redeployed its marketing efforts towards mandates for foreign financing since it had the monopoly of such capability in the country for a fair length of time. These foreign funds were channeled to rcBc which became the primary source of increase in resources. The central Bank 304 system which was the forerunner of the 343 and the 547 systems (FcDu or foreign currency deposit unit) were used extensively. Dollar time deposits accounted for 67% of total deposits of rcBc by the end of 1971. in a sense, the merger became a victim of its own success. correspondingly, the events that were to follow lay the seeds of Bancom’s eventual weakening and forced it to take measures which in the end, led to further deterioration of its strategic position. The phenomenal growth of the commercial bank had a time fuse. The dollar time deposits were maturing and the only way to maintain the growth was to build up its peso deposit base. in turn, the only two ways to do this were to either infuse fresh equity to open new branches (due to cB regulations) or to merge with another bank. But it was evaluated at that time that even if two thirds of annual earnings were re-invested, another P15 million in fresh equity were needed. Yet this would only result in a fourteen-branch expansion program which at best would maintain the commercial bank’s existing business but not sustain its growth. Thus, the only other logical alternative appeared at that time to be a merger with a second commercial bank. The opportunities open to the enlarged merger of the two commercial banks were enough to whet any banker’s appetite. The combined resources of the two commercial banks would have totalled P905 million in 1973. Bancom had another P700 million “off balance sheet” and a fund level of P1.6 billion in outstanding money market securities. it would have been by far the largest private and most integrated financial enterprise in the country at that time. aside from being the most sophisticated locally-owned financial institutions, the merged bank would have been among the largest in asean. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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The ensuing negotiations and the breakup of the merger are fairly well-known. The break-up was traumatic to the two institutions and more so on the officers and staff, who to this day have their own favorite anecdotes to tell. Bancom proceeded to engage in another functional merger with another commercial bank, Far east Bank. For many reasons this did not work out. The unconsummated marriage lasted many years. Here lies one of the primary causes of Bancom’s downfall as it entered into the second period of its history.

II. 1974-1977: Changing markets, increasing regulations, advent of competition The second period covering 1974 to 1977 was marked by rapid structural changes in the corporate market, in government regulations, and in competition. Bancom responded by diversifying into other fields domestically while intensifying earlier efforts in the international area. it had set up the first Philippine DTc (deposit taking company) in Hongkong, and then proceeded to establish a merchant bank and a discount house in Kuala Lumpur, and a merchant bank in Jakarta. The earlier operations in Bangkok had been scrapped due to shareholder considerations. The promising joint venture in the middle east was cut short by the Lebanese civil war. With its growing international reputation, Bancom was engaged to perform studies on the financial markets of Taiwan and indonesia. its views carried also weight in monetary and banking policies in malaysia and Thailand. The international outreach experience of Bancom particularly in Hong Kong, Kuala Lumpur, and Jakarta deserves a separate paper preferably by some in the distinguished core of young Filipino professionals who had set out to spread the financial gospel according to Bancom in the asean region. But its basic strategic flaw was that it had no effective commercial banking tie-up from 1973 onwards. as early as the sixties when it had virtual monopoly, Bancom had recognized that there were limits to its profitability even with an extensive clientele of prime companies. spread income and investment banking fees were only a portion of the business to be captured. The gravy was in the commercial banks, notably the letter of credit and foreign exchange businesses. There were other attempts to team up with other commercial banks and even with a large savings bank during this period. But none of these moves prospered. in the meantime, the need for this partnership became more acute for Bancom during this period for many reasons. Firstly, the corporate market that Bancom had helped to gain sophistication was ironically fast out-growing it. up to the first few years of the seventies, expertise in eurodollar and other foreign credits were the sole domain of Bancom and a handful of other players. However, corporate treasurers quickly caught on, brokers (many with Bancom experience) proliferated and by the time the oBu’s flooded the market, foreign credit became common place. even the central Bank became its own investment banker with the jumbo loan program. With this development, Bancom began to lose some of its luster among other potential partners – commercial banks, and could no longer re-kindle the magic it had during the rcBc days. secondly, in the money market front, the changes were more disastrous although it took many astute strategic thinkers the benefit of hindsight to recognize it as such. investment houses were subjected to a creeping regulatory environment designed to push them away from money market towards the long-term capital market. However, the few buds of the Philippine capital market were the first victims of the backlash of oPec first oil shock in

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the mid-seventies and have not recovered since then. in fact, for all the criticism leveled against Bancom and other investment houses, it was not well-known that up to the time of its demise, Bancom alone carried in its books over P100 million in bonds and equities resulting in a negative spread. While it is true that this amount represents the shortfall in expectations of underwriting on a “firm” basis, nevertheless, someone had to start somewhere and Bancom took the bold moves. This was a dear price paid by private Bancom shareholders in subsidizing the development of the capital market in the Philippines. Thus, by the time the 35% withholding tax on money market placements and the reserve requirements for investment houses were instituted, the revenue-cost configuration of an investment house became so distorted that Bancom’s long-term viability could have been questioned even then. The commercial paper flotation was largely “sans recourse” but this was a misnomer for in effect, the investment houses guaranteed payment to the investor. Therefore, Bancom carried the same risk as a commercial bank but with less profits since there was no collateral business. it now also had statutory reserve requirements further impairing profitability. on the other hand, it maintained the fiction of “sans recourse” in its accounting treatment, therefore it had no pressure to set aside prudent levels of loan loss reserves for the actual risk it was taking, thus overstating its capital accounts. To top it all, a 35% withholding tax was imposed in lending rates that were much higher than those of commercial banks. The prime companies started shying away from resorting to issuances of commercial papers, thus leaving the investment house portfolio with lesser grade paper. eventually, the risk complexion of the portfolio deteriorated, as it mostly had paper from companies whose source of repayment would be from another creditor. The solid collateral that could be offered were naturally all with commercial banks. The commercial paper market had become a source for lesser grade paper and a mere residual market for prime paper. Thirdly, Bancom’s ability to influence the market, such as, strictly enforcing the “sans recourse” provision, was hampered by fast growing competition. other investment houses backed by strong business groups were established. although faced with the same basic constraints, these institutions were newer and therefore had more flexibility, something that Bancom had slowly lost along the way. a few institutions in the meantime also developed fast. one of them ccP securities (now aiDc of the ayala Group) had grown to be a serious rival of Bancom. managed by capable officers, it also had the advantage of being close to fund sources within the same conglomerate, at the same time, had a baseload of clientele among its affiliates. This formula, either on the sourcing side or the lending/mandate side, or both, still remains the key to solid investment banking today. other new players designed their operations differently, some with major thrusts in other areas, like development banking as in the case of Plso, some electing to maintain a certain size, move conservatively and concentrated on a pre-determined clientele as in the case of Paic. During this period, the tell tale signs of decline were showing but were not adequately addressed. For example, Bancom’s gross revenues in 1973 doubled from P48 million to P103 million in 1978. its net income also doubled from P11 million in 1973 to P22 million in 1978. But taking away inflation, the actual growth in real terms amounted to only 16% in gross revenues and 11% in net income over a six-year period. Productivity declines were more apparent. in 1975, the gross revenues per marketing personnel amounted to over P1 million per capital but in 1978, this decreased to P0.78 million or almost 25% decline in productivity.

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When compared to other investment houses, the efficiency figures (taken in 1979) were also revealing. Bancom had a marketing to support staff ratio of 1:10 while aiDc, PPcc, Piso had ratios ranging from 1:2 to 1:3, while Paic had 1:6 and state investment had 1:7. in per capita net income (total employees), Bancom was also the lowest with P35,438 compared to aiDc (P85,268), PPcc(P38,100), Piso (P84,298), Palc (P297,160), and state investment (P98,855). The foregoing should have jolted Bancom to take stock of things and to review its total investment banking enterprise and utilize its very strengths in innovation to try and cure itself. The problems relating to investment banking varied according to individual perceptions of the decision-makers and were largely regarded as mere series of tactical reversals. However, there eventually was a collective perception that a strategic response was necessary since the commercial banking tie-up was not working out. The strategic response was not to be within investment banking but rather, out of it, which led Bancom to its crucial decision to diversify. Bancom’s diversification is widely regarded as the reason for its downfall. This is of course talking from hindsight. The decision at that time appeared to be a sound one. The question as to why Bancom’s strategic response was to diversify rather than intensify investment banking and resolving the commercial bank issue was largely a private and personal one. There were real shareholder constraints and the trauma of the previous split up were still fresh. it was also the judgment of decision-makers that investment banking was becoming too narrow a field with the changing markets, the creeping regulations and onset of more competition. after all, between 1972 to 1979 the net income of Bancom grew by a mere 4% in real terms. The visionary zeal of the leadership of Bancom was too strong to be confined to investment banking, thus, the serious attempts into far flung fields such as rural credit and rural economic systems. aside from the affiliates born out of this visionary zeal, the profile of subsidiaries that was formed corresponded to opportunities open to a diversifying Philippine financial enterprise. realty companies, insurance brokerage, finance and leasing company, and international operations were good examples. in fact, these array of subsidiaries were to be replicated by the unibanks of the next decade. Bancom, as usual, as well ahead of its time. There were significant highlights that one could draw from the diversification move. First, as investments go, the results ranged from fair to bad. The international operations, however, were very good considering the constraints. second, due to its Bancom parenthood, the design and management of many subsidiaries were too colored with financial managers when the enterprise actually called for more manufacturing, marketing or administrative skills. Third, the establishment of the subsidiaries came at a time when Bancom was no longer a source of low cost funds. The equity Bancom placed in these subsidiaries resulted in the locking in to a negative spread situation for the parent company. Bancom borrowed high cost funds from the money market then placed these in equity of subsidiaries which yielded zero dividends. The subsequent credit facilities extended by Bancom to the subsidiaries started a value chain of high cost funds feeding into the network of balance sheets which would culminate in one consolidated P & L statement which was Bancom’s itself. Fourth, the leap into diversification and acquisitions were bold enough; after folding up many corporations, the decision to continue supporting some of the subsidiaries in the face of tremendous odds were even bolder still. The prime example was the acquisition and continued credit support to Gami (G.a. machineries, incorporated,

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the nationwide distributor of Ford tractors) which in the end, was the one biggest singular cause of Bancom’s downfall, next to Dewey Dee accounts. Thus, it could be said that the diversification move was a paradox after all. The move was made because the flagship investment bank, Bancom Development corporation, was ailing and in any case was no longer viewed as a high growth area. as it turned out, the diversification further sapped the investment banking operations which in turn, could not provide the adequate low cost funding support anyway. The corporate objectives at this point were begging the question. The result was that the consolidated financial position deteriorated even further due to the opposite of synergy. Lastly, it was during this period that the organization grew tremendously and reached its peak. on the investment banking side, this period was characterized by the ascendancy of young senior officers but also marked by a rapid turn-over at middle and lower professional levels. corporate politics became more vicious as the handles of power moved down to third and fourth generations of senior officers. at the diversification side, the opening of new affiliates and subsidiaries, and the corresponding increase of new hires was kept at a dizzying pace. a significant effect of this development over this period was that Bancom had grown from a compact team of highly skilled officers to a huge bureaucracy. The same wizardry was still there but this time the backroom was clogging up. The administrative, personnel and recording sub-systems were being strained beyond limits not only in volume, but also, in the zigzag manner of operations, as Bancom took tactical measures to navigate through regulations, competition and changing markets. one favorite tactical response of Bancom was to reorganize. Being a young organization, it had a high tolerance for change. The organizational structure was subjected to an intermittent series of iterations. a highly technical record of Bancom’s sporadic reorganizations were enshrined in its local telephone exchange, where a full time crew was engaged throughout the years splicing and reconnecting the lines due to frequent reshuffles of desks and positions. Valiant but vain attempts to keep an up to date local telephone directory were mercifully abandoned in the late seventies. Bancom ended this chapter of 1974-1977 by exhausting the benefits of its trail blazing days when it was opening new frontiers in Philippine financial practice. it had the burdens of innovation and leadership in an industry it somehow spawned; its competitors could learn from its lessons; Bancom had no one to learn from but from within. But no matter how brilliant a group, the in-breeding of ideas and reluctance to heed the warning signals started to take its toll, even as the symptoms were masked by the razzle dazzle and high flying style of operations. and it had everything to lose.

III. 1978-1980: Growth trap, inertia and the house of cards By 1978, almost all aspects of operations were exhibiting signs of fatigue. However, the momentum built up by the early years was so tremendous and the core team still relatively intact that the organization could have continued running on inertia. in an attempt to inject new dynamism to the organization, it was asked to convert into a matrix form of organization. even for an organization so used to reorganizations, this move was too drastic. unlike previous numerous reorganizations (which must be another record of Bancom), it disturbed the fragile balance between senior officers who had regarded their own turfs as separate fiefdoms. Besides, the deeper problem was that it tried an organizational solution to a market problem. The investment banking operations were losing its prime markets as previously discussed. on the other hand, the product lines comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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of the subsidiaries were either too narrow, too ahead of their time or were just downright unsellable. The effort to grid all of these out in a geographical/product matrix did not do the trick. in short, it did not work. The more basic issue that could have been addressed was the fact that Bancom was caught in a spiraling growth trap. investment banks in the Philippine financial markets operated in a regulatory environment that made them prone to fall into this trap. and once again, Bancom led the pack. The size of operations had reached a certain threshold where the only way to keep on going was to keep on growing. The size of the portfolio grows in tandem with the size of staff and overhead which eventually graduates into a large bureaucracy. The incidence of loan defaults increase over time; thus creating a “drag” in the balance sheet and profitability, which in turn creates the need for more earning assets to compensate. This inordinate desire for increased credit volume resulted in much higher credit risks which further deteriorated portfolio quality. on the other hand, the corresponding drive for increased sources of funds could only succeed if higher cost of funds were offered to the public and in turn ate up profitability. The spiral continued as the changing staffing pattern elongated and widened the organizational totem pole. corporate overhead rose once again on top of high cost funds. and so on. Bancom fell into this classic scenario by the late seventies. even if the problem was properly diagnosed, it is doubtful whether Bancom could have extricated itself from this trap. in order to be effective, the solutions required write-offs, a balance quasi-reorganization as well as draconian measures on staff and overhead – all of which did not appear to be politically acceptable at senior officer and board levels. even assuming that decision-makers were determined to pursue such radical changes, there was a risk that these very changes particularly balance sheet reorg) could have precipitated a run on placements/deposits and then the house of cards would have collapsed even earlier. on the other hand, it would be inaccurate to depict only a fast and steady decline during this period. Bancom, in many ways, still had the spark of the old flame. For example, in late 1977 and 1978, the financial markets enjoyed a brief window of liquidity favorable enough to resume bond issues. During this period, Bancom floated the bond issues of PicoP, cFc and BF Homes. other issues were lining up when liquidity tightened once again in late 1978 with the second oil shock, closing the window since then. To give an indication of competition, many similar mandates were lost to other investment houses such as aiDc. in another example, during this late period, Bancom was able to arrange two large syndications for nPc (refinancing of assumed meralco obligations) both of which had the terms that were better than those of the immediately preceding jumbo Loans to the central Bank. one loan was the first to break below one percent over LiBor while the other, was the first eurodollar loan of this type to go beyond ten years for a Philippine risk. in the area of project finance, Bancom continued its financial advisory services to large projects but more and more of its capabilities were going to a growing list of corporate rehabilitation projects, many of which owed Bancom substantial amounts. upon the request of the ministry of industry, Bancom performed a study on the foreign exchange impact of the eleven major industrial projects and conducted a round of discussions with World Bank officials on its findings. in the money market side, Bancom had lost much of its competitiveness in both sourcing and lending, but still it retained the capability of being able to mobilize tens of millions of pesos from the open market within a short period of time.

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also, by this time, the necessary crucial decisions were being made at the holding company level. new shareholders came in and fresh equity was infused after the recognition of book losses as of that date. However, the new financial plan was still hinged on the flagship, the investment bank. While the investment bank also received fresh liquidity resulting from the new plan, this turned out to be a symptomatic relief and could not strengthen the investment bank enough to withstand the financial storm that was to come. one laudable move made at this time was the acquisition of union savings and mortgage Bank, a savings bank which was to figure prominently in the negotiations to rehabilitate Bancom. it can only be speculated now, how far Bancom could have gone in good times with a thrift bank rather than a commercial bank license. This was also the time when unibanking came into fashion. in response to these developments, the top decisionmakers made determined attempts to re-align Bancom’s institutional and shareholders alliances, but basic disagreements occurred and major resignations ensued. By the time a new consensus on how to respond to unibanking was formed, the year 1981 came.

IV. 1981: The terminal stage The year started with somewhat renewed confidence. The mood was that of a sober and mature organization, saddled by problems, but determined to solve them with the same commitment from shareholders and management that had been an energy source all along. The prescriptions, after all, were about the best that one could expect given the circumstances. The benefits of new capital from additional shareholders flowed through from the new international holding company to the new Philippine holding company which in the process recognized the losses of the past. G.a. machineries (Gami) had a quasi-reorganization and the new management team was making significant headway and were talking of a possible turnaround. surviving subsidiaries were re-grouped and were tasked to begin severing the umbilical cords that were sapping the investment bank. on the investment banking side, an expansion program of union savings was underway, with a commercial banking license targeted within three years based on a “do-it-alone” option. The other option, of course, was a replay of discussions involving two other leading financial institutions. The latter option potentially would have been a powerhouse combination but the organizational implications were formidable. Then it happened in the second week of January, 1981. only a few weeks after the Dewey Dee financial scandal and its ramifications became public, Bancom and a few other institutions perceived by the public as the most affected, experienced a run on deposits. Pre-terminations dramatically increased especially from corporate placers. on the lending side, the portfolio could not be liquified as fast since most of the borrowers could only pay by borrowing from other creditors. But these were mainly “fair weather borrowers” namely, when the going was good, were able to borrow, but on a crises were the first ones to have the lending windows shut on them by creditors. in the meantime, the subsidiaries were withering in the vine as its funding lifeblood from the investment bank came down to a trickle. a doomsday scenario became an item for discussion. investment houses could have closed its doors and directed its investor-clients to the addresses of the various companies the maturities of whose commercial papers they could not service thus, invoking the long standing “sans recourse” provision. This was a politically explosive move considering that martial law had just been lifted and marcos had some kind of presidential elections coming up. This never became a real option since the primary concern of management at this point was laudably the protection of the investing public who, in Bancom’s case, were kept whole throughout the crisis. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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Due to the high cost of emergency liquidity assistance, Bancom’s capital rapidly eroded. Before the end of the first quarter, it became clear that a hand-to-mouth assistance would not relieve the problem. There was now a need for an immediate rehab plan to strengthen the balance sheet and overcome once and for all, the volatile problem of deposit substitutes. negotiations with government were initiated involving the Bancom companies on one hand, and certain government entities on the other. Various permutations were explored. But due to the complexity of the problem of Bancom and similarly situated financial institutions, guidelines and decisions came out at a glacial pace. The negotiations were overtaken by events. Bancom Development corporation’s assets and liabilities, together with those of Bancom Finance corporation and First countryside credit corporation, were finally transferred to union Bank which became the surviving vehicle for the government’s entry on august 20, 1981. The flagship, Bancom Development corporation retained its corporate shell but has been inoperative since then. The elite core of officers and staff, here and in Hong Kong, Kuala Lumpur, and Jakarta gradually when into a diaspora and are now in key positions elsewhere in the financial markets. as a postscript to these dramatic developments, the valuation exercises became yet another paradox for Bancom. in its effort to retain some equity holdings in the expanded union Bank, Bancom threw into the merger pot, the shares of First countryside credit corporation (Fccc) which was the funding lifeblood of G.a. machineries(Gami). union Bank retained an exposure in Gami and under new owners, it took the conservative stance of disallowing Fccc to remit funds to Gami until the whole thing was sorted out. as a result, Gami failed to meet its maturing obligations, was taken over by a creditors committee, and eventually placed in receivership and liquidation. The ripple effects of this move cascaded upwards and impacted on the Bancom holding company which had large equity holdings and loan exposures in Gami plus guarantees which were about to be called. With this, the shares of the holding company which union Bank and the central Bank were holding as collateral in effect had to be written-off. The write-off was totally charged to the remaining Bancom share in union Bank. What started out as a last attempt to retain ownership by the holding company in union Bank actually became the immediate cause for the same holding company’s collapse. as in previous paradoxical situations, it is now a matter of speculation whether the Bancom holding company could have survived much longer even with no equity share in the new union Bank. But at least, it could have bought a bit more time. But instead, it lost everything.

V. Conclusions as discussed earlier in this paper, it would be difficult for anyone outside a handful of people, to make a proper inventory of lessons and conclusions from this corporate experience. For one thing, only a few were privy to a comprehensive coverage of the facts and circumstances. For another, it would not be prudent to ventilate in public the more sensitive issues, for after all, people are entitled to privacy especially since not only careers but also financial stakes were involved. But hindsight wisdom being what it is, could point to a numerous glaring points. in perspective, the strategic dilemma of Bancom was a classic one for any pioneer. after having set the stage in the financial markets, developed its components, and created a new industry, what then?

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as the financial markets began to have a life of its own, Bancom was caught in an uncharacteristic position of merely responding to events while its previous strengths were in creating and initiating events in order to influence the final outcome in the market. The high public profile of Bancom is a point that should not be missed. While this posture served well during its ascendancy, it also hastened its slide through rumors since it was a staple item for idle talk from board rooms to coffee shops. There was also the general reluctance of first, failing to properly recognize losses and second, to make the decisive move of cutting losses by saying enough is enough. Bancom suffered its first financial setback out of its adventures in the stock market in 1969 but the sobering lessons that go with this experience were overwhelmed by the institutional momentum that was still building up during those heady days. an organization so strong in some areas could be blinded away from other essential corporate requirements. officers were promoted into positions based on financial skills, positions which actually required leadership, planning and administrative skills. The corporate culture was so steeped in financial skills that it failed to realize that financial technology was but a tool in total enterprise development and cannot be relied upon as a fallback to every major problem that Bancom could not or refused to solve through the other aspects of operations. Bancom was unique in many ways but one of its unique attributes was its obsession to translate macroeconomic development patterns too closely into corporate terms. Within the confines of its capitalist business lines, it took on in its diversification program which addressed major problems affecting economic development. This role was more suited to a development agency or the government itself. Bancom boldly tested the hypothesis that corporate capitalist profits could be reaped in activities that many people thought were rightfully the duty of government to perform. a standout in Bancom’s history was its strategic entrepreneurial vision and its power to mobilize human and financial resources to aggressively pursue such visions. But it also seemed fatally myopic in some ways. myopic decisions or indecisions co-existing with strategic vision was one of Bancom’s ironies. rather, what appeared to be myopic thinking or indecisions were the results of fancy strategic thinking which, once brought down to earth, would clash with Philippine business culture and values such as “kahiyaan” and “delicadeza” and the latter would prevail. What could be considered a high-tech and somewhat unique company would fall prey after all to common Filipino values. Bancom played a key role in glamorizing finance as a career. in much the same way as most brilliant young men went into law during the commonwealth period, many promising young men and women were lured to finance in the sixties and seventies at the expense of other areas like manufacturing, agribusiness and international marketing. one valuable lesson that could be learned is that, a financial institution, particularly those operating under tight government regulations, should properly align and blend three types of institutional capabilities, namely, the legal capabilities, financial capabilities and organizational capabilities. The legal capabilities pertain to the type of license an institution has, which in turn, defines the kinds of business lines it can engage in. in the banking and finance industry, the possession by anyone of the various layers of licenses is crucial such as commercial banking license, quasi-bank license and the superior universal bank license. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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The financial capabilities are dependent on the type of license (e.g. commercial bank can take demand deposits which are the lowest cost funds), the willingness and capability of shareholders to mobilize equity funds, and the access an institution would have to reasonably low cost funds such as those of insurance companies. These capabilities in turn determine the competitive position of the financial institution, in terms of lending rates and the size of loans it can carry for one client. until and unless this critical mass was achieved, the basic viability of the financial enterprise would be severely tested and may not be robust enough to withstand runs on deposits in a rumor prone developing market as experienced by Bancom. The organizational capabilities consist of the technology, the drive and the professionalism of the management and staff. added to these would be the kind of posture the top management and/or the board of directors would effectively take in its operations. This would determine whether they are conservative or aggressive, benign or creative. in the case of Bancom, throughout its history, the mismatch of these three capabilities were behind most of its problems. it is no coincidence that Bancom did very well during the early years when it had a commercial bank tie-up, thus enhancing its legal capabilities. in the absence of such tie-up, Bancom was a picture of a frustrated organization which was immensely over-qualified in organizational capabilities for the narrow license it was trying to break away from. its financial capabilities gradually deteriorated since it had no captive source of funds and had to compete in the money market, a source which by nature was of a higher cost than those of commercial banks or insurance companies. Thus, if a financial institution’s three capabilities develop in varying degrees, its overall effectiveness will be determined not by the capability which is most developed but rather, by the capability that is least developed. in the case of Bancom, its organization capabilities which were its basic strengths (it excelled in project finance and other merchant banking activities where neither licenses nor finance resources were essential) were the most developed and yet it was hamstrung by its narrow legal capabilities. We now know what went wrong, but what was right with Bancom? These points are also legion. its contributions such as the industry it created, the state of the art in managing the financial system it helped develop, and the financial practices, are all alive today. all these have been placed in a crucible, so to speak, and tested and tempered in the heat of open market competition and close government scrutiny. But perhaps its bigger legacy are the hundreds of men and women who went through this experience not only in the Philippines but in asean and dozens from other countries. The caliber of its professionals were exceptionally high. Bancom had seven ToYm awardees and at one time could boast that 10% of its officers were such awardees. numerous others had equally distinguished credentials. But no narrative would be complete on Bancom without the mention of the man who headed it, mr. sixto K. roxas iii. His personal genius and charisma was intertwined with Bancom’s. His leadership and the financial gospel he preached have countless followers. Because of him, the commitment of the officers and staff to the corporate ideology was so strong that it was jokingly said that Bancom was the corporate group that came closest to being a religious corporate sect. The men and women many of whom are now in top and senior positions elsewhere are living testimonies of the way he helped develop his people. in his last parting message. he said, “when the last asset of what was the Group has been put away, there will continue in the most humble corner of the country’s and asian region’s network of institutions where some struggling employee who may have served in Bancom at one time and been touched by its style and vision, a spirit that will refuse to die”.

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in retrospect, Bancom was controversial. its critics claim it to be an over-rated group, an institution whose reputation was largely built by excellent Pr work; but its admirers claim otherwise. But somehow, when both discuss Bancom, they invariably utter the word “sayang”.

roberto a. atendido Bobby is a captain of today’s investment banking industry, as President of Asian Alliance Investment Corp., and of Asian Alliance Holdings & Development Corp. He is a past President of the Investment House Association of the Philippines.

“my Bancom years” i joined Bancom on an auspicious day, april Fool’s day (april 1), 1974. i reported directly to Babes simpao who was in charge of big ticket transactions for the institution. Working with Babes was the late Tony salgado (God bless his soul) whose level of financial acuity was directly proportional to the amount of alcohol circulating in his bloodstream. Tony was quite a character and i took an instant liking to him. i truly admired these two mentors who introduced me to the world of investment banking. They were good, competent, and able bosses. our group reported to our bearded guru, sito santillan. much of the learning i gained in Bancom were from them. Young, driven, aggressive, articulate, innovative, supremely confident, smart people. This was the Bancom i joined in 1974. coming from a management consulting firm previously, i had no idea of what investment banking was all about at the time. However, my experience in financial modelling obviously helped in getting me to work immediately in large projects that Tony and Babes were working on. initially, we worked with paper and pencil on yellow spread sheets, a lot of them. Later on, it became more sophisticated as Bancom acquired an iBm 360 which was housed in a fully air conditioned room on an elevated floor, operated by a full iT staff, which today is equivalent in memory and processing capability to the original tiny apple computer of steve Jobs. since the computer facility prioritized money market transactions, our group was relegated to the graveyard shift to run our financial models. We had decks of computer-punched index cards that contained instructions to the computer on how to run what today are simple financial projections. i remember one night disaster struck as one of our financial analysts, marlou castillo, dropped the box of index cards on the floor and the cards were literally spread out on the floor. it took us a long time to reassemble the cards into the proper sequence, but we did. i also recall when computer time was not available in Bancom, we had to buy time from meralco’s computer subsidiary to run our financial program. We had to spend nights in meralco’s office because the same thing was true, spare computer time was only available at night. under instructions to complete the analysis within a very short period of time, we learned to work nights, sometimes running through several days almost without sleep. after the financial models were done, we had to prepare our write-ups on our recommendations. i became familiar with buzzwords like total project costs, financial plans, roe’s and irr’s on total project costs and equity, leverage and gearing ratios, weighted cost comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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of capital, payback periods, carry costs, negative spreads, etc. i also learned at the same time how to catch a short nap on wooden tables due to lack of sleep. many lessons stand out during the wonderful years i spent in Bancom. as we spent nights running our programs and waiting for the results, as we burned the candle finishing our reports, our bosses Tony and Babes were with us, many of those times. They were in the trenches with “the boys”. This taught me a facet of leadership. a leader has to dirty his hands with his troops. a leader has to be present in the battle. He leads, we follow. He teaches, we learn. He mentors, we grow. The times we spent together, the discussions, the analyses and report writing were precious for me. i learned a lot. i grew up as an investment banking professional. We also had fun working nights, many times with little sleep to complete the job, sometimes with beer bottles on hand as we waited for the computer to finish processing our program. We never thought of the stress involved because the work that we were doing was challenging. imagine the huge projects our group was involved in – a large copper mine, a nickel processing plant, a copper smelter, the nuclear power plant, expressways, an integrated pulp and paper mill, and the like. our financial structuring skills were honed and sharpened during those nights. The mental exercise was a challenge. and we loved it. it was a life lesson for me... “That work must be fun and challenging, that there must be no constraints to creating innovative and executable solutions to complex problems.” i learned how to separate the chaff from the core, to quickly get to the deal essentials. Later on, after some reorganizations, our group was also introduced to the more mundane task of marketing to various client accounts and processing credit applications for short- and medium-term loan facilities. i remember one time our group was handed down an account to process within a short period of time. after analysis, i handed our recommendation to sito santillan. after scanning the report, he asked a simple question: “Bobby, if the money you are lending to the client was yours, will you lend the money?” i had to dig deep into that one before i could respond. i offered an honest answer, “i am not sure.” sito quickly responded, “if you are not sure, how can you recommend granting a loan to this client using company funds!” That conversation is permanently etched in my memory. a valuable lesson in integrity and professionalism. i have to take care of the interests of the company as if they were my own. a congruence in behavior. Quite an ethical lesson that i cherish to this day and will never forget. another time, my colleague, Lito Tagle and i were called by roly Gapud one Friday night. We were instructed to prepare a memorandum of agreement and submit the draft by monday morning. We looked for Bing Picazo, our legal expert in Bancom. He could not be found. We tried calling his other lawyers like art Ponsaran. nowhere to be reached. Having reviewed a lot of loan agreements, restructuring documents and a lot of moa’s in the past, and since we were pressed for time, we thought we were competent enough to prepare a simple moa by ourselves. and so Lito and i took drafted the moa that roly Gapud was asking for. it was already sunday and the deadline was the following day. We told ourselves, this is easy – just take a template moa, cut and paste, insert the new commercial terms and we would have done what we figured Bing’s lawyers would also do. The following day, we were proud to submit our version of the moa. roly scanned the document and asked, “Who is the pseudo lawyer who prepared this?” sheepishly, we had to admit, “We did, Boss!” He threw the moa into the waste basket. a valuable lesson: Do not be what you are not, get an expert! recognize your expertise and as well as your limitations.

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in 1980, i was asked to go to HK on a six months assignment with Bancom international, Ltd (BiL), which was headed by noel escaler. They just experienced an exodus of officers who left to join other investment banking firms Bancom memoirs

in the region and needed some extra hands. This was a new arena for me, entirely unfamiliar territory where clients were regional, products and services offered were novel. Letters of credit, Back to Back Lc’s, Bills of exchange, Foreign exchange Lines, swaps, etc. i reported directly to the comely investment banker, cynthia Picazo. What was initially a six-month assignment turned out to be permanent as noel and cynthia asked me to stay in HK. Hong Kong was a great assignment, fast-paced, sophisticated, cosmopolitan, expansive. Businessmen were always talking about how to make money. They had a global mindset with diversified businesses in the region. i met indonesian, malaysian, Thai clients aside from our HK and Philippine accounts. it was an exciting work place in the early ‘80s. Then in 1981 the Dewey Dee financial fiasco back in manila happened and all of a sudden we were in crisis. international financial institutions started cutting off banking lines to Philippine banks and financial institutions. While BiL was based in HK and business-wise we were supposed to be isolated from the problems in the Philippines, we were not spared and many banks cut off our lines. We went into crisis management mode in HK. our funding short position reached us$ 40 million, which at that time was huge. all of a sudden, i found myself like a traveling salesman selling our inventory of debt papers to generate liquidity to meet our funding requirements. With hard work and perseverance, we were able to raise enough funds to meet all obligations. That was quite an experience in crisis management that not too many investment bankers have experienced. it was a valuable and hard lesson for all of us. crisis can strike anytime, so one has to be prepared. Hubris and arrogance when times are good will not get you through the front door when you get into crisis mode. Fortunately, BiL had built enough goodwill with financial institutions and of course with our clients who were very cooperative and supportive that helped us overcome the crisis. eventually, as events unfolded, the shareholders of Bancom decided to sell all of its offshore investments in 1981. BiL was one of those operating and successful subsidiaries that went on the auction block. We were sad to see the demise of Bancom, a fate that was not anticipated. Today, i am still engaged in investment banking. i continue to have fun in what i do. except for a few years, i have now spent more than 30 years of my life as an investment banker. one thing stands out – my years with Bancom. i will always look back with fond memories. Those were wonderful years. i learned many lessons that i continue to value and cherish. Great friendships with my mentors and colleagues endure. it has been an amazing and awesome journey. mabuhay ang Bancom!

rolando s. atienza Jacky pioneered the institutionalization of professional research services among stockbrokerage firms in the 1960s. He was formerly the Chairman of the Film Development Council of the Philippines. He now serves as Adviser to the Viva Communications Group.

“We were the masters of the universe” i joined Bancom at the height of its glory, in 1975. i was 31 years old and i came in as senior VP of the #1 non-bank financial institution in the country. along with me and about my age were ramon del rosario, Tirso comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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santilian, eduardo Yotoko; a year or two older were evelyn singson, Victor Kalaw; younger was Josue camba; our boss rolando Gapud was probably 33-34 at the time. This was the senior management team of Bancom: young. it was this youth that gave the institution its verve, vibrance, and excitement. We were the masters of the universe and Bancom was the center of the universe. We knew and we felt that everybody else knew that Bancom was the place to be in if you were to be anyone. We had the Bancom swagger, the arrogance that comes from being convinced that you were with an institution that was indisputably the best. i was invited to join Bancom to assume the management of the investment management Division. There seemed to be the feeling in Bancom then that Bancom had to have a more dominating presence in the equities market, in the same manner it dominated the money market. i was the only post-graduate finance man in the stock market at that time. i was with anselmo Trinidad and co., executive VP and head of the research Department. The first thing i did when i assumed command was to restructure the portfolios under my management. considering that interest rates were at the 20-25% level at the time and the stock market, i felt, was too speculative, i decided to shift the portfolios to fixed income investments instead of investing in equities. (The market was dominated by mining and oil stocks – atlas, Philex, Benguet, Lepanto were the market leaders. smc, PLDT, meralco securites, the commercial and industrial issues, probably accounted for only 20% of the market, at best). This was probably the reverse of what i was expected to do. But i had come from the stock market and had no illusions about the mystique of the market or its risk-reward ratio. managing fixed income portfolios was obviously not as taxing as managing equities portfolios. in 1977 when Bancom underwent a reorganization transforming itself into a matrix organization, i found myself at the top of a number of small subsidiaries, clustered together under the new Professional services Division. Together with my base, the investment management unit, i was now also in charge of subsidiaries like Bancom Healthcare, Bancom systems, Bancom Farms, Bancom audiovision, etc. The most fun of these subsidiaries was Bancom audiovision (BaVc). BaVc was eurasia arts then. it was one of the subsidiaries created in pursuit of Bancom’s integrated area development approach. an integral part of this effort was Bancom’s involvement in systems that were usually found in any community. The arts and entertainment system is clearly one of those systems found in every community. eurasia arts had a very soft approach to whatever it was trying to achieve. it was providing small loans, some management skills to theatrical and cultural groups. i felt that it should have a more aggressive approach if it was going to have a more meaningful presence in the arts and entertainment industry. i was able to convince the Bancom Group Board (i remember people like Jobo Fernandez raised questions as to why a company like the Bancom Group should be making movies) that BaVc was in line with the iaD program. Probably more importantly to the Board, i told the Board, and they eventually agreed, that there was a good business, financial reason for being in the movie industry: there was no professionally run organization in this industry, and presumably a professional organization could dominate the industry. Domination of the movie industry would mean domination of the entertainment industry since almost all entertainment activities radiated into and out of the movie industry. BaVc was a lot of fun. We were indisputably the #1 movie company at that time. We won almost all of the awards from 1979 to 1982. During that period we made 22 films and co-produced 2 foreign films. our best films were: Jaguar, the first Filipino film to be in the official program at cannes directed by Lino Brocka; Kisap mata by mike de Leon; Brutal by marilou Diaz-abaya; salome by Laurice Guillen; aguila by eddie romero.

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aside from working with the best directors, we also worked with all the top actors – Fernando Poe Jr., Joseph estrada, ramon revilla sr., Dolphy, among others and actresses such as nora aunor, Vilma santos, Gloria Diaz, charo santos. sometime in the late 70’s we hired charo santos to be the in house line producer of BaVc. BaVc was the first company to perceive her potential as a business professional, and the first to hire her as a business person rather than as an actress. BaVc, i feel, was the company that launched her on to what has become a super successful business career. in the end, BaVc fell when its parent fell. it never quite achieved what it had set out to do. i have gone on to many other institutions and organizations since then, but i have never found any group that had a culture as creative, intelligent, and gentle as Bancom. While Bancom did have its share of politics and territorial disputes, it was always able to maintain a bond among its people, a fellowship that i found unmatched in other organizations. The relationships while competitive were never harsh. The creative, intellectual, gentle character of Bancom was, of course, a reflection of the personality of sKr. i feel that the values that gave Bancom its strength – creativity, innovation, improvisation – probably also contributed to its downfall. The lack of emphasis on discipline and control (the reverse images of creativity and innovation) eventually weakened rather than strengthened Bancom. i had a good 7 years in Bancom and those were the most exciting, fulfilling and intellectually satisfying years of my professional life. and now as i look back on my Bancom years, i might paraphrase someone who said it before: “i experienced more than what i remember, and remember more than what i experienced.”

Fernando r. Balatbat A TOYM Awardee in 1982, Nanding has served as Consultant to a long list of important firms and institutions, including notably the Central Bank and the Metro Pacific Group. He is currently affiliated with the Amb. Alfredo M. Yao Group.

“The circular 304 business line” on august 1, 1970, the Bangko sentral ng Pilipinas (then known as the central Bank of the Philippines) inaugurated the central Bank Foreign currency Deposit plan with its historic issuance of cB circular no. 304. The idea was to augment the country’s heavily depleted foreign exchange reserves which, in the words of then President Ferdinand e. marcos, were burdened by heavy importations and profligate spending by the rich. Little did they realize that it was to open the floodgates for the blocked foreign exchange royalty and dividend payments, even profits, of the multinational companies operating in the Philippines which had been trapped for years by strict foreign exchange regulations. For Bancom Development corporation, it was to be just another new business line for its foreign subsidiary, southeast asia securities co., Ltd. Hong Kong (seascom), later to be renamed Bancom international Ltd. (BiL).

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The Essence of CB Circular 304 With the need to raise the country’s foreign exchange resources, it was imperative that foreign currency deposits made into the system via this regulation be given the widest of latitudes. Thus, foreign currency deposits under cB circular 304 were made absolutely confidential, free from any scrutiny, and freely withdrawable and transferable.

Another Line of Business it was the latter attribute – freely withdrawable and freely transferable – that would prompt the development of a new line of business for Bancom. The government, it was thought then, may have effectively paved the way for the servicing of the required foreign currency needs of the multinationals, in the process unblocking the long-overdue payments to their parent companies. The question was – how?

The Route The general theory was that if foreign currency funds were to be deposited into a cB circular 304 account, the same funds could theoretically be withdrawn and/or transferred to another account. This was the essence of the circular. internal discussions within Bancom legal and marketing minds supported the idea. What needed to be done was to get the consents of external legal and tax counsels, and at least the affirmations of the regulatory agencies. Bancom first approached the law firm of sycip salazar, bared what it wanted to do – to intermediate between the sources and uses of foreign currency funds, and inquired whether the planned withdrawal of deposited funds was legal. The answer was positive. next stop was sycip Gorres & Velayo (sGV) Tax Division. We asked for the tax incidence, if any, of the planned transactions, particularly since the transaction involved a multinational corporation, through the putative intermediation of a Hong Kong company. We were given the go signal. The next step was to seek the consent, or at least the affirmation, of the central Bank of the Philippines itself. it was then decided to pose an inquiry to an official in the Foreign exchange Department (FeD). The query, composed of 5 questions, was so structured as to elicit a yes to each step, and with each yes, there was no way but to answer the next question with another yes. and so we started to ask whether cB circular 304 was open to all foreign currency holders – and the answer was yes. We proceeded to inquire whether said foreign currency deposits were freely withdrawable – and the answer was another yes. We ended by asking if said deposits were freely transferrable to another account, regardless of situs – and we got the ultimate yes. We officially got the central Bank reply from a middle management official of the FeD, a person by the name of antiporda. Thus was born what we would all call “The antiporda ruling”. The tag became well known in the industry, but not to the central Bank.

Tying the Loose Ends The problem was sourcing the dollar funds. The supply of the actual dollar deposits was estimated to be far short of the potential demand of the multinationals. after all, their contemplated payment of royalties and dividends had been blocked by the authorities for a long time. Besides, it was doubtful if the dollar depositors will part with their safely placed funds. it was evident from the start that servicing these needs will take a little while.

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What was then needed was a legitimization of what otherwise are dollar funds outside the banking system – what we would then call the BLacK marKeT. if we could somehow get these black market dollars deposited into the banks under cB circular 304, then the same funds can eventually be legally withdrawn and transferred to some other account. Thus was born the GraY marKeT.

The Marketing Pitch We then started to craft a marketing letter that was sent to most multinational companies who were perceived to be in need of dollar funds but could not access the same from official banking channels. enclosed in that letter were copies of the opinions of sycip salazar law firm, sGV, and the opinion of the central Bank itself. essentially, the idea was to declare their royalties and prospective dividends payable in Phiippine Pesos. This was subsequently paid for in Pesos, to a designated Peso bank account. This was all there was to it, as far as they were concerned – a perfectly legal move. They could then close their books on any blocked payments. The black market dollars are simultaneously encouraged to be deposited in a cB circular 304 foreign currency account, but susbsequently withdrawn, against payment from the Peso bank deposit, and transferred to a designated foreign currency account.

Who Benefited? cB circular 304 went through various iterations, going from cB circular 304 to cB circular 343 to cB circular 547, until it became a law. Through it all, the blocked payments were slowly serviced. indeed, most multinationals went through this route, from the Procter & Gambles to the Georgia Pacifics. Did Bancom deprive the system of the much needed dollar funds? We don’t think so. The black market funds would never have been deposited into the official system on their own. They would have remained as black as ever. on the contrary, Bancom did help the system by eliminating the foreign exchange overhang represented by these blocked royalty and dividends payments. otherwise, they would have remained as contingent foreign exchange payments, until ultimately granted by the authorities. Did Bancom, or seascom, benefit? rightly so, by the spread between black market and gray market prices.

roberto s. calida A Consultant to the Chairman of the Subic Bay Metropolitan Authority, Bobby is also the principal of Doulos Subic Inc., a boutique financial advisory firm that focuses on investment projects and prospects located at the Subic Freeport.

“Davao branch experience, 1968 - 1977” my first glimpse of investment banking came from my high school classmate mads Lacuesta who recruited me into Bancom during my rookie year at sGV. i was to head up a new branch in Davao city.

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it was whirlwind training at Bancom cebu and Bancom Head office at the comtrust Bldg. in makati. i remember Tony Fernandez, branch manager of cebu branch, tall, large and so energetic, and alex marbella, kind and wholesome and his telex machine. it was my first time to see the telex at work. Little did i know it was the heart of branch operations and would play a prominent role in my future work. i saw mads constantly writing up the Branch operating manual. mads was funny, cheerful, a pleasant story teller who would later be an award-winning movie screenplay writer. it seemed to me he was writing the future story of the branch.

Starting the Davao branch Picture a small room on the 4th floor above rcBc Davao – 3 desks for mads, me and Bernie miranda and our telex machine, best friend, companion and toy of all. Little did i know the branch would grow in 5 years to around 7 people and a fund portfolio of P50m (that was a lot at that time), teach a government agency (mindanao Development authority) to put its money in T-bills, and teach the central Bank regional office about central Bank certificates of indebtedness (cBcis). i will not forget mads’ usual sales pitch to impress clients that we were no flight by night operators: “We have more telephone lines than PLDT!” remember the Bancom Bill? i thought tenor was a part of a choir, but it referred to 1, 3, or 7-day call, or sm. i thought sm was a small shoe store in escolta. it meant “straight to maturity” pala. i fondly remember Berong ma, our chinese trader. not only was he chinese, he had a flair for getting chinese money. some would write millions over just a stick of Berong’s chain of cigarettes which seemed never to stop burning. i think he eventually died from lung cancer, requiescat in pace.

Investment banking was fun-tastik it was fun draining the banks of their time deposits into our Bancom Bills and seeing eyebrows of bank branch managers raised three notches higher. it was fun learning to remit Davao Light & Power (aboitiz) money from Davao to cebu, just by trading the 1-day call Bancom Bill. it was fun selling innovative investment instruments culminating in the offering of Landoil shares. it was so easy selling something “na may land na, may oil pa”. more fun earning a huge commission of a few ten thousands when our basic pay was just about P500. maybe this was the reason why the practice of paying commissions was stopped. The telex was the centerpiece fun office equipment which allowed branches to trade and make “commissions” even after commissions were banned. Fun playing with the telex to trade “304 accounts” to get dollars of banana companies into manila and then Davao. Fun creating what charlie cuesico dubbed as “rubber”. edgie eugenio will tell you that “rubber” was a way to get his Bancom Finance paper into the hands of Davao investors using the telex without ever riding on a plane which he may have avoided to this day. if the Branches team made some money on the side using the telex, imagine what they would be able to do now with the internet! The Volks Beetle was another fun machine. it was my first car. i and i’m sure many others won’t forget their laughter when, shortly after martial law and checkpoints were prevalent, soldiers would ask us to open the

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baggage compartment, only to find the funny Beetle engine! But the Volks Beetle was a real workhorse and witness to our fun and successes. it was and is fun to remember how people responded to big money and the Beetle was witness to this event. The Davao branch staff will remember this, during the time when Bancom and Far east Bank were partners. Bancom was at the 2nd floor of the Far east Bank branch on magallanes st. our cars, all Beetles, were parked beside the building. one of the Bancom clients had a Beetle with the same color as the branch manager of Far east Bank who regularly brought cash in his car to Gen. santos branch. it was a normal day, except for the fact that the branch manager placed the bag of cash in our client’s car instead of his. i’ll stop the story at this point and allow you to have fun imagining the comedy of errors that ensued. Yes, the client returned the cash and it has been said again and again that the client is a reflection of the kind of people that service him. True or not, we had real fun. it was fun training the branch staff and Traders. To mention a few, malou Dominguez would thrive as Trader in Bancom Head office, abee ng as a banker and senior executive in PDcP. my secretary suchi inting is now a Justice in the court of appeals. i’m sure they had their fun too! manoling roxas also had much fun when he visited the branch for a weekend. i had strict instructions from Ho to take care of him at all costs. maybe, the kind of fun we had can be inferred in how, many years after, (requiescat in pace) manoling would introduce me when sometimes we would meet in manila, as the “guy who saved my life”. There is no need for more details.

Bancom Cagayan de Oro i can no longer remember what year it was that we opened the cDo branch, maybe it was around 1976. The main players were Franchit Valencia, eddie Buenviaje, charlie cuesico from Ho and rocky Villanueva, now Dean of college of Law of Xavier u, Buboy noble, retired banker, Joey medalla, now farmer-entrepreneur, eng roa. if my memory were as sharp as i wanted, i could tell many more fun stories. maybe it’s best these stories be told by rocky Villanueva, who was in the middle of things as they happened and who stayed on after i left Bancom.

The guys at Head Office The story of the branches won’t be complete without mentioning the guys at Branches management Group or BmG. Franchit Valencia and eddie B whose constant visits always meant loads of fun brainstorming, planning, eating and drinking. Jac, feared but admired head of mcmD. sKr, elegant, even majestic to my young mind. The rare glimpse of integrated area development he gave when i served a Task Force for a project in cDo has served me to this day. i give tribute for all the fun and pleasant memories to eaY, the head of FmD, who to my young mind was the model of a “cool boss”.

The clients we served above all, recognition must be given to the numerous clients we served. They can no longer be named, but they are the reason, purpose and real source of our pleasant memories when we say that we in Bancom delivered what they needed in new and better ways and had lots of fun in doing so. Where do we go from here?

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i have confined my ruminations to fun and pleasant memories, intentionally avoiding deep analysis, conclusions, and prescriptions. if you ask why, it is because i believe the latter is better done by writing the “future history” of Bancom ii. as in the movie Gone With The Wind, Bancom i is the overture and Bancom ii the encore, to be “written” with as much fun and fulfillment as those who are called to write it want. indeed, Bancom is not just a story to be remembered it is a story to be completed. Bancom i is not gone with the wind, if there is Bancom ii to be the second wind!

Josue a. camba Jr. Josue migrated to the US after Bancom, serving as CFO for a semiconductor group in Silicon Valley. Back in Manila, he headed several investment houses and was a Finex President. He now heads Bancpros & Associates, a financial advisory outfit.

“The dreaded revalida ritual” The revalida was similar to a fraternity initiation process, whereby the money market trader-trainee who had gone through a short period of orientation or after going through each group within the department – or a staff assistant, secretary, clerk, typist or messenger (we had actual cases of these, and even a typist at cashiering dept. eventually became a VP of an investment house) wanting to take a stab at becoming a trader – must pass a rigorous oral exam or revalidation process before he or she can be finally accepted as a trader. Basically i introduced this revalida process in Bancom in 1970 and had adopted it from Procter and Gamble Pmc as all their management trainees (i was recruited as such after my cPa review class) had to go through it. Bancom then began institutionalizing this since 1970, and improved the process by introducing a Phase 2. Phase 1 was when the trainee is asked to just ramble along and relate what he has learned during the training period and answer specific questions from the panel. Phase 2 was when the panel is presented as a board of directors, or as a group of clients to whom the trainee is making a presentation of the various Bancom money market and other investment banking services. This was the fun part where officers (Philip ang was infamous in this role during revalidas) of the panel join in and ask the most impertinent questions (Who are you, what are you doing here? We’re busy now, come back next year...) to determine the tenacity or ability of the trainee to respond under pressure. Quite a few react negatively (they cry or surrender or ask to be excused, etc.) to the impertinence of the panel. Peping antonio (riP), formerly with the office of sKr who used to type faster than anybody else in Bancom, passed through this and became a trader, possesing all the patience in the world, and was assigned to the Personal center catering to problemmatic widows and matrons. Boy Bombais was a typist in cashiering who became a staff assistant in the trading room and became a trader after going through a revalida. Beu Feliciano was a guitar-playing Bancom messenger assigned at the Qc FeBTc branch who breezed through a revalida and became a trader. Toti escarella was a brilliant young man who felt so insulted, he wanted to give up but was prevailed upon to stay and became a very good trader and later a senior officer in several investment houses and banks. of course who could forget Pons Gadia, who was near tears with the incessant questioning by some traders during a revalida that he even blurted out: “sino ba kayo? ako kasali sa pag design ng

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treasury bill!” Pons had assisted the first team in HK that set up seascom and later reportedly became a multimillionaire with his own business. Foreign trainees, especially, like the sun Hung Kai officers from HK and Jimmy saad from amex Beirut, dreaded having to undergo the revalida. of course who can forget that ViP englishman hire for BiL, the Viscount errington, whom eaY instructed to be given the whole nine yards in a revalida. after only fifteen minutes or so, he was already hitting his head with his fist calling himself dumb! This was in response to a questions related to repurchase and resale agreements, the rationale for the design and the various underlying instruments surrounding it. in the later years, in the very late ‘70s the panel became kinder but trainees still dreaded going thru it. as mentioned, it was more like a fraternity initiation and the revalida process was brought by archit Bartolome to multinational investment Bancorporation, rcBc, and urban Bank, etc. even anscor iH reportedly adopted it. i think some financial institutions still practice this today.

“The Dewey Dee caper and its aftermath” it was on a monday in early January of 1981 when Bancom’s trading room was abuzz with the rumor that one of Bancom’s major clients – Dewey Dee, had left the country suddenly with his family, leaving behind huge amounts of debt with banks and other financial institutions like Bancom. at that time, Dewey Dee’s company, continental manufacturing corp., had outstanding borrowings from Bancom through a commercial paper float of more than Php 60 million – which at the time was already a huge sum and was in the top 20 borrowers list. The absence of a centralized up-to-date data base made the lending institutions, banks and non-banks, unaware of the accurate total outstanding commercial paper issue of cmc, later known to be over Php 750 million, way beyond its approved commercial paper permit from the sec. The rumor was that Dewey Dee’s main bank decided to cut down on his overdraft line and that made Dee realize he could not continue rolling over his debts and financing his maturity payments through borrowings from the same or other institutions. True or not, the fact is that on a sunday in early January of 1981, he decided to leave the country with his family. reportedly, his younger brother Donald Dee (a successful businessman today), received a call from Dewey Dee on the day of his departure that he had to go and apologized for what he was about to do. according to Donald, even Donald’s house and lot were mortgaged by Dewey Dee and left unpaid. at that time, Bancom’s senior eVP roly Gapud (rcG) had already resigned and had moved over as President of security Bank & Trust co.(sBTc), the acquisition of which, from the Jacinto family, was partly financed by the cmc borrowings from Bancom. The sBTc acquisition was supposedly part of the Bancom strategy to finally have a wholly-owned commercial bank subsidiary – not just a savings bank, for it had already union savings & mortgage Bank under its wing in partnership with the the Katigbak family. But it was rumored that somehow, Jobo Fernandez, then ceo of Far east Bank (which had a functional merger with Bancom, though not so efficiently functioning) was able to dissuade sKr from continuing with the sBTc acquisition, thus causing rcG to eventually leave Bancom and lead the other investors’ group to acquire sBTc. The group known as the “Three musketeers” (Dewey Dee, ramon siy Lai and Philip ang – Philip was a former Bancom pioneer who headed Bancom’s equities trading center operations in the late ‘60s) were to be Bancom’s comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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partners in sBTc, then went ahead with the bank acquisition with rcG as President and ceo. The newspapers had a heyday on the Dewey Dee caper that by march and april of 1981, maturities in Bancom’s money market operations were not being rolled over and fresh funds were difficult to come by. Liquidity was a problem. Loss of market confidence was pronounced. For the sum of Php 60 million (versus a Php 3 Billion+ Fund Level, the total outstanding placements on and off books), Bancom could have easily eaten up the loss but erosion of market confidence with almost daily bad news, no fresh funds, and non-renewal of placements certainly aggravated the situation. and Bancom’s bank partner, FeBTc, was not a big help either, as it had immediately cut the bills payable line of Bancom (which otherwise would have allowed Bancom immediate credit for its check deposits). This, despite the fact that Jobo sat as Bancom’s Vice chair during the functional merger. The operating mood in Bancom’s trading room was stressful as traders and specialists, including all those located in the branches tried to convince clients to stay on. Firstly of course they had to deal with their family and friends’ placements, a difficult task for young eager beaver traders. at a certain point around april, Bancom decided that pre-terminations of placements will no longer be allowed but appropriately redeemed on their respective maturities, a condition that it had been able to meet. High level negotiations were of course ongoing for the appropriate support from the central Bank but the cB’s hands were tied by its charter in lending directly to non-banks. interim support was done through cB’s rediscounting window but at very arbitrary values (e.g. around 40% value was given to a loan covered by a real estate mortgage that was 200% covered). obviously this was not sufficient to cover maturities and in time assets were reduced. By July, the solution was the merger of three financial institutions, Bancom Development corporation (BDc the investment house), Bancom Finance corp. (BFc the finance company) and union savings and mortgage Bank (usmB the savings bank), with usmB emerging as the surviving entity through which Land Bank of the Philippines (LBP) and the social security system (sss) came in as the new majority owners. The cB then (around august of 1981) had total loans to LBP of some Php 750 million, to bail out the group, a pittance compared to today’s billion peso bailouts by PDic/BsP to closed banks (commercials, savings or rural banks alike). after the entry of LBP and sss, with sss chair as the new uBP chair, a single board resolution wiped out whatever equity there was of the old Bancom Group including a reduction of the executives’ pay. it has to be mentioned that several other investment houses also closed shop as a result of the Dewey Dee caper and later a credit Bureau was organized and funded by the cB to ensure that monitoring of debts is done. it still didn’t stop banks and other financial institutions later from going under for one reason or another. usmB subsequently was renamed union Bank of the Philippines (uBP) and years after, LBP and sss exited and uBP is now controlled by the aboitiz family and listed in the Philippine stock exchange. it was to be claimed that all obligations or money market placements with Bancom were fully paid down to the the full principal and the committed interest rate and no single client was left holding an empty bag. some traders of Bancom continued to work with the new uBP and some reportedly stayed on until their retirement after completing 20 years or so of service. security Bank continued to operate and was subsequently listed in the Pse. sBTc also had changes in

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ownership after marcos left the country and is now considered as the best Philippine commercial bank in securities operations. Dewey Dee is reportedly still in Vancouver, canada. ramon siy Lai was assassinated several years after in chinatown, a crime unsolved to this day. Philip ang is still around as a successful low-profile businessman.

“it was more fun in Bancom” it was around november 1969, i was at work at Proctor & Gamble (P&G) when i got a call from celso samaniego, who was a year ahead of me in the university of the east. We both had been active in the ue student government and in the JPia (Jr. Phil. institute of accountants). celso asked me if i would like to join Bancom. He described Bancom as a new company doing investment banking, which i had no idea what it was all about. it sounded interesting especially after i consulted manny Pacis at P&G, who pointed at the P&G Finance department organizational chart, showing me (as internal auditor) at the bottom line of the managers’ level and revealing how young the people above me were. He estimated it would probably take years before i could rise to Group manager level. so i sought permission from my department head rene Paras, who so kindly allowed me to finish the calendar year, instead of accepting my resignation effective immediately as was the usual severe practice at P&G then. on Jan 2, 1970 i joined Bancom and entered a totally different world of finance. my first assignment from celso was to prepare an asset management manual (a fancy name for a detailed description of the various accounts used by accounting for the departmental management information system (essentially the whole backroom of the money and capital market operations). celso was head of the market research and analysis Group (mraG) in the money and capital market Department under ramon K. ilusorio (rKi). The trading room was then at the 6th floor of the old cBTc Bldg. at the corner of ayala ave. facing the old metro Bank Bldg. The trading desks formed a big letter T, where at one end was the seat of archit Bartolome, head of money market and at the other end was Philip ang’s, head of the equities market. scattered around the T table were the traders and specialists and behind them were the trading assistants or position-keepers. it was organized chaos during trading hours. after two months of doing interviews and writing the asset management manual, archit got me from the mraG room saying, “come, we have a new assignment for you at the trading room.” at that time celso and rKi were both in Bangkok, organizing Tisco (Thai investment and securities co.). archit designated me to be a specialist, lending to companies and originating commercial papers. archit told eddie Buenviaje, who handled all the corporate accounts, to introduce me to his clients. The ever-smiling eddie B handed me the thick PLDT telephone directory, pointed to the companies’ section and said, “That’s your market”. my first lending was to meralco for a million pesos, which was huge at that time since we were accepting placements at a minimum of only fifty thousand. i recall nervously calling roy Zosa, one of meralco’s veteran finance guys, several times during the day to reconfirm the amount, the interest rate, net proceeds, value date, and other delivery instructions, all of the info contained in our trading sheet (Ts). if roy got growingly irritated at my anxiousness, at least he didn’t show it. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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a copy of the Ts was the basis for manual posting to the master money position (inflows and outflows for all forward maturities), such that there was a big ledger card for each day forward to so many years, as long as there were maturing placements, loans, notes, treasury bills, bonds, etc. Then the Ts info had to be posted on individual client ledger cards (for both placers and borrowers), contained in a wooden box half the size of a shoe box, which you guard with your life. after trading, the fun begins. We had those black high-backed chairs with four wheels that roll easily down the aisle. Bets were made as races across the aisle were conducted. all joined in, especially after a strenuous trading day, including the officers except rKi, who would immediately ask nobody in particular, “are all your maturities tomorrow rolled over?” end of the games. Then there was the paper airplane contest. Bets would be made as to who could land his paper plane on the ledge of metro Bank building across ayala ave. archit and Philip most often won, so somehow we thought rank had something to do with it – the higher you are in the corporate ladder, the higher your paper plane goes. i never had a chance to prove this when years later we moved from cBTc to the Bancom Bldg. and i became sVP and head of money market. of course, the basketball betting was the real thing when the hat would be passed around, especially when crispa would be up against meralco, and the meralco finance guys would challenge the Bancom traders to a bet. Big sums at that time (a few thousand pesos) and we were always short, but there were always archit, Philip and rKi to cover the difference. i cannot recall whether we were ahead or not in those bets, but there was always a blowout after each won game. We were a lively trading group. There was Johnny Figueroa, whom i succeeded as specialist, eddie B of course, Badong castaños, Lamberto escarella (Toti, code name Tochiki), oscar cembrano doing equities trading under edgar Yao, the chief equities trader under Philip, Lito Quiogue and of course andy Dysangco. andy was the documents specialist whose initials were required on any set of checks or documents, placements or loan releases or maturity payments as he counter-checked in detail the data on the Ts, authorities’ signatures (trader and specialist must sign each Ts), then the accounting and cashiering instructions, following through to the deliveries and pick up of checks all the way to the bank clearing process. i recall Teddy marquez, a trading staff assistant who had a calculator for a brain – as he could just shout back at you the interest for 30 days for 12% per annum! This was circa 1970, no cell phones, fax machines, laptops, iPads, Pcs, HP12c, etc. There was though the Friden calculator that seemed to have a hundred buttons to push and was heavier than a modern cashier’s machine you see in sm today. You became a certified expert when you could handle the Friden and have it come out with 999,999,999.99 at the end. i never passed that one. We had a big celebration when in mid1972 Danding Yotoko, then our Division head, came back from Hong Kong bringing the hand-held HP80, where you could do true discount in one continuous flow! There was a telex machine which was “the ghost” in the upper floor. imagine Tony salgado, newly hired on his first day, was working late alone in his cubicle in the old cBTc building and all the other lights were out. suddenly in the dark, a typewriter (actually, the telex machine in the other room) began pounding away with no one around. Tony salgado ran out and went home after that. new hires were never told about the telex machine. They only got to know it later when they were assigned abroad or asked to retrieve the telex reports of aP Dow-Jones. at that time, we only had those heavy rotary phones, which were difficult to hold by your chin and neck. it was funny when you had two phones on hand, a phone in one ear, the other on your shoulder, banged close

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on the wrong cradle and you realized belatedly that you just lost a client. and this kind of accident happened almost every day as traders had at least two phone units each. The joke was that the trading room had more phones than PLDT. it was also a trading room secret to know what 3-digit number to dial to make the same phone ring after you put it down. imagine during lunch time when you were assigned as Trader on-duty for the day and upon entering the trading room, all the phones (almost a hundred direct lines) were ringing and you had to answer each one! one of the favorite pranks was to answer the phone of chito Bernardo (the government securities specialist) around 5:15 pm and telling the caller (always his wife) that chito is out in some beer garden, and this was done with consistency. The pranks stopped when chito reported late one morning and pulled his long sleeves to show mosquito bites as he spent the night in their balcony. There was tall and crew-cut sandro nadal, head of the Personal center, with such a fantastic intelligence network that provided him the bids of other Gs dealers for the T-bill auction. We never knew how he got those data, and even up to this day his secret remains. i recall our first two lady traders, the famous Violet ong and Josie Gregorio. The joke was that on christmas time, more than half of Violet’s christmas cards were addressed to “Bearer” – since she handled the chinese center. some say that in their first two months in the all-boys trading room, they spent more time in the ladies room crying due to pranks from the boys. Pranks ended when the trading room later was filled with more lady traders: Louie Barcelon, Beth Villanueva, sandra Palanca, Dol Panlilio, Becky antonio, marilou alejandrino, ofie Ligon, to name the few i can remember offhand. i will end this story-telling with some tired, old anecdotes about our big bosses that we love to recount and laugh about at every reunion. The specific times when they occurred now escape me, but all these occurred in 1970-1981:

AMB (Augusto M. Barcelon, Chairman): sometime early 1970, Bancom hosted a series of cocktail parties for various corporate accounts and the key guideline from rKi was for the traders not to just talk to each other but to mingle and spread the word about the money market. Tony Valdez, an old-timer trader to most, cornered this tall, respectable-looking gentleman in a very nice black suit and began the usual spiel on why and how one should invest in the money market. Tony had a captive audience in that tall person, who would once in a while ask him some questions. a little later, archit approached the two and said, “Good evening mr. Barcelon!” Then he turned to Tony saying, “Tony, i see you’ve met our chairman mr. Barcelon,” after which Tony was profuse with apologies and wanted to evaporate. amB being the cool guy that he was said, “it’s okay Tony, i also wanted to know about the money market!”

SKR (Sixto K. Roxas, President): During a presentation to sKr, he began by saying, “You must appreciate that the ‘multiple coefficient of receivables’ in an investment house is supposed to be nil”. i turned to sVP Danding Yotoko, and quietly asked, “Boss, sorry, i am a cPa but what’s the multiple coefficient of receivables?” eaY whispered, “must be bad debt percentage.” upon returning from a trip abroad, sKr was confronted by a new receptionist who did not know him. after he got off the elevator and turned right to his office, the new receptionist stopped him and asked, “sir, who are you and where are you going?” sKr replied, “i am mr. roxas and i am going to my office.” after that incident an organizational chart was made by Personnel showing the names and faces of at least the senior officers of Bancom. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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at one time the executive offices at the 7th floor had a receptionist who was a former beauty queen. Heads would turn as she went by. one morning, amB and sKr were expecting visitors from irving Trust. so Priscilla Tang, the chairman’s executive secretary, told the receptionist to expect the guests around ten and bring them to her immediately. Ten o’clock came and the elevator opened with three suited gentlemen, and the receptionist said, “mr. irving Trust?” The guests politely nodded. she escorted them inside and said confidently and loudly, “Priscilla, here’s mr. irving Trust”. Before noon it was all over makati and she later became known as miss irving Trust.

RCG (Rolando C. Gapud. EVP): During a dinner at Hugo’s at the old Hyatt, then the most expensive dining place in town, we had foreign guests and rcG was the host. He ordered a 6-ounce steak. The captain said, “sir, the 8-ounce steak is the same price as the 6-ounce steak.” rcG replied, “i want the 6-ounce steak! and vegetables on the side.” The captain again said, “sir, veggies are separate orders, so which ones do you like to order?” Peeved, rcG replied, “The most expensive ones!” end of that captain’s career, i think. During a visit of amexco officials, rcG hosted a lunch at the famous, then newly-opened, au Bon Vivant of nora Daza. everybody ordered steak except rcG who ordered the duck, a house specialty. When they served the food and we all started eating, i told rcG, “Boss i’ve been eating chicken all my life and i bet that’s chicken.” rcG cut a piece, chewed it and then declared, “This is not duck, it’s chicken! call the chef!” The French chef came out and said, “mr. Gapud, so sorry, i had told the waiters we’ve run out of duck.” rcG replied, “Please take this away, i’ve lost my appetite.” The chef apologized and said he will prepare a special dessert for all, on the house. Dessert was indeed the best. But rcG didn’t eat at all. returning to the office, rcG asked me to join him first in his office and he called for mang Fely, then the executive pantry head, and said, “mang Fely gawa mo nga ako ng hamburger. Gutom ako.” i told this story several times with rcG present and he just laughed it off. We had a very efficient staffer in evelyn singson’s department named ed evangelista, an outgoing and nice fellow. if you shaved his head, he could look like Telly savalas of the famed Kojak TV series. it was probably in the trading room where he was baptized as Kojak and the name stuck for years and he liked it too. People didn’t know his real name anymore. When he was up for promotion to assistant Treasurer, the first officer level then, the list had to go to rcG for final approval, after the committee of sVPs went through it. Then rcG blurted out, “How dare you guys recommend to an officer position someone i don’t know! Who is this ed evangelista?” our reply, “Boss si Kojak yan!” rcG’s reaction, “si Kojak ba ito? ok ‘to!” (may you rest in Peace, ed/Kojak). Basketball tournaments were held annually and this was a serious corporate event. rcG at one time joined the investment banking department team and played for a few minutes. The dreaded team was the Bulls of the money market trading group (we had our big traders, messengers and guards in our team). rcG entered the game and was given the ball for a fast break and a clean lay-up. Guarding the board was our bald-headed messenger giant named secong with his raised arms and he was ready to prevent rcG from his fast break. several feet before he got to secong, rcG barked, “secong tabi ka!” secong replied, “Yes sir!” and rcG made the easy two points and then asked their captain to take him out. in Bancom, all knew who the bosses were.

LRV (Luis R. Villafuerte, EVP): at around 4:00 am (that’s 4 in the morning) in the office, LrV looked for a typist. rudy Bunda said, “Boss, its 4:00 am and all typists have gone home.” LrV said, “i want a typist beginning tomorrow to be available at all times.” so rudy instructed Personnel to hire typists who will be available in three shifts. i don’t know if any of them stayed long in Bancom.

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During a morning meeting with a visiting Japanese banker, LrV presided over the meeting with Danding Yotoko, noel escaler and me present for any questions the guest might have on our operations. The Japanese banker bowed to each one of us as he gave out, using both hands, his beautifully engraved calling card. as was the tradition, we also bowed and spent a few respectful seconds reading and appreciating his card before proceeding. LrV then began his briefing about Bancom’s history, its milestones, regional presence, money market operations, etc., all the while absent-mindedly folding and re-folding the calling card of the Japanese, until it was the size of a cigarette. all that time, the man was looking at what was happening to his card, with anguish and disbelief. after about half an hour of question and answer, LrV summed it all up, stood up, and said, “Please come back anytime you are in manila and call us for anything you need from Bancom.” LrV then threw the calling card, now like a used cigarette, into the big ashtray in the middle of the big round table in his conference room before shaking the visitor’s hand. after the man had left, we told LrV about the calling card, and he simply asked us, “napansin ba?” “Di naman yata boss,” was our reply. i don’t think the Japanese ever came back. a morning meeting with LrV went longer than usual and it was almost 2:00 pm when LrV noticed noel escaler writing intensely on his yellow pad. so concentrated was noel in his writing that LrV stopped the discussions and said, “noel, what are you writing about?” noel showed the paper and what he wrote, the big word “FooD.” meeting was abruptly ended and we all went to lunch.

RKI (Ramon K. Ilusorio, SVP): Before 1970, rKi reportedly had a very efficient secretary and i think she went abroad or got married such that rKi had no secretary for some time. so he asked rudy Bunda to look for one who should be pretty and sexy and very good in taking rKi’s dictation. rKi would dictate the day’s summary report in his big dictaphone, one with the pedal for the secretary’s use, and the secretary must transcribe and type it immediately. she must also be around before rKi got in and could only leave after rKi left. it took a while and the Personnel department could not come up with one who was qualified on all counts. Finally, rudy Bunda’s solution was to hire two – carmen nabong who could then pass for a beauty queen and sylvia Valdez, a good looker too but truly great in dictation and typing, who guarded rKi’s library and stuff like a hawk and was considered by all as “guardia civil”. Years later sylvia came back to Bancom and became my executive secretary. in our first assignment in Hong Kong in 1971 after rKi organized the mBD (multinational Banking Department) to basically operationalize seasco (south east asia securities co. Ltd.), we rented a flat at the north Point and it had four bedrooms and was cheaper than staying in hotels. Pons Gadia and i would go ahead to the office in Queens road central and rKi would follow. Then in the evening on our way back to the flat, we would pass by Wanchai and buy take-out food. The flat was fully furnished and had more than eight sets of china for breakfast, lunch and dinner. We had no amah at that time and domestic helpers from the Philippines were yet unheard of. so we kept using all of the china and about a week after, the sink was full of unwashed dirty dishes (no electric dishwasher at that time). rKi looked at the situation and immediately organized a kitchen brigade – pour boiling water into the plates, cups, saucers, utensils, etc., after which Pons and i would apply the soap and rinse all of the stuff. rKi took care of drying them and putting them back on the shelves, as he was the tallest. Task was done in less than an hour, pretty neat for investment bankers. We also had a washing machine and a dryer in the flat. so one time, in our haste, we simply dumped all the dirty clothes into the machines and upon our return rKi noticed that his white shirt was now evenly colored light beige (as a result of mixing it with other colors). rKi liked the new color and asked Pons to do it again. unfortunately, it didn’t come out like before as some came out with polka dots of different hues and the others just a horrendous mix of white, beige and black, so back to the cleaners for rKi’s shirts. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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at one time, rKi had lunch with santi Dumlao, then also based in HK with the Lopez group. commenting on our acronym seasco, santi said it sounded like fiasco. When rKi came back to the office, he issued a memo that effective immediately seasco should now be called seascom and ordered us to reflect the new acronym in our calling cards, letterheads, envelopes, signage, etc. it was a little costly for just one letter but it didn’t sound like fiasco anymore. about a year after, it was renamed BiL (Bancom international Ltd.)

Ferdinand G. Dysangco Andy passed away last October 2012. He was, in his own words, “a motoring enthusiast and a consummate mapmaker by advocacy” and participated as driver, navigator, or organizer in numerous car rallies throughout the archipelago. Among Andy’s legacy is a Bancom Alumni page on Facebook, which he started

“on the lighter side of Bancom” Ayala Paper Chase it was a complete turnaround for me when i shifted work from advertising (i took up marketing management) to investment Banking in 1968. it was a whole new world for me but under celso samaniego’s guidance i adapted to what Bancom was all about. There was also rKi’s vision which inspired me. i became fascinated with money and capital markets trading and learned, as part of my job, to design its unique instrumentation and documentation. The key was simply to understand the market, the products and services and the demand (still part of traditional marketing). Then accordingly you dressed up (documentation) the undertaking (transaction) and cover your tracks (legal conditions) to avoid being burned (liabilities). These were the turf of rKi and LrV. rKi’s vision was to simulate nY in manila. LrV’s job was to set the scenario on the right track. But rKi sometimes would become impatient and shortcut the process. Trading instruments and securities unique to nY, London and other sophisticated markets were new to the legal guys. it would take several sessions with them to finalize the terms and conditions of say, a Put and call option. under this situation rKi would instruct me to proceed with the final printing and put the instrument in the market. Guiling Torres, Willie’s dad, was always first on the line; he was a reluctant trial horse of rKi. But once the intricacies were explained to him he would agree. LrV would never sign documents not cleared with Legal. rKi’s instruction was to look for other signatories, but just in case, he would be responsible. at that time the cB deadline for clearing of checks was set at 2:00 Pm. Between 11:30 and 1:30 many signatories were gone either for lunch or meeting. it was also a time when many of us were not yet designated signatories or have limited signing authorities. it was very tight for our messengers. i appreciated our messengers; they fully understood what the clearing was all about, its deadline and process. We had this messenger named abe (forgot his last name). either due to exigency or “di niya alam meron ganun dokumento siyang dala (not aware of such document) o matigas lang talaga ulo (hardheaded) pinapirma pa rin si LrV (he asked him to sign).” When LrV saw the controversial document “ginawa niya sa inis tinapon lahat ng dokumento sa bintana ng 7th floor sa cBTc (LrV threw away the documents out of the window).” shocked as he was, abe ran down the stairs (elevator was always full and slow) to the street below to retrieve

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the documents. “eh malakas hangin (strong wind) kaya hanggang ayala naghahabol siya ng papel hindi malaman anong papel dadamputin sa dami ng nililipad ng hangin (many papers were being blown toward ayala ave. he could not distinguish which papers to pick up).” Poor abe got the scare of his life. in 1971 when mcmD was put under his wings LrV only remembered similar “abe stories” about me. i was not part of his re-organization plan. i weighed my options including a new job offer but i chose to appeal. LrV reconsidered and neither of us regretted it.

The Greatest Prank In Bancom in 1972 from July to september the sports world became very excited with the robert Fischer - Boris spassky world championship chess match, a 24-game series. The much anticipated “match of the century” was finally taking place at reykjavik, iceland. in manila where Bobby Fischer had great followings, people awaited what the talented but controversial chess genius could do against the mighty soviet chess machinery. as the match progressed the suspense became more intense. spassky began losing after the 3rd game and Fischer soon had won 7 of the next 19 games with 11 matches drawn. People felt the start of the russian world champion’s downfall was forthcoming. meanwhile at the Bancom building inside the Trading room, the daily financial markets had just opened and phones were ringing on top of Traders’ voices. nearby inside the Telex room, prominently reverberating amidst the noise was the continuous clickety-clapping of the aP-Dow Jones telex machine. Lito Q. who used to man the aP-DJ telex as part of his responsibility was on the watch for the latest from reykjavik. During the entire series aP-DJ conveniently provided a first hand source where results of the on-going chess championship were scooped. Lito Q. and i worked together at the institutional center. i told him on that particular day to watch for it. i also told him in jest spassky was just about ready to commit suicide if he lost again. The aP-DJ telex installed at mcmD had a keyboard and during lull moments when there were no news feeds, one could actually type and insert an article or comment among the news bulletins and it would appear like it was from aP-DJ. maybe Lito Q. thought it was a perfect timing and the right setting for a classic prank. The guy was pleasant but quite mischievous and so am i (minus the pleasant). a while later Lito Q. invited me to come to the Telex room. There he showed me the aP-DJ news feed with a reykjavik dateline which read, “spassky lost again; commits suicide” i said, “come on this is a trick!” Lito Q. laughed softly. i told him to remove it at once. But on second thought i blurted out, “maybe if you leave it there the whole gang will see it and spread the bad news”. True enough the Traders started talking about it, then our boss Jac came to learn of it. everybody took the “bait” hook, line and sinker since there was no reason to doubt the aP-DJ bulletin. With his booming voice Jac went around and announced the “great scoop” to everyone he met. some Traders informed their clients but Jac went even farther and showed sKr the article. nobody knew to whom sKr may have passed on the “news”. The whole Bancom building was abuzz with spassky’s unfortunate luck. intended for “local comsumption” among us mcmD boys, the prank had suddenly gotten out of hand and was spreading like a bush fire. it was creating a messy situation for Jac. But before it was too late our seascom office in Hongkong confirmed the news was probably a hoax and that in fact spassky managed to draw. Jac was flabbergasted and fuming mad but he did not know on whom to vent his anger. The suspect was Lito Q. but he wouldn’t admit to it. in the end everybody had a good laugh except Jac the herald. now we can aptly say, “mea culpa, mea culpa”.. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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ernesto T. echauz Judes is the Chairman of the Standard Insurance Co., Inc. Outside of the business world, he is better known as a national sports leader, figuring prominently in sailing and game fishing.

“short and sweet” in Bancom there was no such thing as training. You just had to learn and do things on your own. For three years i must have worked at least 12 hours each day, including weekends, and mostly on financial structuring and its documentation. Without my realizing it, i could have given at least 10,000 hours... not to be an expert, but to make sure that the deals worked and that they were flawless. after all, my bosses, who were only slightly older than i was, were very intelligent, smart and with high academic achievements. Yes, there were exciting phases of my life, both personal and in business, brought about by a successful career in finance. However, this could not have been possible without my exposure in Bancom, where there was no fun but all work for me. i may not have enjoyed what i was doing there, but i liked it. Bancom will be forever endeared to me and i will always give my highest respects to the people whom i have worked with, no matter what the outcomes of their own lives may have been. it is just fitting that this write-up be kept short and sweet, since that was how it really was.

John B. echauz John is a next generation investment banker, being the son of Judes Echauz. He is a Partner at Mabuhay Capital, a leading Asian financial advisory firm. He is also the Executive Vice President of the Standard Insurance Co., Inc.

“i am grateful for sKr” Firstly, i am very grateful for sKr. many of the breaks that i have received in my professional career are attributable to him, directly and indirectly. Two good men who i currently work with – my father, ernesto T. echauz, who grew our company standard insurance, and manuel V. Pangilinan, who built First Pacific from scratch – were products of Bancom. my first job at the now-defunct investment bank Bear stearns was thanks to Daniel ibasco, whom i met while assisting sKr on a securitization project in 1996. i am sure that there are many of us who have been first-, second- or even third-degree beneficiaries of the good that sKr is and has done. secondly, i consider sKr a kindred spirit.

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not in terms of mental horsepower and achievement – only sKr can be sKr, and sometimes people use his and rizal’s name in the same sentence – but rather, in that i believe we are both searching for the same thing. We search for the damaged or retarded gene in the most fundamental cell of Philippine society with the hope that upon locating it, it can be repaired by this and future generations. i believe, this is why people who actively look for solutions to end our country’s cycle of poverty and ignorance are drawn to sKr. it is my sincere hope that the work can be completed.

noel L. escaler After his BIL stint, Noel stayed as a HK resident and prospered magnificently managing his personal estate and exploiting the swings in HK property values. Noel is now back in Manila, retired as a quintessential gentleman of leisure.

“Highlights of my Bancom international story” Danding Yotoko (eaY) lifted me out of the domestic money market operations and assigned me to work in BiL Hong Kong circa 1973. my specific objectives were to raise the balance sheet levels of BiL and create a niche, as well as to firmly establish the Bancom name in the Hong Kong financial markets. i remember that Louie Villafuerte was against it initially, saying it might be a waste of time and money. But eaY insisted and prevailed. This move to Hong Kong was a defining moment in my life, for which i am grateful. The main challenge in Hong Kong was that the presence of long-term debt markets was not complemented by the existence of a short-term money market. The established institutions such as HsBc, standard chartered Bank, and other institutions were not keen on this as this would compete with their cash deposits. our selling point was that Hong Kong as a financial center should develop its short-term instruments as a basis for establishing a proper yield curve, which in turn would serve as a basis for pricing long-term debt instruments. Tony Gatmaitan was my comrade-in-arms in those pioneering days of pushing the BiL name in Hong Kong and we made a marketing blitz selling the idea of a commercial paper market. We made appointments to call and visit the heads of the major financial institutions such as schroders and chartered Limited (sir Lawrence Kadoorie), Hong Kong Bank’s subsidiary, Wardley, Jardine Fleming (allan matheson), sun Hung Kai Finance (Fung King Hey), Bank of east asia (sir Kenneth Fung), Trident international (claude charles), n. m. rothschild and sons, P. murray-Jones, W. i. carr, Daiwa, nikko, nomura, Yamaichi and other such institutions. The name of BiL, after all these marketing calls, became fairly well known in a major financial market. after this point, the other people i remember working with were Lord (Viscount) evelyn errington who became my deputy, Jackson Pau, Dick Yin, John Li and others. subsequently, cynthia Picazo, manny Pangilinan (who also became a deputy mD), ric Pascua, Tony Valdez, raffy Bengzon, Vic Tinsay, Lorna ranola, Dennis Goquingco joined our expatriate team. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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in 1975, within three months, BiL raised its Balance sheet assets from HKD 10 million to HKD 100 million. BiL lead managed the short-term commercial paper issue of Dow chemical Pacific Limited in the amount of HKD 10 million with varying maturity dates. This was significant then because it seeded the beginnings of a commercial paper market. BiL also participated in a bungled equity underwriting of the cross Harbour Tunnel, which was lead managed by Jardine Fleming. The issue was extremely undersubscribed. Jardine was so embarassed that they said BiL could back out from its underwriting agreement. i remember very well consulting eaY on whether we should back out as Jardine indicated. eaY responded, “noel, money we lose, we can recover. But if you go back on your word, you may never recover the trust you lose.” We therefore took a huge book loss initially. But this further established our prestige as a reputable investment house. subsequently, the market recovered and BiL made a huge profit from the cross Harbour Tunnel shares. BiL’s success at this point made american express invite us to assist Gilbert Gargour in Lebanon. eaY asked me to meet sKr and Gilbert Gargour in Beirut in 1974. upon my arrival, i was settling in my room at the Phoenicia intercon, when i heard a huge explosion nearby. i almost panicked. i got an immediate call from Gilbert asking me not to worry because the israelis were retaliating by bombing military Lebanese army positions near the hotel. i briefed eaY on the contents of a frame agreement discussed with Gilbert. The subsequent negotiations were carried on by eaY. circa 1976, after our success as an established Depost Taking company, as we were setting up FicorinVesT, asiaVesT and others in the region, i wrote to Hong Kong’s Financial secretary, sir Philip Haddon cave, asking him to give BiL an opportunity for preparing a proposal on how the government can establish a Treasury Bill market in Hongkong. i mentioned that Bancom had prepared and successfully implemented such proposals to governments such as the Philippines, Thailand and indonesia. Within a week or so, i got a written reply from the Financial secretary expressing thanks but stating that it was not appropriate for Hong Kong to do so at that time.

octavio V. espiritu OV was the last President of Far East Bank until its historic merger with Bank of PI. He is a past President of the Bankers Association of the Philippines, and former Chair of the Board of Trustees of the Ateneo de Manila University.

“The functional mergers with rcBc and FeBTc” in the history of banking in the Philippines up to the decade of the 1960’s, universal banking was non-existent. Philippine banking laws were patterned after those of the united states which segregated commercial banks and investment banks into separate and distinct activities and institutions. universal banking, where both commercial and investment banking activities were performed by one financial institution, was found only in the european financial system, particularly in Germany and switzerland. Thus, at that stage, the Philippine banking system was composed solely of commercial banks. investment

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banking was non-existent until Bancom, the first true investment bank, started operations and its entry forever changed the Philippine financial landscape.

Bancom and RCBC it was obvious to a few individuals at that time, particularly sKr, that combining the strengths of a commercial and investment bank, while keeping them separate, will result in a formidable force in the financial industry, thus a FuncTionaL merGer. The first functional merger was that of Bancom and rcBc. and this occurred in 1970 when shareholders of Bancom bought into rcBc and vice versa. rcBc was a very medium sized bank at that time with a very modest corporate business. Bancom, on the other hand, had a large corporate clientele base that could be brought into the bank. With the stockholder exchange, mr. augusto Barcelon was appointed President of rcBc and andres K. roxas (younger brother of sKr) became executive Vice President. other key persons that came into rcBc were miss Josefina a. Balatbat as comptroller. i was appointed Treasurer of rcBc and at the same time Vice President at Bancom and worked with ray ilusorio, archit Bartolome and Josue camba in coordinating Treasury positions, pricing and funding strategies. The functional merger of Bancom and rcBc resulted in a formidable force that competed effectively in the markets and advanced successfully against domestic and foreign banks. unfortunately, 2 years after the death of andy roxas in a plane crash, the combination unraveled. nonetheless, the functional merger proved to be a very successful model, soon copied by others.

Bancom and FEBTC There was a brief waiting period before the Bancom-FeBTc combination came into being. The opportunity presented itself when a law or regulation was passed requiring all banks to have a minimum capital of P100 million. That amount was a substantial sum at that time and all banks had to raise capital to meet the minimum requirements. and as bank shareholders could not raise the needed amount, the stage was set for new investors and foreign banks to become shareholders in Philippine banks. mr. sKr on the Bancom side put together the concept of the “shadow balance sheet”. Briefly it meant that Bancom, as its shareholders invested in FeBTc, could take into the bank a substantial amount of business that could be measured concretely into specified amounts of loans, deposits and other financial business. This also meant that this increased business will well improve the bank’s return on capital in a short time, even if capital was increased substantially. Together with shareholders of Bancom, chemical Bank of the usa and mitsui Bank of Japan also invested in FeBTc. mr. augusto Barcelon came into FeBTc as President, Josefina a. Balatbat as comptroller and octavio V. espiritu as Treasurer. mr. Jose B. Fernandez Jr. the founder of FeBTc, occupied the position of chairman and chief executive officer (ceo). Bancom’s market posture was an aggressive one while that of FeBTc reflected its classic conservative culture. each had its own decision making process and mechanism that respected each other. sharing of information was quite open. in my area, i coordinated quite frequently with Josue camba as ray ilusorio and archit Bartolome had moved on to other institutions. The key personalities we interacted with in Bancom were roly Gapud and mon del rosario Jr. among others. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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mr. Barcelon retired from Far east bank in 1980. and in early 1984, mr. Fernandez was appointed Governor of the central Bank of the Philippines. i subsequently became President and chief executive officer of FeBTc in 1986.

edgardo m. eugenio With his MBM degree from Ateneo plus eight years of experience as a Bancom officer, Edgie felt he had enough smarts to be self-employed and work full-time managing his personal estate. As his write-up attests, Edgie has succeeded very well in his various asset trading and property ventures.

“Personal business lessons i learned at Bancom” To comply with my wife inos’ condition that i should work with a reputable third party company rather than with our family owned corporation, i applied for a job with Bancom Development corporation. During late 1969, Bancom was the pioneer Philippine investment house, known for its innovations in money and capital markets. The money market department was known for its innovative dealership operations in commercial papers, equities and government securities. The markets research and analysis Group, which i first joined, was the research and support group to the money market dealership operations. During 1970, Bancom had a substantial stock portfolio with substantial paper profit, but which subsequently became a substantial paper loss, hence the reshuffle in management. During the reshuffle, i was assigned to the credit Bureau Task Force. subsequently, Bancom Finance was set up to warehouse bad loans of BDc and to handle loans to medium sized corporations rather than prime accounts. i noticed that substantial incomes can be realized by originating medium-term loans to semi-prime corporations and selling such instruments to trust and managed accounts and to large individual investors. also, we learned to give emphasis to amortized loans and more collateral, for better control of assets. among our loan accounts were Vicor music corporation, radiowealth Finance, Flying V, and alen engineering. We co-financed the Philippine visit of the Jackson 5, including young michael Jackson, with the Vicor Group. i admired ray ilusorio’s practise of hiring promising young graduates who are street-smart and are likely to become successful businessmen. in Bancom, i learned about asset management guidelines, shiftability of assets, lending and investment limits, maintaining a liquidity buffer, risk management limits and operating within your cash flow. Given my family’s real estate background, my wife became a real estate broker, and we became interested in housing renovation and trading properties. We learned that the dealership position is more profitable than a brokerage position and i applied the asset management guidelines and liquidity management concepts from securities dealership to real estate dealership. after my Bancom years, my principal assets application in private business was towards real estate investments rather than prevalent direct lendings, because of my personal distaste for borrowings and contingent obligations.

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During the confidence crisis in early eighties, i was able to liquidate my direct lendings and real estate holdings with minimal losses, and i shifted to forex holdings. Then during the cory regime, i liquidated my forex holdings and shifted back to real estate in the ortigas area. in addition to asset management guidelines, i learned the need to shift to different asset categories depending on one’s analysis of economic conditions; from direct lending to real estate to forex to stocks to art. The lessons learned from my Bancom experience enabled our branch of the family to survive the decline of the marcelo business empire during the eighties and the takeover by my cousin to the detriment of the minority stockholders.

George Forrai For three decades, George was the most sought-after Solicitor in HK among the Filipino financial community. After retiring as managing partner at Baker & McKenzie, George keeps busy authoring books and providing business advisory services

“Thank you, Bancom, for changing my life” in 1972 or 1973, i was a young associate in the international law firm, Baker & mcKenzie’s sydney office. one night, i returned home from work, a bit late, tired and ready to wind down. instead of being able to relax, i heard the annoying noise of hammering in the apartment above mine. after a while, i thought enough is enough, it’s after 9 pm and i want to rest, so i went upstairs to ask the neighbor to stop the noise. i came face to face with my first Filipino, a mr. Lozada. When i explained my reason for calling on him, he apologized and explained that his little boy had somehow locked himself in the toilet and he was trying desperately to get him out. i felt bad and decided to stay to help him. We finally got the toilet door open and we shared a glass of red wine, during which i had a chance to explain what i did. He said he’d use my services if the opportunity came up. it did soon enough and i handled some small legal matters for him. a few months later, he called me out of the blue to invite me for a chinese dinner (another first for this exHungarian refugee!) to meet some Filipino bankers who were looking for a lawyer in sydney. i accepted and that night had my first taste of chinese food with messrs. Luis Villafuerte, Danding Yotoko and Lozada. During our meal, i assumed that Luis was the “boss” and i actually thought Danding was a young assistant! Well, he looked sooo young! of course, Danding was the V-P!! The visitors explained that they were looking for a lawyer with experience in setting up a company in the new Hebrides (now Vanuatu). i told them they needed to look no further! of course, i had no idea what the laws of the nH were – but i wanted to land a new client. We agreed to meet next morning in my office around 9 am. i was in there by 8 am looking up the books about the nH. i read the first paragraph and nearly died: it said the laws of the nH were based on French civil law! oucH! That was it, i thought. so much for my bluff! But i read on and soon discovered that you could choose english law – and that, in fact, that was the law most often chosen by offshore companies registering there. saVeD! By the time the new clients arrived, i was able to spout about nH company law like a trouper... and got the job! setting up the company with 8 classes of shares proved a bit of a challenge – with literally miles of telexes passing between us over the next 5-6 months. But, finally, it was done. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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a few months passed and one day, around april 1974, out of the blue, i received an embossed invitation to attend the Grand opening of the new Head office of Bancom international Ltd in Hong Kong on 14 June, 1974. i thought: ”That’s nice but i don’t have the money to fly to Hong Kong for a party.” so, i actually threw the invitation in the rubbish bin. something made me retrieve it and i took it to one of the partners, and with a silly grin on my face asked: “How would you like to send me to Hong Kong to attend a client’s grand opening?” i expected to be told what i could do with the invitation, but to my great surprise he said, “Leave it with me!” i thought, “What’s going on? usually he’d tell me to shove it where the sun don’t shine!” a few days later, i was told that my junket would be paid for provided i could get an invitation to the opening for the senior Partner, John connor. This proved to be easy, thanks to the generosity of Bancom’s management. i was still unaware why the senior Partner wanted in on my party… but, hey, he paid for the trip, so who cares. The party at the mandarin Hotel was amazing: great food, great band, great people – with some of the most beautiful ladies i’d ever seen wearing glittering diamonds and the men all dressed in very smart suits! and a keynote speech from the Banking commissioner! after the party, John and i walked back to the Furama Hotel and i asked him what was going on. He then told me confidentially that he was opening an office for Baker & mcKenzie in Hong Kong the following week!! They had already selected another young lawyer from the sydney office to start up the office but since i had a client in hand, i should stay for 3 weeks to cement the relationship with Bancom for the new Hong Kong office and replace him for the time being. Well, i did a good job… thanks to noel escaler, later cynthia Picazo (and later still roly Gapud) for after 6 months of living in the Furama (without a salary because my expenses far exceeded my salary) i was finally offered the chance to stay in Hong Kong for good. i jumped at the opportunity and, as you know, have been living in Hong Kong ever since then. so, THanK You, Bancom, for changing my life and giving me the opportunity to live in asia, have the chance to develop an exciting legal practice and to make wonderful, life-long friends with several of your team members!

antonio P. Gatmaitan Tony Gat capped his career in finance in the 1980s as founding Chair of the Commercial Bank of Manila, which became the Bank of Commerce. After enjoying celebrity status for many years as a Political Analyst, Tony is now semi-retired, quietly engaging in private farming and real estate development.

“BiL breakout in the eurodollar market” iFebruary 1973 Bancom international Limited just moved to our new offices on the 18th floor of the newly constructed connaught centre in Hong Kong. We were hoping for a reversal of fortunes because five months ago, martial law was declared in the Philippines. There were hardly any deals moving at the time and the prospects looked rather dim.

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our next door neighbor was sun Hung Kai, and one afternoon we were invited to the cocktail party celebrating their new offices. We met martin Lee-Warner, Gm of P. murray Jones, a London based money broking firm who intimated to us that some of their clients in London were looking for a possibility of eurodollar placements in Philippine institutions or any other qualified borrowers. i relayed their interest to Louie Villafuerte, our senior managing Director of BiL who was holding office in manila. LrV told us that mr. Leonides Virata, DBP chairman at that time may be interested and he will discuss the possibilities with mr. Virata. after two months, no word from manila. in the meantime, martin Lee-Warner kept prodding me for other potential clients in the Philippines. i kept telling him to be a little more patient because manila was a difficult place at the moment. Then one bright morning i was surprised by an overseas phone call from marina Trinidad, assistant to the central Bank Governor. she came to the line and she said, “is this Tony Gatmaitan?” i said, “Yes ma’am”. “Governor Licaros on the line, please wait.” i said, “Good morning sir”, when i heard somebody picking up the phone. “si Tony Gatmaitan ba ito? Balita ko may limang banko na gusto mag pautang sa atin ng 100 million dollars, totoo ba ito?... i was called by the palace to attend a meeting chaired by alex melchor. in attendance will be sixto roxas, Gus Barcelon, Villafuerte, Leonides Virata and the President (marcos). i want to know the facts...” i replied, “Yes mr. Governor, there’s a pending offer of 100 million dollars from five non-american banks to qualified borrowers. These are Bank of montreal, Banco alicante of spain, Kansallis osaki Pakki, and two others.” Then i hurriedly explained that their proposal was to offer a) 25 million dollars to DBP subject to a review by their Hong Kong lawyers of DBP’s ability to accept dollar deposits because its charter does not explicitly say that it can borrow and deal in foreign currency; b) 20 million dollars in negotiable certificates of deposit denominated in us dollars; and c) the balance of 55 million dollars to other qualified borrowers from the Philippines. “Those are the facts, mr. Governor,” i told him. “But these loans require a sovereign guarantee, right?” “no sir, no sovereign guarantee required.” “okay.” end of phone call. at the time when skepticism was prevalent, Bancom international arranged a private placement of these two debt instruments of two of the largest government financial institutions, 20 million dollars to PnB, and three weeks after, 25 million dollars to DBP. in June of 1974, the Board of Directors of Bancom held its regular Board meeting in Hong Kong, coinciding with an inaugural party for BiL. it was the first time that the Board of Directors of a Philippine financial institution was meeting outside of the country. Hong Kong had been long recognized as a major centre in the financial community. not only did we hold a successful Board meeting, but we were able to complete two major eurodollar placements at the time. i resigned from BiL the day after that historic meeting. i didn’t want to push my luck. Went home to manila to engage in fishing and rice farming. and i was looking forward to my newly-born baby girl born 3 months ago and watch her grow up. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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Federico c. Gonzalez Dickie was a past President of the Home Insurance Guaranty Corp., the founding President of San Miguel Properties, Inc. and was Dean of the De La Salle Graduate School of Business. He is the President of Philippine Emerging Start-ups Open Inc.

“Project Development operations” The day i joined Bancom in may 1970 was a day of mourning for andy roxas, whose plane had crashed one or two days before. i didn’t personally know him, but learned of his reputation as a key player in the Bancom brain trust. However, i would also soon discover that the talent bench at Bancom was incredibly deep, built from the best and the brightest that sixto K. roxas (sKr) was able to attract, develop and motivate with his visionary leadership. although projects were assigned piecemeal to the Project Developmet Department, the benefit of hindsight reveals one of sKr’s initiatives, which was to study key industries, identify those still trapped under old structures and practices, formulate change strategies, and organize the ventures to execute those strategies. While Bancom would craft the logic of the change and its implementing strategies, it would also provide investment support and identify key partners to beef up and operate the venture. The private electric utility industry was one of those; the proposition was to substitute costly and inefficient equipment purchases with open and consolidated procurement of generation, transmission and distribution equipment, thereby benefitting from scale and competitive supplier bidding not often available from earlier practices. To implement this, the utilities Development Finance corp. (uDFc) was organized by the Philippine electric Plant owners’ association (PePoa) and the industry’s funders, viz., Bancom, DBP and PDcP. uDFc’s business model was to provide professional services as buyer’s procurement agent and to be compensated as such, thereby achieving transparency in pricing and professional fees. This new set-up bypassed the supplier agent and its commission, as well as any padding that was possible under the old arrangements. The first consolidated purchase was bid out and then awarded sometime in 1974, for delivery a year later. But this plan was overtaken by Pres. marcos’ executive order or Loi mandating the transfer to the national Power corp. (nPc) of responsibility over all power plant operations, including procurement. By the time the ordered equipment arrived, nPc was the new buyer. and not appreciating the concept behind the buyer’s agent model, they unilaterally withheld paying the procurement fee; privately, the belief was expressed that uDFc was surely enjoying a hidden commission from suppliers and would do well enough even without the buyers’ procurement fee. Housing was a major business activity that found a fresh trajectory with the innovations introduced by Land and Housing Development corp. (LHDc), a firm which Bancom organized with key players in the housing supply chain: sindiong, ocampo & Garcia for architectural design; DccD for engineering; Francisco cacho for construction; the Tuazon family for land in marikina; Bancom for development financing; project management was organic. The projects were developed with economies of scale on the ground. While buyers were attracted by the superior planning, design and pricing of the product, mortgage take-out at sss was still stuck at the level of processing individual loan applications. LHDc introduced various incremental innovations at attaining economies and efficiencies in securing fund

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releases, with the sss cooperating with supportive procedures at their end, as they themselves were in search for efficiencies. What evolved was the mass-housing window of sss that today benefits all developers and buyers. it was fortunate that Bancom found a visionary collaborator in the person of sss administrator Gilbert Teodoro, who cut through bureaucratic red tape in the process of creating the mass-housing window of sss. The rise of the giant Japanese “shoji Kaisha” trading-cum-manufacturing conglomerate model motivated the search for a corresponding Philippine model to attain competitiveness in international trade. Bancom actually drafted the charter for such a venture, with the thought of attracting major private export companies to consolidate their overseas trading offices, expand reach and improve economies beyond what was possible from single-company or single-industry trade offices. But the government had similar ambitions and the Bancominitiated concept was eventually adopted by the government for the creation of the Philippine international Trading corp. (PiTc). Projects that required aggressive project management inputs in support of approved loans were also tackled by the PD department. one such project that pioneered the enclosed-mall design was the Harrison Plaza mall of marsteel, at a time when most retail stores were still located in strip malls like the angela arcade at the makati commercial center. in addition to financing. Bancom supplied critical inputs that included project management and marketing from the PD Department, architectural design and engineering from the partners at LHDc. The consequent build-up of construction management expertise enabled other building projects like the Bancom one and Two buildings, Twin Towers, Bulletin HQ, among others. a major horizontal development project was the ecoland Development in Davao. When the move came in the mid-1970s for Bancom to spin off its non-banking activities into separate entities, one of those formed was Bancom realty corp. (Brc), under which property, housing, and construction management businesses were housed. Bancom realty eventually became a talent source of the cory aquino Government, with many of its officers appointed to the Human settlements ministry and its operating agencies. For more than 20 years, key positions of the Home insurance Guaranty corp. (formerly the Home Finance corp. and again later renamed to Home Guaranty corp.), were staffed with ex-Brc officers, viz., myself, chuck Doble, Jun miranda, Willy Hernandez and art Tan, who in that order assumed the positions of President or eVP of HiGc from 1986 to 2008.

rolando P. Gosiengfiao After his Bancom assignment in Thailand, Rollie continued on as an expatriate management professional for many years. He is now back in the country, and was recently named Chairman of the Bases Conversion and Development Authority.

“Bancom in Thailand” it was in mid 1979 that a deal was struck to form a joint-venture presence in Thailand. The idea was to form a simple financial advisory company and develop a small team which could then in time acquire an investment company or a securities company. Thailand had earlier just been through a financial industry crisis and plenty comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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of investment houses were in trouble. They were either being consolidated or being folded into existing banks and finance companies. mike Goco had been stationed in Bangkok for a year as representative of Bancom to explore how to enter the market. it should be noted that Bancom had an earlier presence in Thailand together with Bankers Trust when Tisco was formed and managed by Bancom secondees at the beginning. Tisco eventually became one of the top 5 investment houses in the country but Bancom lost its stake in the reorganization and parting with Bankers Trust. our majority partners were the saha-union Group and the asia credit Group. saha-union was by then the largest textile group in Thailand and was owned by the Darakananda headed by Khun Damri Darakananda. Dr. amnuay Virawan, previously a cabinet minister, was one of their key professional executives and he took the lead in forming the venture with Dr. sixto K. roxas. The asia credit Group was a leading financial group and was part of the Bangkok Bank family controlled by the sophonpanich family led by Khun chatri sophonpanich. its then President was Khun sunthorn arunanondchai who was previously one of the key executives of Tisco and was thus quite familiar with Bancom. i was informed that i would be seconded to the new venture in late 1979 together with Delfin (Jing) Warren who was at that time in Jakarta. i had just returned from a month-long sailing trip from Davao to northern australia and was quite surprised by the new offer. at that time i had also decided to ask someone in Hong Kong to marry me but had not yet done so. it was a crossroads for me as i would have to ship out by December 1979. so i moved to Bangkok in that month, and happily got married in Hong Kong in February 1980, then moved my bride to Bangkok 2 days after the wedding. The company univest Development co., Ltd. was formed with a nominal capital of Bt10 million, with the Bancom Group taking a minority. The Board chairman was Dr. amnuay and the managing Director was Khun araya arunanondchai, Khun sunthorn’s wife, who also headed union securities for the saha-union Group. also joining the Board was Khun anand Panyarachun, a former senior diplomat who had just joined saha-union as chairman of its export arm. i was designated Deputy managing Director while Jing Warren was senior manager. Within six months of our existence, Dr. amnuay was appointed Finance minister by the new coalition government, so Khun anand took over the chair for the next 2 years. it should be noted that Khun anand would subsequently become the Prime minister of the country twice in the 80’s. We formed a small team and hired a local to be a junior professional (Khun Kessuda raiva who is now President of s&P Global co., Ltd.) plus an accountant and an executive secretary. our office would be on the fifth floor of an old building in old Bangkok’s chinatown, within walking distance from the old offices of Bangkok Bank and asia credit. During the first few months in 1980 we witnessed the rumbling of tanks near our office when there was a military coup against the government of Gen. Kriangsak chomanan who eventually resigned and was replaced by Gen. Prem Tinsulanonda. as we were limited to providing financial advisory services, we started with raising funds and syndicated loans for local groups. The highlight for us was the us$6.5 million loan syndication for the central Group of the chirathivat family. at that time this was a significant amount for a private unsecured corporate borrowing

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and the central Group was not known to bankers outside Bangkok. Jing Warren and i had to piece together the splintered information on the companies comprising the central Group and even we were surprised by the size of the informally consolidated accounts. The successful syndication of the loan in Hong Kong was the beginning of the central Group going financially mainstream, so to speak. The funds were eventually used partially to finance the new Hyatt Hotel and adjacent central Department store mall. as a side note, i remember the 3 chirathivat brothers led by Khun suthikiat who flew with us to Hong Kong for the signing. The family was known for being thrifty. We all flew economy and their check-in luggage were mainly empty. on the flight back, each brother was carrying a brand-new briefcase with tags on them and inside were shirts in packages. i asked if they went shopping and they said no, these were items to be sold in the stores and they were just carrying them back, including the briefcases! We did other significant financing deals for the likes of the charoen Pokphand Group, min seng machinery, Thai Pulp & Paper, and others. The venture would be shortlived as in late 1981, barely our second year, the Bancom Group crisis in the Philippines would end our efforts. my brief stay in Thailand will always be well remembered. our first daughter was born there. my wife isabella would work briefly for Khun mechai Viravaidya who was best known for population planning and for free condoms which were named after him and he would eventually become Deputy Prime minister. i still see my old friends in Bangkok and i am still in touch with Khun sunthorn who is now chairman of cP Land (property arm of charoen Pokphand).

christopher m. Gotanco Chris is the President of Anglo Philippine Holdings Corp., a listed diversified holding company. He is also Chairman of Penta Capital Finance Corporation and Vice Chairman of Penta Capital Investment Corporation, an investment bank.

“sudden shift from Bancom to union Bank” on my first working day in Bancom Development corporation, there was a bank run. January 19, 1981 was the monday after the weekend when news broke out in the newspapers and in the rumor mill that a leading chinese businessman, Dewey Dee, had fled the country, leaving behind a huge pile of debt with numerous financial institutions, including Bancom. it was the proverbial straw that broke the camel’s back in what was then already felt to be a tenuous Philippine financial market. Flashback to november 1980. art aguilar who was then senior Vice President and head of the Financial management Division of Bancom took me in as Vice President and head of the Project Finance Department, replacing Bobby atendido, a former classmate in the asian institute of management, who had transferred to the Hong Kong office of Bancom. art, who was one year ahead of me in aim, explained that Bancom was comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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going through a major corporate reorganization, with a new group of investors led by the Filipino-chinese entrepreneur Tan Yu infusing fresh equity into the company. a lavish and well-attended cocktail party at the ballroom of a five-star hotel in makati was held shortly before christmas of that year to formally announce the reorganization and the entry of the new shareholders. art was very optimistic that these developments would enable us to pursue an aggressive campaign for new project finance deals. i had agreed to start in the third week of January 1981 to allow me time to wind down on my previous job. in the aftermath of the Dewey Dee scandal, all of art’s optimism flew out of the window. my first week on the job was spent in meetings to assess the existing loan portfolio of the investment bank. a crisis atmosphere prevailed over the sixth floor of the Bancom head office, as it did throughout the whole building. The Project Finance Department, instead of chasing new deals, had to participate in the messy and complicated task of collecting on or restructuring past due loans or foreclosing on assets that were used as collateral by borrowers whose businesses had become unviable as a result of the financial aftershock. my group had the particularly difficult task of handling most of the so-called “crony accounts” or loans to groups who were perceived to be close to the powers-that-be in the presidential palace. most of these accounts had so called “evergreen lines” whose loans were almost always renewed upon maturity. The system was fine for as long as the sources of funding for these loans rolled over their placements. in the aftermath of the Dewey Dee caper, these fund sources which were enticed by the attractive returns on their money market placements all but dried up. a vivid memory of my first day on the job was the sight of a long queue of panicky money market placers who occupied most of the driveway leading to the entrance of the Bancom i building. What impressed me most during those first few weeks of working in a crisis-torn organization was the quality of the professionals who were assigned to my group. i was fortunate to have inherited a bunch of well-trained and driven young account officers (mostly products of leading business schools both here and abroad) whose courage and equanimity in the face of overwhelming odds were simply awesome. in later years, after leaving Bancom, many of them would move on to key executive positions in leading local and foreign banks or conglomerates. although i had a previous background in corporate finance, in addition to years of teaching graduate business courses, my banking experience when i joined Bancom was fairly limited. These professionals helped me a lot to learn the ropes of investment banking “on the fly”, so to speak. The first few months of working in Bancom and participating in its subsequent transformation into union Bank in august 1981 were genuinely challenging and life-defining. The hours spent reading through voluminous credit reports, new loan and restructuring proposals, and attending endless credit committee, board of directors and creditors’ committee meetings, have left indelible imprints on my professional life. a particularly moving and memorable experience in Bancom was a decision to foreclose on an ancestral home in new manila that was used as collateral by a chinese client for a loan that had turned sour. i would learn afterwards that this meant displacing the octogenarian matriarch of the family who had become emotional upon seeing that the house that she and her late husband had built was being taken away. Perhaps, this traumatic experience influenced me in a deliberate choice to leave banking as a full-time career. The transition from investment banking to commercial banking, with the collapse of Bancom and its revival as union Bank under the control of the social security system and the Land Bank, was as much of a culture shock for me as it was for most of the Bancom professionals who had stayed behind. By then, a number of Bancom’s executives and professionals, including art aguilar, had moved on to more promising and stable career options.

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For those left behind, the conversion involved a paradigm shift, from “thinking out of the box” (read, creatively) in an investment bank, to “thinking within the box” in a commercial bank where adherence to systems, procedures, and operational controls held sway. it took a while before account officers who started in Bancom could overcome the so-called “pink slip syndrome”, or getting approvals for loan releases and the like by exception. The Bancom professionals who had remained in union Bank had to undergo crash courses on commercial banking operations. in keeping with its mandate to continue handling the restructuring of Bancom’s major delinquent accounts, the Project Finance Department was renamed the Financial consultancy Department. i stayed on for another two years until the middle of 1983 when i went on a one-year sabbatical through a us Government-sponsored fellowship in the united states. This was about the time of the aquino assassination. it was not until my return in mid-1984 that i got a taste of working in the midst of the major political and economic crisis that had hit the country. For almost everyone then, those were truly interesting times! The crisis of survival that prevailed in Bancom in the aftermath of Dewey Dee was turned into a crisis of confidence which made it difficult to sell the product lines and services of a revitalized union Bank. The presence of the sss and the Land Bank came as a convenient competitive tool, but the bank’s limited balance sheet and branch network made it difficult to prosper in the midst of strong competition. By then (around late 1984), i had transferred to the Branch Banking Division from the reorganized corporate Banking Division. i was assigned to head the Branch marketing Department, a stint that enabled me to handle accounts on both sides of the bank’s balance sheet. my three-year stay in that post was truly a valuable learning experience in so many ways. a favorite episode was the crisis precipitated by the inclusion of union Bank among the government-owned and controlled companies which cory aquino, as a sign of protest against the perceived cheating in the 1986 presidential elections, had urged the public to boycott. For a brief period, the bank suffered massive withdrawals but this was cut short by the eDsa revolution which gave the bank, with the help of its major shareholders, time to stabilize operations. By 1987, the government started moves to divest from the bank, a process which entailed giving generous early retirement benefits to those who wanted to explore other career options. Having thought of giving up on a fulltime banking career, i availed myself of the generous offer. my short stint in Bancom, and the four years spent in union Bank, were truly life-defining career opportunities from which relationships were established and depth of business knowledge was acquired. all these have helped me for the rest of my professional life.

Daniel D. ibasco Danny is a co-founder and currently the President of Fortman Cline Capital Markets (Hong Kong) Ltd., a rapidly growing private investment banking firm with an impressive track record in completed M&A deals in Southeast Asia.

“my memories of Bancom” i joined Bancom right out of college in 1980 as a De La salle university graduate. During those days, it was every graduate’s dream to work for multinational companies such as citibank, P&G, unilever and blue chip comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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conglomerates such as ayala and san miguel. Bancom was, however, the first institution to make an offer. i just had one interview with cathy Go and Tony Tiongson who headed a credit risk-monitoring department and which needed new blood. i was one of the three newcomers hired alongside an atenean and a uP graduate. risk management and compliance was relatively new in Bancom then and did not seem to get the full support of senior management. it was against this background that i sought a transfer to the Financial engineering Department (or the credit Department) after 6 months on the job. i reported to a DLsu colleague alboy Poblete, Bernie atienza and evelyn singson. Bancom was a great after-college experience. it had a young workforce and was like an extension of college life. i knew in an instant that the firm had first-rate people from the top schools in manila. The firm enjoyed a corporate culture of success and was key in shaping the future of capital markets in the Philippines. i had so much inter-departmental experience with people in the accounts management group as well as the remedial asset management group. The camaraderie within my department and other departments was what made my experience at Bancom the most memorable. The quality of people and the relationships i have had with them has endured over the years. many of them occupy very senior positions in most financial institutions in the Philippines. Bancom had a unique corporate culture where strong teamwork and bonds existed with fellow co-workers despite perceived warfare between our own respective bosses or department heads. i may have joined Bancom, however, already during its twilight years. When i joined, Bancom had (i) too many departments and reporting channels, (ii) engaged into business diversification that to some people may be defined as slack, (iii) political fiefdoms characteristic of a growing organization with scarce resources, and (iv) a decentralized risk management system which may have contributed to its downfall. it was a short 2 years after i joined when the firm suffered financial distress from the commercial paper defaults of Dewey Dee, among others. The remedial asset function was growing in importance with deal origination (principally in the form of underwriting) drawn to a halt. i must be one of the alumni that did not see Bancom during its glory days. my experience had more to do with (i) renewals of existing underwriting facilities, (ii) credit risk management, and (iii) remedial asset management. The Philippines at that time was opening up to the international capital markets and i needed to find a new ship as Bancom’s downfall was imminent. i since then joined the First national Bank of Boston when it opened an offshore banking unit in 1982. shortly after i left, Bancom fell into the hands of the union Bank of the Philippines and became a full-fledged commercial bank. i’ve always wondered what Bancom was like during its glory days. i now run my own investment bank focused on mergers & acquisitions and private placements of equity in southeast asia and soon in Latin america. The firm has since grown into a league table m&a firm with over us$9 billion in completed transactions. When mulling over corporate strategy and shaping up the corporate culture of the firm, i always think about my pleasant years in Bancom as a model for talent development and a productive work environment. i have hired the best and brightest from the top schools here, similar to Bancom during its glory years. it was this pleasant learning experience in Bancom that gave me the motivation to create an organization of young, smart and highly motivated people. in addition, i have adjusted this for the modern environment where the organization is flat, non-political and highly responsive to the customer. risk management like in any institution will be an important facet as we

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grow and ensure our long-term survival. The right mix of corporate culture, allocation of resources to the needs of the customer, and having a sharp eye on risk and management thereof would, in my mind, lead to over performance of any professional service organization. These were my key takeaways from my short stint in Bancom but which had a strong impact on how i wish to position my firm for the future.

eugenio L. Lopez iii Gabby is the Chairman and was until recently the CEO of ABS-CBN. Under his long years of leadership, ABS-CBN developed into the leading information and entertainment media conglomerate in the Philippines.

“a memorable apprenticeship” my Bancom days was my first foray into the world of Finance. i was a political science major from college. my understanding of the world of business was extremely limited. more importantly, it was my first experience of how a corporate culture is part and parcel of a successful organization. The esprit de corps at Bancom energized everyone. everyone was young, everyone was capable, everyone had a can-do attitude. Till today, i carry many of the lessons i learned from my Bancom days.

Victor c. macalincag A former National Treasurer, Vic had a long and distinguished career serving in government, as President or Director of a succession of GOCCs. He is the Chairman of AZ Development Managers, Inc. and Macalincag, Miranda & Associates, Inc.

“Working for sKr in the early years” mr. sixto K. roxas (sKr) was already a legend even before i joined Bancom Development corporation (BDc) in 1965. He was regarded as the economist of his time after a brilliant stint in the government at a very young age. He was held in high esteem not only by his peers but also by those who have worked with him, both in the government and the private sectors. a great number of them later rose to positions of power and influence in almost all sectors of society. most of them stand witness to the exceptional ability of sKr, to his great vision and exceptional analytical gift. even before i married my wife, i already got a lot of feedback from her about sKr’s work habits and brilliance. she had worked with sKr in the central Bank, the Philippine national Bank and Filoil when he returned to the Philippines after his graduate studies and teaching stint in the us. His meteoric rise as a young professional created a great demand for his services and a niche for himself. This paved the way to his appointment to head, as Director-General (cabinet rank), the Program implementation agency, a newly created think-tank comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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government agency composed of newly recruited young bright technocrats, most of them handpicked by sKr. The agency was tasked by then incumbent government administration to draw up the economic program and the priority projects needed to implement said program. after government, he established Bancom Development corporation, the country’s first investment bank performing a genuine investment banking function. i gather that sKr was also invited to sit on the board of several large corporations headed by business moguls of that generation. With the foregoing as backdrop, i was deeply honored and extremely excited to have been invited to join sKr’s outfit – with sKr himself as my immediate superior. The prospect of working with sKr titillated my imagination with anticipation of challenging encounters with this highly revered man. i found out within a very short time that all the accolades accorded to sKr were well-deserved. my admiration for him was further heightened when we started working together on a project assigned to me. i was hired to be special assistant to sKr who was the President. at that time there were no eVPs, VPs, and aVPs, except for one aVP, a foreigner from Bankers Trust company. The titles given to senior officers were Head of underwriting, Head of money market, Head of Legal, special assistant to the President, etc. simultaneously with my appointment was the hiring of a senior consultant with a Ph.D. degree from a u.s. university and with masteral and bachelor degrees from u.P. The first task that was given to both of us related to the development of the money and capital markets in the Philippines, which at that time were non-existent. The core of said project was government securities. as explained to us by sKr, BDc was appointed by the central Bank and the Department of Finance as their financial advisor, specifically to develop the government securities market. sKr was noted for being a “workaholic”. almost everyday he would stay up late in his office. most of us would also stay in the office way beyond office hours just in case he would need anyone of us. The funny thing was when the intercom would ring at late hours, each of us was hesitant to pick up the phone knowing that it was sKr at the other end of the line. i myself had a lot of inadequacies as i was starting my professional life, so i was afraid of being asked questions by sKr which were very difficult to answer. Thus, this hesitation to pick up the phone. There were times when sKr would hole us up in the conference room for brainstorming. This was his way of getting us out of our shells: to draw out our ideas and proposals where BDc could possibly establish itself. During these sessions, i would hear terminologies used by sKr which i hear for the first time. some of these were high sounding words to me then, like “physical and financial infrastructure”, “land banking”, “liquidity”, “yield curve”, etc. i remember that in one of our sessions in 1966, he broached the idea of BDc raising funds for condominiums. What the heck was a condominium, i asked myself. after hearing his proposals and explaining what a condominium was, his proposal was rejected outright by his officers and technicians, citing the Filipino culture of families preferring to own a piece of land where they can build a house on. That was then when the population was small and there was enough land space available. But viewed in the present perspective, condominiums are now the main staple of real estate developers especially in mega cities like metro manila, metro cebu, Davao and the like. This foresight of sKr only shows what many say that “he was born ahead of his time”. There was one occasion when sKr called me to do something i never heard about before, i.e., to construct a monetary balance sheet for him without explaining the background, purpose or objective of the request. my pride took the better of me so i did not seek any help from him. on my own, i had to exhaust all avenues of research just to find out that there was nothing written about it in any textbook, reference or reading materials. my background as an accounting major graduate and cPa played a crucial role in analyzing the terms of reference of the research paper.

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maybe, just maybe, he wanted to know how the operations of the cB, being the source of liquidity through its currency creation power, would affect the commercial banks and the entire financial system in terms of liquidity, lending operations, interest rate, inflation, etc. so, i started to study and understand the cB balance sheet and how its behavior would affect the operation and balance sheet of the financial system. When i submitted the product of my research, he told me that i was on the right track. i felt so elated by his comment until he drew open the drapes covering the blackboard behind his office desk and started writing, non-stop, an outline on the board while briefing me at the same time on what he wanted done on the subject. He left me in awe at the speed at which he wrote the outline from one end to the other end of the blackboard which covered the entire width of the room behind his desk. in short, he made me realize without offending me that there was a lot to be desired from my paper. reverting to the specific task assigned to me and the senior consultant, we immediately formed an inter-agency committee composed of government people from the cB (now BsP), the DoF, the Budget commission (now DBm) and the Bureau of the Treasury as counterpart to BDc’s representatives, the latter providing all the guidelines and the guidance on the background research work needed to complete the project. all the expenses incurred by the committee, including the provision of office space, were shouldered by the cB. The research work was completed after gathering, collating and analyzing all the data on outstanding government securities and all authorizations, procedures and rules and regulations concerning the issuance of said securities, as well as the monetary and fiscal policies governing them. The primary purpose was to formulate a background paper that will serve as a platform for launching a particular type of government financial instrument as initial step towards developing a government securities market. To summarize, the study revealed that almost all government securities, although with fixed maturity, were really demand obligations because they carried central Bank support. This meant that the securities could be encashed anytime at the cB at face value plus accrued interest. in other words, there was no yield curve to speak of. There were other features attached to the government securities which distorted the market and thus impeded its development. among them were the tax exemption and the primary reserve eligibility features. BDc decided to remove all these embellishments so that an orderly government securities market could be created. initially, there was debate among us within BDc on what type of financial instrument would be launched. in the end, it was decided to start with a short-term maturity as the initial offering, thus the birth of the 91-day, 182-day and 364-day Treasury bills which were launched in the summer of 1966 through auction. The auction was done every seven days. only accredited members of the national association of Government securities Dealers [(naGsD), presently known as Government securities eligible Dealers (GseD)] could participate in the auction. The launch was started with a test issue of modest volume, gradually expanding in terms of volume as the financial market gained experience. at present, the outstanding T-bills amounting to almost P300 billion constitute the principal commodity in the money market. in hindsight, we believed that we made the right decision in starting with the short-term T-bills. They served as the launching pad for longer instruments such as Treasury notes and Treasury bonds. Like T-bills, they were sold through auction and traded in the market by eligible dealers. The presence in the market of all types of maturities paved the way towards establishing a yield curve on a wider spectrum. aside from designing the T-bills, BDc also prepared a training kit on how to conduct a sale auction for the T-bills. The securities market department (smD) of the central Bank was the user of the training kit. as fiscal comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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agent of the national Government, the central Bank through smD was also its marketing arm. This function was later on assumed by the Bureau of the Treasury. BDc also conducted a training program for prospective dealers of government securities (Gs). The purpose was to teach them how to submit their bids in the auction, how to trade the Gs and how to make a market for Gs through daily quotes. BDc also initiated the formation of the naGsD where it played a pivotal role as member. after nearly three years working for Bancom, i was invited by then secretary of Finance to head his Technical staff. my relatively short stint enriched me in many ways, broadened my horizon and widened my perspective. in short, my experience with sKr has strengthened my foundation and has helped me face new and difficult challenges with greater confidence. i felt great pain when, as undersecretary of Finance and concurrently national Treasurer, in 1981 i was requested by then central Bank Governor to draw up a bail out program for union savings Bank, the only surviving institution in the Bancom Group of companies. The equity infusion by the Land Bank and the social security system saved the savings bank but totally eliminated the stake of BDc and its stockholders in the bank after its quasi-reorganization. The rest is history. union savings Bank has metamorphosed to a commercial bank and finally to a universal bank, presently known as union Bank of the Philippines. i felt very sad to see a great institution i had loved so much vanish only after 16 years of existence. i found it ironic that i had to get involved in a futile effort to save a great business conglomerate. From its ruins, i saw the shadow of a great man left standing – great because he left a legacy that cannot be erased by time. Without any doubt, sKr is regarded as the father of the money and capital market in the Philippines. He pioneered investment banking and initiated many more other concepts such as securitization as a form of project financing, and setting up of monetary and financial indicators, etc. and equally important, he left a roster of outstanding Bancom alumni under his tutelage, who distinguished themselves in their respective fields of endeavor in business, in banking and finance, in public service, in the exercise of the profession, and in the academe, among others. i could not find the appropriate words to express my gratitude and thanks to mr. sixto K. roxas for the opportunity to experience a short but rewarding career in Bancom. it opened many enriching and fulfilling options that have brought me to where i am today.

angelo V. manahan Upon leaving RCBC in 1975, Lito held various positions as CFO or as a senior banking officer. His latest posting was in UCPB which he joined after the EDSA Revolution as Head of the corporate lending unit. He retired as Executive Vice President from UCPB in 2004.

“Bancom investment services and rcBc Trust” The year was 1969. i was head of Bancom’s investment research Department holding office at the cojuangco Building along ayala ave. and about a kilometer away from the Bancom Head office in comtrust Building. Together with me in my unit were evelyn singson, Flor Tariella, Bobby Tanchoco, a few other officers and the irD staff.

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one day, i received a call from cynthia Lontoc, secretary of rcG (roly Gapud) who told me that her boss wanted to see me immediately. so with haste, i went to the office of rcG and when i entered his room, FGm (Francis moran) was already there. rcG said, “The functional merger between Bancom and rcBc is now complete. The investment services Department of Bancom and rcBc’s Trust Department will be combined as one and the new unit will be headed by FGm. FGm wants you to be the deputy and your direct assignment will be to head rcBc’s Trust Department”. FGm said that the new unit will be located at the rcBc Head office located along Buendia ave. (now Gil Puyat ave.) and housed at the Great Pacifc Life Bldg. The new is/Trust Department was a mixture of both Bancom and rcBc officers and employees. FGm was unit head, was a senior officer of Bancom, but did not carry any rcBc title. i was made the head of rcBc Trust Department with the title of “assistant to the President” and continued to be a Bancom officer. Together with us in is/Trust were Gene Bautista, eric mondragon, and Jimmy Gonzales who were Bancom account officers. senen Glinoga, an rcBc officer, was Trust counsel. The operations head was rey canonizado, a Bancom officer. However, the staff that rey supervised were a mixture of Bancom and rcBc employees. it was easy to distinguish who among them were from Bancom or from rcBc. rcBc employees were in uniform while those from Bancom were not. For a better picture of the rcBc organization, here is how it was after the functional merger. chairman was aY (al Yuchengco), President was amB (Gus Barcelon), executive Vice President was sKr (Ting roxas), marketing/Lending Head was rYc (romy co), Treasury Head was oVe (oV espiritu). Vicot Panlilio was oV’s deputy. Freddie Villadelgado was Head of Branches, abe novales was Head of corporate Planning, Tony de Leon was Head of international Banking, sim reyes was controller and i was the Head of the Trust Department. The general management thrust was business expansion so everyone was “upbeat” and was marketing oriented. so when officers go on client calls whose products do they sell? Bancom or rcBc? Well, theoretically both. in the case of is/Trust some policies had to be made. if a client wants a trust product or service, the business clearly goes to rcBc. But suppose the service desired is fund management, to which entity does this go? The principle applied in this case is “customer’s choice”. me? i do marketing work for Bancom and rcBc, going out on calls with both FGm and rYc. Those years were truly fun. in 1972, talk was circulating that the camps of aY and amB/sKr were having problems. This proved to be true and eventually the functional merger was disengaged. all Bancom officers and employees were advised to be ready to leave their post if they were performing rcBc functions. under such a scenario, a significant management void will materialize in the bank. rcBc will be without a President, eVP, Head of Treasury, Head of Trust, and other staff units that Bancom provides rcBc. a crisis in rcBc. During the transition of the break up, rYc, with whom i had a very close working relationship while the merger was on, sent word that he wanted to talk to me. so i went to see him and this is what rYc told me: “You probably know by now that the Bancom-rcBc merger is being disengaged. a big void will happen in the organizational structure of the bank. aY talked to me and has made me eVP of rcBc. moreover, i was given a free hand to pick my management team. How would you like to join us?” rYc offered me to head the Trust and Treasury Departments of the bank. He further said, “Your years in Bancom have given you a lot of knowledge and experience in the investment banking field. Here is your opportunity to expand that knowledge and learn more about commercial banking.” in reply, i simply asked him, “Who will i be reporting to?” rYc replied, “To me”. i accepted his offer. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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With my decision made, i went to my Bancom bosses to say my goodbyes. FGm was first and was truly sad when i told him the news. He, however, understood very well my position. next were rcG and sKr. Their response was the same. Both of them respected my decision. in a few weeks, all Bancom officers and staff doing rcBc work were relocated in the new Head office of Bancom located along Pasay road. i stayed on in the rcBc Head office to attend to my new job. in about six months, David sycip came on board and was elected rcBc President. aY kept the chairmanship. in the meantime, other challenges and opportunities came my way and in 1975 i left rcBc for other postings. The country was in the middle of martial law.

narayan B. menon While originally from Kerala, Nary retired in Bangalore, India a few years ago, after working in Indonesia for some 30 years. He was a Senior Partner at Peat Marwick in their Jakarta practice.

“From Jakarta, memories of Bancom” my earliest memory of working for Bancom was the informality and speed of the interview process. a twenty minute interview with ramon Del rosario and a similar one with Kaiku Licuanan and i was on board, with the intention of being posted to Jakarta. During my orientation, i spent time in the money market department and with the investment Banking department, before being posted to Jakarta to join Francis estrada’s team in December 1975. my memory of that time is that Bancom was full of smart dynamic people and sixto roxas had almost a “rock star” status in the field of investment banking in the Philippines. i was happy in that environment. in Jakarta, Bancom had acquired a 25% stake in a dormant non-bank Financial institution (nBFi), Ficorinvest, which had one loan on it’s books and that too a bad one. The Bancom seconded team to Ficorinvest consisted of Boyet Barlis (a money market specialist par excellence), ike Bernardo (a superb marketing man), with me looking after credit, all led by a dynamic, young but wise beyond his years Francis estrada. The busy “can do” Jing Warren joined us later. in the second, full year of taking over, we had become the number one in the field, in all parameters. The competition was tough, nBFi’s led by chemical bank, manufacturer’s Hanover, Bank of america etc. However the “Bancom spirit“ triumphed in Jakarta. Throughout this period, we had the leadership, knowledge and wisdom of sixto roxas and Kaiku Licuanan backstopping us. in the early days, we stayed in an estate called country Woods, which had all the facilities, tennis and squash courts, swimming pool, etc. on one of his visits, we had invited mr. roxas for dinner at our place. Prior to dinner, he wanted to play squash and i volunteered. i won the first game and he took the second. i was now ready to call it a day, honour having been restored. He said, let’s play a third. i took the third, but i was really tired. He insisted on making it a best of five and went on to take the fourth. i can’t remember who took the fifth. it was an amazing display of stamina and tenacity. That evening, he was one of us, very informal in an avuncular sort of way. i can’t think of many Presidents of corporations, who could have that kind of relationship with his officers. We would all go through the wall for him.

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We in Jakarta were saddened to hear of the end of Bancom, but even here, i learnt that augusto Barcelon and sixto roxas decided to take over Pn’s sold “Without recourse” to individuals, though Bancom had no legal obligation to do so, an act of unselfishness and integrity, with few if any parallels in corporate life. my life has been enriched, knowing them and all my friends in Bancom.

Jorge B. navarra Jorge was a money market pioneer, starting at the Manila Bank treasury in the mid-1960s, and was head of trading at Atrium Capital until the Dewey Dee upheaval. He currently runs their family farm in Butuan.

“Joining Bancom in midstream” my Bancom stint was from mid-1976 to first quarter-1980 during the tail-end of Bancom’s unchallenged dominance of the Philippine financial markets. However, prior to joining Bancom, i became very familiar with its operations in my capacity as client buying Bancom financial instruments, as competitor sharing the same target markets, as personal friend to Bancom officers and staff, and as a prospective hire since 1972 (always postponed for one reason or another until late 1975 when i agreed to transfer after a 6-month turn-over period at the bank whose treasury management i handled). my job in Bancom focused on the geographic expansion of our funds sourcing reach to Philippine regional centers and the optimal utilization of manpower resources which were performing overlapping functions largely as a result of placing good salespeople in the few management positions available for them. it was then becoming evident that the edge enjoyed by a pioneering and innovative Bancom was gradually being eroded by: 1) Tightened regulatory framework which gave banks clear advantages over non-bank financial intermediaries and practically stopped the development of new financial instruments; 2) entry of big banks which took away the more conservative clients from Bancom, and proliferation of small finance companies which introduced patently but smartly disguised illegal money market schemes that attracted the less risk-averse investors; 3) interest rate regimes which favored government borrowings and prevented the introduction of retail nongovernment securities being developed by Bancom in compliant forms with new regulations; 4) Growing image of Bancom as a diversified group entering businesses outside its expertise and straying into areas widely perceived to be government ‘s work; and 5) internal inefficiencies caused by organizational gaps and overlaps, conflicts in management styles and personalities, and prolonged stages of denial that the old glory days could come back only by returning to the pioneering and innovative ways of Bancom which must now happen under stricter regulations, better competitors, more sophisticated investors, etc. my first task upon reporting was the streamlining of the organization placed under my supervision and control. That assignment surprised me. i was supposed to join Danding Yotoko (eaY) in his international banking group, specifically in amex Bancom as a ready soldier to be paratrooped where needed on short notice. Danding comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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was away in Lebanon when i reported to roly Gapud (rcG). instead of the expected training in Hongkong to prepare for amex Bancom deployment, i was told that i could contribute more by managing domestic funds sourcing operations. in a way, i welcomed the surprise assignment. my wife had been worrying about my constant postings outside the country with our two children then not yet of school age. i just justified my expected absences as part of necessary career moves so my wife accepted my decision provided i would try to get the whole family to live in the country of my assignment or arrange for frequent home leaves. i actually did not know how to comply with my wife’s conditions, or if i could comply at all. it did not matter to me! i would be with Bancom where doing the difficult was easy and the impossible a while longer! so there i was on that day in June, 1976 being given marching orders by rcG to report to Financial markets Division (under Josue camba as caretaker head in eaY’s absence) as Department Head of securities sales under which three provincial branches and Binondo Branch were placed. in addition, i would have to clean up the receivables mess at Brsi (our stock brokerage firm under the FmD organization) and make sure that pioneer/veteran money market traders could work effectively in new non-100% sales positions. i was aghast to discover that the huge collectibles were long past-due stock market transactions in the names of Bancom personnel and their purported clients who could not be contacted. Quickly, i formulated a collection plan aware that i could not avoid stepping on the toes of fellow Bancom employees who lost months or even years of salaries from what they had thought to be sure money stock purchases in the first semester of 1976. To address the issue of senior money market traders who should be recognized for their significant funds mobilization skills but not to continue in their status as securities salespersons, i saw two options for them: deployment to new branches or transfer to sister-companies. Both placements jibed with our expansion program so it was a much simpler problem of finding the most suitable assignments for these pioneer/veteran money market traders. For some, further education and/or management training would be prescribed. Danding got stuck in Lebanon when war erupted and i heard he had to go on the run after his living quarterscum-office took a bomb hit. rudy Bunda could not contact Danding to inquire about my compensation package. my first payday was coming. Hr did not know what to put in my pay slip. i learned later that rcG was asked about my salary since Danding had been out of reach. roly called me to inquire about Danding’s commitments. all that Danding and i talked about was Bancom’s plans in amex Bancom and how i would fit in. i wanted to know the deliverables expected of me and who could help or hinder my work. regarding my package, the only item we had discussed was my need to transfer my housing loan in the amount of P150,000 under the same or better terms and conditions as my existing home financing. i relayed all this to roly who could only laugh unsurprised about my hiring negotiations. He knew both Danding and me to be above these mundane matters, whether good or bad. roly offered to give me cash advances while my payroll would wait for the figures from Danding, as roly and i agreed to wait. Little did i realize that two months had to pass before rudy Bunda excitedly told me that my payslip was finally processed. i enjoyed a lump sum payment from forced savings, thanks to Danding’s Beirut crisis.

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midelfio T. nibungco After Bancom, Ed migrated to the USA and established a lucrative practice as a CPA in New York state. In retirement, he regularly regales the xBancom Yahoo Group with updates about his frequent cruises and tourist travels.

“musings of a money market trader” The first mm clients we handled and remained for a couple of years are unforgettable. i can think of 3 outstanding woman clients. one of them is Grace Lagman or mrs. custodio who owned a beauty parlor bearing her name and employed blind people as masseurs as her father was also blind. she was a conservative investor and started investing in Bancom with 15k pesos in the form of a maturing treasury bill she bought from central Bank. she told me her cB contacts told her about Bancom as the one who designed the T-bills. Her placements went beyond 2 million and we are talking about circa mid ‘70s. i did not know she was that rich because she would come to Bancom using a private jeep. When i started to make client calls at her beauty parlor in sampaloc where she and her family resided, i saw her mercedes Benz car covered and seldom used. she later on bought as much as $200k from BiL for her Los angeles, ca beauty parlor business. and later on as her trust on me built up, she disclosed the houses she owned in Bel air, makati and other areas that she rented out. she wore very simple dresses when she came to our Pasay road office and no one would think she was a millionaire... another client is the mother of Gilbert Teodoro or the wife of the sss chairman then. she told me stories about imelda marcos and the Blue Ladies as she was one of them. Puede bang ikuwento ito dito? When we were traders, Bancom name was synonymous to “trust” and when we serviced personal clients properly, they would give us their money and would not even bother to look at the risks of their placements or investments. it is amazing to recall that some personal clients would call me when they would go on vacation for months outside the Philippines to tell me i could just roll over their placements and would meet me for updates when they came back. and one of them was mrs. Teodoro. she would invite me to see her at their house and she would have endless stories. i remember seeing her only son (only child) Gilbert playing basketball in their backyard.

Gary B. olivar A former activist and First Quarter Storm hero, Gary is involved today in bank consultancy and Internet publishing, having served recently as President Arroyo’s economic spokesman and as a Finance faculty member at the Asian Institute of Management.

“my early BiDTecH days” my Bancom experience was limited to a year or so at the Bancom institute of Development Technology (BiDTecH) sometime in 1976. i had just finished my one year of coursework at the ma program of the uP comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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school of economics, a very academic program of absolutely no value at all in preparing one for the rough and tumble world of financial deal-making then being pioneered by the hotshots at the investment bank. Thus, BiDTecH, where i was given the prosaic title of manager, Documentation. it was my job to document the various initiatives then being launched in the countryside around sKr’s concept of integrated area development (iaD). my real hope was that i might be able to fish out a masteral thesis topic from the job – something that in the end didn’t happen anyway, after i eventually decided instead to update data for an earlier econometric model of the monetary sector. BiDTecH’s ambition was to translate what Danding Yotoko has described as “sKr’s lofty musings” into working models for profitable corporate interventions in the development issues of the countryside. it was nowhere near as simplistic as straightforward financing, let alone handouts (what is now called csr). instead, the idea was to capture synergies upon which a creative entrepreneur might innovate business models that made social as well as financial sense. i remember that the major pilot project at the time involved Licab, a sleepy rice-growing town in nueva ecija. How could a company like Bancom deploy its financial and intellectual assets into business programs that would not only modernize traditional rice farming and make it more profitable, but would moreover do so in an “integrated” way? Licab is where i remember meeting Patrick Pineda, a “swashbuckler of the nGo world” as he might today be described, striding around the rice fields of Licab like a benevolent overseer. He was a younger brother of Jing Pineda, like me a former activist – tall and fair complexioned, and i remember that he was blessed with a diminutive but well-endowed wife. apparently the two had gotten married while parachuting out of a plane! it was that kind of a relationship. BiDTecH had more than its share of interesting characters for a company that small. ninotchka rosca worked with me in documentation – an award-winning novelist, the rebellious founder of Gabriela, a small woman of outsized appetites. Vic magdaraog, a former activist who was a co-accused in my subversion case, ran training programs out of Bidtech, which he would later convert into a lifelong career in human resources. and of course, the big honcho, Vic ordoñez, with his beard and beaked nose and incongruously artistic predilection for directing movies and dating actresses. i’ve long lost touch since with Vic – i hear he was based in Hawaii for a long time – and i run into his younger and better-known brother ernie more often these days. There’s a rumor that Vic has already passed on to a happier afterlife, but i wouldn’t trust my ageing memory on that one. my stay at BiDTecH was too brief to register lasting memories, and i don’t even know what eventually happened to the company or its ambitions. What has stayed with me is the impression of a quixotic corporate exercise, very much ahead of its time, inspired by the most charitable of intentions as well as the loftiest of musings. it was cutting-edge, unrealistically and impossibly so – another vintage testament to sKr’s intellectual and philosophical reach, whether successful or not.

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ramon s. orosa Ray was the first Filipino Resident Manager at Citibank and was a TOYM Awardee in banking. He was an icon of innovative banking during his years as President of PCIB. Nowadays, Ray continues to excel as a lay Christian minister and as a political commentator.

“Ting roxas and Bancom” To write about Bancom is not appropriate without including Ting roxas, the pioneering spirit behind the institution. i did not work for Bancom but did work with Bancom on quite a few occasions. i was already in the commercial banking profession (citibank) when it was founded and so had a wonderful opportunity to work with and observe the way it performed over a long period of time. if there was ever a problem with Ting it was, i believe, that he was way ahead of his time. His efforts in pioneering an investment bank in the country ought to be both commended and learned from. Ting, of course, was rigorously trained in the field of economics and i suspect, dealt heavily in the world of ideas and, if there was ever a renaissance man, it was Ting for his intellectual reach exceeds the world of economics and finance! Personally, i found it somewhat amusing that i was often mistaken as the son of Ting roxas, because he and my father (who was in the commercial banking industry) had the same first name, sixto, came from the same province, Batangas, and both had achieved quite a measure of prominence in their respective fields; my father, commercial banking and Ting roxas as an economist par excellance and in Bancom, as an investment banker. But in setting up Bancom, i think that Ting had already envisioned in his mind the development of a fully functioning money market in the Philippines. it was at a time when developments in the “money” industry were slow, when conservatism reigned supreme and nobody wanted to be the one who rocked the boat or tried anything new. i was dealing with men who were considerably older than me and it was hard to try and get new ideas and concepts through. Few were willing to innovate and things were done in a certain manner because that was the way it had been done for so many years before. The age of computers had barely begun and the behemoth machines pioneered by iBm and ncr required so much special treatment, raised flooring, a temperature controlled environment and punched cards with which to process the data. Banking was also a highly controlled industry by the central Bank and that is, new ideas were looked upon with incredulity and mostly skepticism! moreover, Bancom was seen as a potential competitor by other banks and very few appreciated what Ting was trying to establish when he founded Bancom. The conceptual distinction was, of course that investment banking looked at money largely as a commodity, and while subject to factors of demand and supply coursing through rigid channels, Ting saw things differently and sought to carve out for Bancom novel ways of packaging and making available funds for industrial lending. The more pioneering idea, of course, was how to break into the market both in the closed knit banking industry’s overnight dealings and the public supply of money then still held rather uneconomically by the commercial banks and thus provide borrowers other institutional options for sourcing funds for growth. Being an originator rather than a strict lender, the transactions were looked at somewhat differently and theoretically, income was derived mostly from origination or underwriting fees. But the market was still new comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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and so Bancom also originated their own placement papers and therefore became direct borrowers themselves but to what extent the income mix broke down, i am not privy to. in citibank, we were aware of the need of the banking industry to become more attuned to more efficient if not more profitable ways of gathering and using money and so was created what was called “participation certificates”. citibank issued these certificates as an option to time deposits, and the idea was to “sell” existing loans to placers on a with recourse or non-recourse basis for 30 days up to the maturity of the note depending on what a placer might desire, and we worked on a spread between placement rate and lending rate. and so was also born the idea of “floating” commercial papers which at that time was pretty much unknown in the banking industry. But we did not do “origination” work but rather worked off our existing loan portfolio where there were different lending rates. of course, the result was that we could then improve our lending turnover to the extent we could attract the placers with rates that were more attractive than savings or time deposit rates. This was important because there were existing branch limitations on foreign banks so the bank’s ability to source low cost deposits was indeed limited. in fact there still are limitations though these have been somewhat relaxed and subject to certain rules and requirements. and, of course, the size of the money market transactions suggested “wholesale” activities, therefore much lower unit costs. There was nothing in law or regulations that prohibited any of this, but Bancom initiated what was then called “commercial paper” originations. in a large respect, Bancom institutionalized and gave a better framework for money market dealings but as commercial banks were prohibited from mixing investment banking activities, (this was still the heyday of the Glass-steagall act separating investment banking and commercial banking activities) Bancom had clearly gone ahead of the market and therefore enjoyed great success. it obviously was a service needed by industry and appreciated by the moneyed public as providing them with better returns and varied levels of risks. Because the market was rather stable, the gradients of risks were probably not fully appreciated by the public but in time they became more conversant with publicly listed firms or very prime borrowers and banking was never the same thereafter. This was also not too far away from the time when the foreign exchange market was developed with the freeing of the peso exchange rate from central Bank dictated controls and these two developments in my mind contributed greatly to the expansion of the investment banking field and therefore saw many other such companies being established. competition became very fierce and time saw some of these institutions “bite the dust” so to speak, as the volatility of the market caused some institutions to take risks that stretched their liquidity and other reserves to the breaking point when the market over reacted to certain developments. The liquidity of investment banks obviously was less than that of commercial banks, and competition for money being very fierce, the more “leveraged” investment houses which did not have sufficient backup support such as investment banks subsequently formed by commercial banks as a subsidiary or affiliate, had a much more difficult time when the market took a tumble for one reason or another. obviously, there was a significant amount of emotional resistance couched in civilized language about the pioneering work of Bancom, but within me, i welcomed what they were doing because it was forcing the commercial banks to sharpen their thinking and becoming much more market oriented institutions seeking to truly serve a growing market increasingly becoming more sophisticated in its dealings. ideas don’t take off quickly and to some extent, Bancom succeeded in its work because of the reputation, perspicacity and integrity of Ting roxas. He was the spirit behind Bancom’s founding and its face before the public. But, many others who joined Bancom were surely impressed with both Ting’s charisma and profound thinking, and so came quite a number of names that are today still familiar in the world of finance, who grew their skills within the institution that was called Bancom: Danding Yotoko, Lito manahan, Josh camba, etc., etc.

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i deeply regret that Ting is no longer as active in the market or its development especially due to the market collapse through the housing price bubbles in the us, the unrestricted and poorly supervised development and abuse of derivative trading, whose volume of activities exceeded total world trade by a considerable factor. and now, in the face of all the news about how LiBor had been virtually criminally manipulated, thinkers like Ting are sorely missed. i am still looking around for successors to the “master” in the field and am not sure that anyone has developed the wallop to match Ting and his Bancom. What can i say, “may Ting’s and Bancom’s tribe increase?” i very much hope so!

cristino L. Panlilio This piece appeared in the August 17, 2004 issue of Philippine Star, following the death of AMB. Tito was AMB’s Executive Assistant at Far East Bank. He recently completed a 2-year tour of duty as Managing Head of the Board of Investments and Undersecretary of DTI.

“a tribute to Barcy” The Philippine banking world may never be the same again after augusto m. Barcelon. He was, indeed – as many of his peers and colleagues can attest to – a venerable pillar whose recent passing has left many bereft of his exemplary driving force and impeccable leadership. except for Wilfrido Tecson, founder of then solid Bank, all six other “horsemen” of Filipino banking are deceased now. They were in the 60s and 70s also referred to as the “magnificent 7” for their sterling leadership in banking at the height of the restructuring of the General Banking act during President marcos’ tumultuous pre-martial law administration. There was chester Babst, founder of then Pacific Bank; Jose B. Fernandez, founder of then Far east Bank; alberto Villa-abrille sr., head of the ever-stable Bank of the Philippine islands; Go Kim Pah, founder of equitable Bank; edgardo Kalaw, founder of the merged iBaa; and last but not least, augusto m. Barcelon, considered by many as banker primus inter pares of his generation. Barcelon’s colorful banking career goes back to 1954 when he co-founded the then commercial Bank and Trust co. (comtrust). The bank, which was one of the first commercial banks established by Filipinos, thrived on the principle that not a single major shareholder would control it. it soon became, by the mid-60s, one of the top five Filipino-owned banks, sprouting branches in the then growing suburban communities of metro manila. in 1981, comtrust was deemed a good buy and acquired by the country’s top bank, Bank of the Philippine islands (BPi). Having seen how investment banking had become the trigger and catalyst to the enormous economic growth of other developed countries, Barcelon in 1966 opened the doors of Bancom Development corp. to the more aggressive and enterprising businessmen and industrialists of the Philippines. With him as chairman and sixto K. roxas iii as president, Bancom – a joint venture between comtrust and Bankers Trust of new York – had blossomed into a giant but sophisticated investment banking institution. With its astounding success tagged as the “Bancom mystique”, the company innovated the institutionalized money market operation and the “commercial paper” instrument which was considered a first in the world. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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Barcelon also marshalled the company’s rapid pioneering and expansion in the asean region during the ’70s. While all Filipino bankers were still too preoccupied with the local market, Barcelon had pushed his people to indonesia, malaysia, Thailand and Hong Kong where they had met equal success. The company even planted its flag in california through a commercial bank subsidiary there. after a falling out with comtrust in 1969, Barcelon towed his already famous Bancom to rcBc and then, in 1974, to Far east Bank. This latter strategic merger brought two of the country’s most dynamic bankers – Jose B. Fernandez as chairman and Barcelon as president – under one roof. Far east Bank had been become the repository of time-tested business wisdom, prudent aggressiveness, marketing savvy and innovative banking strategies. in a short span, it had become the third largest Filipino private bank. in 1981, Barcelon, at age 58, retired from Far east Bank to concentrate on overseeing his other investments in the food, banana, steel and realty industries while retaining the chairmanship of Bancom. it was, however, a brief retirement for shortly, the grave impact of the Dewey Dee caper in the same year badly affected all the investment banks and weak commercial banks in the country. investment banks, whose lifeblood was the money market operations, started to suffer runs and not even the giant Bancom nor ayala corp.’s investment house, aiDc, could withstand the panic caused by Dewey Dee’s huge unpaid loans. Through some “financial reengineering” Barcelon deftly and skillfully steered Bancom to safe waters by converting its little-known banking subsidiary, union Bank, into a commercial banking operation with infusion of fresh equity and long-term funding from the sss. in no time he was the hands-on president of union Bank which by then had absorbed all the assets and liabilities of Bancom. Barcelon grew union Bank into a leading financial player that it is today. He had turned it into a highly profitable bank that in the late ’80s, new investors like the aboitiz Group and insular Life had bought majority interest in the bank. outside the banking world, Barcelon ventured into other businesses/investments, the following of which are due to his initiatives and vision: pioneered the banana industry in Davao with the prominent Jose m. Tuason family, uFc Banana catsup, medical city Hospital, milagros Farms, and rizal steel, among others. a strong “people sense” was his endearing and enduring trait. When he gave his trust on the competence of a potential executive, he supported him by giving him a chance to execute and actualize his ideas. “The secret of growth,” he once said, “is having people who can be delegated challenges and responsibilities, and can be left on their own to create their own niches in the company.” Graduates of Barcelon’s astute mentorship are chito ayala, manny Pangilinan, ramon del rosario Jr., Francisco Licuanan, oV espiritu, Dr. alfredo Bengzon, Josie Tan, Vicente Panlilio and many more “who’s who” in Philipine business. Barcelon also pioneered and practiced “good governance”. This underlying reality, which calls for utmost transparency, integrity and honor, is the bedrock of management and systems procedures that are innately collegial in decision-making. Barcelon and his close peers had practiced this all their professional lives; thus, he is known for his unsullied integrity and high moral standards for himself and his people. Barcelon’s unblemished character can be attributed to his education and hard work during the early years of his career. educated for the most part at the ateneo de manila in Padre Faura, he worked his way up, starting as a credit investigator at the old PnB office along escolta. During the Japanese occupation, he managed to pursue his law studies at the m.L.Quezon law night school and accountancy at the Far eastern university.

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He soon became credit and Foreign manager in PnB. He later resigned, however, and invested all his savings in co-founding comtrust in 1954, together with a few managers from PnB. Fondly called “atos”, his childhood pet name by relatives, and “Barcy” by his friends and peers, Barcelon is survived by his wife of 56 years, Teresita ayala. The couple’s friends and close relatives attest that their marriage remained strong because both are endless romantics. Their union produced four accomplished children: eddie (an investment banker), Louie (personable wife of rep. Teddy Boy Locsin), Tessie and Binky (both businesswomen). eight good looking grandchildren and two cuddly pugs are counted among their blessings. Perhaps the apropos epithet for the endless dreamer and visionary that Barcelon was is to quote another banker par excellence, Jose “Jobo” Fernandez. Fernandez had started to conceptualize his own bank (Far east Bank) in 1959. By then, Barcelon’s comtrust was already a stable and enviable five-year-old bank. Fernandez admitted that his model for the soon-to-be-born Far east Bank was Barcelon’s widely owned comtrust. in training his first batch of soon-to-be managers, Fernandez exhorted them by yelling: “Let’s duplicate Barcy’s baby!” in life, no less than “the” Jobo Fernandez admired Barcelon. For us lesser mortals who had a rare and privileged chance to have the inimitable augusto m. Barcelon as mentor, adviser, associate and friend, he shall, in life and in death, own our grateful admiration, ad infinitum!

Jose T. Pardo Titoy has the unique distinction of having served as a Cabinet member for three successive Presidents (Aquino, Ramos and Estrada). He now occupies several prestigious business and civic positions, notably as Chair of the Philippine Stock Exchange.

“insights on my Bancom experience” an out-sourced consulting engagement meant to apply Value analysis and Value engineering principles on select Bancom subsidiaries and clients led to an acquisition of systems control inc (sci) by Bancom Group, inc. From Louie Villafuerte’s point of view, the acquisition made sense as Bancom was in the midst of a number of acquisitions and mergers. While financial number-crunching was second nature to Bancom people, the engineering-focused sci brought the science of value analyzing to the lending and/or acquisition equation. in the center was a former uniDo British engineering expert, Dr. Derek Warburton Brown who was President of sci. and behind him was myself as sci chair and subsequently, i was enlisted to join Louie Villafuerte as BGi sr. VP for diversification. i was concurrently asked to head Bancom realty corporation, Land and Housing Development corporation, Bancom ohsaki construction corporation and to serve as Director of Gami, Bancom audio Vision corp. and union savings Bank. i was likewise, at the request of chair Leonides Virata, seconded to DBP as lead consultant to help in the promotion and development of small and medium scale enterprises.

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i value and treasure my years with Bancom and take exceptional pride being associated with the best minds in investment banking, particularly Ting roxas. as a ToYm awardee myself, i took particularly pride in the fact that Bancom had the most number of (past and future)ToYm awardees in a single business organization. There were Ting roxas, Louie Villafuerte, roly Gapud, manny Pangilinan, ramon del rosario, and nanding Balatbat, among others. unknown perhaps to many Bancom alumni was my acquisition of LHDc and Bancom ohsaki construction corporation from the social security system, after Bancom’s closure. Worthy of note is that both companies became the purveyor of my ascendancy as an entrepreneur. shortly after Bancom, i launched in 1983 the 7eleven and the Wendy’s chains in the Philippines. Looking back, the many lessons learned from my years with Bancom had allowed me to cope with the volatility in the marketplace and the periodic political upheavals post 1983. The experience and vast Bancom network served me well also as i journeyed into public service when i was first appointed as eDsa chair under President cory aquino, cB monetary Board member under President Fidel V. ramos, Trade and industry secretary and after, as secretary in the Department of Finance under the estrada administration. staring at me in my office is a plaque with a quotation which Louie Villafuerte often repeated, “the difficult takes a while and the impossible a little longer”. again, a borrowed legacy from my stint in Bancom.

ricardo s. Pascua Ric had a distinguished career with the Metro Pacific Group, and was founding President of Fort Bonifacio Development Corp. He is a past President of the Management Association of the Philippines. Ric now heads several private firms as a business entrepreneur.

“Beirut adventure” The first inkling i had that i might be expatriated came via the company rumor mill through Tony Valdez, then Head of the commercial Paper Trading Desk. Tony sat next to me at the Third Floor of Bancom Building i. it was sometime in the fourth quarter of 1974 and i had been with Bancom’s international markets Group for just over two years, in charge of Position management for imG’s foreign exchange, eurodollars, and money market trading positions. Tony told me that Danding Yotoko was tapped to head the Bancom team that would help american express middle east Development company (ameDco) set up its own money market trading desk in Beirut and that Danding had picked me to join him. i was at first skeptical of this rumor. Less than a week after that conversation, though, Danding called me to his office to ask me if i’d be prepared to go with him to Beirut. He said that Bancom had agreed to take on the challenge to help american express establish a money market trading operation for its subsidiary merchant bank in Lebanon, ameDco. apparently, ameDco’s ceo, Gilbert Gargour, was so impressed with what he saw in the Third Floor when he visited that he determined to replicate it in his shop in Beirut. in preparation, he first sent one of his officers, Jamil “Jimmy” saad, an amiable and caucasian-looking Lebanese, to spend at least a couple of months

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observing Bancom’s operations in manila, after which a team from Bancom would be seconded to ameDco in Beirut to establish the operation. Danding was to head it and he picked me to assist him. i felt very proud and privileged to have been chosen for such an important foreign assignment. and to have one of Bancom’s “star executives” making the choice was an extra bonus. i accepted Danding’s offer to join him with little hesitation. To prepare for Beirut, Danding and i, joined by several others who volunteered, took French language lessons in the office after work. our teacher was a pretty young Filipina who spent some years living in Paris before coming back home to manila. unfortunately for me, about all i learned from the lessons were how to ask directions for the train station (ou est la garre?) and to the tobacco store in Parisian French! i found out later though that all the people i needed to talk to in Beirut were trilingual, being able to speak in arabic, French, and english with almost equal proficiency. meanwhile, my family, then consisting only of my wife rizza, a year-and-a-half old daughter corinne, and me, prepared to face the exciting yet daunting prospect of leaving kith and kin behind for what we were projecting to be a three to five year stint in a foreign land. i was to leave ahead of rizza and cor as my working visa first needed to be regularized before they could follow. in late January or early February 1975, i left manila for Beirut with short (two days each) touristy stop-overs in singapore and Bangkok. Danding linked up with me in Beirut about a couple of days after my arrival. Beirut in the mid-1970’s lived up to its billing as the Paris of the middle east and as the financial center of the arab world. it had charming sidewalk cafes, well-stocked shops, lively night life, and many financial institutions. its people were sophisticated, cosmopolitan, well-dressed, and was a handsome mix of the deepset semitic eyes, fair skin and sometimes even blond hair of crusader-descended northern european blood. However, the outside cultural influence was mainly european, principally French; american cultural influence was not as strong at that time. i found it rather foreign as it was my first overseas assignment and manila’s foreign cultural influence, with which i was familiar, was mainly american. Jimmy saad, who was given the task of helping us settle down and making us feel at home, did a yeoman’s job of making us feel welcome. He took us around, treated us one weekend to a trip to the mountains surrounding Beirut where i first saw snow and to a night at the casino du Liban to sample the night life. He also helped in finding apartments for us, in getting us cars, and pointing out places to shop for daily needs. all in all, i found the people in ameDco’s office very hospitable as well as competent. Danding and i spent the first few weeks of our assignment feeling the lay of the land, familiarizing ourselves with Lebanon’s legal structures as they impact on business and finance, getting briefed on the country’s business community, organizing a new subsidiary of ameDco (ameXFin s.a.L.) to house the money market activity, recruiting and getting to know the professionals and staff who would work with us, all aside from organizing our domestic situations with apartments, cars, and such. among the innovations we sought to introduce in Beirut, in the spring of 1975, was the “Lacce” or the Letter agreement covering checks exchange, which we borrowed from our brethren in manila and Hong Kong. This was to be the mainstay instrument we would use as we introduced the commercial paper market into Beirut’s business community. The Lebanese lawyer we worked with in designing the instrument to conform to Lebanese law was very intrigued and excited with the innovativeness of our Lacce, at least in the context of Lebanese business law of the time. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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Following the successful legal design of the instrument, we begun the process of making calls on the leading Lebanese business houses and banks introducing the commercial paper market as a viable short-term financing source and investment outlet. But the newness of the product and the brewing political instability in the country made the effort rather difficult to succeed. a word about the confusing politics of Lebanon at that time. When the French quit Lebanon to become an independent country after the end of World War ii, it left behind a republican structure where political positions were rationed in accordance with the proportions of the population belonging to different religious/ethnic groupings. Thus, the Presidency was reserved to the maronite catholic christians, who largely inhabited the mountainous northern part of the country, while the Prime ministership was given to the sunnis, who comprised the majority of muslims, the minorities being the shiites and the Druze. By the mid-1970s, differentials in the population growth rates of the various communities comprising the Lebanese body politic has made this initial allocation of political power rather questionable in its fairness. add to the mix the large and restless community of Palestinian refugees inhabiting various camps in the country since the partition of israel in 1948 and the israeli-arab war of 1967, and you had a pretty volatile powder keg of a mix waiting to explode. in the early months of 1975, the rumblings of political instability and potential violence were beginning to be heard, but it was not till after the summer, in late september, that business, at least to me, became untenable. meanwhile, Gilbert Gargour, ameDco’s ceo, and his crew still tried to remain upbeat and optimistic. They kept telling us, i think with fingers crossed behind their backs, that things would settle down as it would be crazy to destroy the good thing that was Lebanon at that time. sometime in may, Danding was summoned back to manila as his wife, who was expecting, was to give birth very soon. so i was left behind in Beirut to “hold the fort” so to speak. Those months, between may and late June, when my family joined me, were some of the loneliest times i ever experienced in my life. i was fine during office hours, given the responsibilities of the job, but i would begin to feel exceedingly alone towards late afternoon, when the prospect of going home to an empty flat, eating TV dinners, and watching the only two english language programs in Beirut – “The Long Hot summer”, a drama series, and “The Pink Panther”, a cartoon show – began to loom. i resolved then that in future foreign assignments, i would try to get my family to join me as soon as they possibly can. in June, ameDco, with our help, led the offering of an innovative issue in the eurodollar market, a us$50 million 7-year redeemable Floating rate notes (rFrns) of the national Bank of Hungary. it was the first time any such issue was ever offered in those early days of the medium-term euro-notes market. The idea behind the rFrns was to bridge issuers’ desire for medium-term tenors and lower rates for their debt and investors’ desire for high coupons while enjoying the possibility of shortening their investment horizon with little risk of capital losses. This was made possible by having the underwriters commit to the issuer that the notes would remain outstanding for the full stated term, while giving the note holders the option of tendering the notes for redemption to the underwriters at a fixed price in relation to par at each semi-annual interest payment date. The underwriters then were committed to re-market the note in the secondary market if any of the notes were so tendered for redemption. it was a hybrid instrument therefore that mimicked both the classical multi-year fixed-term Floating rate notes and the short-term semi-annually maturing notes. if i am not mistaken, it was our own s. K. roxas who originated this idea when he was Vice-chairman of american express international Banking corporation and was based in new York city. and it was ameDco in Beirut that found a willing client to grant a mandate for

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the issue. Bancom international Limited in Hong Kong, by the way, acted as a co-manager of this issue and placed some of the notes with its clients and in its own portfolio. To secure the mandate of the nBH, Gilbert and i flew to Budapest, capital of Hungary, sometime in June 1975 to pitch the issue to the senior officers of nBH. it was my first time to anywhere in europe. and being introduced to europe through such a lovely city, full of well-preserved architectural wonders of the late middle ages, was an extra treat. Budapest is a city which straddles the Duna river (Danube in english) and is made up really of two old medieval towns, Buda and Pest. along the Duna’s banks on Pest sits the old Parliament Palace that when seen at night in all its illuminated glory transports one back to the times of kings, queens, and knights in shining armor. i was fortunate that the Hilton Hotel in Buda, where we booked ourselves in, sat right across the Parliament and we were thus treated to this magnificent view. in late June, rizza, my wife, and cor, my almost two-year old daughter, joined me in Beirut. Their arrival was the happiest day of my stay in Beirut as my days of being alone in an empty flat at night ended. i again savored laughter and conversation with my two ladies along with home-cooked breakfasts and evening meals. Late morning mass and sunday lunches with them at a seaside restaurant named “sultan ibrahim” which began with a basketful of fresh crunchy vegetables from the Bekaa Valley, highlighted by grilled prawns and fish, and ending with sweet honey and pistachio cakes were highlights of the week that summer, of course when the peace and order situation allowed us to go out. The peace and order situation in Beirut from February through early september was tolerable but was intermittently broken with increasing frequency as the year wore on. early in the year, we would hear of reports of tires being burned in the middle of the street in certain neighborhoods accompanied by protest demonstrations and gun-firing in the air, perhaps every other week. i never quite understood which group demonstrated when and what for, and to this day, i remain confused as to how many different groups there were contending and what issues were in dispute. What was becoming clear to me as the weeks and months passed was that it would become impossible for Beirut to maintain its claim as the region’s financial center if guns, which seemed to be in almost everyone’s hands, keep going off seemingly at the slightest provocation. our office would shut down and my family would be moved by ameDco from my flat to the Phoenicia, one of the swankiest hotels in the city along a charming seaside avenue, each time the civil unrest became especially dangerous. i probably spent a fourth or a third of my time lounging at poolside with rizza and cor during that summer and early fall due to these unrests instead of being in the office. The flat that the office rented for me was in a high-rise block of apartments that seemed to be in a muslim neighborhood. But it had a stunning view of the harbor and was no more than a ten-minute drive from the office. in mid-summer, a pair of machine gun nests surrounded by sandbags sprouted on either side of the block my building was on, manned by squads of men with automatic weapons and bandoliers across their chests. These militia men must have known that i resided in the neighborhood as they never bothered me, except on one occasion. i had just bought a new camera and i thought i’d take some pictures of the spectacular view of Beirut’s harbor from the balcony of my flat. so i merrily pointed and clicked away at the view of the sea and the ships anchored in the basin like a kid enjoying his new toy. about five to ten minutes later, i heard a loud knock at my door, urgent loud knocks, like what you see policemen do on TV crime shows. When i opened the door, i was startled to be confronted by four or five bearded men with aK 47s and bandoliers across their chests looking at me intently. The leader wagged his fingers at me, mimicked someone taking photos and said, “no, comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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no, no.” i gathered that they were warning me against taking pictures from my balcony as i might be mistaken for a spy and shot! i apologized profusely and even tried to offer to give them my camera, promising never ever to even take a peek out of my balcony with camera in hand. all these of course were done in sign language as none of the men seemed to have any english in them except, “no, no, no.” in late september or early october, i received a telex from Danding telling me that he was already in BiL’s office in Hong Kong on his way back to Beirut from manila. i responded quickly advising him to forget coming back and for him to authorize my evacuation from Beirut. i told him that, in my view, there was no way any sensible business could be done in Beirut in the immediate future as civil war seems imminent and may actually have broken out already. i was very fearful for my family’s physical safety and wanted to be out of there pronto. Fortunately, i got the green light next day to leave, perhaps after the seniors in manila managed to persuade Gilbert to let us leave. my family spent the next two days preparing to leave back for manila, while the office arranged for airline tickets and such. We said our goodbyes to the ameDco guys the day before we left, thanking them for their friendship, hospitality, and support while wishing them well given the dodgy circumstances. early the next morning, ameDco’s burly but kind security consultant drove my family and me, with just two suitcases among us, to the airport. We were praying fervently as we passed the stretch that bisected the Palestinian refugee camp, petitioning heaven to let us through without incident. mercifully, the drive was uneventful. We finally sighed our relief when the plane took off for home. my Beirut assignment, i believe, was not only exciting but on the whole beneficial to my career as it ushered in for me the beginning of 18 years as an expatriate executive – 8 for Bancom and eventually 10 for First Pacific. although i had to leave behind in Beirut almost all my worldly goods – car and home furnishings – except for two suitcases of clothes, the experience i gained and the life of an expat that began with Beirut, gave a tremendous boost to my career. i understand that when Lebanese civil war escalated the next year, ameDco moved its operations to amman, Jordan. However, i am not familiar with what had happened after that day when my family and i had to leave Beirut in a hurry. my next assignment for Bancom in late 1975 was to head BiL’s money market, foreign exchange, and trade finance operation in HK. i was then seconded to amex Bancom Limited, also in HK, in 1977, together with sito santillan, manny Pangilinan, and Dick Yin. amex Bancom was a joint venture merchant bank between aeiBc and Bancom and was supposed to be the asian leg of aeiBc’s global merchant banking network. i headed the loan syndication department for amex Bancom. Then in early 1980, i was sent to organize the international Department of redwood Bank in san Francisco, california, with Larry Greenberg, whom Bancom recruited from aeiBc to become redwood Bank’s president. redwood Bank was acquired by Bancom’s key clients, ramon siy Lai, Dewey Dee, and Philip ang, and was entrusted to Bancom to manage. in late 1981, manny Pangilinan invited me to join him in founding what became First Pacific company Limited and so i found myself back in HK in January of 1982, but no longer with Bancom.

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The documentary credits or “bills” (as it is known in Hong Kong) business was not offered as a service by Bancom Development corporation (BDc) in manila. only commercial and universal banks were licensed by the central Bank of the Philippines to offer the “bills” service, i.e. to issue, advise, confirm, and negotiate international letters of credit. BDc, being an investment bank, did not have this license. Bancom memoirs

Hence, when BDc organized its subsidiary in Hong Kong, initially named south east asia securities and Finance company Limited (seascom) and later named Bancom international Limited (BiL), neither did it intend to offer the bills business as a service to its clients there. BiL’s initial service lines were limited to the origination, underwriting, placing, and trading of negotiable instruments like bonds, equities, and short-term notes, as well as trading in HK Dollar deposits, euro-deposits and foreign exchange. L/cs were foreign to Bancom up until 1976. sometime in 1976, roger Laureta, cFo of the sarmiento Group’s timber and forest products businesses, visited BiL in HK seeking assistance in solving his group’s foreign exchange working capital funding problem in both indonesia and the Philippines. The sarmientos operated logging concessions, sawmills, and plywood plants in both countries. at that time, local financing was very expensive and foreign exchange flows were tightly controlled in both countries, making life difficult for roger notwithstanding that the Group had good export contracts. Their Japanese buyers paid for their orders with sight Letters of credit issued by banks of unquestioned credit quality. To solve roger’s problem, we designed a package involving the sarmientos setting up a trading company in HK which would book the orders from Japan and would then open red-clause letters of credit in favour of indonesia and the Philippines supported by sight L/cs from the final buyers. This would allow their indonesian and Philippine affiliates to make “red clause” drawings from the L/cs and thus finance their local affiliates’ working capital needs, while giving the sarmientos access to less expensive funding in HK. We then marketed the package among banks and DTcs in HK affiliated with commercial banks, while we helped roger set up the trading company. in one of my marketing visits to place the package, John rednall, then HK country manager for royal Bank of canada asked me, “Why don’t you do this yourselves? You have no reason not to!” i was initially stumped by John’s remark as it never crossed anyone’s mind in the office that BiL could actually do letters of credit or bills business. We thought only commercial banks could do it. But given that remark, we proceeded to check the regulations in HK and found out that indeed, BiL’s licence did not forbid it from engaging in the business. i then broached the idea with noel escaler, who, after initial skepticism, gave the go signal for us to seek approval from manila to open up this new business line for BiL. after a similar initial hesitation, manila bought our argument that we should be able to safely and profitably broaden BiL’s business line to include bills. i was tasked to oversee the organization of the bills unit and to supervise it subsequently. i proceeded to look for people to man the bills unit. my first hires were David Lai and Peter Poon. David, from Bank of america, was to act as the unit’s leader and Peter was to be his deputy. i remember telling them, “You will report to me. Your job includes educating me on this business in addition to the usual responsibilities of running the unit.” and then we were off and running! The bills business proved to be a source of recurrent profitability as it supplied BiL with fees income, lending business, foreign exchange demand, and interesting feed to the development of counterparties and correspondent banks. i believe BiL continued this business until it closed its doors due to the problems encountered by Bancom group-wide in the late 1980s. meanwhile, in 1977, i had to move from BiL to amex Bancom Limited, albeit a bit reluctantly, as mr. Gapud impressed on me that it was my duty as a “good soldier” to go to where i was assigned, so others continued the further development of the bills business. This anecdote exemplifies the Bancom ethos of aggressive opportunity seeking and “can do” attitude that made working there very fulfilling and so much fun!

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cynthia L. Picazo Since her Wharton days up until her HK stay, Cynthia’s excellent home cooking established her place as the most popular haven for homesick and hungry Filipino expats. She now serves as President of Radiowealth Finance Co, Inc.

“a place not for the faint-hearted” in the mid-60s in manila, the concept of an investment bank was a novelty. it was not quite a commercial bank, not a development bank nor a savings bank. after my graduation for my master’s degree in 1967, it was my curiosity that drove me to apply for a job as an investment analyst at Bancom. i had the impression that women professionals were not being hired at Bancom at that time. it seemed exclusively for men only, and for the elite ateneo alumni at that. Female employees held a few positions only at the administrative or secretarial offices. Work was going to be tough and hard, with long hours, not for the faint-hearted and weak of nerves, as i was amply warned during my interview by Johnny romualdez, Head of the investment research Department. But i was prepared for the challenge, accepting a modest pay, and thus began my journey at Bancom. The months that followed were a test of endurance. in the next six months my daily working hours were at least 12 hours, seven days a week. i had to stay competive with my fellow analysts in the department like George Lorenzana, Bobby Tantoco, art catindig, allan Tolentino, and of course ramon Picazo, who after years of office courtship, and much to the delight of our office mates, became my life partner. our assignments were given by industry: mining, sugar, commercial and industrial. our investment reports, which analyzed both fundamental and stock performance, were painstakingly prepared using Friden rotary calculators and our deadlines were always imposed for submission on a monday, so overtime surely extended on the week end. i almost believe that this was made compulsory by our boss, to reinforce our Bancom training for excellent work under pressure. Johnny romualdez was a perfectionist, a trademark of the Bancom culture of excellence. i would see my submitted draft reports crushed in front of my eyes and thrown into the bin, my paper margins were measured precisely by a ruler, and my grammar was meticulously corrected. after two years in investment research work, i noticed more women with postgraduate degrees came to work for our department. i feel it must have been the female’s inquisitiveness, resourcefulness and passion for details that proved to be a strong force in hiring more women into research work. Then it was time for me to move to investment services Department under Francis moran, which catered to institutional and high net worth clients. in the meantime, my husband ramon moved out of Bancom, probably wanting to avoid competing too closely with me in our career paths. Vic Kalaw then was the sole officer of the fairly new department. The challenge was to aggressively market our services to potential clients and convince them that under Bancom’s management they would get higher returns on their investments. The leading investment management group at that time was Far east Bank Trust Department headed by chuckie arellano. We raided their market and promised clients to please them by offering higher yields and personalized service.

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The most time-consuming clients we took on were the individual and institutional accounts. Widows, rich spinsters, family estates and the religious orders, schools and catholic dioceses, became our major clients. We would witness receiving bags of cash and foreign currency checks in small denominations, like us$ 15 from donees abroad, being brought to our office by bishops, nuns and priests. a gentle pat, a warm handshake, an infectious smile together with a one pager investment proposal were all that was really needed to gain their confidence and secure their funds. The Jesuit order was our biggest client group. Fr. Federico escaler, sJ. (later named a Bishop) was our ambassador of goodwill. We had Xavier school, ateneo de Davao, ateneo de Zamboanga, the Jesuit order funds. Visits from our Bishop clients were likewise challenging. Bishops from the Dioceses of manila, cebu, Dumaguete, aklan were some of our happy clients. With a very reverent tone, serious gestures and a formal countenance, i gave them all assurances of the safety and protection of their investments. in exchange, i would request them for more intercessory prayers for better results in our management of their investments. in the 70s, Bancom international Ltd.’s main work place was Hong Kong, supported by the international markets Departmeent (imD) in manila. noel escaler was the managing Director of BiL, while i held the post of head of imD, both of us reporting to Danding Yotoko. imD’s organization was structured such as to enable the operations to develop specialization in currency trading and asean lending operations. The staff at imD included the likes of Bingo cruz, albert Liong, Bing de Guzman, Val araneta, among others. shortly before the formation of amex-Bancom, circa 1975 i was relocated to BiL in HK, and later took over the position of Deputy mD, the post vacated by manny Pangilinan, who together with ric Pascua and sito santillan were assigned to amex-Bancom. BiL was the flagship of Bancom’s international operations, carrying the balance sheet of the investments of Bancom in the asean region, like Ficorinvest in indonesia and asiavest in malaysia. credit participation by Bancom’s regional affiliates was promoted by BiL. Within the BiL organization, we had assigned country specialists to oversee the investments of the affiliates. Loan processing and evaluation were performed by country specialists who developed expertise in their assigned area. During that time, the “bright boys” of BiL included rollie Gosiengfiao, eric mondragon, Vic Tinsay, ronnie cuenca, raffy Bengzon, menow nivera. BiL also performed trading operations in HKD and other foreign currencies. That trading group was headed by Dennis Goquingco, assisted by Jackson Pau, Dick Poon and Henry Ting. it is noteworthy that our loan facilities were extended to high-growth asean groups, such as chareon Pokphand, siam cement, Lion metals Bhd, PT Batik Keris, and PT Kayu Lapis. after the Bancom group closed and BiL was sold off in the 80s, my family decided to keep our home in HK. i was offered a string of executive positions in HK, while my husband ramon continued with his HK-manila trading ventures. i am cherishing this occasion to recollect my formative years in Bancom, where ramon and i had so many wonderful life-long friends. When ramon passed away a few years ago, everyday at his wake was like a Bancom reunion.

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ramon r. del rosario Jr. This public tribute to Bancom first appeared as a Finex column in the December 2, 1981 issue of Business Day. A TOYM Awardee in 1978, Mon is a former Secretary of Finance. He is the current Chair of the Makati Business Club and also the Chair and CEO of the PHINMA Group.

“To Bancom, a fond farewell!” “Here at Bancom,” we used to say, “the difficult takes a while; the impossible takes a little longer.” such was the bravado of the organization that words like these were uttered only half in jest. no problem was too difficult, no financing was too large, no project was too complex for Bancom to handle. it was “Gung ho!” and “Full steam ahead!” and woe to those who stood in our way. Ten years ago, Bancom was every young man’s dream of a launching pad for a career in finance. it had a reputation of innovation and daring. it had unquestioned integrity. and it had as head one with a unique combination of genius and charisma. it was eminently successful, and even foreign governments sought its advice and assistance. a few weeks ago, Bancom Development corporation ceased to exist as an entity and few, it seems, even noticed its passing. it had sunk into oblivion without any fanfare. The Bancom we once knew was no more, a victim perhaps of circumstances as much of its own pride. it is not my purpose to analyze the causes of Bancom’s difficulties. There is too much passion in that. all i wish is to bid her a fitting farewell.

Training ground among the many facets of Bancom, the one that is probably most widely recognized is that of Bancom as training ground for leadership in Philippine finance. no other institution in the Philippines, for example, can claim to have spawned a total of nine ToYm awardees as Bancom has, an amazing number for an institution with such a short history. add to these the numerous Bancom alumni that occupy key positions in financial institutions not only in the Philippines but also in a few other southeast asian nations, and you have a truly remarkable record. Bancom never had formal training programs for its senior officers. instead what it offered was an environment that challenged its corps of aggressive and ambitious financial wizards (or so we fancied ourselves) to constantly outdo themselves. more often than not, keen rivalries were balanced with mutual respect, thus, allowing for healthy exchanges of views and opinions. We were constantly on our toes, but we learned much from each other. What was perhaps most remarkable was that such a high powered bunch of impatient and ambitious individuals could somehow be welded into a reasonably cohesive team. The key, of course, was sKr, mr. Bancom himself. call it a vision or call it a dream: what matters is that most of us truly believed that we had a mission to fulfill – to make the Philippine financial system more responsive to our country’s needs, and then to share what we had learned with the provinces that dot the Philippine countryside and with our neighbouring countries.

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The result, at least for a while, was an extremely potent team that had its finger on virtually all the major financing deals in the country. While it is true that the magic gradually wore off and the team eventually disintegrated, it is my rather immodest belief that the Philippine financial system is unquestionably richer for having encountered the Bancom man.

Innovator Bancom’s contributions as innovator and pace-setter similarly cannot be overlooked and ignored. The creation of a free, viable, and well-organized commercial paper market in the Philippines is undoubtedly Bancom’s crowning achievement. it is of no major consequence that the money market has recently fallen into disfavor; the crucial thing is that a system was developed that facilitated the flow of excess investible funds into productive enterprises. equally important, the money market institutions led by Bancom forced a generally unresponsive and unimaginative commercial banking system into a more aggressive, competitive stance, in the process freeing up the funds that fuelled the country’s economic growth in the late ‘60s and in the ‘70s. indeed, it would not be an exaggeration to say that numerous projects and enterprises engaged in high priority undertakings would not have taken off the ground were it not for the timely availability of funds in sufficient amounts and acceptable maturities made possible by an efficiently functioning commercial paper market. so widely recognized was Bancom’s expertise that the Philippine government sought its advice. in this connection, two achievements clearly stand out: Bancom’s role in the design and establishment of a Treasury Bill program for the Philippine government, and its role in the design and installation of a foreign debt monitoring system for the central Bank. For years, T-bills were the mainstay of the government’s securities marketing program, while the debt monitoring system designed by Bancom is still in use today. in securities underwriting, Bancom was the undisputed leader, having successfully brought to the market the equity or long-term debt issues of such corporations as the Philippine national Bank, a. soriano corporation, Paper industries corporation of the Philippines, usiphil, Globe-mackay, cFc corporation, Bacnotan consolidated industries, unimart, BF Homes and many others. in recent years, Bancom’s most significant achievement in the underwriting field was the leading role it played in demonstrating that significant corporate bond issues could indeed be floated in the Philippines when circumstances so warranted. Bancom was also responsible for successfully floating the only issue of subordinated convertible debentures ever sold publicly in the Philippines. in project finance, Bancom also stood out as the only Philippine financial institution to be involved as investment banker or financial adviser in such major projects as the national Power corporation’s nuclear power plant, the Pasar copper smelter, marinduque mining’s nickel project, and PicoP’s integrated pulp and paper mill. This string of significant achievements could go on and on. To my mind, only one word can adequately describe this record: remarkable. Truly, Bancom was a remarkable institution.

Showcase There is no testimonial to Bancom’s success that is more eloquent than the recognition accorded it by foreign governments. Because of its outstanding performance in the Philippines, particularly in the area of financial market development, Bancom was viewed as a model financial institution for other countries with less sophisticated financial systems to strive to emulate. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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at the invitation of host governments or groups of leading private bankers and businessmen, Bancom fielded teams to Bangkok, Jakarta, and Kuala Lumpur to start up and initially manage institutions in the Bancom mold. it is to Bancom’s credit that these institutions are all presently thriving. Taiwan and south Korea also sent teams to study Bancom in the hope of adapting some Bancom innovations to their respective financial systems. even international organizations like the international Finance corporation took keen interest in the Bancom experience and viewed Bancom as a possible prototype of a financial institution suited for developing countries. among Philippine financial institutions, Bancom was a pioneer in Hong Kong, where it became an active participant in the local money market and in arranging syndicated loans for Philippine borrowers, and in the middle east through an office set up in Beirut with american express international Banking corp. Bancom was also one of the first Philippine companies to view asean as a serious concept as it embarked on a major effort to develop an asean network of financial institutions to be owned by nationals of the participating entities. at the time Bancom ran into difficulties, it already had operating entities in malaysia and indonesia, and was in the process of completing the network through a finance company in Thailand and a representative office in singapore. Bancom’s expertise in international finance was widely recognized. The financial package for the nuclear power plant, which included for the first time ever a u.s. eximbank-guaranteed bond issue sold in the us market, was viewed as a major breakthrough for project financing for developing countries. The Development Bank of the Philippines tapped Bancom as its financial adviser when it became the first major Philippine borrower to re-enter the international financial market after the imposition of martial law. The central Bank and the Philippine national Bank also sought Bancom’s assistance in many instances.

Conclusion it is easy and, perhaps, quite natural to criticize a financial institution that has run into difficulties. on the other hand, it would be both an extreme injustice and a monumental waste if all we remember of such institutions are the mistakes that they committed. in spite of its unhappy ending, Bancom proved that a financial institution in a developing country, imbued with a mission, staffed by competent and ambitious professionals, led by a charismatic visionary, and armed with appropriate doses of creativity, innovativeness and bravado, can, indeed, be the equal of financial institutions based in the world’s financial centers and can truly make a positive and lasting contribution to the financial system of its country and of its region. We in Philippine finance, who are striving to improve our nation’s lot, are most fortunate that a Bancom has come our way.

celso L. samaniego Celso co-founded, together with other Bancom alumni, the Multinational Investment Bancorporation, which he continues to serve as its Chairman. He was a recipient of the TOYM Award in 1980.

“The early years at Bancom” i had just taken my board exams in accounting when i learned about Bancom through my older brother who was one of the sGV auditors assigned to audit Bancom then. it was in February 1967 when mr. rudyardo V.

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Bunda, the chief accountant, talked to me and referred me to mr. ramon K. ilusorio after i told him that my interest was in money market or finance and investment. miss marivic Padilla who was mr. ilusorio’s credit analyst, interviewed me first and then referred me to mr. ilusorio for another interview. When mr. ilusorio asked me why i would not want to do accounting work, i told him that i thought i already knew enough of accounting and though i had an idea about finance and investments, there was much more to learn in these fields. Besides, i was afraid i might no longer have the opportunity to undertake post-graduate study or pursue another bachelor’s degree. But that if i would have the opportunity, i wanted to either pursue post-graduate study or take up law. From the way mr. ilusorio talked to me i could sense that there was urgency to get an assistant for miss Padilla. and so after a few more questions, i was referred back to mr. Bunda so that a pre-employment medical check-up could be scheduled. i was asked to report for work on February 14 which was a Friday. Little did i know that February 14, 1967 would serve as my first “baptism of fire” because it was only the next day when i was able to go home. my brothers with whom i was staying in a rented house were so afraid that i had gotten lost because it was my first time to go to makati by myself. The following day which was a sunday, i went back to work to finish the assignment that was given to me which was to reorganize the files of the department and come out with a filing system by monday immediately after the weekend. That was my very first lesson; i.e., that work assumes no time dimension. it was a lesson that served me well doing my 5 years with Bancom. shortly thereafter, my immediate superior, miss Padilla, resigned and i was tasked not only to assume the responsibilities she left behind but also to expand the unit from a mere credit analysis unit to a broader research group that covered credit analysis, securities and investment analysis, financial market research and analysis and special projects. This sudden change accelerated my professional development and taught me another lesson; i.e., that an office can serve both as an informal school (source of knowledge) and a source of livelihood. it was during this time that while i was doing my own work and training people to do some of the group’s work, i was given by my superior/mentor, mr. ilusorio, books (to read at night) about investments, financial markets, organization and management philosophies. and to ensure that i read the books given to me, mr. ilusorio allotted 30 minutes to 1 hour each day, usually between 4pm and 5pm., to find out what i had learned from the books he lent me. These readings enhanced my career development and helped me discharge my assigned responsibilities. one of the notable projects that involved our research group was the issuance of the Tax anticipation Bills and the Treasury Bills - Gold subsidy series. These were variant instruments of the Treasury Bills and were designed for specific purposes. The Tax anticipation Bills series was designed to even out the revenue tax collection, avoid bulging during the tax payment period and serve as incentive for taxpayers to promptly pay income tax. The Gold subsidy series was introduced to help fund the requirements of gold producers who were suffering from a dearth of working capital at that time. These Treasury Bill issuances were part of a bigger program for an overall debt management and borrowing strategy for the Philippine government which Bancom designed pursuant to a consultancy engagement it executed with the central bank of the Philippines in mid 1965. The strategy covered all levels of government including government owned and controlled corporations. it also included a plan of action for the development of a market for government securities so that the holdings thereof need not be kept within the confines of the commercial banking system. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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as a tactical measure, Bancom came out with a pricing manual as reference in determining the equivalent prices of given yields. This was intended to facilitate primary bidding and secondary trading for the Bills as they were sold on discount basis and did not carry interest. The price index also demonstrated the inverse relationship between yield and price and served as a handy reference for trading the Bills. Bancom also drew up a parallel program for private issues starting with its own Bancom Bills. it provided a vehicle for warehousing liquid funds in the market that would have otherwise remained idle and non-earning. it also served as an instrument to mobilize excess liquidity in the interbank so that this would find productive use in manufacturing companies. Though short-term in tenor, unlike the Treasury Bills, the Bancom Bills were interest bearing. as Bancom was not authorized to accept deposits, this instrument served as a deposit taking vehicle that became competitive against the widely known time deposits. it also served as a funding vehicle for warehousing corporate promissory notes whose secondary market at that time was not yet as active as the Treasury Bills market. encouraged by the success of its pioneering effort in promoting the development of a secondary market for government securities (where there was not even a well developed primary market before), Bancom’s top management set its sights on the southeast asian region and conceived of a regional program that promoted not only the establishment of similar financial institutions (Bancom type) but also the creation and/or development of a primary market and/or secondary market not only for government securities but also for private issues. over the years Bancom was able to develop a pool of fairly deep and well-rounded management talent that could be readily deployed for offshore assignments. in 1969, an opportunity was made available for the application of its investment banking expertise when a joint venture was forged among Bankers’ Trust, one of its principal stockholders, Thai Farmers Bank, one of the leading commercial banks in Thailand then, and Bancom. The venture called for the establishment of an investment bank (patterned after Bancom) in Bangkok, Thailand and for this purpose, Bancom, in addition to being an investor in the venture, was assigned the task of setting up the company and providing the initial management until a pool of Thai managers would have been installed. Thus, by late February of 1969, a team headed by ramon K. ilusorio (with Jose B. antonio and abraham Laviña) enplaned for Bangkok to survey the business environment and gather preliminary data that would serve as the basis in formulating the legal business structure of the institution to be established. i followed first week of march and finally, alfonso V. Gadia, a few days later. We were initially housed in montien Hotel because of its proximity to the Thai Farmers Bank headquarters at silom road. But our stay at the hotel did not take long and for practical consideration we moved to apartment units nearby. That was the start of months of “long days” because of the tight timeline the team had to follow. The preparatory work included the incorporation of the investment bank which was named Thai investment securities, co. Ltd. (Tisco), manualization of the products and services envisioned to be provided by the investment bank, manualization of the accounting and operating procedures, the design and finalization of standard contracts, agreements and financial instruments, preparation of brochures, product kits, standard sales letters and other promotional materials, design and construction of the office premises, installation of communication facilities and acquisition of office furniture and equipment. in between the paper works, calls to prospective clients, consultation on legal and tax matters, negotiation with counter parties for supplies, furniture and equipment, interviews of prospective members of the management team and staff were conducted. The products and services were informally introduced to prospective clients and initial transactions were booked to test not only the market sentiment but also the effectiveness of the

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operating systems. all these were completed after more than a month of hard work and before the formal inaguration of the company (Tisco). after the inauguration, mr. ilusorio continued to serve as the Deputy managing Director / chief executive officer until the company attained consistent monthly profitability. in June of the same year, mr. Peter Grossman, representing the interest of Bankers Trust, arrived and took the place of mr. ilusorio. i stayed up to the end of august and acted as consultant to the Deputy managing Director. Tisco served as the “test case” of the Bancom expertise in organizing and putting into a profitable operation an investment bank (more particularly its money market business) even in an environment where the business concept was not only relatively new but sounded foreign to the local market. The success of Bancom in manila and in introducing investment banking in Thailand caught the attention of the Harvard advisory council which through a funding provided by the Ford Foundation enlisted the services of Bancom to develop a market for government securities in Djakarta, indonesia. Finding the project consistent with its vision of regional presence, Bancom took the engagement and again, organized a team to undertake the project. The team was headed by mr. ilusorio and consisted of myself and alfonso V. Gadia as members. Prior to the Djakarta project, abe Laviña and i were sent to Hong Kong under the direction of mr. ilusorio to incorporate a securities investor company. it took us only a few days to capitalize, register and license the company which was named southeast asia securities co. Ltd. (seascom) which was then envisioned to be the vehicle that would carry out the expansion plans of Bancom in the region. While it was incorporated on march 12, 1970 as a securities investor company, it had for its business lines almost all the products and services provided by an investment bank. From Hong Kong, mr. ilusorio, myself and Pons Gadia flew to Djakarta to fulfill Bancom’s commitment to prepare a program for the development of a market for government securities. it was a flight that we could not forget because half-way in the air, the plane (Panam) suddenly took a drastic turn around to Kai Tak airport in Hong Kong. on the way back, smoke pervaded inside the aircraft and caused the oxygen masks to drop. nobody knew the exact cause except for the announcement that something went wrong with the plane’s airconditioning system. We realized how grave the situation was only when the plane landed and we saw fire trucks surrounding the plane and everybody was rushing for the exit. as there was no other flight available that day, we were told that the flight would resume after two hours. The technical staff was already working on the plane and it would be ready soon. We were hesitant to proceed and were thinking of taking the next day flight. However, there were schedules to meet and the next day’s flight would be a little late for the said schedules. Besides, a staff of Bank indonesia would be there at the Djakarta airport waiting for us. To settle the issue, we left our decision to a coin toss and the result was for us to proceed and take the same plane. as mr. ilusorio commented, we should not be afraid anymore because the law of averages is on our side as the incident we were afraid of already happened. That flight was a foreboding of the many hard decisions we had to make and the tremendous pressures we had to bear on this assignment. mr. ilusorio was given only two weeks to submit hard copies of the proposal for approval by the Board of Bank indonesia (the central Bank of indonesia) whose meeting was scheduled precisely at the end of the three-week deadline. The first week was spent conducting research and interviews and the evenings were used for brainstorming the project, firming up the outline of the manual to be prepared, identifying information critical to the completion comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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of the program to be drawn, preparing the materials we would need and the manpower support that we would draw from the bank to enable us the optimum use of their offices and equipment, and drawing the timeline leading to the completion of the manual. in all these activities, mr. ilusorio assigned each of us a defined role to play and area to concentrate on. The next two weeks were spent documenting the program including the design of Bank indonesia certificate and the issuance, secondary trading and the operational aspect of the issue. The rest is history. Bank indonesia certificate was born and an organized primary and secondary market for government securities in indonesia was established. in June 1970, Vice President Fernando Lopez who was also the secretary of agriculture and natural resources issued a special order creating an ad Hoc committee to Promote the use of rural Bank acceptances backedup by rice Quedans as funding mechanism for the improvement in food production, more specifically, rice. The committee was composed of officers of the central Bank, other government banks and national offices involved in rice production. i was designated to represent the private sector as one of the eight members and the committee was chaired by mr. Tirso V. antiporda, Director of the Dept. of rural Banks, central Bank. obviously, my designation was not on the basis of my personal qualification but more in recognition of the expertise of Bancom on this matter. With the assistance of the Bancom staff, i prepared a presentation to the committee on how a rural Bank acceptance as bill of exchange was created, how it could be traded in the open market to draw funds into the agriculture sector and how the farmers could derive benefits therefrom. That presentation provided the focal points of discussion and served as reference in the design of a “Proposal to Promote and Develop a market for rural Bank acceptances secured by stored Grains”. it is noteworthy that the special order on this project was an offshoot of a proposal submitted by Bancom to the central Bank of the Philippines sometime in late 1967. it would also bear noting that though i participated in the discussions and even made the initial presentation, i was not included in the finalization of the proposal. But one of the things i learned in Bancom which i carried with me in all my future endeavors is not to work for one’s personal glory but to be a team player and to work for the interest of the team.

Tirso G. santillan Jr. Sito is the EVP/COO of Alsons Consolidated Resources Inc., and is in charge of business development for the Alcantara Group of companies. He is also Managing Partner of Private Capital of Asia Ltd.

“musings on my Bancom years” i joined Bancom as my first full-time job on may 2, 1966, a few days after graduation from the ateneo mBm Program. i remember i was taken in as employee no. 30. my first assignment was to head one of three teams in the Financial Planning and underwriting Department (FPu). The other teams were headed by Vector Limlingan and Lito manahan. reporting to me then were Babes simpao and mike Goco. FPu reported directly to rolando c. Gapud (rcG) who was then asst. Vice President. Vector and i were

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recruited by rcG who was our professor at the ateneo mBm Program in a subject entitled, as i remember, Quantitative analysis for management Decision making. at that time, the work at FPu was more of financial planning than underwriting. i remember that our first major job was to develop a medium-term financial plan for PLDT, using a then advanced technique called linear programming, which took our entire department of 9 people 2 weeks of manual iteration to complete. With laptop technology today, that job would probably take one analyst one or two days to finish without any computational errors, with the inputting of data taking the most time. our work then had a lot of peaks and valleys. The peaks would happen when we had deadlines to meet, to submit reports to clients, which had a tendency to bunch. The valleys were the lulls in our engagements, which did not happen often. We were all dedicated to our jobs and would not complain when we had to work overnight, sometimes for days on end. This was true not just of our department but was the pervading culture throughout Bancom. our jobs became our personal, professional, social and even quasi-family lives all rolled into one. Working intensively together created a bond that was nearly as strong as soldiers risking their lives in the front lines, fighting for their country, which in our case was Bancom. our role in Bancom under the rcG wing was to develop the medium and long-term capital markets. This meant soliciting investment grade corporate clients like PLDT, soriano-controlled companies like san miguel, atlas mining, Paper industries corporation of the Philippines (PicoP), etc. During these days, most of our clients were solicited through the efforts of sKr who was great at opening doors and impressing potential clients. Later, rcG also acquired this skill but in his own style, more skewed to personal rapport. our role then was to be the production line for the services committed to the corporate customers. When we succeeded to be the lead underwriter of PicoP, our crowning achievement of the late 1960s, we also had to develop a placement capability. This role was provided by a securities marketing group that was then headed by Pet Jingco, who graduated from our same mBm class. another area of development was the creation of an investment services group to expand Bancom’s capability to place medium and long-term capital instruments. This unit was headed by Francis moran, my fond memory of whom was his habit of asking people whether it was going to rain that day. This group had to be supported by an investment research group, which was started by Johnny romualdez, also a classmate at the ateneo mBm program. aside from the development of the local money and capital markets, we also embarked to develop Philippine access to the international markets. my first experience in this market was in 1972 after the declaration of martial Law during an era when strong central governments found some acceptance with the international banking community. i remember accompanying the american express international Banking corporation (aeiBc) Philippine representative, mr. Terence d’ath, to see then Defense minister Juan Ponce enrile for a briefing on the country’s socio-political situation. This led to a successful foreign bank syndication of us$50 million for the martial law government. Having built up a bigger basket of financial capabilities, we developed the confidence and credibility to approach and offer prospective clients with short-, medium- and long-term funds from the local and foreign markets. it thus became easier for us to obtain big clients like marinduque mining and industrial corporation for its nonoc nickel Project, or later the national Power corporation (nPc) for its Bagac nuclear Power Project. our biggest Bancom deal was financing nPc’s 600 mW nuclear power project which at the time of our comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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involvement was a us$1.3 billion project. This later grew to over us$2 billion by the time it was ready for implementation. This project was notable in many ways: •

This was not only Bancom’s largest project but probably the largest for the Philippines as well. To date, this remains the largest project i have ever gotten involved in.

•

This was the first and only nuclear power plant planned for the Philippines, which unfortunately did not push through.

•

This was also our first experience to use computers for financing negotiations. We employed computer analysis using punched cards to feed data into an iBm 1401 computer to work out the financial implications of any us eximbank proposal. We would negotiated with us exim in Washington, D. c., in the morning, then with our computer expert, Tony salgado, would run to a computer installation in nearby alexandria in the afternoon, so we could react to eximbank the following day. This was still not real time negotiations but it cut down significantly the time and foreign trips required to reach agreement.

•

This was also the first time that US Eximbank guaranteed debentures were issued.

This transaction put us side by side in the financial advisers’ consortium with big players like citibank, manufacturer’s Hanover Trust and aeiBc. To further the concept of one-stop banking, Bancom tied up with rcBc to be able to supply the total financing needs of a client. The idea was to build total banking capability from commercial banking to investments banking services. This was very similar to the universal banking structure that was later adopted by the central Bank. The attempt to organize a quasi-universal bank with rcBc, in my opinion, worked for a while when atty. romy co who was a very cooperative senior officer was still in rcBc. This arrangement was disbanded which, as i vaguely remember, was not due to business imperatives but more due to the some lack of chemistry at the Board level. The second attempt was with Far east Bank. This was working but in the end it fizzled out too due, i believe, to Bancom’s financial problems in the early ‘80s. in 1977, amex Bancom, a merchant bank based in Hongkong, was formed. i was appointed managing director and was joined by manny V. Pangilinan as executive Director. sKr was our chairman. it was also the time that sKr moved to new York as Vice chairman of aeiBc. amex Bancom was a joint venture with aeiBc which owned 75% of the equity. amex Bancom existed side by side with Bancom international Ltd. amex Bancom was focused on developing placing power in the international capital markets, while BiL was geared to service the remittance and money market needs of Philippine clients. amex Bancom suffered a loss on its first year but this was expected. it turned in a profit by 1978. By 1979, however, amex changed its organizational policy; it adopted an area management concept, probably influenced by sKr. as a result, there was no longer a place for a joint venture in its organization. aeiBc bought out Bancom in 1979, so it became amex asia Ltd. concurrent with amex Bancom, Bancom embarked on developing BDc equivalents in the region, an effort started and developed by Kaiku Licuanan. These units were focused on developing local markets and originating borrowers and investors to give them access to the local and eventually the international markets, including through amex Bancom. This plan led to the development of local investment banks: Ficorinvest in

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indonesia, asiavest in malaysia and univest in Thailand. a regional holding company called asean investors Group (aiG) was formed in singapore to tie these country institutions together. i stayed for a year more in amex asia Ltd. but at the request of rcG, i returned to Bancom at the end of 1979. rcG needed help to address the deteriorating financial condition of Bancom which was brought about by a tax regime biased against local investment houses. This affected adversely the quality of Bancom’s loan portfolio. Bancom’s traditional solution to a financial problem, it would seem, was to bulk up so the problem became relatively smaller. Bancom had experienced its first financial crisis in the early ‘70s when an attempt to spur a year-end stock market run failed to catch on. This left Bancom with potential market losses that were large enough to wipe out its capital. a so-called buisiness trust was created to sterilize the losses. Later a diversification program to grow the size of Bancom was adopted, which was carried out by Luis r. Villafuerte (LrV). When the diversification program did not deliver the expected financial results, another growth spurt was planned. This time it was through the acquisition of Gami, a brainchild of LrV, to reduce the size of the problems brought by the diversification. in keeping with its tradition, the solution to BDc’s weak loan portfolio was to grow its resource base. Thus was hatched rcG’s plan to acquire security Bank and merge it with BDc to become a universal bank. This would not only reduce the size of its bad accounts relative to its total portfolio, but also give it other product lines and access to a more favorable tax regime. To carry out this plan, rcG asked messrs. Dewey Dee, ramon sy Lai and Philip ang, aka the three musketeers, to front in the acquisition of security Bank. But this solution came too late as Dewey Dee decided to skip the country to avoid some P800 million of debts, which precipitated a financial crisis that brought down all the weak financial institutions which included most investment houses as well as Bancom. The collapse of BDc led to the further reorganization of the Bancom Group, inc. as a repository of Bancom’s non-financial assets and bad accounts. The better financial assets were merged into union savings and mortgage Bank that was converted into union Bank of the Phils., a commercial bank. Land Bank and sss took over control of uBP. i became eVP at union Bank when Bancom closed. What key lessons and observations did i take away from my Bancom years? Probably, i could say these: •

Bancom was a high powered organization because it had a highly motivated organization, manned by very intelligent, educated, achieving individuals.

•

The Philippine and Asian financial markets were undeveloped, undefined. There was a lot of room for trail blazers and innovators.

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SKR was a charismatic leader. Paraphrasing a US Midwest banker: “I didn’t understand what he said but whatever it was, he said it darn well.” He attracted the best minds.

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If you have a big problem, bulk up so the problem becomes smaller.

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Develop the objectives from the results; suit goals to the results.

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Principal is bigger than the interest.

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evelyn r. singson A multi-awarded woman executive, Evelyn is a past President of MAP, and was the founding Chair of Asian Hospital. She is Chair of the Bancom Alumni, Inc. (BALI) and Vice-Chair of Dusit Thani Hotel, where she graciously hosts extravagant luncheon meetings for the BALI Trustees.

“candid reflections on Bancom” i joined Bancom in 1969, a few months before i got married. i was not happy in my job as a Product manager of a drug company and i was sure it would be easier for me to find a new job as a single girl than as a married woman. Then, the big bosses of Bancom were sKr, rcG, LrV and rKi. each of the 3 sVPs had their own territory and when you get assigned to a department, you automatically were under the sVP of that territory. i got the impression that each of the sVPs was independent and allowed to run his territory with a lot of leverage. Bancom was the place to be because it was perceived to hire only the best and the brightest. it was a privilege to belong to this group. everybody in Bancom seemed to belong to one generation – everyone was young, ambitious, driven, creative and most of all, happy. its strength was the liberal environment in which we operated. We were allowed to determine how to do our jobs with not too much supervision. This encouraged people to be innovative and self driven. This strength was also its weakness. This environment worked well with certain people, but not with everyone. There was a good reward system but there was no perceived penalty system. Hence, my impression was that there was “responsibility but no accountability”. i joined Bancom as a senior analyst six months after i returned from northwestern university. my Boss was mandy eduque, who then joined Bancom after graduating from the university of chicago. our department was called research and investment Department (riD) and our mandate was to produce industry studies and company reports as a service to the investment management Department (imD). When mandy eduque left Bancom, his job was taken over by Lito manahan. The Deparment became bigger and we moved from the comtrust building to the Bank of commerce building where we occupied one whole floor. after some time, there was another re-organization. Lito was transferred to imD and i was made to head riD. our whole department was consolidated with the Publications Department (aP-DJ) and we were put under ralph Perez de Tagle, another sVP. after a few years, mr. Tagle resigned and migrated to the usa. For a while, i did not report to any senior officer and i was named the head of the department. Then another re-organization occurred and riD was re-named the Financial engineering Department. our functions were expanded to include credit (analysis, evaluation and recommendation), credit monitoring, industry and company analysis (for credit and imD). i recall i was even asked to head Bancom currency Brokers inc. We were returned to mr. Gapud at this time. The Bancom culture suited young guys who were ambitious, driven, creative, sociable and outspoken. These guys flourished and developed an intense loyalty to the instittution. These kinds of people thrived in an

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environment where they were allowed to be independent and to operate with little supervision. They were responsible and determined to give their best to Bancom. When Bancom was solely engaged in financial intermediation and financial services, there was hegemony in the people who worked together. They shared the same background and the same specialization and they understood each other’s language. This culture slowly changed as Bancom decided to diversify to non-related fields that were not directly finance oriented. it began to hire people of diverse backgrounds and specializations. The culture of the non-financial services companies was completely different from the original. Gami people for example were used to selling tractors to farmers and thus were laid back and felt they can depend on Bancom to continuously finance their operations, even if they were not operating profitably. We also had financial services people turned entrepreneurs when they were asked to head companies they had no experience in. They too felt that their learning process will be perpetually funded by Bancom. These attitudes created friction because Bancom saw these companies depleting Bancom’s resources (at least to me, as head of credit and credit monitoring, it was very obvious). We at the management level also felt that the top people were acting independently of each other. it seemed to me that they were running their operations with little coordination even if Bancom was sourcing the funding requirements of the diversification group. i really do not know how coordination on the top was, but i do not recall we ever met together as one institution. We considered ourselves as separate from the diversification group. eventually, i was asked to handle the BGi Treasury. This just meant, i would have to provide funds to the diversification projects even if i did not think they deserved it. again at that time, it almost became a necessity to keep pouring funds to the diversification projects just to keep these companies alive, because any one failing can cause the entire institution to follow. FeD was charged with the evaluation of credit risk of companies applying for lines. We interacted directly with clients while we processed their creditworthiness. The output was a credit report recommending the approval or disapproval of the credit application, including rating the ability of the client to repay the loan according to the terms applied for. The results of the credit evaluation were presented to the credit committee composed of the departmental heads of the Financial markets and investment Banking Divisions. The credit committee either affirmed the recommendations or modified the terms as it saw fit (usually to ease the terms to make them acceptable to the client). When the account was approved by the credit committee and the client wished to drawdown but the conditions for drawdown were not met, credit monitoring issued a “pink slip”. The pink slip had to be signed by LrV or rcG and then the client was allowed to draw with all the deficiencies noted in the pink slip. at the start, it was very difficult to have the pink slip signed but as more and more accounts were unable to meet the terms of the loan approval, the pink slips became the rule rather than the exception. There came a point that the accounts just kept being rolled over and we were in fact selling inferior papers with very low credit ratings in the money market. But the market i think did not care because they either did not realize they were buying mediocre assets or they just believed in Bancom’s credit reputation. i recall i began an “acquired assets” department because we were accumulating hard assets from defaulting borrowers or inventories and receivables from the subsidiaries. This was headed by marylin ong. i don’t recall there was panic by anyone except by me. i kept complaining about the ease we were lending money to the subsidiaries who had no means of paying these back. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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i felt lucky that before Bancom got into trouble i had already resigned and moved on to security Bank, for a higher position and better pay. my life in Bancom was probably the happiest time in my career. i believed i learned so much, particularly in making very tough decisions. it also taught me to stand by what i believed is right, even if i did not always win the fight. There will probably not be any company like Bancom where the environment was tough, challenging and competitive but you enjoyed it because the people were brilliant (sometimes in the wrong way) and fun. The camaraderie was great and the working environment was enjoyable. i am proud that i trained some of the best and the brightest, and contributed them to the business world. There are angel ong who rose to be President of BenPres, mel alonzo who became President of Pag-iBiG Fund and then the small Business corporation, emily Varua who was President of Wise and company (renamed Dharmala), Danny Venida who held the reigns of the Philippine Daily inquirer during its turbulent times, Bernie atienza who now heads the Philippine retirement authority, and many more here and abroad who are holding responsible positions in the corporate world.

manuel n. Tordesillas Manny is the President of Maybank ATR Kim Eng Financial Corp., and is regional head of investment banking for the Maybank Kim Eng Group. He is the founding President of Bancom Alumni, Inc.

“What Bancom means to me” in the Philippine business community today, only a few companies stand out in the sense that they make a lasting impact on the careers of executives, professionals, or staff who are former employees, such that, even after they have left the company, they still regard themselves as the company’s “alumni”, a term referring to former students or graduates of a school or university. Despite its well-publicized closure in 1981, Bancom was one such company, and recently its former executives put together Bancom alumni, inc., with the end in view of promoting an effort to produce a Bancom book, to be written by former Bancom President sixto K. roxas. While it may perplex some who may not have even heard of Bancom today, this simply confirms that Bancom was a financial institution that had the nature of a school of learning in its time, and that it had produced a number of notable “graduates”. it also confirms that it was not an ordinary learning experience that the employees derived from their experience of working at Bancom. That was how it was for me then. as a fresh industrial management engineering undergraduate from De La salle college in 1975, the attraction of Bancom as a place of apprenticeship was strong. Bancom was considered the fast track to a successful career in finance and capital markets, as opposed to working in a management consulting firm or commercial bank, such as sGV or Bank of the Philippine islands, which were my other career choices at that time. and fast track it was. Despite having no prior academic training in banking and finance or for that matter, investment banking, in a period of just 4 years i found myself immersed in the areas of project finance, loan

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syndications, commercial paper issues and private placements initially, and later on advancing to the more complicated world of public offerings of equities and bonds. not only that, my bosses or mentors in Bancom happened to be among the best and brightest stars in the Philippine financial solar system – former Finance secretary ramon del rosario Jr., former PnB chairman Francisco Dizon, former security Bank President rafael simpao, former DBP President Francisco del rosario and many other stellar names contributed to my early education in investment banking. But most of all, Bancom nurtured in me a culture of creativity and innovation, even as it recruited many other market-savvy, street smart and highly self-motivated professionals, and promoted a spirit of competition both internally within the company and against rival investment houses. in this mix, excellence and leadership in deal-making by individuals and teams were considered to be the gold standards, and ever-increasing market share and higher profitability were the assumed consequences of the company’s strategy. But it did not exactly turn out that way. as the saying goes, failure is a better teacher than success. What led to Bancom’s eventual demise? George santayana, the spanish philosopher, once said, “Those who cannot remember the past are condemned to repeat it.” Hopefully, the Bancom memoirs of sKr will shed some light on what went wrong. Yet, many years after Bancom failed, we still encountered the likes of urban Bank or all asia in the Philippines, Peregrine investments Holdings in Hong Kong, or even Lehman Brothers in the united states, and their failures often precipitated or exacerbated financial crises that endangered the entire financial system itself. common to the failure of these financial institutions were fundamental management issues such as poor asset quality, asset-liability mismatches, high gearing, and in most cases, excessive risk-taking. But the straw that usually breaks the camel’s back is oftentimes the hubris that comes along when we, as money managers or investment bankers, having created innovative financial products or having command of substantial financial resources or having the ability to raise billions of pesos or dollars for our customers, ourselves begin to believe that we are the new masters of the universe. it is this feeling of invincibility that we all need to check in ourselves from time to time. otherwise, history simply will repeat itself.

Danilo s. Venida His Bancom years prepared him well for the various managerial challenges he has faced, says Danny in this write-up. He is the President of Healthcare Systems of Asia Philippines, Inc. and also serves as the Principal of Venida Consulting.

“Daring and building: a Bancom legacy” The corporate life of Bancom Development corporation was brief, 1965 to 1981, just 16 years, but the institution’s impact on Philippine business and society, by way of what those who had the privilege of being a part of it built in careers or in building other institutions, can be awe-inspiring. if there are firms for law and accountancy that define sound pedigree, in everything else: management, banking and investment banking, finance, and a diversified spectrum of industries and services, the Bancom-brand will not be out-done; is second to none, so to speak! This kind of bravado, perhaps, is one big factor why Bancom did not last. But comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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no doubt, since 1981, Bancom alumni have dared and built on their careers after Bancom, and contributed to building institutions that help Philippine economy and society and even other asean economies, run and grow to this day. i joined Bancom in 1975 in the Financial engineering Department (FeD) under ms. evelyn r. singson. i was to beef up industry research in the department to support credit, investment and project evaluation. nothing can be “googled” yet then, and the sources of global news and information were the teleprinters of associated PressDow Jones or reuters coming in overnight and quickly summarized in the morning by a unit in my group for pertinent insights for the tasks at hand. my group then churned out two reports: an annual industry Prospects and a week-days “World Watch” until 1978 when the re-organization for integrated area development (iaD) was implemented, the beginning of the passing. i stayed until 1980 after finalizing evaluation reports for the acquisition of two banks: a local commercial bank and an overseas commercial bank. my Bancom experience was a 5-year stint of what is now over 40 years of professional and entrepreneurial career. i was 4 years into my career when i joined Bancom. i just completed in 1973 my graduate program in industrial economics at the center for research and communication (crc) Graduate school of industrial economics, the forerunner of what would be the university of asia and the Pacific (ua&P). i was one of eight first students of what is now a full blown university, a singular privilege, indeed. my crc and Bancom exposures must have fired-up my pioneering propensity. i dared accept in 1985 an invitation to handle the business aspects of printing and circulating and managing a mosquito newspaper, The Philippine Daily inquirer. The run-up to eDsa People Power i, before, during and after the 1986 snap presidential elections made the inquirer the biggest circulating english broadsheet in the country, against all odds. i became president of the Philippine Daily inquirer, inc. in 1987. in 1997, evelyn r. singson invited me to join her build a state-of-the-art tertiary hospital within the metro manila area. asian Hospital, inc. was incorporated. i prepared the pre-feasibility study and we raised equity and debt funds amounting to Php 4 Billion to make asian Hospital and medical center in alabang, muntinlupa city a reality. it opened to admit patients in 2002. Before this project, no one dared invest in a major new tertiary hospital. now new developments follow the standards asian Hospital set. The inquirer and asian Hospital are two institutions i dared to help build, flowing from the spirit of daring and building my Bancom experience reinforced in me. There were and some continuing involvements in agrilivestock business; in environment protection and renewable energy generation projects; in communications; in micro-finance; in hotel and property development areas. But the bottom line of the Bancom experience that is invaluable are the many friends i made, and the friendships after more than 30 years continue to endure. i had the chance to work with sKr as a peer in the office of the Vice President of the republic of the Philippines, Teofisto T. Guingona Jr. in 2003, and we were on nickname basis since we both called the vice president “Tito”. The network of friends from Bancom days, no doubt, has been a positive influence in my professional and entrepreneurial life – a life enriched by the experience. an expression of deep gratitude is in order: Thank you, Bancom!

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Jose alfredo L. Villanueva Joe-Al joined PDCP in 1971 and was with the company for over 30 years, seeing it transformed into PDCP Bank and subsequently into 1st eBank. He was the Executive Vice President when it was acquired by BDO in 2002. He retired from banking in 2003.

“conclusion to the PDcP story” This is a brief write-up on the history of the Private Development corporation of the Philippines (PDcP) and the various factors that led to it’s demise. i don’t recall sKr being an original incorporator or stockholder, although i believe he was part of the steering committee that negotiated and formulated the concept and operational guidelines for the institution, together with representatives of the World Bank and the Government. While PDcP was also organized as an investment House, it was primarily evaluated on its ability to fulfill its primary mandate of generating projects that could contribute to the economic development of the country. as such, PDcP developed a more conservative culture with expertise in project finance. eventually, it was primarily the open-ended exposure to foreign currency risk that weighed down the institution. Bancom on the other hand was perceived to be more flexible in its operations; a more aggressive group composed of bright innovative professionals led by a capital markets visionary willing to take risks. PDcP was set up in 1963 at the initiative of the World Bank and the Philippine Government, in cooperation with leading Philippine industry leaders. The objective was to establish a private financial institution, free from political interference, to serve as a conduit for long-term development loans for the private sector. Loans would be used for the establishment or expansion of economically desirable and financially feasible projects in the Philippines. PDcP would be tasked to identify, evaluate, approve, disburse and supervise said projects, with funding for the importation of machinery and equipment to be initially provided by the World Bank and guaranteed by the Philippine Government. The original incorporators included Francisco ortigas sr., aurelio montinola sr., carlos Palanca, antonio Delgado, roberto Villanueva and Vicente Jayme. PDcP was organized as an investment House and was listed in the Philippine stock exchange. Fund sources were eventually expanded to include credit lines from the asian Development Bank, among others. credit Lines were expressed in equivalent us Dollars, with the currency of obligation dependent on the currency or basket of currencies used in the actual disbursement of the individual loans. While in theory the loan recipients bore the exchange risk, PDcP, aside from the credit risk, also shouldered the debt servicing burden in cases of default. as an investment House, PDcP was also expected to initiate and participate in the development of the capital markets. Given its original objective however, PDcP was primarily evaluated by its long-term creditors on the basis of its success in creating financially viable projects within the investment Priority Plans of the Philippines and how they contributed to the overall economic growth of the country. aside from financial indicators, its loan portfolio was periodically reviewed for factors such as contribution to GDP, foreign currency generated, comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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labor creation, economic rate of return and other indicators. as a conduit for government guaranteed loans, PDcP was also subject to stringent supervision by regulatory authorities. PDcP therefore developed a more conservative organization with expertise primarily in project identification, project evaluation and supervision, and in economic and corporate research. While PDcP remained active in the capital markets, its main source of income was primarily asset based. PDcP, in the early 1980’s, became a majority owned subsidiary of Far east Bank via a share swap agreement among common shareholders. The objective was to expand Far east Bank into what was then envisioned to eventually be a universal bank. For twenty years, PDcP fulfilled its original mandate, having financed successful projects in manufacturing, mining, shipping, power, construction and other economically desirable projects. The company showed a track record of continuous profits and regular cash dividends. However, in the early 1980’s, the successive oil price increases from the late 1970’s, the political turmoil brought about by the aquino assassination, and the continuing devaluation of the Philippine Peso, started to affect the Philippine economy and tolled heavily on the debt servicing capability of PDcP’s clients. notwithstanding defaults incurred by some clients, PDcP attempted to keep its loans with international lending agencies in current status. still, the Peso equivalent of its outstanding foreign denominated credit lines continued to increase as the peso continued to devalue against the currencies of obligation. resources were being drained. it was getting to be a bottomless pit. even if the loans from the multilateral agencies were guaranteed by the Philippine Government, calling on the Guaranty or seeking government relief was never considered as an option. This was a sensitive issue because of the profile of PDcP’s major shareholders and because PDcP was a private corporation. in 1986, Far east Bank secured approval from regulatory authorities to divest its PDcP shares to the PDcP employees retirement Fund, at a price equivalent to the maximum single investment limit of the fund. as part of the divestment agreement, Far east Bank was required to purchase certain non-earning assets of PDcP and provide a subordinated loan to augment PDcP’s resources. effectively, PDcP’s management and staff were now the majority owners. as part of its rehabilitation plan, the management of PDcP successfully negotiated with the Department of Finance to convert the remaining balance of its government guaranteed foreign currency loans to equivalent pesos as of a certain cut-off date, payable over a certain period of time. in exchange, PDcP would pay a higher interest rate than the average it was paying for the foreign loans. Government on the other hand, as guarantor, would continue to service payments on the remaining foreign currency loans. PDcP made a case that this was a cheaper option for government, as it would have to assume these foreign loans anyway in case of a PDcP collapse, not to mention the administrative cost of managing the remaining portfolio, attending to outstanding collection cases, the preservation of foreclosed properties, and other administrative functions. With the foreign currency overhang out of the way, PDcP focused on liquefying non-earning assets, restructuring its loan portfolio and cutting down on overhead expenses. Foreign currency lending stopped and lending activities were confined to local currency loans to small and medium enterprises, sourced primarily from the iGLF. This marked the end of PDcP’s involvement as a conduit for foreign currency denominated loans for development projects.

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With its improved operating results, a more viable PDcP secured approval in 1992 to convert into a Private Development Bank (PDcP Bank) and to convert its seven regional lending offices into deposit taking branches. Bancom memoirs

The objective was not only to have access to low cost local currency funds, but also to participate in the banking requirements of its successful clients, something it could not exploit fully as an investment House. simultaneously, PDcP Bank was in the market for strategic investors to strengthen its capital base and shareholder composition. in 1994, it was approached by metro Pacific corporation (mPc) and an agreement was reached where mPc would acquire primary shares to give them initially 30 percent of the Bank. in addition, mPc would get corresponding seats in the Board and would appoint a senior officer in management. simultaneously, PDcP Bank was able to negotiate for the investment of Hambrecht & Quist and the German Development Bank, with both institutions investing up to 5 - 6% each of the resulting capital. The public announcement of the entry of new shareholders dramatically boosted PDcP Bank’s share prices. in 1996, mPc initiated the acquisition of First Bank (formerly Producers Bank), a commercial bank which was at that time under BsP rehabilitation. With PDcP Bank as the acquiring institution, mPc increased its shareholdings in PDcP Bank and acquired First Bank through a purchase of selected assets and assumption of deposit liabilities and branches. The attraction of First Bank was the close to sixty nationwide branches it had, which would accelerate the growth of PDcP Bank. The strategy was to thereafter aggressively increase PDcP Bank’s loan portfolio and acquired commercial banking activities to offset First Bank’s operating losses. The acquisition of First Bank however came at the onset of the asian Financial crisis, which adversely affected the quality of PDcP Bank’s increased loan portfolio. a decision was eventually made to dispose of the Bank (by then renamed 1st e-Bank to reflect its e-commerce activities initiated with smart and PLDT). in 2002, an agreement was reached and implemented with Banco de oro whereby BDo assumed the banking business and deposit liabilities of 1st e-Bank in exchange for selected assets and liabilities. With the sale of its banking business, 1st e-Bank again changed its name to Prime media Holdings corporation, a shell company, that remains listed in the Philippine stock exchange to this date.

Delfin L. Warren Jing is the Founder and Chair of One Incentive Systems Advocates (1ISA) Group, a Loyalty Solutions company. He is an active enthusiast of Pinoy Classic Rock, and occasionally still plays lead guitar with his rock band.

“my story as a Bancom expat” apart from the catholic church and family, there are 3 other institutions that have defined my life thus far – La salle, Bancom, and First Pacific. But let me focus on Bancom where i learned my finance and developed cherished friendships. i first got into Bancom in 1975 upon the recommendation of Bro. J. Benedict, La salle’s grand alumni link, who was like a father to me. i was interviewed by ramon del rosario, 4 years my senior in La salle. mon knew that having graduated as a chemical engineer, i had very limited knowledge of finance. and so, he sent me first to train under the Financial engineering Department (FeD) headed by evelyn singson, my first big boss in Bancom. comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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it was in FeD that i started learning the ropes in investment banking. i can never forget how angel ong took pains in helping me with my first credit report, a daunting task then for a neophyte credit analyst like me. (i hope angel feels fully paid for those invaluable finance and accounting lessons by my introducing to him mita aure, his wife to be). my first unit head was eric Togle, and i had a great time working with roommates Volney ricafort, rhym Basbas, Gil alcantara, Gary Baretta, and minnie crisostomo, who quickly became one of the boys. other FeD colleagues i remember were susan Figueras, Tessie Fonacier, Boots rodriguez, ed “Kojak” evangelista, Johnny abito, ed cruz, Danny miranda, Danny Venida, Bernie atienza, and emily Varua. of course, i am eternally grateful to the typing pool, Pete Bravo among others, who showed us what hard work really meant, and patience too. after a short stint as credit supervisor, i was then ready for the originations and underwriting Department where i learned investment banking deal-making, the marketing of financial instruments, and underwriting. These were times when we had to calculate, by trial and error, internal rates of return using present value tables which often took overnight. But then voila, the dawning of HP financial calculators. as a Deal manager, my direct boss was cip de Leon, and after him, Paquito Dizon. our division boss was rrr, while mike Goco, Gene Bautista, chuck Garcia, mario Villareal, and Bobby atendido were among the other bosses i recall. eventually i was assisted in my unit by Jojo mangahas and manny Villanueva. it was in Bancom where i developed lots of lasting friends, and enjoyed long working hours (of course often with needed breaks at cork and cleaver, for those who remember!). i learned to play tennis with the FeD guys, but it was efren (can’t remember his family name) who “trained” me. other tennis regulars were ronnie suarez, nitoy estrellas, ed cruz, Lito de Tagle, al Dantes, and Vic Tinsay who was assigned in Hong Kong then. occasionally, i had the privilege of playing with sKr and ramon Picazo at the Ding Velayo sports center across the domestic airport (sometimes as early as 5:30am upon sKr’s request). it was in sKr’s office that i first saw and was truly awed by a personal computer, the apple iie, which was operated by marie de asis. i also had a stint in Project Finance, working with bosses art aguilar and Babes simpao. at this stage, the opportunity of entering aim under a Bancom scholarship for a master in management Degree presented itself. Having completed the requirements, i was about to enroll when rrr called saying he needed me over the next few months to assist Francis estrada in our Jakarta operations. rrr promised that the aim scholarship was still going to be there after i come back from my foreign assignment (which never happened anymore as the initial 3 months became 2 years in Jakarta, and 2 more years in Bangkok). The moment i landed in Jakarta, i was greeted by this weird smell which i later discovered to emanate from kretek, indonesia’s unique clove cigarette. i immediately felt at home working with boss FGe, ike Bernardo, Boyet Barlis and nary menon in Ficorinvest, and with Jing alampay, nonoy reyes, and Willie Tirona in Panca Bina esa (Pabesa). Ficorinvest was our investment banking joint venture with Bank indonesia (the country’s central bank), while Pabesa was our consulting company. our President Director in Ficor was oey Beng To, a director of Bi, while managing Director was FGe. my initial assignment was to train credit analysts and deal managers. i assisted nary in credit, then ike in Deal management. i became known as “Jungle Jing”, the only crazy guy who agreed to visit prospective timber industry clients in Kalimantan. The locals i worked with included subowo, Bus Kusmuljono, sunario, mimy ratulangi, Gunawan Danurahardja, and Jack makonda. i also got involved in the development of indonesia’s capital market at a time when there was only one listed company, a cement company, PT semen cibinong. i even remember delivering a talk in Bapepam (the local sec) on company valuation. (How i wish i had saved my notes then!). subsequently, i worked on the supposedly first formal iPo, a surabaya-based pressure lantern company, PT sinar surya. ike would envy my rare instant access to the country’s top notary in indonesia, Kartini muljadi, since it often took him one week

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to get a return call from her. i am proud to say that evidently the early underwriting and selling agreements used by notary muljadi were patterned after documents i brought from manila. november 17, 1978 was our signing date. Then, without any warning, on the evening of november 16, devaluation of the rupiah from 415 to 625 was announced. Whoosh, my six months’ work down the drain! Fortunately, the policy of indonesianisasi (or indonesianization) provided an opportunity for foreign entities to fulfill their obligation of transferring part ownership to indonesian nationals by going public. eventually i was able to take PT richardson Vicks public. Life in Jakarta could have been so lonely for ike, Boyet and me who were on bachelor status (before my wife and my son joined me eventually), if not for our “friends from the skies” to whom we are very grateful. The “hardship post” was alleviated by the privilege of being visited by, and getting to know personally, our big bosses amB, sKr, rcG, TGs, FHL, nLe, Jac, and cLP. Two years passed quickly, but before leaving indonesia, my wife ecky gave birth to our second son, the first of our next 4 children to be born in Jakarta, my family’s home for 15 out of our 20 years overseas. next stop was Bangkok to join rollie Gosiengfiao in setting up univest, a joint venture with the Bangkok Bank and saha union Groups. on tow now were our eldest son and our new born baby. apart from the very challenging business setting which rollie suitably described in his article, life in Bangkok was quite vibrant. Food was great and the night life was something else. Then the inevitable happened. We received a call from manila that we were being recalled. after just a few months back home, i witnessed the saddest moment in Bancom’s history – the turnover of our beloved institution to the government. i clearly remember that when mr. Teodoro of sss dropped the name Bancom from the new corporate name, union Bank of the Philippines (vis-a-vis union Bancom Bank), sKr excused himself, turned around and went briefly to his room. shortly after, he came back – with eyes red from tears. at that point i remembered the slogan i had read in sKr’s room – “in the Bancom Group of companies, the difficult takes a while; the impossible, a little longer.” in the aftermath, i opted to join sKr to set-up sKr and associates, initially made up of sKr, his secretary, marie de asis, and myself. We took an old office in Bancom iii and furnished it with second hand carpets and furniture from the Bancom storage area. our initial capital was P150,000. sKr confided to me that he had lost everything, and that i needed to call mrs. Bing roxas for the money. i already knew the complications then but mrs. roxas was such a gentle soul that when i asked her, she simply responded, “When do you need it?” This time, it was me who had tears on the other end of the line. and so, in the words of sKr, “Jing, time to roll up our sleeves and face a new challenge. Just put me at the end of our conference table which will be my work area.” i think it was also this time that he started to grow his hair. We had not yet formally moved to our new-old office when i got a call from ayala international. i had been given an offer to set-up a leasing company in Jakarta, a pioneering financial activity at that time. apparently, the lead came from Dr. mahmood, one of our Bancom partners in malaysia. i was interviewed by ariston estrada, and after accepting, i dropped by Kaiku Licuanan’s office who had already joined ayala then. and now the sad goodbye. i went up to sKr’s office and after steadying my shaking knees i finally mustered enough courage to break the news. His response was: “Jing, let me not be an obstacle to your career. i would have done the same if i were your age. Don’t worry about me. i’ll be ok.” after i stood up and walked towards the door, he added, “Jing, can we still play tennis?” With tears in my eyes i said, “anytime, sir. anytime.” my stint with ayala was short-lived. as early as a few months back to Jakarta, manny Pangilinan met with me and tried persuading me to join him in his newly established venture, First Pacific Limited. i told mVP, “my

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problem (in not being able to consider joining you) is that i don’t have any.” my package with ayala was so ideal it was very similar to my previous arrangements at Bancom. However, not even a year hence, BPi took over ayala international Finance in Hong Kong, and manny Bengson, who became my boss, asked me to be reoriented the BPi-way back in manila. i immediately called mVP to ask when he would next come to Jakarta. instinctively, manny said, “if you’re thinking about my offer, it still stands.” Whew! i did not have to come back home when i resigned from ayala, and set-up the FP office in Jakarta. i spent the next 20 years with First Pacific. it was like Bancom all over again, with mVP as my boss and i worked closely with familiar ex-Bancom colleagues including ric Pascua and Vic Tinsay. my career in First Pacific was very rewarding, thanks to a very good boss, mVP. The culmination was taking public a pharmaceutical company we acquired, PT Darya-Varia Laboratoria. That was a full circle from delivering a talk in Bapepam, to receiving an approval from the same institution for my company’s iPo. i took my early retirement from FP when things turned from bad to worse in 1998, right before suharto’s downfall. i came home for good with my family and set up one incentive systems advocates, inc. (1isa), now the leading loyalty management company in the country. i am blessed with a great business partner, myrna alberto, an ex-rcBc executive. a large part of who i had become, and where i am now, i owe to Bancom.

eduardo a. Yotoko This private letter, written in July of 1999, is published with the permission of Randy Roxas. Danding was President of Atrium Capital Corp., the rival investment bank formed in 1980, which prospered for barely a year before perishing alongside Bancom after the Dewey Dee episode.

“remembering andy roxas” Dear randy, i was touched by your unexpected email, particularly your declaration that even after 30 years you still have the yearning to learn more about the kind of person your father really was in his life through the testimony of his friends and contemporaries. Well, you are right about my case, as i do have my share of distinctive memories about andy, which is my exclusive privilege to relate since they proceed from the unique, close personal working relationship that i enjoyed with him for four short but fulfilling years. so before our intended face to face meeting, i thought i should pause and reflect a bit about that 1966-1970 period. Then i decided that the least i should do for you was to take the effort to write down my recollections for this personal letter. at least, we will not have to be over-reliant on my fast-diminishing memory cells and will be able to cover more ground at our meeting. This note might also let you think ahead about any special areas of your interest to which you might want to guide our conversation. You realize, of course, that everything that i know and can tell about andy must only be subjective and confined to the limited province of my own experience and observations at the time. Thus, i may have to dwell a bit on my own past circumstances in an effort to shed meaningful light and context on the reflections that i am writing down.

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at this moment i am encountering some difficulty on how i should compose a summary paragraph about andy, because i sense that anything so short would be inadequate and fail to convey the proper range of what i deem to be the most essential attributes of his character and personality. so i will abandon the thought of composing a systematic or structured presentation, and will instead just write down what comes to my mind in a more spontaneous or stream-of-consciousness style. i first met andy in mid-1966 for my very first job interview after returning home from my graduate studies at the u of Penn. Frankly, i had not known about him beforehand, but as an ateneo economics graduate i was like everyone else star-struck by the reputation of Ting roxas. so all i knew was that this was the younger brother, also an economist, looking for an m.a. level assistant, according to Tony de Leon, the cBTc officer who arranged for my interview. Though i had intended to interview at the central Bank and at citibank, where Xavier Loinaz my Wharton contemporary was recommending i go to join him, that initial meeting with andy apparently went so smoothly that we committed to each other at the end of the interview. He would groom me to become his deputy for economic research. although i felt i was a shoo-in as a citibank middle management recruit with a starting pay of P1,000 monthly, i readily agreed to the P700 which andy explained was the most he could offer under cBTc pay scales. interestingly, later on i discovered that he had gone out on a limb to narrow the salary gap with citibank’s, because the maximum basic rate for cBTc non-officers was actually less than P600, which was what Boyer syquia, his deputy for Trust investments and also a Wharton grad, was still being paid. so he took the chance that he could obtain the Board’s approval later for the pay rate he committed to me. (oh, by the way, Boyer and other departmental seniors also got their pays realigned after i came in.) What attracted me most at that first encounter was andy’s demeanor. He exuded a quiet competence, a straightforwardness with no hot airs whatsoever, and a kindly mannerism. i sensed i could learn a lot from him, and was impressed by his description of the job concerns. He was also the economist of the Bankers association and part of my job would be to assist him in periodic assessments of the monetary situation in order to formulate policy strategies for the banking sector. Thus, he made me feel that i could be on the verge of getting into something of national importance. We understood that i lacked working experience, i would not be contributing any instant expertise, but i only seemed to have been well grounded by an interesting masteral program in applied economics that had included hefty segments in money and banking and in corporate finance. in other words, he still needed to work on me before i could be of use to him. my first weeks featured comprehensive readings of past papers he had written and of other works that he thought were worthy of emulation, as well as a private lecture series with him as lecturer and myself as principal audience about the real-life, nuts and bolts workings of Philippine macro-finance and about the refinements on the use of analytical tools. The crash course i received from andy transported me up into a much superior calibre of worker, to say the least. Happily, we easily recognized in the next few months that we had made a right decision about our working together, and that all his teaching efforts were not in vain. Looking back, i believe our early relationship epitomized what the botanists would call a symbiotic function. i found it notable that andy was the kind of self-assured boss who generously accorded more of the credits to his underlings whenever he received frequent accolades for the outstanding works produced by his department. He was totally unselfish, and almost saintly, in this respect. if i noticed that i began to be regarded as the new “flash” or a bright boy at the bank, it was thanks to andy who despite my sense of unpreparedness or unworthiness in those formative years insisted to expose me to high-powered people and assemblies. For example, early on he forced me to handle direct presentations on monetary issues to the cBTc Board and to informal caucuses of banking leaders and to engage them in their interrogations, which certainly hastened my deepening as an aspiring professional. But the greatest satisfaction that i could recall of that time was the comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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periodic praise that he would privately bestow on me when he felt that i had written a particularly outstanding piece or some such accomplishment. andy enjoyed a lofty reputation as Gus Barcelon’s wonder boy at the time. Barcelon was a stalwart of the powerful clique of banking industry leaders that was universally respected, and his peers surely were beside themselves with envy because Gus had andy on his side as his brilliant protege. as an inside observer, i can attest that it was really andy who decided for the banking industry about regulatory policies and issues brought up for consultation from time to time with the central Bank. i saw that the senior bankers completely trusted his views and treated him either with respectful deference or with affectionate chumminess. Later i discovered that some of them had no compunction about asking andy to write speeches for them or to advice them about their private stock investment portfolios. and he was admired and genuinely well liked by other technocrats and highly reputed corporate financial officers who mattered during that period, several of whom i was privileged to meet since andy would often ask me to tag along to his meetings. after less than a year of working directly with him in a staff capacity, he “sacrificed” me so i could be promoted to a line officer’s function as deputy at the cBTc Treasurer’s office. But before going on, maybe i should delve into some personality sidelights and minutiae about andy which you as his son might find curiously interesting. andy was a true “hands on” manager and did not mind working on his yellow columnar pad spreadsheets himself. This was before the computer and even before portable calculators. i guess doing the detailed work process also stimulated his thinking juices. sometimes out of deference i would offer to take over his spreadsheet and perform the laborious calculations privately, but he would usually order me to just sit in front of him to hear him out thinking aloud and formulating his analysis as he plodded through his figures. Because he was a bit absent-minded and could get engrossed in his thought formulations, he would sometimes have 2 or 3 lighted and unfinished cigarettes on his ashtray while pulling out another new stick to light up. He smoked heavily while working, in direct proportion to the gravity of the work, and would have to quit for a few days due to attacks of smoker’s cough. The only affectation i saw in andy, if i could even call it that, was the little slide rule that he always carried on the ready in his shirtpocket. He would smoothly fish it out in the middle of making a long statement, do a flourished calculation with hardly a pause, and announce the significant figure he had reckoned to clinch his argument. i recall that we thrilled to the advent of a major technological breakthrough, the portable calculator. it was still plug-in and clunky, but it meant that serious spreadsheet work could hereon be done even at home. Previously, we had to calculate on mechanical Friden machines which could give you an hernia if you tried to lug it home. i think the new portability of the calculator was what enabled us to seek refuge more often at your house in new manila to concentrate and beat the deadline for certain important papers. not once did i ever see andy angry or raise his voice or yield to exasperation. He kept his temperament on a pretty narrow range. This is not to say that he appeared stony, because we would notice whether he was feeling chipper or forlorn, but there were never any excesses of temper. The worst treatment i ever got from him was maybe once or twice i thought he was giving me the cold shoulder because i still could not deliver some important work beyond the pre-agreed deadline. But that did not last for more than a couple of days. even when someone would submit some really shabby work, he would never insult or demean the person. He had the knack to admonish in a courteous and dignified manner. on the recreation side, i noticed that andy could hold his drink, but if he ever got drunk it never caused him to act foolishly in public. on boys’ nights out like when officers would go out of town overnight for a branch

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opening, i don’t believe andy ever participated in any form of womanizing as far as i can remember. if he ever did, he was extremely secretive and discreet about it. my guess is that he just had an old-fashioned belief in the sanctity of marriage. Poker was a game wherein i had the edge of experience over him and he was enthusiastic about learning and becoming skilled at it. maybe he liked the game or maybe found it an effective forum for showing the other senior officers that he could act just like one of the boys. Because he was held in awe and conceded to be a cut far above the rest of what was supposed to be his peer group, andy knew he had to be the one to go out of his way to convince others that he was a friendly human being and not as high-falutin’ as his image. The commercial paper market was at its infancy in 1967 and i was to head up a new dealership operation, the idea for which had been cooked up at andy’s department. my only private concession to him, which i was glad to give since i felt some apprehension about losing my links to him, was that i would still moonlight for him on occasions to help in a pinch for major position papers and the like. He egged me to move on out of his wings, arguing that my career as a banker could be best advanced through the new key position at Treasurer’s that he helped create for me and that it was in that new arena where i could best serve the bank’s interests. amen, no way to argue against him. Bancom was concededly that era’s rising star in the financial scene. supposedly it was a sister company of cBTc, with both companies having common shareholders on the majority side, and with Gus Barcelon as chairman and the older roxas brother as President of Bancom. since there was a neat legal demarcation between commercial banking and investment banking, ala the Glass-steagall strictures in the u.s., there was to be no competition between cBTc and Bancom. But in fact Bancom was competing with the entire commercial banking system. Large deposit funds were migrating in waves to Bancom’s higher-yielding money market instruments. andy, known to be a key member of the banking innovators who nurtured Bancom’s emergence, was held as partly to blame. andy smartly realized that Bancom was already like a steamroller that could no longer be halted. if cBTc’s large deposits were vulnerable to Bancom anyway, cBTc might as well be a dealer in commercial paper and have an alternative means to intermediate those volatile deposit funds, not to mention other banks’ deposits. This was a strategic advocacy of andy, resented by traditionalists at the bank, but in which andy prevailed. ray ilusorio, Bancom’s chief money market man, preferred to promote the Bancom Bill rather than third party commercial paper, but could not find any legal bar nor cite any money market convention against cBTc’s dealership intentions. Thus began a new knot in the Bancom-cBTc saga which was to reach a boil in the following year. Fast forward to the second half of 1968. Looking back, cBTc’s dealership desk did just as andy had envisioned. it established its premiership in the commercial paper sector of the money market and its contributions to the bottom line accounted for the entire growth in bank income. But large deposits had indeed decreased, though not nearly as much as the rise in float of commercial paper. meantime, the competition with Bancom grew as much as the controversy attending it. some people claim it was just the vanity of old man marquez, cBTc’s founder who was required by cBTc pension fund rules to relinquish the Presidency to Barcelon because he had reached the compulsory retirement age, that led to the eventual resignation of Barcelon, roxas, and company (this writer included) from cBTc. But actually, it was serious policy differences, and not in any euphemistic sense. marquez and the traditionalists wanted out of Bancom. The battle lines were drawn, and the Gus-andy team chose to side with Bancom which they had co-created. The short argument was that the money market comPenDium oF recoLLecTions anD TriBuTe Pieces From Bancom aLumni anD FrienDs

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phenomenon was an inevitable force of the market’s natural development and that was where the future of finance was at. one day the dam just burst and the rift was exposed into the open. i was suddenly called to andy’s office, and the small handful of his inner circle gathered there was somberly told by him about his resignation. even then, he was a gentleman enough not to exhort anyone to resign out of sympathy or loyalty. only days later, in a one-on-one meeting did he invite me to join him in a management consulting partnership to be named as Barcelon, roxas and associates. But somebody later noticed the lack of dignity in the acronym “Bra” and so it became Barcelon, roxas and company. Brc was really a holding action while andy and Gus were deciding and negotiating where to go next. i don’t think they were lacking for offers. But finally they reached a good agreement with al Yuchengco and so it was to be rcBc as their new home. andy was installed as the sole eVP and clearly next in line to Gus. as for me, i was not allowed to again create another competitive dealer operation at the rcBc Treasury, but was left in charge of Brc’s consulting business, whose principal client was none other than Bancom. everything seemed to fall neatly into place. The events of 1969 represented a turning point. andy understandably had to carry the yeoman’s load in implanting his new management order in rcBc. While he would regularly make his token appearances at Brc’s offices, his mind was mainly focused on the rcBc front. mine was on the Bancom front. i began to function as executive secretary of Bancom’s management committee, and was assigned to coordinate the unification program of Bancom and rcBc’s respective Treasury operations. From here, the inter-corporate tensions escalated and things began to move downhill. Basically, Bancom was impatient to put into practice a “functional merger” strategy with rcBc, using something like a survival of the fittest approach. on the other hand, andy felt it important to preserve the morale of rcBc officers, who were chafing at the aggressive “take-over” stance of Bancom. unfortunately, the situation put andy in a conflict situation with Ting. To make a long story short, and to spare myself the agony of remembering all the gory details, i reached my own limit of unhappiness with all the tensions and intrigues, and so i asked andy for permission to resign. surprisingly, he did not resist forcefully, because we both understood that he too was disgruntled but that resignation was not a way out for him. For those final months, my stark recollection of andy is about his humaneness. He chose to take brickbats from Bancom because he felt honor-bound to defend and secure the careers of his rcBc officers. There was an honorable principle at stake, which he believed could not be subordinated to the goals of impersonal corporate efficiency. i will leave this topic right here, lest i stoke the embers that have long ago already died down. With a new job and a refreshed outlook, i decided i would get married on may 6, 1970. The principal sponsor was of course andy. i had the saddest honeymoon in Hongkong the next day when i learned that Boy Tuason’s plane bound for Baguio with andy on board had crashed, leaving no survivors. as a postscript, let me note that andy’s sudden death occurring while they were in the midst of an unresolved corporate disagreement must have been a big disconsolation for Ting. To the surprise of many of us, he decided to step into andy’s shoes as eVP at rcBc while continuing as Bancom President. it’s a safe guess that this allowed Ting to appreciate how andy saw things at rcBc, and while i am only speculating because i was absent from the scene for 2 years, nothing jolting seemed to have been allowed to occur at rcBc during Ting’s watch at andy’s position. The rest of the story on the corporate setting, although interesting, need not be pursued here since it no longer involved andy, except possibly that his memory continued to cast an influence on some of the key players.

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Had he lived, without a doubt andy would have become a bank President at an early age, and by this time might already have completed his deserved stint at the helm of the central Bank. He was a man of such importance that his life, and abrupt passing, had profound effects on the course of corporate events and personal careers. Like you, i and many other admirers of andy have been deprived of witnessing what would have been a glorious blossoming of his banking career. although you lost a great father, i can’t believe that you and your brothers are lesser persons today than you could otherwise be had andy lived. after all, you carry his genes, fortified by Tañada blood which has its own prideful attributes, and in my book that is plenty enough to give you a favored start in any career race that you choose to join. i hope you found some satisfaction reading this personal narrative. With kindest regards, Danding Yotoko

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