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Alibaba’s Jack Ma in APEC

November 10, 2015November 10, 2015 Ellen Leave a comment

Aside from President Xi Jinping, another APEC guest from China is stirring interest.

He is Jack Ma, founder and chairman of the Alibaba Group, the largest marketplace in the world which is expected to be worth over $150 Billion by next year, according to Forbes.com.

Ma is the second richest man in China (Forbes: $28.7 billion) and is the 18th richest man in the world.

He will be one of the speakers in the APEC2015 CEO Summit to be held on Nov. 16 to 18 at the Makati Shangrila in Makati.

Chaired by Jollibee Foods’ Tony Tan Caktiong, the 2015 APEC CEO summit expects to gather some 700 chief executive officers from across the Asia Pacific region to discuss under the theme “Creating the Future: Better, Stronger, Together.”
The CEOs will be meeting the 21 Leaders of APEC morning of Nov. 18.

Foreign Undersecretary Lula del Rosario, chair of the APEC 2015 Senior Officials Meetings that did the spadework for the Foreign Ministers and the Leaders, cites Ma as an example of the changes in the global economy which APEC tackles.

“Look at Jack Ma,” del Rosario said. “He sells goods that he does not own. What he has is Platform. That’s how your get your customer.”
Ma shared the strategy that made the Alibaba Group a huge success. He said he once told a Walmart (an American multinational retail corporation that operates a chain of discount department stores and warehouse stores) executive that Alibaba would surpass them in sales in 10 years and explained why.
“If you want 10,000 new customers you have to build a new warehouse and this and that. For me: two servers,” Ma was quoted to have said.

Del Rosario said in a borderless economy fueled by the internet, other issues come up like taxation and that’s where changes in policies and laws are needed. Transition is facilitated when it is discussed by persons who can make the decision, she said.

The story of the Alibaba Group’s dazzling success (its 21.8 billion IPO in New York in 2014 set a record as the world’s biggest public stock offering) is as fascinating as the story of its founder.

Born on September 10, 1964 in Hangzhou, about two hours’ drive from Shanghai, Ma was an English teacher. He improved his English by working as tourist guide for local hotels for free.

It’s interesting to know that the man who earned his wealth in an internet-based business, got introduced to the technology he was 30 years old. That was when he went to the United States in 1994. His friends said “He says that he came to know that there was a thing called a computer, only when he was 33.”

Ma founded Alibaba with a 17 friends in 1999 in his apartment in Hangzhou. Today, Alibaba’s headquarters in Hangzhou is a model of modern workplace – a campus style flexible open-plan office space that accommodates some 9,000 Alibaba employees.

The driving message of Ma and the Alibaba Group’s story is about overcoming failures and learning from them.
Ma failed his university entrance exam three times. Ma said when Kentucky Fried Chicken came to China, he applied for employment. There were 24 of them applicants. The 23 were accepted except him.

He said he has applied for admission in Harvard University 10 times and was never accepted. The five- feet- tall economic giant said, “Someday I should go teach there (Harvard) maybe”.

Ma related that he got the idea of naming their company Alibaba while he was in a coffee shop in San Francisco. “Suddenly I thought Alibaba is a good name. The waitress comes, and I asked her, ‘Do you know about Ali Baba?’ She said, ‘Open sesame.’ So I went out onto the street, asking 10, 20 people. They all knew about Ali Baba. I decided it was a good name. Plus, it starts with A, so it’s always on top.”

Like in the Arabian Nights tale that when the woodcutter Ali Baba uttered the magic word “Open Sesame, ” the cave opened and revealed the stolen loot of gold and other riches, when one clicks at Alibaba.com, one is led to a variety of merchandises. Not stolen though.

Ma, in a letter to Alibaba stockholders, said “We firmly believe the era of heavy business conglomerates is gone. The economy of today and tomorrow will rely on a platform and ecosystem approach. Sustainable growth can only be achieved when enterprises operate within an ecosystem, participate in collective development and share common interests.”

That’s what APEC is all about about.

Pangilinan offers Spratlys to Chinese oil firm in Reed Bank talks

March 10, 2014March 10, 2014 Ellen Leave a comment

By Theresa Martelino-Reyes, VERA Files

(Conclusion)

Business tycoon Manuel V. Pangilinan offered China’s state-owned oil firm access to the Spratly group of islands in the South China Sea over which the Philippines has a territorial claim, although he had no legal capacity to do so.

Pangilinan, chairman and chief executive officer of Philex Petroleum Corp, offered to include in his discussions with officials of the state-owned China National Offshore Oil Corp. (CNOOC) the Spratlys Islands, even if his company’s contract with the Philippine government is limited to Reed Bank, which is part of Palawan.

Philex chair Manuel V. Pangilinan and CNOOC President Yang Hua.

In an aide memoire addressed to President Benigno Aquino dated May 7, 2012, Pangilinan reported on his meeting with CNOOC officials led by its president Yang Hua and listed his 11 point proposal which, he said, the Chinese “received positively.”

The 11-point proposal includes a Framework Agreement between Philex and CNOOC “relating to an area of mutual interest which will be defined as the area covered by SC 72.”

“Other disputed areas (such as the Spratlys) could be included by agreement,” wrote Pangilinan.

SC 72 refers to Service Contract 72, signed in 2010, in which the Philippine government awarded Forum Energy Plc. (FEP) exploration rights to a basin within Reed Bank. Philex owns 64.45 percent of FEP, a London-based listed oil and gas exploration firm focused on the Philippines. FEP in turn owns 70 percent of SC 72.

Reed Bank is not in the Spratlys, although China is claiming it as part of its territory under its 9-dash line map in which covers almost the entire South China Sea. Aside from the Philippines and China, Vietnam and Taiwan also claim Reed Bank.

SC 72 is a seven-year exploration contract that can be extended y three years. Its 25-year production period can be extended by another 15 years.

The Spratlys is being claimed either wholly or partially by the Philippines, China, Brunei, Malaysia, Vietnam and Taiwan.

Pangilinan said, “The period of the Framework Agreement will be from execution up to the date on which the parties reach a determination as to whether hydrocarbon resources in the area of mutual interest are capable of commercial development.”

“The Framework Agreement will cover exclusively commercial and technical arrangements and neither party will take a position on the sovereignty issue which is agreed to be a Government to Government matter,” wrote Pangilinan, who is also managing director of First Pacific Co. Ltd., whose chairman is the Indonesian tycoon Anthoni Salim.

Philex president and FEP executive director Carlo Pablo said neither the Philippines nor China has approved the proposed framework agreement at this time. There is also “nothing agreed yet” on CNOOC’s specific participation in SC 72, he added, nor is there any agreement on the offer to include the other disputed areas, including Spratly Islands.

“The framework agreement will set out an exploration work program to be implemented in stages designed to determine by year 2016 the commerciality of hydrocarbon resources in the area of mutual interest,” the Pangilinan memoire said.

Pangilinan said, “Philex will give CNOOC an opportunity to make an equity investment in Forum Energy Plc under terms to be agreed.”
Legal experts warn that Pangilinan’s offer to CNOOC would violate the Philippine Constitution which states that “the exploration, development, and utilization of natural resources shall be under the full control and supervision of the State.”

The Constitution further provides that “the state may directly undertake such activities or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by such citizens.”

A Joint Marine Seismic Undertaking by the Philippines, China and Vietnam in disputed areas, including Reed Bank, that was entered into by President Gloria Arroyo in 2004 has been questioned in the Supreme Court on the basis of these charter provisions.

Pangilinan’s proposal to CNOOC also states that a separate agreement would be negotiated by the parties if oil and gas of commercial quantity is discovered in the area, including the terms for profit-sharing.

“Any subsequent agreement (including any agreement as to the sharing of any profits after deduction of appropriate capital and operational expenses) between CNOOC and Philex to develop hydrocarbon resource within the area of mutual interest would be conditional on a resolution by the Philippine and Chinese Governments of the dispute relating to the sovereignty of such area,” Pangilinan said in his aide memoire.

Pangilinan clarified that the two parties would agree on their respective roles, “including the terms on which CNOOC might participate in the exploration work program as a technical consultant, and/or advisor, and/or investor.”

The two firms opted to form a working group that would negotiate and implement the framework agreement subject to approval of their governments. Each party would have two members in the group.

Representatives of the two companies also decided to exchange technical information on SC 72 but again subject to approval of their governments and other possible joint venture partners. The work program would also have to be approved by their respective authorities.

As an additional point, Pangilinan said he would later propose that the framework agreement be subject to “a neutral but internationally-recognized jurisdiction,” preferably British law, as long as this does not go against Philippine laws and the terms of Philex’s contract with the government under SC 72.

Pangilinan was accompanied in the Beijing meeting by Pablo, First Pacific executive director Robert Nicholson, and Pangilinan’s executive assistant Edilbert T. Dungo.

Also sitting on the CNOOC side were the general manager of CNOOC’s legal department Kang Xin, the deputy general manager of the foreign affairs bureau Zhi Yiran, the deputy general of the exploration department Cai Dongsheng, overseas exploration director Cui Hanyun, and director for neighboring affairs Zhang Sheng.
The government has extended until August 2015 the deadline for completing the first phase of FEP’s work program involving an $80 million investment, after it failed to issue a permit for the survey needed before the company can start drilling.

“We are still awaiting Government instructions,” Pablo replied when asked if FEP has been given the go signal to resume exploration.

The decision to grant permits concerning the exploration and drilling activities in Reed Bank should come from Foreign Secretary Albert del Rosario, who is himself a former director of Philex and a close associate of Pangilinan. The Department of Energy deferred to Del Rosario’s office this authority last year because of its foreign relations implications.

The Philippines has asked the UN Arbitral Tribunal to declare as invalid China’s 9-dash line that covers almost 90 per cent of the whole South China Sea and to declare as part of the Philippine 200 nautical mile the continental shelf rocks, reefs and shoals that are exposed at low tide but submerged at high tide where China has built structures.

The UN tribunal is expected to rule on the Philippine suit, which has been snubbed by China, before the end of the Aquino administration in 2016.

Supreme Court Justice Antonio T. Carpio said a favorable decision by UN Arbitral Tribunal will clarify the situation in Reed Bank.

“There can no longer be any legal dispute that the fully submerged Reed Bank, which is where the rich reserves of gas is located, belongs exclusively to the Philippines, being within 200 nautical miles from Palawan and more than 800 nautical miles from China. The resolution of the legal issue is important for investors,” Carpio said.

(VERA Files is put out by veteran journalists taking a deeper look at current issues. Vera is Latin for “true.”)

Chinese firm rejects MVP offer for share in PH project in Reed Bank

March 10, 2014March 10, 2014 Ellen Leave a comment

(First of two parts)

Forum’s Service Contacts including SC72.

By Theresa Martelino-Reyes, VERA Files

A state-owned Chinese oil firm has rejected the proposal of business tycoon Manuel V. Pangilinan to invest in a contract to drill in the disputed Reed Bank but welcomed “innovative” proposals on how it can participate, according to a memorandum Pangilinan submitted to President Benigno Aquino.

State-owned China National Offshore Oil Corp. (CNOOC) turned down the offer made by Pangilinan, chairman and chief executive officer of Philex Petroleum Corp, in a meeting on May 2, 2012.

“A Farm-In Agreement into SC 72 (which Philex previously suggested to them) is not acceptable given the sovereignty issue,” Pangilinan reported to Aquino in an aide memoire submitted to the President on May 7, 2012. The contents of the aide memoire, obtained by VERA Files, have not been made public since it was submitted to the President.

A farm-in agreement is a contract signed between the owner of the “farm” and its exploration partner. Accepting such an arrangement could be interpreted as CNOOC accepting the Philippines as “owner” of Reed Bank.

Reed Bank, also known as Recto Bank, is an islet being claimed by the Philippines, Vietnam, Taiwan and China, which calls it Liyue Tan.

To the Phlippines, Reed Bank is part of Palawan, being about 85 nautical miles west of Puerto Princesa and within the country’s 200 nautical mile Exclusive Economic Zone. It falls within the area defined by the United Nations Convention on the Law of the Sea (UNCLOS) as part of the territory of a coastal state which has the sovereign right to explore, exploit, conserve and manage the natural resources found there.

Reed Bank is about 800 nautical miles from mainland China but is included in its controversial 9-dash line map covering almost the entire South China Sea.

Pangilinan further told the President that CNOOC president Yang Hua received “positively” his proposal for a framework agreement that would cover commercial and technical activities in the area covered by SC 72.

Last week, Pangilinan confirmed that his office in Hong Kong, where the headquarters of First Pacific Co. Ltd. is located, was coordinating with CNOOC to set a date to continue discussions on Philex’s offer to explore for oil and natural gas in the Reed Bank.

Regarding the planned meeting, Philex president and chief operating officer Carlo Pablo said, “Nothing (is) scheduled yet.” If it pushes through, this would be at least the third known Philex-CNOOC meeting after the second one held in Hongkong last year.

In the May 2012 aide memoire, Pangilinan said Yang made it clear that “the Chinese government has granted CNOOC exploration rights over an area which includes SC72.”

Pangilinan said Yang summarized the discussion under three points. First, Sovereignty remains fundamental and neither CNOOC nor Philex is competent to address this issue. Still, CNOOC saw no obstacle to commercial and technical cooperation between the companies, provided both the Philippine and Chinese governments agree that both companies can work together to explore the resource potential of the area of mutual interest, while allowing any question over sovereignty to be resolved as a separate matter on a Government-to-Government basis.

Second, both companies are open to studying all innovative proposals to be able to move forward.

Third, both companies agree that the early involvement of CNOOC would be helpful in defining the resource potential of the area of mutual interest (including participation of CNOOC in FEP’s/ Philex’s work program).

SC 72 provides for a seven-year exploration period extendable by three years, and a 25-year production period can be extended by another 15 years.

Under its approved work program with the government, FEP committed to drill two wells by August 2013 in the Sampaguita field which is covered by SC 72. Based on the company’s 2011 seismic survey, Sampaguita contains 2.6 trillion cubic feet (TCF) of oil and 5.5 TCF of gas. Malampaya has only 2.7 TCF of gas.

FEP began exploration activities under SC 72 in 2011 with $10 million sourced from Philex Mining Corp., its mother firm which owns 64 percent of Philex Petroleum. All drilling activities, however, were stopped following an incident in the Reed Bank on March 2, 2011 when Chinese vessels approached FEP’s ship demanding that it stop all activities and leave the area.

This prompted the Philippine military to send planes and Coast Guard ships to the area and forced FEP to cancel a planned a geotechnical survey of the sea floor seven months later.

The Department of Energy has estimated that the entire Reed Bank has 1.035 million hectares of potential gas field containing oil, gas, and condensates worth some $23.2 billion.

According to 2012 estimates of the United States Energy Information Administration, about one-fifth of the 12 billion barrels of oil and 160 TCF of gas in the western portion of the South China Sea are found in contested areas, particularly the Reed Bank.

It warned, however, that “these additional resources are not considered commercial reserves at this time; extracting them may not be economically feasible.”

Pablo, an engineer with almost 30 years of experience in the mining and oil industries, has pointed out that the only way to determine the commercial viability of SC 72 is by drilling wells. He likened a seismic survey to an ultrasound which provides only an indication of what may possibly lie beneath the water.
Earlier media reports said Pangilinan brought CNOOC into the Reed Bank project to address the problem of the security posed by China.
(To be concluded.)

(VERA Files is put out by veteran journalists taking a deeper look at current issues. Vera is Latin for “true.”)

Chinese firm rejects MVP offer for share in PH project in Reed Bank

March 10, 2014March 10, 2014 Ellen Leave a comment

Phikex Petroleum President Manuel V. Pangilinan

(First of two parts)

By Theresa Martelino-Reyes, VERA Files

State-owned China National Offshore Oil Corp. (CNOOC) turned down the offer made by Pangilinan, chairman and chief executive officer of Philex Petroleum Corp, in a meeting on May 2, 2012.

Reed Bank is about 800 nautical miles from mainland China but is included in its controversial 9-dash line map covering almost the entire South China Sea.

CNOOC President Yang Hua

In the May 2012 aide memoire, Pangilinan said Yang made it clear that “the Chinese government has granted CNOOC exploration rights over an area which includes SC72.”
Pangilinan said Yang summarized the discussion under three points. First, Sovereignty remains fundamental and neither CNOOC nor Philex is competent to address this issue. Still, CNOOC saw no obstacle to commercial and technical cooperation between the companies, provided both the Philippine and Chinese governments agree that both companies can work together to explore the resource potential of the area of mutual interest, while allowing any question over sovereignty to be resolved as a separate matter on a Government-to-Government basis.

Second, both companies are open to studying all innovative proposals to be able to move forward.

SC 72 provides for a seven-year exploration period extendable by three years, and a 25-year production period can be extended by another 15 years.

SC 72. Photo from Forum Energy website.

This prompted the Philippine military to send planes and Coast Guard ships to the area and forced FEP to cancel a planned a geotechnical survey of the sea floor seven months later.

The Department of Energy has estimated that the entire Reed Bank has 1.035 million hectares of potential gas field containing oil, gas, and condensates worth some $23.2 billion.

It warned, however, that “these additional resources are not considered commercial reserves at this time; extracting them may not be economically feasible.”

(VERA Files is put out by veteran journalists taking a deeper look at current issues. Vera is Latin for “true.”)

Will PH be ready for Asean 2015 when we can’t do simple things right

December 15, 2013December 15, 2013 Ellen Leave a comment

Immigration counter, Manila airport.

What I’m relating is not a life-and-death matter but it shows why we are lagging behind with some of our Southeast Asian neighbors.

When the Jetstar plane I took from Singapore touched down at the Ninoy Aquino International Airport about 10 in the morning yesterday, I realized I haven’t filled up the Immigration and Customs Declaration forms that are usually distributed on the plane. I asked fellow passengers if the flight stewardess had distributed the forms while many of us were asleep and they replied, “None.”

When we got to the area before the Immigration Counter, we were told the forms were on the stands on both side of the room occupied by passengers dutifully filling up the form.

We asked for the Customs Declaration forms that usually go with the Immigration Forms. The lady in the Assistance Counter told us to get them at the Customs area.

While we were retrieving our luggage from the carousel, a guy was going around distributing the Customs Declaration form. We asked him why they were not placed in the Immigration Counter so we could have filled them up when we were accomplishing the Immigration forms.

The Customs guy said, “I don’t know. I was just told to distribute this to you here.”

Thank you.

We surrendered the accomplished from to the Customs officer. In my case, I passed through the “Nothing to Declare” counter. I asked the Customs officer collecting the accomplished Declaration forms, why were the documents not distributed in the plane and he said it was Jetstar’s responsibility.

So, okay, Jetstar failed to do that. But why was it not distributed together with the Immigration Card so we could have accomplished them together, which would have facilitated our exit. And why are these forms so scarce. In other airports, you see these forms aplenty at the counter. The officer said, “I don’t know.”

Just a minor, simple matter and we can’t do it right.

I’m not sure if this inefficiency can fall under what economic experts call non-tariff barriers. But I know this is the kind of situation that explains why visitors do not come out of our airports impressed. If you replicate that kind of situation in other offices, conducting business in the Philippines becomes a stressful experience.

The workshop I attended in Singapore was about Asean 2015, when the 10-country Association of Southeast Asian Nations, would be integrated as a single market, an Economic Community, something like, but not exactly like the European Union.

Part of Asean’s vision, when it was founded in 1967, was “to establish a firm foundation for common action to promote regional cooperation in South-East Asia in the spirit of equality and partnership and thereby contribute towards peace, progress and prosperity in the region.”

From a group of five -Indonesia, Malaysia, Philippines, Singapore and Thailand, the membership has grown to 10 including Brunei, Cambodia,Laos, Myanmar, and Vietnam and accounting for over a billion people.

Towards attaining that vision of ASEAN that is peaceful, progressive and prosperous, member countries set a target for an ASEAN Economic Community , inspired by the EU, by 2015.

An Asean Economic Community would have the following characteristics: single market and production base; highly competitive economic region; equitable development; and fully integrated into the global community.

A single market base would necessitate free flow of goods, services, investments, capital, and skilled labor.

Member countries have made significant strides in this area ( a good example is visa- free travel within the ASEAN countries except Myanmar). More need still to be done.

In the Philippines, we have to remind ourselves that doing simple things right matter a lot.