A stunning business opportunity


February 7, 2011
Manila, Philippines

Hi this is Tim Staermose, the newest addition at Sovereign Research– Simon asked me to fill in for him today as he is currently hard at work on his presentations for the upcoming workshop.

I wanted to tell you a bit about a business opportunity I just came across here in Manila– it’s a small example of what we believe are the infinite opportunities around the world if you’re just willing to look.

Often times, differences in business culture present unique opportunities to foreigners, and what I routinely come across in Manila certainly qualifies.

Manila is a rapidly-developing, English-speaking Asian mega-city of over 16 million… so just about anything you need or want here, you can find.

In my case, I needed to get some documents scanned and sent off via email, so I found one of those copy shops. They wanted to charge me 75 pesos, or about $1.68 PER PAGE to scan my documents.

The daily minimum wage here is only about five times that. You could buy a whole cheese burger meal at McDonald’s for that, or TWO bottles of good quality local rum, or two and a half packs of cigarettes, or FOUR local newspapers.

Incredulous, I did a double take, performed some instant mental arithmetic, and told the guy in no uncertain terms, “Seventy five pesos for EACH PAGE? That makes absolutely NO SENSE WHATSOEVER. I can BUY a new scanner for that, given the amount of pages I want done!”

He simply shrugged as I quickly made a bee-line for the exit.

Sure enough, a hundred yards down the road I went into an office supply store and bought a brand spanking new Canon scanner for P6,295, or about $140. I could’ve bought the cheaper model for just P4,650, or $104 — or, the same amount of money as the print shop guy wanted to scan my 62 pages.

To me, this illustrates two things:

1. How cheap mass manufactured goods such as electronics are nowadays, especially relative to services. The scanner I bought was made in Vietnam (no doubt from parts made in China, using Japanese technology) and had been shipped to Manila with 12% tax added, yet it still cost less than 150 bucks.

2. The unfortunate lack of commercial acumen that many small business managers and proprietors have here in the Philippines. Believe me, the rip off copy shop is not alone, I come across it all the time. And as my wife is from here, I can attest that high prices are not just reserved for foreigners.

Partly, I think this has to do with the out-dated perception that equipment and machinery require a great deal of capital outlay– something that few people in this country have, and thus many specialty shops like this require a generous return on investment by bilking customers.

Clearly, though, at $150 per scanner, the ‘high priced machinery’ argument no longer holds water.

The entire incident is another example of how, for a savvy entrepreneur willing to do a little boots on the ground research, invest a modest sum of capital, and hire a bunch of locals (for peanuts), the Philippines is really a gold mine.

Interestingly, the government recently introduced a visa scheme whereby foreign business owners who come into the country and create 10 jobs for locals can get a “visa for life.”

This is further evidence of what Simon frequently discusses– governments competing with each other for residents who can add value to their economy.

It really is true that as an outsider or guest in a country, you will be much less likely to be treated as a doormat by the government in the way that citizens all too often are.

And as Simon and I are regularly seeing in our travels, the business environment in such places is much easy to penetrate for a foreign entrepreneur or professional with a common sense business approach– something that is definitely lacking in many countries.

About the author

Tim Staermose

About the author

Tim Staermose is Sovereign Research’s Chief Investment officer, based in the Asia-Pacific region. Born to a Danish father and British mother in Dar Es Salaam, Tanzania, Tim has led an international life since the day he was born. He has lived and worked throughout Asia, primarily focusing on equity research and emerging market opportunities.

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