Providing infrastructure and services in times of crisis

In mid-March, when Philippine president Rodrigo Duterte declared a “state of calamity” after a spike in Covid-19 cases, economic and social stability in the developing archipelago nation was looking precarious.

As the president imposed one of Asia’s strictest lockdowns on Metro Manila, police erected roadblocks, imposed harsh punishments for curfew violators, and prevented millions of day labourers from reaching work. Concerns over food security in the megacity rose late in the month after a demonstration of hungry people in one slum ended in violence.

While the government scrambled to marshal its resources to fight the pandemic, managers at Ayala, the family-controlled conglomerate, were already at work on their own coronavirus response. 

In early March, Ayala’s chief executive, Jaime Augusto Zobel de Ayala, 61, and his younger brother Fernando, CEO of the group’s land division, began their brainstorming at a meeting of the group’s operating companies, which include property, construction, water, the country’s second-biggest telecoms company — Globe — and the Bank of the Philippine Islands. 

One of their first conclusions was that the government’s emergency response, including stimulus money needed to help businesses and individuals survive, would take time to wend its way through Congress. 

A soldier checks a woman’s quarantine pass in Pasay A soldier checks a woman’s quarantine pass in Pasay © Eloisa Lopez/Reuters

“And so we got together and as a community put some numbers on the table and said, ‘Let’s fill a gap, because this is going to be bad’,” the Ayala chief says via a Zoom call. 

Since March, the group has by its own reckoning stepped up with Covid-19 response measures worth 9bn pesos ($181m) in emergency food and medical aid and loan, bill and rent deferrals or forgiveness for its customers and suppliers. 

“This is a period where we all have to work hand in hand with others to preserve the ecosystem we are in,” Mr Ayala says. “All of us have to hold hands, suffer a little bit together for the sake of rising back together.”

Ayala is one of many global companies that have come up with coronavirus corporate social responsibility packages, and announced them with greater or lesser amounts of fanfare, credibility and self-serving corporate spin. 

What is striking about Ayala’s response is that it won over one of south-east Asia’s toughest and most feared politicians. Before the pandemic came along, Ayala was in trouble with the administration because of a long-running, politically charged dispute over its water company in Manila. In December, Mr Duterte attacked its family owners and Manuel Pangilinan, CEO of another family conglomerate and water concessionaire First Pacific, calling them “son of a bitch” and threatening to “ruin your face” in a rant that hit the companies’ share prices and sent a chill through Philippine big business. 

Ayala’s response to the virus appears to have proved a game changer. In an uncharacteristically conciliatory and sincere moment in May, Mr Duterte apologised to both Ayala (he specified the company, but did not say which brother) and Mr Pangilinan for his “hurting words”, and thanked them for helping to fight coronavirus. 

Ayala’s CEO, while declining to comment on the water dispute, confirms that he and his brother wrote to Mr Duterte to thank him for his words. “It was a good moment to start closing that chapter,” he now says. “Of course it was warmly received and appreciated on our part.” 

He says that when the crisis hit “we were there from day one, regardless of what had been said or what feelings — it’s the way we work”. 

How the Philippines’ oldest conglomerate went from deep political hot water to the receiving end of a rare Duterte apology is a story that speaks richly about the complex symbiosis between government and business in the country.

Ayala, like other Philippine family companies, has a long history of responding to government requests for help, which are frequent given the country’s regular disasters, such as typhoons, earthquakes, and volcanic eruptions — like the one in January at Taal. Philippine governments, past and present, are limited in their financial resources, and reliant on big private groups to supply basic infrastructure and services in public-private partnerships. 

According to Mr Ayala, the company began devising its response to Covid-19 before receiving a request for help.

At their meeting in early March, the group executives discussed ways to help Manila’s legions of day labourers, including the roughly 75,000 construction workers Ayala uses on projects. “How are they going to handle something like this when we have a massive lockdown?” Ayala’s CEO recalls thinking.

Led by Fernando, the Ayala brothers began phoning up other businessmen to put together an emergency food distribution programme, using vouchers rather than handouts to preserve beneficiaries’ dignity, and distributing them through Roman Catholic churches to ensure they targeted the urban poor who needed it most. About 20 companies in all, including San Miguel, the brewing group, Jollibee, the fast-food chain, and Aboitiz, a diversified holding group, joined in the 1.5bn peso effort. 

The Ayalas’ focus then turned to their employees, and the large network of midsized and small companies that surround the group, from material suppliers to mall tenants. Ayala announced the biggest chunk of its relief operation: “business operations waivers”, which included short-term rent forgiveness for tenants, and grace periods for its Globe customers’ phone bills and BPI customers’ loans.

Ayala also encouraged its employees to pitch in to the relief effort by sacrificing part of their first quarter bonuses. “All of this happened before any government initiative or government engagement,” Mr Ayala says. “It was an instinct we had.” 

In mid-March the government’s Covid-19 task force did turn to Ayala for help converting an exhibition centre into a 502-bed pandemic facility, which it completed in a week. “Our whole construction team were out of work and they were delighted to do it to get out of the home and do something.” 

Jaime Augusto Zobel de Ayala, left, and his younger brother Fernando, centre, visit Globe’s chief Ernest Lawrence Cu Jaime Augusto Zobel de Ayala, left, and his younger brother Fernando, centre, visit Globe’s chief Ernest Lawrence Cu
Mr Ayala tours a Covid-19 facility Mr Ayala tours a Covid-19 facility

Ayala also built for the Philippine Red Cross a coronavirus testing centre with capacity to conduct 3,000 tests a day, which has allowed authorities to ramp up screening for the virus and keep closer tabs on its spread. 

While family CEOs such as Mr Ayala speak in terms of social obligations, political analysts point to a symbiosis between the country’s overstretched — and at times feckless or corrupt — governments on the one hand, and efficient private groups that deliver infrastructure or services for profit in normal times, and emergency help when needed. 

Aries Arugay, an associate professor of political science at the University of the Philippines, thinks the country’s family billionaires have been “altruistic” by stepping up with aid during the pandemic. However, he also thinks they are “hedging their bets” if the political camp Mr Duterte represents extends its hold on power after he leaves office in 2022 and the family groups need to “fight for favours against Duterte-backed oligarchs”. 

For now Ayala’s focus — and the government’s — is squarely on the pandemic, which shows no signs of abating after more than 38,000 cases to date and nearly 1,300 deaths. The Philippine government and central bank have indeed found their footing — with help from big business which is now focusing on getting back to work.

Three questions for Jaime Augusto Zobel de Ayala

If you were not a CEO, what would you be? 

An interviewer / journalist like David Rubenstein. I like his style; I like the people he picks. He’s so good at bringing out details. I’d love to do that. 

Who is your leadership hero?

Angela Merkel. She came to my attention when she opened the door to refugees. I like her humanitarian instincts, science-based approach, and strong discipline with the German economy.

What was the first leadership lesson you learnt?

My involvement in telecoms for Ayala was the toughest. I learnt about the power of partnerships, building a management team and executing on plan, and resilience — we needed to get the plan through Congress.