FRIDAY: MARCH 6, 2015
B3
BUSINESS business@manilastandardtoday.com extrastory2000@gmail.com
Nurturing billionaires WHO wants to be a billionaire? Wait. That’s not the right question. The real MAYA BALTAZAR question is: How do you HERRERA get there? An Exclusive Club A record 290, 71 from China, joined the 2015 Forbes list of the world’s billionaires, up from 268 in the previous year. The number of billionaires on the Forbes list is now at 1,826, also up from 1,645 in 2014. The Forbes 1,826 have an aggregate net worth of US$7.05 trillion, up from last year’s US$6.4 trillion. 138 people dropped out of the list and the average net worth dropped by US$60 million to US$3.86 billion. Bill Gates, with US$79.2 billion in net worth, tops the list, a slot Forbes reports he has held for 16 of the last 21 years. Gates’ net worth grew a reported $3.2 billion in 2014, an amount net of the $1.5 billion in Microsoft shares donated to the Bill and Melinda Gates Foundation in 2014. Carlos Slim Helu (Mexico) whose family controls pan-Latin American wireless carrier America Movil came in second (he topped the list in 2013). The Oracle of Omaha took the number 3 slot back from Amancio Ortega (Zara) who is now number four again. Buffett topped the list of gainers for the year, with an increase in net worth of $14.5 billion, primarily from capital gains on Berkshire Hathaway share prices. Jack Ma, whose Alibaba accounted for the biggest IPO in history in 2014, took 33rd slot with $22.7 billion. It took $29.2 billion to make it to this year’s top 20 and $18.1 billion to make it to the top 50. Forty six in the Forbes list are under 40, with Facebook’s Zuckerberg (Age 30, No. 16, $33.4 billion) leading the pack in terms of net worth. 21 of the under 40’s are making their debut in this year’s list, including the very youngest on the list, Snapchat co-founders, Evan Spiegel, 24, and Bobby Murphy, 26, each with an estimated net worth of $1.5 billion.Spiegel and Murphy reportedly turned down a $3-billion buyout offer from Zuckerberg and Fortune reports that they are now getting offers in the region of $19 billion. 27 of these under 40s are self-made and 20 did so in tech. The newcomers include Airbnb creators Blecharczyk and Chesky; Uber’s Kalanicik, Camp and Graves; and Theranos blood test creator Elizabeth Holmes, one of nine in the under 40 list and, at 31, the youngest self-made woman in the world. Of the world’s richest, 1,191 (65.2 percent) are self-made billionaires, 230 (12.6 percent) inherited their fortunes, and 405 (22.2 percent) inherited part of their fortunes but are continuing to work to increase it. Entrepreneurship is clearly the path for majority of the members of this exclusive club. Making It There are a handful of ways to make money: inherit it, marry it, or earn it. If you are preparing to earn money yourself, there are three paths: get employed, practice a craft or profession, or start a business. If you want to be a billionaire, the lesson of the Forbes list seems to be to start a business. There are, of course, many who claim to know what it takes to become a successful entrepreneur. Those lessons cover management tips as well as selfmanagement tips. There is, however, another side to the question of entrepreneurship and that is a policy question. What nobody seems to dispute is that entrepreneurship is the primary engine for growth for most economies of the world. The question of nurturing entrepreneurship is one that is important to many countries. In April of 2014, the UK Centre for Policy Studies released a report promising to shed light on precisely this question. The report is entitled SuperEntrepreneurs (Sanandaji & Sanandaji). The study adopts economist Joseph Schumpeter definition of entrepreneurship: the creation of innovative and growth-oriented firms. To identify the creators of the most successful innovative companies, the researchers mined the list of Forbes list of richest people between 1996 and 2000, identify 1000 self-made billionaires, the SuperEntrepreneurs. The study provides some very interesting observations. The “SuperEntrepreneurs” founded half of the largest new firms since the end of the Second World War. 42 percent of Western European billionaires in the sample are self-made, sharply contrasting with 70 percent in the US and almost 100 percent in China. The proportion of SuperEntrepreneurs vary significantly by country, with Hong Kong (3 per million), Israel, the US, Switzerland, and Singapore topping the list. The Policy Question The key policy question is, of course, this: What accounts for country differences? The study concluded that active government and supranational programs (such as the EU’s Lisbon strategy) to encourage entrepreneurship have largely failed. However, governments can encourage entrepreneurship by lowering taxes (particularly capital gains taxes), reducing regulations and vigorously enforcing property rights.The report points out that corruption and regulations go hand in hand, a lesson those in government would do well to heed. The report concludes that high rates of philanthropy also correlate strongly with entrepreneurship and that SuperEntrepreneurs tend to be well-educated. SuperEntrepreneurs in the US are five times more likely to hold a PhD degree than the general population. In addition, some industries are inherently friendlier to entrepreneurs because of their fixed cost and capital requirements. The Forbes data indicate that the US outstrips Western Europe in entrepreneurship, with US SuperEntrepreneurs per capita being 4.5 times more in the US. Using observations concerning the negative linkage of taxes and regulation, the report estimates that taxes and regulations explains two-thirds of the difference between Western Europe and the US. The report also explains that per capita income is positively correlated to entrepreneurship, although it is not clear whether this is a cause or a result (or both). Together, taxes, regulations and per capita wealth explain 80 percent of the entrepreneurship difference between the US and Western Europe. The report cautions policymakers against conflating self-employment with entrepreneurship, pointing to innovation as a key differentiating factor. The selfemployment rate in Silicon Valley, a hotbed for entrepreneurship, is half of the California average. The SuperEntrepreneurs report ends with a few lessons for entrepreneurs themselves. Entrepreneurship is risky and failure is part of the game. Because of the high level of risk, entrepreneurship is a numbers game. Entrepreneurship is knowledge intensive. Entrepreneurship increasingly requires specialization and an infrastructure (think venture capital availability). Entrepreneurship is more common in certain areas than in others. Entrepreneurship often requires industry experience and entrepreneurship requires scaling up. The lessons for policymakers seem clear. Define entrepreneurship clearly. Innovation is the key differentiator. Lower taxes, especially capital gains taxes. Ease the regulatory burden. Pay particular attention to regulations that affect the preconditions to entrepreneurship, e.g. those affecting capital markets. Eliminate corruption. Encourage education. Focus on industries that are entrepreneur-friendly. In this year before the elections, this perhaps is what our policymakers need to add to their agenda. You can email Maya at integrations_manila@yahoo.com. Please like the Integrations Manila Facebook page or visit her archives atmanilastandardtoday.com/author/ maya-baltazar-herrera/ or integrations.tumblr.com or www.mayaherrera.aim.edu.
IntegratIons
ICTSI increases capex to $530m By Jenniffer B. Austria
INTERNATIONAL Container Terminal Services Inc., an international port operator owned by tycoon Enrique Razon Jr., is increasing its capital expenditure for 2015 to $530 million from $279 million in 2013 after posting positive financial performance in 2014. ICTSI said in a disclosure to the stock exchange net income attributable to equity holders in 2014 rose 6 percent to $182 million from $172.4 million in 2013. “The increase in net income attributable to equity holders for 2014 was mainly due to strong consolidated revenue and EBITDA growth driven by increased contributions from newer operations in Manzanillo, Mexico and Puerto Cortes, Honduras, the consolidation of terminal operations in Yantai, China, and improved performance at Subic
Bay, Philippines,” ICTSI said. The income was boosted by non-recurring items, including gains on the sale of a non-operating subsidiary in the Philippines ($13.2 million), the termination of a management contract in Kattupalli, India ($1.9 million), settlement of insurance claims in Guayaquil, Ecuador ($1.5 million) and the restructuring of investment in Yantai, China amounting to $31.8 million. The gains were offset by start-up costs and higher levels of operating expenses in new
ports, as well as an impairment charge of $38.1 million against the subsidiary in Argentina and a $0.9-million insurance settlement claim in Gdynia, Poland, ICTSI said. Minus these non-recurring items, net income would have been flat at $172.6 million. Revenues from port operations totalled $1.1 billion in 2014, up 24 percent from $852.4 million reported in the previous year. ICTSI attributed the increase in gross revenues to higher contribution from new terminals and robust growth from the company’s consolidated terminal operations in Yantai, China. Excluding the revenues from the new terminals, organic revenue growth was at eight percent. All three geographical segments reported double-digit growth in gross revenues with Americas posting a notable growth of 40 percent and Asia and EMEA (Europe, Middle East and Africa) each posting a 16 percent increases.
Sun Life anniversary.
Former President Fidel Ramos (second from left) graces Sun Life Philippines’ musical gala at the Palacio de Maynila in celebration of the company’s 120th anniversary in the Philippines. With Ramos (from left) are Sun Life Philippines chairman Lito Camacho, Sun Life Financial-Asia chief operating officer Fabien Jeudy and Sun Life Philippines president and chief executive Riza Mantaring. Ramos received a special gift of appreciation for helping Sun Life reach its decision to stay in the country, at a time of chaos before the dawn of the Edsa revolution.
Stocks retreat; Manila Water sinks THE stock market retreated Thursday on profit-taking after the government reported a slight increase in the inflation rate for the month of February. The Philippine Stock Exchange Index fell 28.79 points, or 0.4 percent, to 7,819.04 on a value turnover of P9 billion. Gainers edged losers, 95 to 90, with 46 issues unchanged. The National Economic and Development Authority reported Thursday that inflation in February rose to 2.5 percent from 2.4 percent in January due to higher petroleum prices and utility rates, offsetting the slow increase in food prices. The February inflation rate was within the 2 percent to 4 percent target set by the government for 2015 and 2016 and
much slower than 4.1 percent year-on-year. Manila Water Co. Inc., a unit of conglomerate Ayala Corp., sank 10.7 percent to P26.80 on a television report that an arbitration body ruled against the company’s bid for a higher tariff rate by passing the income tax burden to consumers. Parent Ayala Corp. lost 0.9 percent to P728.50. Universal Robina Corp., the biggest snack food maker, dropped 2.2 percent to P213.20, while parent JG Summit Holdings Inc. of retail and airline tycoon John Gokongwei fell 1.7 percent to P66.05. Metro Pacific Investments Corp., which is into toll roads, water and electricity distribution and hospitals, tumbled 4.9 per-
cent to P5.04, while Metropolitan Bank & Trust Co., the secondlargest lender, fell 2.1 percent to P92. Megaworld Corp., the biggest lessor of office spaces, rose 2.8 percent to P5.60, while Semirara Mining and Power Corp. added 2.1 percent to P166.80. Hong Kong and Shanghai markets, meanwhile, sank in Asian trade Thursday after China set tepid 2015 economic and trade growth targets, while the euro fell to 11-year lows ahead of a key European Central Bank meeting. Wall Street provided a negative lead again despite an upbeat report on the state of the US economy and another round of healthy private-sector jobs growth. With AFP