KKR sees significant Philippines investment opportunities amidst pandemic
Global investment firm KKR continues to see the Philippines as an attractive market amid the global pandemic, citing the fundamental strength of the country’s economy as well as its young and dynamic population.
KKR believes the Philippines’ stable currency and strong level of foreign reserves, its focus on keeping inflation low, and the introduction of reform programs aimed at improving the investment climate are additional characteristics that drive the country’s attractiveness in the global arena.
Since 2018, US-based KKR has invested over USD1 billion into the Philippines across four investments, starting with Voyager Innovations whose flagship product is digital payment platform PayMaya. KKR then invested into Metro Pacific Hospitals in December 2019 and First Gen in June 2020. This month, it invested into Pinnacle Towers, which aims to strengthen and expand the Philippines’ telecom infrastructure.
Ashish Shastry, co-head of Private Equity for KKR Asia Pacific & head of Southeast Asia, says: “We see significant opportunity in the Philippines and will continue to invest where we believe we can add value to companies and the economy.”
While the Covid-19 pandemic has been challenging for investors across the globe with economies posting sharp declines in growth due to varying stages of shutdowns, Shastry said KKR is “a strong believer in the underlying Philippines’ growth story and not deterred by the short-term impact of Covid-19.”
With eight offices across Southeast Asia, Japan, Korea, India, Australia as well as Greater China, the giant firm now has approximately USD30 billion in assets under management in Asia and USD234 billion globally as of end of September this year.
While KKR is not looking at specific industries to invest in, it is focusing on a few themes across Asia and the Philippines, among them digital transformation and data usage.
“Voyager Innovations and its PayMaya service offer an excellent channel to drive content and mobile-enabled commerce to Filipinos. Covid-19 has only accelerated the trends and needs around digital, with developments like working from home, increased online purchase and delivery all reinforcing the fundamentals of investments into technology,” says Shastry, who adds that Asia is among the most mobile-enabled regions whose “large, young millennial population are digital natives who pick up new technology extraordinarily fast.”
A second theme is infrastructure, which is estimated to have a financing gap of USD459 billion per year in Asia, according to data from the Asian Development Bank. KKR sees a great opportunity to provide capital and help fill this gap for Asia and the Philippines, whose “Build, Build, Build” infrastructure program is providing the framework for business efficiency and connectivity as well as generating jobs that would propel inclusive growth and economic recovery.
“Another theme is consumption upgrades as consumers in the Philippines and across Asia seek higher-quality goods and services among the rising middle class, newly urban populations and millennials. A good example is Metro Pacific Hospitals which is delivering high-quality medical services across the Philippines,” the KKR executive said, adding that they are also looking at partnering with large family-owned businesses.
During the recent 46th Philippine Business Conference and Expo hosted by the Philippine Chamber of Commerce and Industry, Finance Secretary Carlos Dominguez assured the business community that government will continue to maintain a pro-business environment for enterprises to prosper. “Together, we will overcome the challenges of this year and provide our people the inclusive economy they deserve,” the Cabinet official said.
HE Jose Manuel G Romualdez, Ambassador for Republic of the Philippines to the United States of America, says: “Here in the United States, we always highlight a post-pandemic recovery roadmap that is based on the proven resilience of the Philippine economy. We strongly urge American and other foreign companies to seize the opportunities that the Philippines has to offer and be partners of the Filipino people in their journey toward sustainable development.”
A growing consensus in the global investment community is that thoughtful stakeholder engagement and management of environmental, social and governance (ESG) issues is smart business and critical to smart investing. According to Shastry, stakeholders are now expecting strong ESG due diligence framework before investing in a company.
“KKR appreciates the commitment of the Philippine government to pursue economic reforms that continue to make its economy more attractive for investment. We urge the government to continue these efforts, and maintain its focus on ESG to further build investor confidence in the Philippines and strengthen its position as an attractive destination for international investors,” says the KKR executive.