Plastic Kingdom by Patricia L. Adversario

The local licensee for the Philippine edition of FORBES magazine is part of the group.

“Sometimes, there were doubts whether we are doing the right thing or not.” He adds : Petrochemicals isn’t sexy. It’s not a business that you think you should go into. It’s capital- intensive and the risks are not worth the returns.”

Given competing business interests, some members of the board thought the returns might be better if funds were allocated to a different industry.

OBVIOUSLY, THE “BIGGEST VOICE” -Gokongwei’s- prevailed’ Go says with a laugh.

A lot of it perhaps had to do with the vision of Gokongwei and his faith in manufacturing in the Philippines. It was clear to him the country needed this plant as a cornerstone for manufacturing , which accounts for about half of the value of the JG Summit group. That is the highest among leading Philippine conglomerates covered in a December 2014 report by CLSA securities brokerage.

But along with that vision was an astute sense of how to position JG Summit at the top of the petrochemical supply chain.

Petrochemicals are a strategic industry with a multiple links to main sectors of the economy such as construction, electronics and computer, transportation and automotive, packaging, telecommunications, agriculture and fishery.
As a key industry, the groundwork for an integrated setup was laid out early as 1993 when the government established the PNOC-Petrchemical Development Corporation to develop the country’s first integrated complex in bataan. Plans fell through mainly because of financial constraints.

JG Summit’s Cracker is envisioned to supply feedstock mostly for its polymer plants. The polymers are sold under the Evalene brand to plastic manufacturers, who convert them into film, pipes, injection molding and other various applications.

The brand is named after Eva, wife of James Go. James is chairman of JG Summit Holdings and Gokongwei’s younger brother who prefer to use the family’s original surname.

The cracker is important in building an integrated local petrochemical supply chain, explains Homer Maranahan, executive director of the Association of Petrochemical Manufacturers of the Philippines (APMP). Linkages to the upstream cracker will stabilize monomer and plastic resin supply.

Domestic capacity for resins presently exceed local demand but are little used due to intense competition from imports, the absence of domestic monomer production and intermittent feedstock supply, says Rafaelita Aldaba, assistant secretary at the Department of Trade and Industry.

“The integration with the upstream naptha cracker will address the supply issue for monomers and dramatically improve plant utilization rates,” says Aldaba.

Go, who heads the petrochemical business, came in from the cold in mid-1998.
He was working with JG Summit’s textile unit when Gokongwei summoned him to ask if he wanted to join a number of investment endeavors the group was involved in.

Petrochemicals appealed to him the most. “It was a completely new field then. I was thinking to myself, it might be an easier thing to do. But lo and behold, it wasn’t!” he says laughing.

The industry is challenging and always has surprises. But Go’s not complaining.

“You don’t want things too simple, otherwise you lose interest in it.” Just as well the group found someone with an ample dose of good humor and flexibility to trailblaze a project that incurred heavy losses.

The petrochemicals group has been in the red since it began operations in 1998. “We survived because the parent company supported us,” says Napoleon H. Vasay, JGSPC’s vice president for finance and administration.

“In this business, I learned to act fast and decisive. The moretime you lose, the more dangerous the situation,” adds Go.

Whatever decision he can make on his own, he decides quickly. But for decisions that involve millions of dollars, it’s always better to decide collectively.

Go, third child and eldest son of Gokongwei’s younger brother Henry, has been working with the JG Summit group since high school.

Go says he learned more about chemicals in textiles than in petrochemicals. The chemistry in textiles made it easy for him to understand petrochemicals.

He jokes that at 44 he is at the right age because it will take 20 to 30 more years to build up a fully integrated complex.

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