Business | Economy
Philippines opens world's third-biggest shopping mall
What is claimed to be the world's third-largest shopping centre was created over the weekend in the Philippines, a country where almost half the people earn less than $2 (Dh7.35) a day.
- By Roel Landingin, Financial Times
- Published: 23:57 December 15, 2008
Manila: What is claimed to be the world's third-largest shopping centre was created over the weekend in the Philippines, a country where almost half the people earn less than $2 (Dh7.35) a day.
SM Prime Holdings, the operator, opened an annexe to its SM North EDSA shopping mall in Manila, the country's first giant shopping complex built in 1985.
The mall, with 425,000 square metres of gross space, beat another of the company's shopping centres in the capital - the Mall of Asia, which has an area of a mere 407,000 square metres - into fourth place.
Philippines' richest man
SM, which is owned by Henry Sy, 83, whom Forbes magazine listed as the Philippines' richest man, said the world's third, fourth, seventh and 11th biggest malls by floor area were now to be found in the Philippines, where per capita gross national product is $910.
It added that more than 95 per cent of the retail space in the malls was occupied.
The bigger picture
The opening of the wing amid the worst global recession since the 1930s underscores the SM Group's philosophy of focusing on the long view to the point of almost ignoring short-term cycles.
"This year, amid serious global challenges, we open The Annex at the SM North EDSA," Henry Sy, SM Prime president and second eldest son of the company's founder, said.
"This speaks of how we view the longer-term prospects of the country."
The World Bank forecast that the country's gross domestic product growth would drop from 7.2 per cent in 2007, the highest in three decades, to 4.6 per cent this year and 3 per cent next year.
The Economist Intelligence Unit expects the economy to grow by 1.8 per cent next year.
Future revenue
SM Prime, which runs 31 shopping malls in the Philippines and three in China, recorded a net income of 5 billion pesos (Dh383.7 million) on revenue of 12 billion pesos in the first nine months of 2009.
The group could not afford to be distracted by short-term economic factors because it took 16-24 months to build a shopping mall, Jeffrey Lim, the company's chief financial officer, said.
"If we decide to freeze expansion plans because of the current slowdown, we'll be too late to catch the beginnings of the next recovery two or three years from now," he said.
Strategy
Instead, the company adopted a conservative strategy wherein capital expenditures were almost entirely funded from internal cash generation and borrowings were minimal, Lim said.
"Because of our conservative approach, we can stick to our business expansion plans whatever the short-term economic environment," he said.
Operating cash flow in the first nine months of the year reached 7.1 billion pesos, slightly more than investments of 6.4 billion pesos to build new malls, expand existing ones or buy land for future development.
Consumer spending
SM is favoured by resilient consumer spending, buoyed by remittances from more than eight million Filipinos working and living abroad that accounts for a tenth of gross national product.
While GDP growth in the first three quarters of the year dropped by 2.9 percentage points from a year ago, household spending growth fell by only 1.1 percentage points.
Ricky Aragon, owner of a foot spa service called "Foot for the Gods" in the basement of the SM annexe, said he was hardly feeling the impact of the global crisis.
"Filipinos like to go to the malls, and these giant malls are a boon for me because people's feet get tired after all that walking," said the former advertising creative director, who now runs four spas, all in SM malls.
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