Government Investment News Analysis Reforms

No more crumbs; share the pie

The Philippine oligarchy – a control system that’s operated since Spanish colonial times – has been put on notice with the country’s president, Rodrigo Duterte, saying it’s time to relegate the plutocratic practices of the country’s powerful corporate clans to history and embrace the 21st century. No name, no pack drill, but we all know who they are.

This is great news for the vast number of Filipinos who have remained economically stake-less throughout successive administrations – virtually living off the crumbs from the rich men’s tables – and for foreign investors who, for too long, have been prevented or dissuaded from entering the Philippine market. Local monopolies – or a duopoly in the case of the telecoms sector – along with government regulators, such as in the energy sector, have ensured that big foreign bucks give the Philippines a wide berth, travelling instead to other Southeast Asian counties such as Singapore, Thailand and Vietnam.

In the president’s words. “It’s about time we shared the money of the entire country and move faster; make competition open to all”. Protectionism has no place in fulfilling the administration’s socio-economic agenda, and Duterte has called it out for shackling competition and leaving the economy at the mercy of corruption.

He has specifically identified the telecoms sector which, in the hands of just two companies, has given the Philippines the most expensive services in the whole of Asia and the least reliable in the region with one exception – war-ravaged Afghanistan with its vast mountain ranges and four deserts. Back in early June, Duterte warned the telco tag team of Philippine Long Distance Telephone and Globe Telecom: “You improve the service or I will open the Philippines. All can come in”.

Similarly, the hinder-and-halt tactics of government regulators of the past which kept control of entire industries – most notably in the power and energy sectors – in the hands of the few, are also being targeted with department heads now scrutinising regulatory requirements and institutional arrangements “to hasten the entry of new players”.

Duterte knows that unless these old Spanish practices are dealt with, his country will remain locked in feudal economics and be severely handicapped in its efforts to attract much-needed foreign investment. The socio-economic agenda specifically pledges to “Increase competitiveness and the ease of doing business,” and that certainly can’t happen in a climate of protectionism and political favours.

What’s involved is dismantling the legacy of the encomienda system which in its original form entitled nobles and their clans to lands and labour in return for services to the Spanish Crown. Although, obviously, that isn’t the case today, what’s lingered are echoes of those hierarchical structures, the monopolistic spirit and a notion of entitlement. In our opinion, the Spanish rulers don’t get enough credit for this system of greed which they imposed on the countries and the people they hegemonised. But that’s a whole other can of worms.

Few should be in any doubt, however, that Duterte will deal with the country’s oligarchs. In early August, he singled out business tycoon, Roberto Ongpin – in 2015, No. 20 on Forbes Philippine Rich List – as the type of business operator he intends to put out of business. “The plan is to destroy the oligarchs that are embedded in government,” he said.

Ongpin’s company. PhilWeb – the country’s largest Internet company – was hit by a decision by government-owned Philippine Amusement and Gaming Corporation to end all online-gaming licences. Online gaming was PhiWeb’s main revenue stream. The company’s share price plunged 82.58%, prompting Ongpin to resign as chairman and divest himself of all stock.

Under the government of Ferdinand Marcos, Ongpin had been Trade and Industry Minister from 1979 to 1986 and had cultivated enduring government connections which allegedly had aided his corporate rise. Another of his companies – property developer, Alphaland Corp. – last year was involved in an alleged kickbacks scandal involving a plot of land in the heart of the Makati business district in Manila. In July, Ongpin was fined PHP174 million by the Securities and Exchange Commission for profiteering by using insider information to trade Philex Mining shares in 2009.

Duterte is as passionate about cleaning out the enmeshed corporate/government stables as he is about ridding the rest of society of its criminality. And, as with his anti-drugs war he gave those involved the opportunity to surrender before he went after the gangs full throttle, the oligarchs too have been made an offer they might not want to refuse.

“The only way for deliverance of this country is to remove it from the clutches of the few people who hold the power and money,” he said last week. “I do not owe you anything … I am not trying to destroy you. You have the advantage, you’re here already, be content with that. But let us open everything”. In shorthand that means, end the wheeler-dealing or have your businesses wound up.

Under Duterte, the days of the rule of the rich in the Philippines, with wealth and influence handed down from generation to generation like a birthright, are numbered. Whether the oligarchs retire gracefully, however, is another matter. This system is deeply entrenched, involving fabulous wealth, politics, power and prestige. And so, as with the war on drugs, likely some will take Duterte’s offer, but others will attempt to hang on and bide their time until they can install one of their own again in the presidential palace of Malacañang.

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