It’s being billed as the country’s largest economic zone; possibly the biggest in Asia. It’s a mixed-use project in Pangasinan province on the west of the Philippines’ northern island of Luzon. It covers 10 municipalities and an area of 3,000-hectares – that’s more than half the size of Manhattan, New York. What’s more, according to the Philippine Economic Zone Authority (PEZA), coupled with a sister project – a technology park along Roxas Boulevard in Manila – it’s expected to pull in a staggering US$360 billion in investments.
So what’s the catch? According to PEZA there is no catch; according to the Taiwanese Government there’s a very big one – the man behind the scheme is a fugitive from justice and among the Republic of China’s “Most Wanted” financial criminals.
Two government agencies – Taiwan’s Mainland Affairs Council and the Taipei Economic and Cultural Office (TECO) – have urged Philippine authorities to be very wary about getting involved with Mr Yu-hao Chen, whose Mainland-based Xu Liang Dragon Group is pushing the proposed development.
Chen, a Taiwanese national, is the former chairman of defunct garment-maker, the Tungtex Group, which went belly up owing millions of dollars in government loans and tax arrears while millions more were lost by banks and investors. After fleeing to China, Chen was indicted by the Taipei District Prosecutors Office for fraud, unlawful embezzlement and other serious economic crimes. TECO has asked the Philippine Bureau of Immigration (BI) to arrest Chen and deport him to Taiwan – a request, it seems, the BI isn’t considering.
Based in Xiamen, southeast China, the 77-year-old tycoon presides over a conglomerate with interests ranging from hotels to petrochemicals. His group also owns the biggest economic zone in Xiamen.
Right now though, the alarm bells set off by Taipei are being ignored – and not least by PEZA’s Director-General, Charito Plaza (photo). She seems to have no concerns at all about Mr Yu-hao Chen. Here’s what she told TV station ABS-CBN: “It’s none of our business if ever this investor has cases in the countries where he has been to. It is a political issue because I was told that the owner [Chen] was supporting another presidential candidate in the last election, so it is not a criminal issue”.
‘She was told’? Is that really the extent of due diligence which the PEZA applies to people bringing money into the Philippines – particularly when formal government-to-government warnings against an individual have been issued? How on Earth would Plaza have a clue about Chen’s culpability or innocence? “It’s none of our business”? It most certainly is – moreover it’s PEZA’s duty to establish the integrity of all investors.
As for him supporting a particular presidential candidate in the last election in Taiwan – held on 29 November 2014 – Chen’s problems with the Taiwanese authorities predate that by some 15 years. Tungtex collapsed in 2001 having racked up US$1 billion worth of debt with local banks. He fled first to the United States and then to China in 2003 as allegations of fraud and embezzlement against him emerged. Furthermore, he was officially indicted by the Taipei District Court on 14 January 2014, months before campaigning for the last election started.
But what makes Plaza believe she’s in a position to adjudicate what constitutes a “criminal issue” in Taiwan anyway? And surely, the fact that this alert has come from not one, but two, government agencies should at least raise some cause for concern?
Also, is it really likely that the Government of Taiwan would seek the deportation of someone simply because he supported “another presidential candidate” in an election? If that was the case, it would have deportation requests out all over the place, which it doesn’t.
A statement from TECO responded to that: “On behalf of the government of the Republic of China, the TECO, acting in good faith, wishes to state that Chen is an out-and-out economic criminal which has nothing to do with politics”.
Furthermore, by rejecting Taipei’s pleas out of hand, there’s a danger of damaging or compromising Philippine-Taiwan relations. And at a time when the Government of Taipei is seeking closer trade ties with Manila – and Manila is seeking to make as many friends in the region as it can – that seems to be imprudent to put it mildly.
Last September, Taiwanese President Tsai Ing-wen, announced the island-state’s New Southbound Policy – a new initiative that seeks to boost cooperation, trade and other exchanges, with the countries of South and Southeast Asia in an attempt to lessen the island’s dependence on the Chinese Mainland. Furthermore, the Philippines is seen as integral to that plan.
One month after the announcement, Taiwan’s representative in the Philippines, Gary Song-Huann Lin – a personal friend of Philippine President Rodrigo Duterte – said that Manila would be Taipei’s most important regional partner in the New Southbound Policy. His goal was to make the Philippines “Taiwan’s Gateway to Asean”. It is, he said, “a natural fit”. For his part, Duterte said he was fully supportive of the initiative.
Since then, the two countries’ de facto embassies – the Manila Economic and Cultural Office in Taipei and TECO in Manila – have stepped up contact and are working on a number of agreements. Cooperation is being discussed across a range of sectors, including: investment, banking, agriculture, fisheries, aquaculture, food-processing, electricity-generation, electronics, pharmaceuticals, climate-change, ICT and education.
They’re also looking at expanding tourism ties. Taiwan is presently the seventh-largest tourist market for the Philippines which receives around 210,000 Taiwanese arrivals annually. Air-service agreement between the two countries have also been expanded with Taiwan carriers now running direct charter flights to the Philippines’ three main tourist destinations of Boracay, Cebu and Palawan. All that then is in the mix.
But the real fear here is that the size of Chen’s promised investment might have blurred PEZA’s fiduciary responsibilities. In short, it’s simply not enough for Plaza to dismiss the word of another government to safeguard the future of a project without first making an exhaustive investigation into the matter. For that could be the perception.
Investors – whoever they are; wherever they’re from; however big their investment might be – have to be thoroughly vetted before they can be allowed to make their investments. If they’re not, then it leaves the way clear for governments to get into bed with organised crime and terror networks. That’s happened in the past in other parts of the world, and there’s nothing we’ve seen that would prevent it happening in the Philippines.
And what that does is deter legitimate investment. In this day and age – in a globalised world bound by compliance and strict money-laundering regulations – few serious investors are looking to put their money with governments that partner with crime syndicates. ’Mafiacracies’ are short lived; long-term they’re bad for business.
And the Philippines, which claims it wants to rid itself of home-grown corruption, certainly doesn’t need to be seen as importing it. If that perception grows it will do the country untold damage as far as the international institutions are concerned and will do little to attract solid inward investment.
Chen’s case needs to be adjudicated in Taipei, not in Manila; and by a Taiwanese court furnished with all the facts of that case, not by the head of an investment-promotion agency in the Philippines who has zero access to those facts.