Second of Two Parts
Forbes magazine has been the definitive listing of the billionaires of the world and of each country. Yet wittingly or unwittingly, Forbes in its 2016 roster helped conceal from public view Anthoni Salim, the newest, yet hidden, oligarch in the Philippines.
While ranked as among Indonesia’s three richest individuals in the past several years, Salim vanished from its 2016 lineup. However, the regional magazine GlobeAsia ranked him as the second richest Indonesian in 2016, with $11 billion in net worth, just below the wealthiest Indonesians, the banking and tobacco-based Hartono brothers, with $14 billion.
The net worth of Salim’s shares in PLDT, Metro Pacific Investments Corp., Philex and Meralco alone is about $4.5 billion. That would make him — if Forbes ranked him among the country’s richest — No. 3 richest magnate in the Philippines, the only foreigner in the list. Yet, he has built and continues to run his conglomerate by remote control as it were, with his executive Manuel V. Pangilinan portrayed in the public mind as its principal owner.
Salim is also the youngest by far at 67 and the newest, overtaking such magnates (in the Forbes listing) as David Consunji, Manuel Villar, the Ayala-Zobel brothers, and even Enrique Razon, in just a decade.
Is it another success that should be credited to Salim’s PR machinery in keeping him unknown to the world?
Or were the Forbes editors incredulous that a huge chunk of an Indonesian billionaires’ wealth is not in his home country but in another? Indeed, in the history of Forbes’ roster of the world’s billionaires, Salim is the only such tycoon, much of whose wealth is in a neighboring country, the Philippines. Such has been the sorry state of our country. Don’t you think that means something terribly wrong is happening in our nation?
Salim’s main sources of wealth in the Forbes and GlobeAsia listings have always been reported as Indofood (the world’s biggest noodle maker) and First Pacific.
But First Pacific’s reports show that its profits from PLDT totaled $2.4 billion from 2000 to 2015, its biggest profit-earner, with that of Indofood at $1.5 billion. This is hardly surprising: PLDT is mostly in the mobile phone industry now, the most profitable sector in the past decade, and a near-monopoly, accounting for 70 percent of mobile and fixed-lines phones in the country.
Pangilinan’s “corporate citizenship,” as discussed in the first part of these series, is indeed admirable, a quality so much needed in a country ruled by oligarchs, who view the Philippines merely as a country where they make profits, and not their real nation.
There is obviously, however, a big ulterior reason for First Pacific’s huge public relations campaign to portray Pangilinan as a tycoon with a high sense of civic duty, one who spends hundreds of millions of pesos on philanthropy, social causes, sports and the academe.
This is to etch, falsely, in the mind of Filipinos that Pangilinan owns the First Pacific conglomerate, concealing the reality that it is tightly owned by an Indonesian magnate, in violation of constitutional provisions limiting foreign capital in public utilities.
We need, of course, foreign capital especially in areas where Filipino capitalists could learn from their technology.
But Salim’s investment in the Philippines is mostly in public utility firms, in which the Constitution limits foreign capital because these exploit natural resources (the radio spectrum in the case of cellphones) and monopoly features (as in the case of Meralco and tollroads), which should be reserved for Filipinos, or for the state itself. No Asian nation, in fact, allows such dominance by a foreign magnate of its telecoms, power, and other public utility firms.
Such control, has, in fact siphoned off from the country much needed capital: From 2000 to 2015 Salim and the other mostly US shareholders in First Pacific have received $8 billion in profits from PLDT and MPIC alone. This is equivalent to the amount of net foreign investment inflow the country had received in six years.
If you think that this is merely capitalism at work, check out the court records in which respected taipan Alfonso
Yuchengco testified under oath that then President Estrada threatened him in 1998 to throw his son in jail on trumped-up illegal-drug charges if he didn’t sell his PLDT shares to Salim. (That case also certainly debunks the argument that we need foreign investment because we lack capital. Yuchengco wanted to organize his consortium to buy out the Cojuangcos.)
Check out the several accounts, including that in the book of incumbent Foreign Affairs Secretary Perfecto Yasay, Jr., in which he claimed Estrada got P3 billion in illegal income from First Pacific’s takeover of PLDT. *
The last time in Philippine post-war history that a foreigner wielded such economic and political power in the country was in the 1950s, when a former G.I., Harry Stonehill, built a conglomerate of cigarette, glass and cement manufacturers. His net worth was estimated at $50 million at the time, equivalent to $400 million today.
That’s peanuts compared with Salim’s estimated assets in the country of $4.5 billion, based on the value of his shares in PLDT, his infrastructure holding firm Metro Pacific Investments Corp. (MPIC) and Philex Mining.
(Stonehill became the subject of a sensational congressional investigation in 1960, which exposed his bribery of top government officials in order to build and maintain his empire, and was subsequently deported.)
A recent article by the respected London-based The Economist magazine defined “cronies” as billionaires heavily involved in “crony sectors,” or those “vulnerable to monopoly or heavy state involvement.”
“They are more prone to graft, according to bribery rankings produced by Transparency International,” the magazine explained. The Economist is saying that one would be so naive to believe that giant companies engaged in public utilities in developing countries are regulated strictly according to the rule of law, and operate at arms’ length from the incumbent political rulers.
Out of the 10 such “rent-seeking sectors” the magazine listed, Salim’s conglomerate in the Philippines is based on three of these: telecoms, utilities and infrastructure. Salim, in fact, is the only billionaire in the Philippines whose conglomerate is deeply engaged in public utilities and infrastructure.
Going by The Economist’s definition of “cronyism,” therefore, Salim is the biggest and newest crony capitalist in the country now.
The Salim conglomerate’s expansion into infrastructure projects last year together would explain The Economist’s finding that the Philippines’ ranking in the crony-capitalism index worsened from fifth in the world in 2014, to third this year, after Malaysia and Russia. Marcos had cronies, but Filipinos. Now we have, going by The Economist’s definition, an Indonesian crony?
What bolsters such appellation is that Salim’s conglomerate made major breakthroughs in each of the past four administrations, which could not have been undertaken without each government’s active participation:
Under Fidel Ramos’ administration, Salim’s consortium won the prized Fort Bonifacio property project, backed by state institutions, beating the group led by the country’s old-elite Ayala clan. Salim would have captured San Miguel Corp. had Ramos moved just a bit earlier in lifting the sequestration of coco-levy shares in the food and beverage conglomerate, which is the biggest in the country;
Joseph Estrada very actively assisted Salim in capturing PLDT from the Cojuangcos, even removing the SEC chairman at that time, Perfecto Yasay, Jr. who raised questions over the buy-out. PLDT became Salim’s launching pad for his rapid expansion in the country in the next two decades, with PLDT funds even used to take over Meralco and build a media empire;
During Gloria Arroyo’s administration, Salim acquired the power-distribution monopoly, Meralco, from the Lopez elite, which became its base for expanding into the power sector. Salim also captured in 2009 the country’s biggest gold producer, Philex Mining, with the crucial help of the Development Bank of the Philippines.
Under Benigno Aquino 3rd, the Securities and Exchange Commission defied Supreme Court decisions in 2011 and 2012, which could have stopped or even closed down Salim’s operations in the country as he was in violation of constitutional limits on foreign capital in PLDT. A Supreme Court decision in 2014, made final and non-appealable in 2015, ruled that corporate-layering schemes such as that which Salim uses to conceal his foreign ownership of local firms is unconstitutional. Yet, the decision has been ignored by the SEC, the very agency tasked to enforce it. Under Aquino’s watch, the Salim conglomerate has grown rapidly to include the largest infrastructure investment management and holding company, running even the country’s longest toll-road network.
Will President Duterte prove different?
First Pacific’s mechanisms for extracting profits from the Philippines are exactly the same as those used by capitalists from the superpowers in the last century, a form of exploitation called neocolonialism.
But now we suffer from a neocolonialist who is not even from a superpower, but from a neighboring country that is not even superior to us but stands at roughly the same economic level where we are.
What kind of a country have we become?
* * *
*These are explained in detail in my book Colossal Deception: How Foreigners Control our Telecoms Sector — A Case Study of Corruption, Cronyism and Regulatory Rapture in the Philippines. Order at rigobertotiglao.com/book.