Philippine President Rodrigo Duterte on the campaign trail in 2016. Photo: AFP/Noel Celis

Philippine President Rodrigo Duterte has renewed his populist assault on the nation’s traditional business elite, a group of so-called “oligarchs” he claims has stunted development by monopolizing sectors of the economy.

At the same time, there are rising concerns the firebrand president aims to supplant the old elite with his own business allies, a fast rising class of tycoons some are already referring to as “Dutertegarchs.”

Duterte has singled out liberal-leaning business elites known to be more aligned with the “yellow” political opposition. Among them are the Ayala and Pangilinan clans, both of which maintain sprawling and profitable business interests across the country.

“If Ayala and Pangilinan are your friends, kindly tell them I don’t go out, but if someone invites me out…if we see each other, no matter how many bodyguards you have, I can ruin your face son of a bitch,” Duterte said on December 3 during a tough-talking address at the presidential palace.

“Look for Ayala, I’ll go to him. They do not pay corporate income tax,” the president claimed, raising the prospect of using tax evasion charges to punish and diminish the power of traditional business elites.

Duterte’s tirade came on the heels of a recent ruling by the Permanent Court of Arbitration (PCA) in Singapore which awarded Manila Water 7.4 billion pesos (US$150 million) in damages in addition to an arbitration fee and 85% of other claimed costs amid a pricing standoff with the Philippine government.

The Ayala-owned company, the sole provider of water and used water services to six million people in Metro Manila, sought arbitration back in 2015 following the government’s injunction against raising utility costs.

Duterte has accused the publicly listed company of unfairly raising costs at the expense of ordinary consumers.

From left to right: Don Jaime Zobel de Ayala, Ayala’s chairman emeritus; Jaime Augusto Zobel de Ayala, CEO of Ayala Corp; and Fernando Zobel de Ayala, Chairman of Ayala Land Inc. Photo: Facebook

“I told [Finance Secretary Carlos Dominguez III] and [Solicitor General Jose Calida], craft a new contract that is really favorable to [the] public, to government. Give it to them. ‘This is the amended contract. Accept it or nothing doing,’” Duterte threatened.

That threat coincided with Duterte’s persistent vow not to renew the franchise of the country’s largest media conglomerate, ABS-CBN, which is owned by the Lopez family, likewise known for their liberal-leaning politics.

ABS-CBN is the nation’s leading television news broadcaster and has aired award-winning critical reports on Duterte’s controversial war on drugs campaign, in which thousands of suspects have reportedly been killed in extrajudicial fashion.

Duterte has said on at least three occasions that he would seek to block the broadcaster’s franchise, which is up for a 30-year renewal in March 2020. Congress, currently dominated by Duterte allies, has set up a committee to vet the application, but has said it will not decide on the matter until next year.

“Your franchise will end next year. If you expect it to be renewed, I’m sorry. I will see to it that you’re out,” Duterte warned earlier this month.

Duterte has similarly threatened to annul multi-billion dollar concession agreements for Manila’s water sector held by what he sees as price-gouging oligarchs.

For the past two decades, Manila Water, owned by the Ayalas, and Maynilad, originally owned by the Lopezes but now by the Pangilinans, have dominated Metro Manila’s water supply under concessionaire deals with the Metropolitan Waterworks and Sewerage System (MWSS).

Philippine businessman Manuel Pangilinan at an ASEAN business forum in a file photo. Photo: Facebook

In the late 1990s, then-president Fidel Ramos administration moved to privatize Manila’s water supply due to massive inefficiencies at MWSS, a state company which at the time struggled to meet even 70% of water demand amid rapid population growth and a booming economy.

The Ramos administration signed Republic Act No. 8041, or the National Water Crisis Act, in 1997, which paved the way for full privatization of the capital’s water sector.

The shift from private to public management, facilitated by the World Bank’s International Finance Corporation (IFC), represented what many saw as one of the most successful large-scale privatizations in the developing world.

Under a so-called “rate rebasing” regime, private companies were given segmented, time-bound monopolies over water supply and infrastructure in exchange for guarantees of full recovery of their investments with a “reasonable” profit.

Ayala’s Manila Water has control over the capital’s so-called East Zone, which covers 23 cities and municipalities, including the business districts of Makati and administrative city of Quezon City.

Panglinan’s Maynilad, meanwhile, controls the so-called West Zone, which covers 17 cities and municipalities, including large parts of old Manila.

Over time, however, problems have arisen, with many, including in civil society and government, alleging large-scale profiteering and price-manipulation by the concessionaires. Both operators have denied the claims.

The upshot has been some of the world’s most expensive utility costs, which have strangled domestic manufacturing and made basic services such as water, fuel and electricity unaffordable for millions of poor Filipinos.

Manila residents with empty water containers during the capital’s water shortage crisis in March 2019. Photo: Twitter/Rappler

Tensions came to a head earlier this year when Manila faced a full-blown water crisis, causing Duterte to openly lash out at the administrators and concessionaires.

To be sure, many have welcomed Duterte’s audacious approach to the country’s once-untouchable business elite, who have benefitted immensely from the Philippines’ growth in recent years.

According to the World Bank, the country’s 40 richest families have accrued 76% of newly-created growth in recent years, twice the rate seen in Thailand and more than 30 times higher than in Japan.

Duterte’s frontal assault on the traditional business elite, however, raises two big questions.

The first concerns the rule of law, given the uncertain legality of Duterte’s threats and his seemingly selective targeting of elites which have either openly or indirectly opposed his rule.

Meanwhile, a cabal of ambitious and dynamic Duterte allies, mostly from the president’s hometown of Davao, has reportedly set its sights on the country’s most prized economic sectors.

That’s raised concerns that Duterte may aim to switch out the old elite with pliable new ones who are dependent on his political patronage.

There is at least one clear example, critics say. Just months into office, Duterte openly attacked and vowed to destroy another so-called “oligarch”, the longtime gaming tycoon Roberto Ongpin.

“The plan is to destroy the oligarchs that are embedded in government. I’ll give you an example, publicly – Ongpin, Roberto” Duterte said then, with critics claiming that the threats eventually compelled the tycoon to sell his shares in a gaming company to one of his administration’s allies.

Now, critics worry that Duterte is selectively leaning on the liberal business elite to again favor his business allies. They reputedly include the powerful Villars, which have recently risen to become the richest Filipinos.

Philippine President Rodrigo Duterte (L) and businessman ally Dennis Uy (R) in a file photo. Photo: Philippine Government/Twitter

Meanwhile, Dennis Uy, another Duterte ally from Davao, is reportedly eying ABS-CBN as the Lopezes broadcast franchise appears to be in jeopardy.

Uy, a Chinese-Filipino businessman and top donor to Duterte’s presidential campaign, rose to national prominence after bidding for and winning a multi-billion dollar telecommunication concession deal in league with China Telecom.

Since Duterte’s ascent to the presidency, Uy has been catapulted from a backwater businessman to one of the country’s most dynamic entrepreneurs – and newest Filipino on Forbes magazine’s richest list.

Many thus wonder whether Duterte is truly committed to shaking up the country’s elite-dominated economy in the name of market-liberalizing reform, or aims instead to replace the old traditional elite with new ones beholden to him.

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