President Rodrigo Duterte said during a national address that he had "destroyed" the nation’s "oligarchs" but a new class of billionaires is rising under his influence. Image: Simeon Celi Jr./Presidential Photo

MANILA – Philippine President Rodrigo Duterte rose to power in part on a promise to tackle “oligarchs” he has persistently claimed have held back national development and monopolized key business sectors.   

On July 27, during a State of the Nation Address to Congress, the populist leader renewed his attacks on select billionaires, with rhetorical salvos fired specifically at the Lopez, Ayala and Pangilinan business families.

But while the populist leader claims to aim at liberalizing locked-up industries, it is just is likely he is targeting perceived political opponents for retribution while creating a new class of high-flying oligarchs who owe their concessions and success to his government.

In mid-July, soon after denying the Lopez family’s application to renew the now-shuttered ABS-CBN media network’s legislative-given franchise, Duterte boasted that he had “destroyed” the “oligarchy” without resorting to martial law.

“I destroyed the people controlling the economy and the people, and who don’t pay,” Duterte said in a typically rousing address to soldiers stationed in one of the least developed and most restive regions. “They take advantage of their political power,” he said.

Duterte’s Robin Hood-like rhetoric no doubt resonates in a country notorious for its yawning wealth divide and lack of economic opportunities, a tilted economic landscape that has driven millions of Filipinos overseas in pursuit of gainful employment.

A man is seen wearing a mask with the name of President Duterte and his election campaign slogan on April 5, 2020 in Quezon city, Metro Manila, Philippines. Ezra Acayan/Getty Images via AFP

But his renewed attacks carry destabilizing risks at a time the economy is faltering amid a runaway Covid-19 outbreak. Gross domestic product (GDP) is expected to shrink by 7% in 2020, a contraction that would make the Philippines among the region’s hardest hit.

Even more economic pain is likely on the horizon as over a million Filipino doctors and nurses said on August 1 that the country is losing its Covid-19 battle and called for a new lockdown in and around Manila.  

Duterte seems to think he can leverage the economic crisis to crush big business families he sees as political opponents while deflecting attention from his government’s failures in dealing with the health crisis, critics say.

But replacing old oligarchs with a new class of tycoons some are already referring to as “Dutertegarchs” runs the risk of undermining investor confidence in the sanctity of contracts and rule of law in a country that until recently was among the region’s fastest-growing.

To date, the biggest beneficiaries of the purge are Duterte’s hometown ally Dennis Uy, a Davao-based newcomer to the nation’s Forbes’ “richest list”, ex-senator and now wealthiest Filipino Manny Villar, and administration loyalist port tycoon Enrique Razon, to name the most prominent.

All three are either directly challenging the hold of Duterte’s identified oligarchs in critical infrastructure, public utilities including telecoms and other sectors by creating new companies or directly taking over parts of their businesses.

Philippine President Rodrigo Duterte and businessman ally Denis Uy in a file photo. Photo: Philippine Government/Twitter

Once describing Russia’s Vladimir Putin as his “favorite hero”, Duterte is clearly cribbing the Russian strongman’s playbook. During his earlier years in office, Putin and allies seized major businesses held by so-called “oligarchs” through controversial privatization schemes in the late 1990s and early 2000’s.

The Filipino president is similarly raising questions of legitimacy about the privatization of major public utilities, including in the electricity, water and energy sectors, in the 1990s, an era when the country faced an acute public debt crisis.

His attacks on “oligarchs” have so far had the desired political effect. Last year, Duterte recorded his highest approval ratings ever after a weeks-long public spat with the Ayalas and Pangilinans. They have served as water concessionaires respectively via the Ayala Corp and First Pacific companies in the past two decades.

Both Ayala and Pangilinan-owned companies have filed and won massive arbitration awards, respectively in 2019 and 2018, filed against the government and handed down in Singapore over water rate disputes.

“If Ayala and Pangilinan are your friends, kindly tell them . . . if we see each other, no matter how many bodyguards you have, I can ruin your face, you son of a bitch,” Duterte said soon after the Singapore court decision.

Amid dire water shortages in Manila last year, partly caused by seasonal droughts, the Filipino president accused both companies of exploiting their contractual terms to extract maximum profits while failing to improve their services.

Combination photo of Rodirgo Duterte, Ayala Corp chairman Jamie Zobel de Ayala and First Pacific Chairman Manuel Pangilinan. Image: Facebook

He has since claimed that the Ayala Corp evades taxes, and demanded a renegotiation of the two companies’ water contracts, which are now both under renegotiation. Ayala Corp and First Pacific have both renounced their Singapore-decided arbitration awards.

The president’s persistent public attacks and threats have hurt both companies’ risk profiles and as a result their stock values. Ayala’s Manila Water Co has lost over one-third of its value since Duterte launched his recent attacks, forcing the Ayalas to sell a 25% stake.

Razon’s Prime Metroline Holdings Inc. reportedly paid US$210 million for 820 million shares, valued at a meager 2 pesos (US 4 cents) each, to give the Duterte-friendly billionaire a strong foothold in the lucrative water sector.

The Ayala family is now busily diversifying its holdings overseas, including in Malaysian and Myanmar property, German automotive technology and US solar panels. First Pacific’s water company’s shares are down over 15% over the same period.

Razon, a Spanish-Filipino tycoon, is intent on consolidating a stronger hold on the water and electricity sectors, among others.

Known as a savvy businessman with his own National Unity Party (NUP) political party, Razon not only enjoys strong ties to Duterte but is widely expected to bankroll the campaign of his chosen successor.

Philippine ports tycoon and political operator Enrique Razon is widely seen as a rising “Dutertegarch.” Photo: Facebook

Also under Duterte’s watch, long-time senator and real estate magnate Manny Villar has become the country’s richest man with a $5.6 billion fortune as of 2019 that has been turbocharged by an expanding business empire that has penetrated nearly all sectors of the economy.

His rising fortunes are closely tied to politics. His wife, Cynthia Villar, is a key Duterte ally who topped last year’s senatorial race thanks to strong performance in the president’s bailiwick in Mindanao. His son, Mark, is the Secretary for the Department of Public Works and Highways, an appointment that raised major conflict of interest concerns.

Amid Duterte’s “Build, Build, Build” infrastructure program, the Villars have been accused of using political connections to link public works projects to their real estate ventures, allegations they have consistently denied.

For years, the Villars have been accused of massive land grabbing schemes that have allegedly disenfranchised poor farmers to make way for their developments. Experts and analysts believe Manny Villar’s self-funded presidential run in 2010 was undermined by such allegations. 

Now he is reportedly setting his sites on the telecommunication sector, which has long also been dominated by the Ayalas and Pangilinans, respectively through their Globe Telecom and PLDT Smart companies.

During his recent SONA address, Duterte threatened to strip the companies of their concessions if they did not improve services by year’s end.

“I call on our communication companies to improve their services lest we be forced to take drastic steps to address the less-than-ideal service that the public is getting from you,” warned Duterte.

“If this is the case, give it to us. We are a republic, sovereign country. Bear that in mind because the patience of the Filipino people is reaching its limit,” Duterte said. “And I will be the one to articulate the anger of the Filipino people and you might not want what I intend to do with you. Kindly improve your services before December.”

Days before the speech, Villar launched a new telecom company known as Streamtech Systems Technologies Inc, which will likely aim to challenge the Ayala-Pangilinan de facto sector duopoly.

Manny Villar is estimated by Forbes to be the wealthiest individual in the Philippines. Image: Twitter

The biggest winner of the gathering shift from old to new big business family power, however, is Dennis Uy, a once-obscure now prominent Davao-based businessman and top campaign donor to Duterte.

Soon after Duterte won the presidency, Uy received big-ticket projects, including most significantly a $5.4 billion state concession telecom deal under his newly-constituted Mislatel company in tandem with China’s state-owned China Telecom. The country’s third telecom operator is now known as Dito Telecommunity.  

More Duterte-supported moves are likely in the offing. After the Duterte-dominated Congress shutting down ABS-CBN, until recently the nation’s best-watched TV network, Uy and Villar are both expected to enter the media business, which some speculate could see them take over some or all of ABS-CBN’s now blacked out assets.

But while the Filipino populist challenges some of the country’s oldest conglomerates nominally in the name of the public interest, he is just as likely to usher in a new era of cronyism not seen since the corruption-riddled days of the Ferdinand Marcos dictatorship.

Asia Times Financial is now live. Linking accurate news, insightful analysis and local knowledge with the ATF China Bond 50 Index, the world's first benchmark cross sector Chinese Bond Indices. Read ATF now.