Urban Property Development and the Creative Destruction of Filipino Capitalism

This material originally appeared as  a chapter in W. Bello and J. Chavez (eds.) State of Fragmentation: The Philippines in Transition. Bangkok: Focus on the Global South.

This entry is the first in a four-part serialization.

Part II: The new rules of the game
Part III: Back to the land
Part IV: The city and the restoration of class power

The past decade had been incredibly good for Filipino capitalism. In 2000, the combined profit of the thirty companies comprising the PSE composite index stood at PHP 26.1 billion. By 2010, it grew to 304.23 billion, or an increase of 635 percent in real terms. Within the same ten years, the Philippines’s gross domestic product grew by only 59 percent (see Table 1). In 2006, when Forbes began publishing an annual list of the richest Filipinos, the combined net worth of the forty wealthiest Filipinos was US$16 billion. By 2010, their fortunes were collectively worth 22.8 billion dollars, an increase of 32.3 percent in real terms. In comparison, GDP per capita increased by a mere 13 percent within the same period.[1] Far from depending exclusively on the Philippine market, several of their conglomerates are presently embarking on ambitious foreign expansion plans. Henry Sy’s SM Prime is presently planning to open five more malls in China within the next three years;[2] the Gokongweis’ Universal Robina is eyeing a factory in Burma, which would follow successful investments into manufacturing in Thailand, Vietnam, Malaysia, Indonesia, and China;[3] and San Miguel Corporation, as part of its plan to bring total sales to one trillion pesos by 2013, is planning to put up plants in Burma, Cambodia, and Laos.[4]

TABLE 1. The Philippine economy versus PSE Composite Index company net incomes, 2000 and 2010.[5]

table-1

This was by no means an expected outcome. The 2000s was a very turbulent decade for business: it began with Philippine capitalism in serious crisis, with the economy still reeling from the Asian financial crisis of 1997-8. The initial contraction, at half a percent, was mild compared to the severe drops seen in the rest of middle-income Southeast Asia. But an anemic recovery, coupled with a hollowed-out neoliberal state unwilling and unable to either stem the outward flow of portfolio investments or to spend its way out of the crisis, prolonged the economy’s stay in the doldrums, culminating in a fiscal crisis in 2005. For much of the decade, the country was also in the grips of a political crisis. The impeachment trial of Joseph Estrada, the subsequent revolt of middle Manila, and the installation of Gloria Macapagal-Arroyo in 2001 proved to be only the beginning: as the decade wore on, Arroyo’s questionable mandate increasingly became illegitimate, and would echo throughout the decade as a rigged election, mass mobilizations, and the reanimation of an adventurist, impune military. Finally, its closing years saw the global capitalism erupt in a systemic crisis that it has yet to emerge from.

Continue reading “Urban Property Development and the Creative Destruction of Filipino Capitalism”

The new rules of the game

This material originally appeared as  a chapter in W. Bello and J. Chavez (eds.) State of Fragmentation: The Philippines in Transition. Bangkok: Focus on the Global South.

This entry is the second of a four-part serialization.

Part I
Part III: Back to the land
Part IV: The creative destruction of Filipino capitalists

From the early 1980s to the present, the structure of the Philippine economy, its position astride global circuits of labor, commodities, and capital, and the opportunities for accumulation available to its capitalist classes have been defined by three sets of processes. First among these was neoliberalization. At first glance, the Philippines was perhaps one of the countries where neoliberalism saw an unqualified ideological triumph. It was among the first countries in the world to participate in structural adjustment program in 1980, and has since been the recipient of a total of nine structural adjustment loans from the World Bank and a participant in three IMF programs.[1] The momentum of neoliberal reform has been sustained from within by state economic planning agencies, the academe, and private-sector think tanks.[2] As a consequence, the Philippines has consistently gone above and beyond the prescriptions of the Washington Consensus: it had unilaterally adopted among the lowest average tariff rates in the world, innovated the privatization of economic zones, and embarked on some of the biggest privatizations in the world.

Far from being a completely ideological project, however, neoliberalization in the Philippines has been implemented in a specific, locally-contingent, and highly-uneven manner, and the resultant contours were crucial to the recent successes of domestic capitalists. This is perhaps most evident in the Philippine privatization program. Beyond the crown jewel corporations, such as Philippine Airlines, Petron, National Steel, and Napocor, public land and infrastructure have been the most consistent targets for privatization by successive post-EDSA governments. In Manila, the privatization of military-owned land, such as Fort Bonifacio and Camp Bago Bantay, of national government centers in Quezon City, and of reclaimed land on Manila Bay have in recent years been a defining feature of urban development in the city. Through the Bases Conversion and Development Authority alone, a total of 267 hectares in the city have been privatized in this manner, creating some PhP46.697 billion in revenues.[3]

Two particular features of the privatization program deserve closer scrutiny. Continue reading “The new rules of the game”

The city and the restoration of class power

This material originally appeared as  a chapter in W. Bello and J. Chavez (eds.) State of Fragmentation: The Philippines in Transition. Bangkok: Focus on the Global South.

This entry is the last of a four-part serialization.

Part I
Part II: The new rules of the game

Part III: Back to the land

All told, the new Philippine economy saw billions of dollars churned into the land by overseas Filipinos and foreign investors, land that had been newly liberated from the state, agriculture, and domestic manufacturing, and redeveloped into subdivisions, condominiums, office space, and malls. This picture so far provides an account for what the new economy is, and why, how, and where these changes are taking place; what is so far lacking is an account of who benefited from this new economy.

As in any other economy, power in the brave new Philippines lies in the opportunities available for capitalist accumulation. Just like ownership of land under hacienda agriculture or dictatorial largesse under import-substitution industrialization, control over these opportunities will mean control over the creation of wealth.

The new economy saw, on one hand, the possibility of amassing wealth from haciendas or from small factories propped up by the state has been decisively closed off, even as important sunshine industries such as electronics manufacturing and business process outsourcing have daunting technical and financial entry barriers. On the other hand, the torrent of foreign investment and remittances that it has unleashed are creating immense opportunities in sectors which, whether by accident or design, are reserved for Filipinos.

Real estate development is one of these sectors. Over the past two decades, an array of crony capitalists, manufacturing-oriented taipans, and landed elites have converged on urban real estate as a central component of their strategies to diversify from their traditional sources of wealth. Continue reading “The city and the restoration of class power”

Retelling the Philippines’ ‘turnaround story’

Originally published as an Asia Research Brief with the York Centre for Asian Reseach, 3 July 2014. The argument outlined here was first developed in Cardenas, K. (2014) “Urban Property Development and the Creative Destruction of Filipino Capitalism”. In W. Bello and J. Chavez (eds.) State of Fragmentation: The Philippines in Transition. Bangkok: Focus on the Global South, and appears in a condensed form in Cardenas, K. (2014). “Cash-crop condominiums.” Philippine Daily Inquirer, 16 March 2014.

Long the exception to a region of dynamic export-oriented economies, recent years have seen the Philippine economy deliver unusually impressive numbers, receive successive votes of confidence from credit rating agencies, and emerge as an unusually bright spot in an otherwise gloomy global economy. In 2013, its GDP grew at a rate of 7.2 percent, second only in the region to China. Over the course of the Great Recession, it grew at a pace that compared favourably with its middle-income and Southeast Asian peers; its average growth over the same period was also at its fastest in its recent history.

The causes behind this growth have been firmly established: a reinvigorated mining sector, robust remittance inflows from overseas Filipinos and a rapidly-growing services offshoring industry. Its effects, however, remain only partially understood. What is so far apparent is that the growth has failed to address the high levels of unemployment, poverty and inequality that have been persistent features of Philippine underdevelopment. If the new wealth has so far failed to translate into the well-being of Filipinos, then where did it go? Continue reading “Retelling the Philippines’ ‘turnaround story’”

Cash-crop condominiums

A version of this piece was first printed by the Philippine Daily Inquirer’s “Talk of the Town” section on 16 March 2014 (p.16). An expanded version of this analysis appears as a chapter in the forthcoming co-authored book, “States of Fragmentation”, to be published by Focus on the Global South.

When we tell the stories of our wealthiest men, we tend to tell the stories that are of no consequence: we repeat their names, which have mostly remained constant for most of recent memory; we futilely recite the numbers of their net worth; we mythologize the secrets to their success.

These stories are of no consequence for the simple fact that we are telling ourselves things that we either already know, or things we don’t need to know. When we dwell on who the ten Filipinos on Forbes’ 2014 list of world billionaires are, we learn nothing of value. Henry Sy’s net worth is a few hundred million dollars lower this year, the Ayalas are mysteriously absent, the majority of the names are Filipino-Chinese. So what?

But once we turn our attention to understanding what the richest Filipinos are, an entirely different story reveals itself. The true significance of the recent fortunes of our Ten Millionth Percent is in how their stories can help make sense of the puzzles of our recent economic successes, such as jobless growth, our inability to address deep and widespread poverty, or whether the near future holds an East Asian-style ‘takeoff’ in the Philippines.

To tell this other story, we need to ask different questions: how are the biggest Filipino capitalists building their fortunes? Why, in the Philippines of the 21st century, is wealth being built in this way? How does this strategy compare to strategies seen in other periods of our economic history,s or in other places? Finally, what does the success of this strategy mean for the prosperity not just of the few, but of the country as a whole? Continue reading “Cash-crop condominiums”