This Sankey diagram depicts data from Ayala Corporation’s 2015 Annual Report: cash flows, both into and out of the company, from and to investing, operating, and financial activities, and total assets. Urban land and infrastructure activities emphasized.
As part of Philippine Center for Investigative Journalism’s special report on Duterte’s China romance, I conducted research into the firms that signed deals during his state visit. What I found was that, among the Philippine parties to these deals include:
• firms with no track record in major infrastructure projects, no recent operating profit, and alarmingly small asset bases;
• firms and personalities that have been implicated in anomalous deals, including Arroyo-era “bridges to nowhere” and the Smokey Mountain Rehabilitation Project; and
• two firms involved in the nickel ore trade with China, one of which had been implicated in smuggling cases at Subic.
“How did virtually unknown firms with no track record in bidding for—much less completing—major infrastructure projects, rise to billion-dollar prominence with the change of the administration?
“For the firms that have no records with the SEC: if they aren’t registered to do business in the Philippines, how could they be party to billion-dollar deals on our behalf? For freshly-registered firms how were their directors able to both anticipate Duterte’s turn to China, and secure influence with the new government so quickly?
“Given the ambitious scope of these projects, can the smaller firms, some of which appear to be seriously undercapitalized, be trusted to deliver on time and within budget? Would any sensible lender take the risk of extending credit to these firms—or will their access to capital depend on intercession from on high?”
Read the full story: Duterte’s China deals, dissected.
Other stories in this series, “Romancing China under DU30”:
Karol Ilagan and Malou Mangahas: Beijing and Manila dating again (part II)
Data Annex: The Philippine parties to Duterte’s China deals
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.
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”