Taking down the oligarchs

President Duterte vowed to object to the renewal of ABS-CBN’s franchise for another 25 years. This comes on the back of his allegation that the TV network purposely failed to air his TV ads (duly paid for) but instead aired ads that were critical of him and paid for by Senator Antonio Trillianes. ABS-CBN is the crown jewel of the Lopez family.

Meanwhile, the President also said he would defy the ruling of a Singaporean Court to pay Maynilad P3.6 billion and MWC P7.4 billion over losses due to a delayed rate increase. He further ordered Solicitor General Jose Calida to craft a new water contract that will be “favorable to the public”. If not an outright cancellation of Maynilad and MWC’s concessionaire’s agreement, a revision of its terms to one that is more stringent is certain. This, on top of the threat to take down the owners of the water companies, the Ayala family and Manny Pangilinan, for plunder.

President Duterte is hitting the three families where it hurts. The Ayalas and Manny Pangilinan each invested close to P200 billion in their water ventures. Even if the market value of Ayala Corp. and Metro Pacific (Pangilinan’s holding company) stands at P488 billion and P85 billion, respectively, the specter of not being able to recover P200 billion will surely grind-down their market values.

As far as the Lopez family is concerned, ABS-CBN is one of the family’s cash cows and base of political power. To withhold its franchise is akin to defanging it, politically.

In a double strike maneuver, the President is taking down three of the country’s “oligarchs.” Over the years, he has been vocal about his resentment of these powerful families, even going on record to say that they have stunted the development of the county by monopolizing sectors of the economy.

Look, before the systematic attack on conglomerates and old families (“oligarchs”) escalates, we should all take a step back and be circumspect about it.

First of all, we should understand that oligarchs are a natural result of a laissez faire economy. They are families who have done well over decades on the back of hard work, smart investments and good strategy. Sure, some have prospered from political favors, but this too is a part of a free market system. In Korea, large conglomerates are known as chaebols. Among them are Hyundai and Samsung, owned by the Ju-yung and Byung-chul families. In Japan, they are called Zaibatsus. Marubeni and Hitachi are some of them, owned by the Itoh and Odaira families.

Chaebols and Zaibatsus are industrial powerhouses  whose size gives them control over parts of the economy. They have sway over the political landscape and can influence national policy. But Chaebols and Zaibatsus are not evil – they are in fact strategic allies of government in nation building. They are purposely supported by their governments in exchange for making massive investments in pioneering industries, research and development and in in high risk industries that are essential to industrialization (eg. Petrochemical plants). They lead the charge in job generations and raising revenues for government by way of exports and taxes.

In short, conglomerates with political gravitas are not parasites, per se. They can be national assets just like the Chaebols and Zaibatsus are. To take them down for the wrong reasons will do the country a disservice and potentially set us back in our industrialization.

What are the wrong reasons? Political revenge and racism are among them.

We must make a distinction between good oligarchs and bad oligarchs, being blind to their political biases. After all, every Filipino, oligarch or not, has the right to their own political beliefs. To attack them for not being in your side is not only petty but an affront to their democratic rights.

As for racism, I find it suspect that the oligarchs under siege today are of Spanish-Filipino heritage. Those of Chinese decent have been immune to the attack – so far, at least. Maybe its my imagination, but I would like to think that racism does not figure in this equation.

So how does one distinguish between good and bad oligarchs?

Bad oligarchs are those who are engaged in illegal or immoral activities; those who have amassed their wealth through illegal means but have not been held accountable; those involved in extracting natural resources but not paying the appropriate excise taxes for them; those whose operations damage the environment; those who oppress the weak; those who are usurious and opportunistic; those who evade taxes (tax avoidance is acceptable); those who give back to the community only up to the extent of tax breaks; those who make their money in the Philippines but park their money abroad.

Who are the good oligarchs? Those who invest in pioneering and capital intensive industries; those who invest in infrastructure; those that come to the support of government when its resources and talent falls short; those who adhere to the principles of good governance (as evidenced by audit reports from audit firms of high repute); those with philanthropic activities that go over and beyond tax benefits.

As far as the Ayala and Metro Pacific are concerned, both have invested billions to upgrade the country’s water system, telecommunications, power generation and distribution and infrastructure. Their services may not be perfect but they stepped-up when government could not. They are listed in the stock exchange, hence, conform to the strict scrutiny of the SEC.

As for Ayala Corp., I appreciate them for their commitment to the development of heavy industries even when conditions in the Philippines are not conducive for it. They invested billions in Integrated Micro-Electronics Inc. as well as a string of companies that manufacture auto parts.

ABS-CBN’s situation is more complicated. They too are a publicly listed, thus, governed professionally. They invest in corporate social responsibility programs like Bantay Bata.

What I take exception to is their programming. While they claim to be “in the service of the Filipino,” their programming suggest otherwise. For decades they have dumbed-down the Filipino by feeding them shows bereft of intellectual value. Let’s be honest, they feed the public trash. And I must agree with the President, they have used their media platform to build up (and take down) certain politicians.

The President’s ire should serve as a wake up call for the management of ABS-CBN.

I don’t have a problem with taking down bad oligarchs.  I do have a problem if they are taken down for the wrong reasons.