Oligarchic control of the state By Tony Lopez

Manila Times

July 19, 2011

Oligarchic control of the state

By Tony Lopez

THREE weeks ago, upon the invitation of economist Bernie Villegas, I attended a seminar on structural reform at the University of Asia and the Pacific.

The consensus after four hours of discussion is that there is need to amend the Constitution to open up the economy and allow a greater inflow of foreign investments to push the country’s economic development.

The view of the participants is that there are just too many areas closed to foreigners. The restrictions were imposed in the 1935 Constitution and which were carried forward into the 1973 and 1987 Constitution.

As a result of these restrictions, the economy has remained in the stranglehold of the country’s entrenched oligarchies and power brokers. There are no more than 100 families controlling the politics and business of this country.

Five of the six largest commercial banks are all privately owned, by oligarchs. The six banks control more than 70 percent. The five largest private banks are: No. 1 BDO owned by retailing and property magnate Henry Sy Sr. (the richest Filipino); No. 2 Metrobank owned by auto and property tycoon George SK Ty; No. 3 Bank of PI owned by the banking, telco and real estate conglomerate Ayala Corp. chaired by Jaime Augusto Zobel de Ayala; No. 5 RCBC of industrialist-philanthropist Al Yuchengco; and PNB of tobacco and property mogul Lucio Tan (the second richest Filipino).

These bank owners are among the 15 richest individuals in the country. Sadly, they are not exactly among the 15 largest individual taxpayers.

Two-bit actors and radio-tv personalities pay more taxes than they do.

With just P331.5 billion of equity, the five largest private banks control P3.29 trillion or 51 percent of total banking industry resources, P2.5 trillion or 53 percent of total system deposits, and P1.52 trillion or 58 percent of total commercial banking loans. The owners of these banks multiplied every peso ten times in terms of banking resources, 7.5 times in terms of deposits and 4.5 times in terms of loans.

If you are or have been a small businessman you will know just how difficult to obtain loans from these banks. The practice reminds you of Shylock.

“We’re still an oligarchy run by a few families,” says Senator Manny Villar, the first Filipino brown billionaire. “They (the oligarchs) are happy with the present setup now and they will not allow the Constitution to be tampered with.”

“The media, from what I’ve seen, is also controlled by groups that do not want to change the Constitution,” the former Senate president adds. “And that is why any proposal (to amend the Constitution) will be killed right away.”

Villar notes the difficulties encountered by small entrepreneurs in growing their business.

“We always look at foreign investments but we don’t look at the local, the small entrepreneurs, who are unable to borrow, unable to access credit because our banking system is controlled by five or six families and they are happy investing in ROPs (government debt papers) or lending to big industries,” the senator relates. “Right now that is our banking system—it’s a cartel and it’s getting fewer and bigger through consolidation.”

Reform is needed in a nation of 95 million (the 12th largest population in the world), a country where one of every four families is certifiably poor, where 70 percent of the wealth is owned by only the top two percent of the population, where both unemployment and underemployment are massive and beyond mitigation, where economic growth in the 25 years before 2005 was the slowest in the world (bar none), where both the Muslim separatist and communist insurgencies are the longest running in the world, and where taxpayers (including the richest people and largest corporations of the land) are congenitally disposed to evade or not pay taxes.

In his paper at the Center for Research and Communication seminar on structural change July 1 at the University of Asia and the Pacific, former National Security Adviser Jose T. Almonte enumerated some of the reforms.

Almonte suggests increasing the pay of government workers. Their pay is 60 percent below market rates, he notes. “This practically encourages officials holding great discretionary powers but take home so little pay to sell favors to their clients,” he points.

“We must raise the standards of openness in all public transactions. And we need to put more teeth in our Ombudsman institution. Right now, corruption is a ‘high-reward, low-risk’ offense,” Almonte urges.

“Far too many branches of our police and justice system are inefficient or even corrupt. Access to the courts is difficult and costly, and decisions are sometimes arbitrary,” he noted.

Also the ‘no-reelection’ clause (for a sitting president)—together with the procedural difficulties of impeachment—in effect places the President beyond the reach of the popular judgment. “I would prefer a President with two four-year terms,” Almonte winces.

He suggests a truly autonomous Commission on Elections —“by vesting it with its own status and resources, enabling it to computerize its facilities, and empowering it to regulate party finances and access to the media.”

Almonte insists on “developing a stable two-party system. At last count, we had 162 separate parties registered with the COMELEC—but with none large enough and coherent enough to make public policy.”

He thinks “switching to the parliamentary system might in fact help institutionalize our parties, and make the centralization of political power easier to organize, it will also rid us of the protectionist provisions that prevent the entry of foreign capital into key sectors of our economy.”

On another front, Almonte says “if we are to begin redressing the balance of our lopsided economy, we must make countryside development a centerpiece of public policy. And the bulk of our spending in human capital, we must shift to our most disadvantaged regions in a kind of affirmative action.”

Finally, Almonte complains, “the very center of the State itself has been captured by the national oligarchy.”

“Interest groups have such effective control of the State machinery that rule making and enforcement serve not the general welfare but particular interests,” he says.

“Oligarchic influence on the highest State organs enables powerful individuals, families, and clans to tilt the rules of competition in their favor —and acquire privileged access to the rents and commissions generated by public investments.”