Lucio Tan

Philippines' most notorious crony capitalist comes to NZ

- Murray Horton

There is so little Philippine investment in New Zealand, or any other kind of economic inter-action, as to be almost invisible. There is, of course, poor old Victor "Vicvic" Villavicencio, whose ownership of the Lyttelton Marina has been one of the great commercial disasters of recent NZ history (a "once in 50 years storm", in October 2000, blew the flimsy thing to pieces and sank nearly every boat "sheltering" within. Lawyers are planning their world trips years in advance in anticipation of the proceeds from the tsunami of litigation that resulted. The storm struck a couple of days after new owners were announced. They quickly voided the sale, which added to the legal mess). Then there’s Eduardo "Danding" Cojuangco, who is a huge name in the Philippines, but unknown here. He has become known for paying record prices for race horses at the annual NZ yearling sales. But that’s about it.

However, our interest was definitely aroused when the Prime Minister, Helen Clark, came to Christchurch, in July 2001, to (among other things) open the Lignus Exchange, an Internet-based lumber and log trading exchange, set up by the McVicar brothers, who are well known in the Christchurch timber industry. It was stated that a Singapore company, Unifize had taken a 20% stake in the Exchange. Right at the end of the Press report (18/7/01; "Asian stake in local Internet timber trader") it was mentioned that Unifize is owned by "Filipino-Chinese billionaire Lucio Tan and family interests".

Lucio Tan is definitely somebody to keep an eye on. He is the Philippines’ richest man and one of the richest in Asia. But it is the way in which he has made his billions that perfectly illustrates the crony capitalism that has plagued the Philippines (and a lot of other Third World countries). About the only remaining "check" on foreign investors coming into New Zealand is that they be of "good character". Tan fails spectacularly.

Top Presidential Crony: Marcos

He comes from poor Chinese immigrant descent (Chinese were not entitled to Filipino citizenship until the 1970s) and started off as a scrap dealer – thus fulfilling the Filipino stereotype of Chinese. As a young man he moved into the tobacco industry, where he first met the young Congressman, Ferdinand Marcos. That was the key. In 1966, when Marcos was President, Tan founded Fortune Tobacco, which is now the country’s biggest tobacco company. It accounts for over half of all cigarettes sold in the Philippines. Fortune took off after Marcos imposed martial law, in 1973, thanks to generous tax and other incentives. In 1977 Tan bought a bankrupt bank from the Government, which is now Allied Bank, one of the country’s top banks. In 1982 he established Asia Brewery, benefiting from a Marcos ruling that allowed new beer companies to open. So he is now the Philippines’ top cigarette and booze baron. Indeed he is known as "Mr Cigarette".

During the long years of the Marcos dictatorship, Lucio Tan was his closest crony. In 1987 (after Marcos’ overthrow by the People Power revolution) Rolando Gapud, Marcos’ financial adviser, swore an affidavit to the Presidential Commission on Good Government: "I know that Mr Marcos and Mr Lucio Tan had an understanding that Mr Marcos owns 60% of Shareholdings Inc, which owns shares in Fortune Tobacco, Asia Brewery, Allied Bank and Foremost Farms…Mr Lucio Tan, apart from the 60% equity of Mr Marcos, has been regularly paying, through Security Bank, 60 to 100 million pesos a year to Mr Marcos, in exchange for privileges and concessions that Mr Marcos has been giving him" (Public Eye, January-March 1999; "Into The Light"; Sheila. S Coronel. Divide the pesos by 50 for a $US approximation). In 1986, when Marcos was compelled to end martial law and call an election, the workers at Tan’s Fortune Tobacco factory were loaded into "Love Buses" and sent en masse to cheer for Marcos, after which they were paid allowances by the company (of course, Marcos "won" that fraudulent election, and was then overthtrown by the outraged people).

In December 1998 the Philippine Daily Inquirer ran an explosive front page series of articles, in which Wonderwidow and shoe fetishist, Imelda Marcos, opened her books to the paper and detailed just which cronies owned what. Her motive was revenge – she said that the Marcos cronies had been given all sorts of companies and assets by the late Ferdinand, for safekeeping (until things settled down), then refused to give them back to the Marcos family. She claimed, as one PDI headline put it: "We own practically everything" (5/12/98). She reckoned that Marcos, having obtained all sorts of companies by fair means or (very) foul, dished them out to his mates: "I won’t be president of any company because I’m already President of the country" (7/12/98). Tan got 12 companies. All the cronies paid Marcos hundreds of millions of pesos per year into his secret bank accounts, in return for privileges and concessions (Ferdinand used the name "William Saunders" for his hidden accounts and assets; Imelda was "Jane Ryan"). She wasn’t very flattering about Lucio Tan: "…he’s nothing, just somebody who used to buy used bottles" (9/12/98; "Imelda: We made Tan, Cojuangcos").

Top Presidential Crony: Estrada

After Marcos’ downfall, Tan faced a hostile President in Cory Aquino. But he continued to thrive and acquire more major assets. In 1992 he bought the privatised Philippine Airlines Ltd (PAL - known universally as Planes Always Late). He attached himself to the rising star of Senator Joseph Estrada, who went on to become Vice-President under Fidel Ramos, then was elected President, in 1998. Tan was the major financier of his successful Presidential campaign. He became Estrada’s closest crony, regularly being seen with him in public and travelling with him (most unusual for the usually circumspect Filipino-Chinese business class). Estrada looked after his mate – when the tax department charged Fortune Tobacco with P26.5 billion in tax evasion, Tan’s well placed connections throughout the bureaucracy, judiciary and the political system (including the President) ensured that the charges were dropped (the Court of Appeals ruled that the Government had filed its case 11 days too late)

Solita Monsod, economics professor and former economic planning secretary, said: "Lucio Tan is a role model for the worst kind of conduct as far as our national economic objectives are concerned. He signals that you can evade taxes and get away with it, pay the courts and get the judges to decide in your favour, get good lawyers and delay your cases. The messages that are given by the kind of treatment that he gets from the Government are the antithesis of what we need for sustainable development: an even playing field and Government intervention of the right kind" (Public Eye, January-March 1999; "Into The Light"; Sheila. S Coronel). Tan is a past master at dispensing bribes to politicians – the same article recounts him giving P100,000 "Christmas presents" to Congressmen in 1998. And the Estrada government made sure that Tan would have no more tax hassles by appointing a new tax commissioner who proclaimed himself a longstanding friend of Tan.

In the late 1990s, PAL took on two Taiwanese airlines in a dispute that led to the cancellation of the Philippines’ air agreement with Taiwan. For keeping PAL afloat, Estrada hailed Tan as a "hero". He was no hero to PAL’s workers and their unions, whom he had locked out and bashed by company security goons, in a contract dispute. For some time PAL was grounded, leaving the Philippines with no national airline (an even worse aeronautical predicament than Air New Zealand found itself in recently); Tan was one of the five co-winners of the 1998 Notoryus Award - he was adjudged by human rights groups to have been one of the worst human rights abusers that year (no mean feat, given the competition in this field in the Philippines) for his anti-labour policies and union busting at PAL). In 2000, the Philippines was compelled to resume the Taiwan air rights agreement, on Taiwan’s terms – Tan was looking to sell the airline.

Estrada went the way of Marcos, in January 2001, when People Power 2 overthrew him – universal disgust at the way he flaunted running the country as a private piggy bank for himself and a coterie of cronies, Tan foremost, led him to where he is now - in custody and on trial, facing the capital charge of plunder. But Lucio Tan emerged unscathed. True to form, he has renounced Estrada and carried on profitably under President Gloria Macapagal-Arroyo. Business is business – politics is only the means to enable him to acquire more wealth and power. And any means will do. Lucio Tan is the very worst sort of crony capitalist and far from the sort of foreign investor that should be welcome in New Zealand.

This has, of necessity, only scratched the surface on Lucio Tan. Visit the excellent Website of the Philippine Center for Investigative Journalism to read an extensive collection of articles on the misdeeds of Lucio Tan.

This article was first published in Kapatiran 19, August 2001. Kapatiran ("Solidarity") is the newsletter of the Philippines Solidarity Network of Aotearoa. Annual membership is $15. Make cheques to PSNA, Box 2450, Christchurch.

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Foreign Control Watchdog, P O Box 2258, Christchurch, New Zealand/Aotearoa. August 2001.


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