Cronyism Revisited

Cronyism is again in the headlines after the President publicly lambasted the water distribution concessionaires, Manila Water and Maynilad Water, for the onerous provisions of the concession agreement they signed with the government, when water distribution was privatized during the Ramos administration. The water distributor's stock took a beating at the Philippine Stock Exchange amid the insinuated sentiment that the President was laying the groundwork for one of his major supporters to take over the distribution concession.

In the run-up to the 1992 election, which had a record field of Presidential candidates, anti-Marcos advocates passed out pamphlets which contained the Eduardo Cojuangco Jr. chapter in his book, Some Are Smarter Than Others - A History of Marcos' Crony Capitalism. Cojuangco surprised political pundits by running for President. Though he wasn't a political neophyte, Boss Danding, as he is fondly referred to by close associates, preferred to be the kingmaker in his region under the Marcos ruling party Kilusang Bagong Lipunan. At the peak of his power, he was the primus inter pares among the businessmen closely identified with Marcos.

The opposition which was able to gain power during the 1986 coup against Marcos had a palpable fear that Cojuangco could actually win the Presidency which would enable the Marcos' to make a political comeback after six years of being political outcasts. Cronyism was one of the main issues against Marcos,together with the behest loans extended to the select group. Government financial institutions wrote off and condoned debt arising from the bankruptcy of some crony companies after the economy went into a tailspin because of the combined effects of the Aquino assassination and the stagflated US economy in the early 1980s.

Cronyism is again in the headlines after the President publicly lambasted the water distribution concessionaires, Manila Water and Maynilad Water, for the onerous provisions of the concession agreement they signed with the government, when water distribution was privatized during the Ramos administration. The water distributor's stock took a beating at the Philippine Stock Exchange amid the insinuated sentiment that the President was laying the groundwork for one of his major supporters to take over the distribution concession. The Villar-led Prime Water would be the primary beneficiary if there was any substantive basis for the supposed conspiracy.

Then there's the phenomenal rise of another major Presidential supporter, Dennis Uy, who has parlayed his Phoenix Petroleum into a diversified conglomerate with holdings in transport and logistics, the much coveted third telco, a high-end automotive dealership, fast food and energy, with the latest foray allegedly being in media, should the ABS-CBN franchise not be renewed by Congress when it expires in 2020. 

While Marcos was indeed guilty of cronyism, it can't be said that he allowed this exclusive group to hold the public hostage to its whims and caprices. The dictator kept the prices of basic commodities in check. Public utilities were controlled by the government and an energy security and stability infrastructure was in place as designed by the then Energy Minister Geronimo Velasco. Caltex and Shell were kept in check by Petron. The Bataan Nuclear Power Plant was constructed to meet the anticipated increase in demand for power as the country's population grew.

This can't be said of the post-Marcos administrations. Privatization was the operative word beginning with the Cory administration and this continued all throughout the thirty years the Aquino-Cojuangco's and their political allies were in power. This is why we have the second highest power rates in Asia and the lopsided concession agreements with the water distribution companies. The drop in agricultural productivity may also be attributed to this practice as the agrarian reform law had loopholes which allowed land conversion that resulted in the development of low and middle-cost housing in provinces within the periphery of Metro Manila.

If the politicians are serious about the issue of cronyism then they should take the lead in opening up the economy to foreign investors in order to foster competition and allow market forces to decide which companies will the public patronize. There is a duopoly in the telecoms sector. The presence of the third player is not a guarantee that the duopoly would simply be replaced by an oligopoly. Our other ASEAN neighbors have more telcos than we do which results in healthy competition and more innovation.

But as is the case with the Philippines, the issue of cronyism is tied in to power and money. The pragmatic definition of the golden rule is, he who has the gold rules. Until this practice stops, public interest will never be front and center in the list of government priorities and it will not happen that we will be able to catch up with our more progressive ASEAN neighbors.

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About the Author
RG is a seasoned international trade and sales and marketing professional who also dabbles in writing. He was a contributor to Business World in the mid-90s and is also a tech geek.
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