COVER STORY
True Color! By Al Labita
While bullish on China’s property market, it seems ironic that here in the Philippines, Henry Sy has run into a slew of controversies, including allegations of land grabbing in Batangas and Cavite in his bid to build tourismoriented facilities.
Where is his sense of patriotism? China, where he suffered abject poverty? Or the Philippines, where he became one of the world’s richest? As the Manila-Beijing territorial row over the resource-rich Spratly Islands heats up, questions have emerged on where ethnic Chinese taipan Henry Sy’s sentiments lie. For Sy, listed by US magazine Forbes as the world’s 97th richest man this year with an estimated net worth of US$11.4 billion, it appears it’s business as usual, seemingly unobtrusive to looming fallout from the raging Manila-Beijing maritime conflict. Instead, Sy has gone to town trumpeting his grand plans for his motherland.
China Forays
Lately, Sy toyed with the idea of raising close to US$1 billion this year to bankroll his rapidly expanding investments in China, ranging from retail to property, banking and finance. Though fund-raising is normal for any businessman, what sets Sy’s move apart is that it will mainly tap the local, not the foreign, credit market as his cash cow. He owns listed Banco de Oro, the nation’s largest bank in assets, and holds a major stake in medium-sized China Bank. Both are likely to be Sy’s key conduits in channeling funds to China. However, given the huge amount Sy plans to float in the capital market, that means inducing a likely scenario of an uptick of interest and inflation rates, other than crowding out other potential borrowers. Part of the huge amount will be sourced from foreign creditors, but one possible downside is that the payback or redemption will ultimately tell on the country’s slumping foreign currency reserve.
Capital Flight
Central Bank officials had been wary of the unabated outflow of foreign exchange from the local financial market, prompting them to tighten regulations to stem the destabilizing effects on the financial system. Over the past years, pundits believe that Sy has been siphoning off money from the Philippines and putting it in the communist-ruled totalitarian China. Quite uncharacteristically and despite Beijing’s “word war” with Manila over the Spratlys row, Sy has remained unperturbed amid plunging bilateral ties between the two countries. Under the guise of foreign investment, Sy’s move could be termed as a form of capital flight – or economic sabotage – on which Manila’s monetary authorities frown as it drains the economy of much-needed foreign exchange.
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The billionaire accounts for the bulk of the over US$2.5 billion shipped out of the Philippines to China by Filipino traders of Chinese origin in 2012 alone based on official claims. That money, undoubtedly sourced out of Filipinos’ pockets, was also used by Sy and other taipans to bribe corrupt Chinese officials, the reported usual route foreign businessmen take to pave the way for their business ventures in China.
Lopsided
In contrast, China has been quite stingy in its investments in the Philippines, pouring in a measly US$1 billion in 2012 in what could be viewed as lopsided bilateral ties in favor of China. In 2012, China became the Philippines’ third-largest export market and second-largest source of imports. But the investment flow between the two countries is not evenly balanced. “In terms of investment, Philippine companies have invested more than US$2.5 billion in China. However, the investment of Chinese companies in the Philippines still remains low at less than US$1 billion,” says Trade and Industry Secretary Gregory Domingo. Apparently, Sy’s goal is to transplant his money-making success from the Philippines to China. But at what price? It’s at the Philippines’ expense, no doubt. China’s huge 1.2 billion consumer market has pressured Sy to cough up more money from the Philippines to help fuel China’s burgeoning economy.
Controversies
Specifically, the money Sy plans to raise from the credit market will finance the acquisition of more lands in China on which he will build new malls and other edifices. He already operates five malls in China. Currently, Sy has two mall development projects in the pipeline, including a 540,000 square meter center in Tianjin that will be one of China’s largest shopping complexes when completed. The taipan’s operational malls on the mainland right now include projects in Xiamen, Jinjiang (Fujian), Chengdu, Suzhou, and Chongqing with a total floor area of 800,000 square meters. Sy plans to build 10 to 12 malls more
in China. Part of his plans is to list the shares of his holding company in China either in Hong Kong or Singapore and use the proceeds of the initial public offering to beef up his China-bound war chest. While bullish on China’s property market, it seems ironic that here in the Philippines, he has run into a slew of controversies, including allegations of land grabbing in Batangas and Cavite in his bid to build tourism-oriented facilities.
Row With BCDA
Also, the taipan has yet to settle his legal dispute with the state-run Bases Conversion Development Authority (BCDA) over his alleged illegal construction of his upscale shopping mall in Taguig city. For BCDA, it feels shortchanged that Sy opted to pay through the local government instead of the agency which it could have used to help modernize the poorly equipped Armed Forces of the Philippines and enable it to stand to the military might of China’s People’s Liberation Army in the west Philippine sea. Sy, through listed flagship SM Investments, operates 48 malls in the Philippines, making him the country’s biggest mall operator. Apparently, he also wants to rev up his forays in China, the world’s second largest economy next to that of the United States. That stance only showed how Sy is insensitive to how the Philippines is being bullied by China, politically and militarily. After bleeding the Filipinos dry of their hardearned money, Sy has the gall to spend it in China. In contrast, other taipans like Lucio Tan or John Gokongwei with existing investments in China are circumspect about their business dealings in the communist-ruled China for fear of a backlash.
Blood In The Streets
As Beijing has stated, it may soon unleash a barrage of sanctions against the Philippines for raising what it deemed as a bilateral issue, the maritime dispute before a United Nations body for arbitration. Most likely, the sanctions will cover trade, labor and investments which can also hurt the businesses of Sy and other Filipino firms with presence in China. Last year, China restricted the entry of bananas and other farm products from the Philippines as their territorial dispute dragged on. This time, China may ramp up its punitive measures against the Philippines and the freespending taipans whose loyalty is doubted by bloggers in the social media may end up as the biggest casualties. But for 90-year-old Sy, he seems to believe in the age-old Chinese adage that there’s money when there’s blood in the streets.
WE TAKE A STAND
4/4/2014 9:40:32 PM