Why Philippines’ Duterte Woos the Oligarchs

President seeks help in cementing dynasty, defeating coronavirus

On May 5, the Philippines’ rough-hewn President Rodrigo Duterte, who has made the country’s oligarchs a target of his spleen since well before his July 2016 election, took to late-night television for a meek apology to the Ayala Group and businessman Manuel V Pangilinan, with whom he had feuded for months over what he characterized as "onerous" provisions in government water contracts for the Manila metropolitan area.

Duterte is also feuding with another aristocratic dynasty, the Lopez family, which owns the country’s most powerful broadcast media conglomerate, although he has taken a back seat in the squabble and let his allies in the congress and the courts carry the ball.

“Let me tell you something,” he said on the television broadcast. “I hope you understand that it was really part of my sworn duty as an employee of the government who has the executive department. The words were mainly mine but if we can just forget it for the moment, I would like to thank you from the bottom of my heart for helping us [in the campaign against the virus], you know, provide the necessities of the moment. I can promise you, I'll be nice and if you want to see me, we can talk. Naubos na po pagkasuplado ko dahil sa Covid (My arrogance has run out because of Covid."

The pandemic, which has left 13,434 people affected and killed 846 – the second highest toll in the region - “humbled me. With the kind of response that you have shown to the public, that it is a humbling experience also for me that, you know, so maybe there are a lot of legal issues but we can talk, I am ready to talk, and I will be reasonable. If you can find it in your heart to forgive me, because if you do not, I will undercut you, I will go directly to God.”

For many Filipinos who have watched the foul-mouthed president attack the country’s elite families ever since he came to office, the question was how crocodilic the tears were, and why now. According to sources in Manila, there are several reasons, including clearing the decks for 2020, when the 75-year-old, physically ailing Duterte – unless he succeeds in engineering a change in the Constitution, which bars him from running again – must put together a political machine that ensures his hold on power through a new president. 

His candidates, the sources say, include Christopher "Bong" Go, 46, his longtime personal aide from 1998 during his days as mayor of Davao City. Go was elected to the Senate in 2018 and has since become a powerhouse in the upper chamber, largely with Duterte’s help. Another is Duterte’s daughter Sara, 42, who succeeded him as mayor of Davao City. A third, who has faded somewhat recently because of illness, is Ferdinand “Bongbong” Marcos Jr., 62, who Duterte since the 2016 election has sought to engineer into the vice presidency by a long-running recount that would oust the current vice president, the popular Leni Robredo, who is currently the leading opposition candidate. (Presidents and vice presidents don’t run as a slate in the Philippines.)

“His daughter and Bong, both are presented as an alternative,” a source said. “They are already in a dynasty. Despite his pretensions as an outsider, his father was a governor. What he would like to do is to cement his handle on power. If he doesn’t return (via charter change), if he is not reappointed, he will make his daughter or Bong the president.”

Duterte’s feud with the Ayalas and Pangilinan began last year during a long-lasting drought that caused water shortages in the Manila area. In 1997, then-President Fidel Ramos ordered the privatization of the sprawling metropolis’s water system, which was nearing disaster. The two companies poured resources into infrastructure to put the system back together in what at the time was called “a celebrated case of a working public-private partnership” that has been repeatedly cited for its transparency and design of the bid process.

The two companies, purifiers, and distributors who distribute water for the government waterworks company, have been seeking scheduled water rate hikes that have stalled for the past five years. Duterte, already publicly disparaging of the aristocratic families that have ruled the country since Spanish colonial days, challenged the pricing and the condition of the system. 

Manila Water has pointed out that it was the government under Ramos that unilaterally determined the terms of the water agreements. They were bid on a take-it-or-leave-it basis, the company argued, and Manila Water offered the government the lowest fee, giving it control of the east zone. Maynilad won the concession agreement for the west zone.

The Permanent Court of Arbitration in Singapore ordered the Metropolitan Waterworks and Sewerage System to pay the losses stemming from the rejected going back to 2015 in Manila Water’s case, and previously to Maynilad Water Services for similar losses from March 2015 to August 2016.

That enraged Duterte, who has repeatedly called Ayalas and Pangilinan “sons of bitches” and offered to throw them in jail as well as “ruining their faces” until the May 5 volte-face. 

“Well, you know the president is very dramatic,” said a political source with substantial familiarity in the war of words. “He will burst into tirades, but at the end of the day he has his apologies. When he says something, it is to garner attention and seek forgiveness. Historical data back up how he conducts himself in public, which in turn becomes public policy. This is to elicit support from his voters.” 

In fact, the public apologies signal that the administration increasingly needs the private sector, and particularly the oligarchs, in the response to the coronavirus, which, although it has resulted in a relatively low infection rate, is ravaging the economy and resulted in a 2 percent contraction over the first quarter of 2020. It appears set to cause much deeper losses before the virus is stopped. Some 100,000 Filipino workers on cruise ships are being repatriated as the industry has dried up, for instance. In all, according to several sources, inward remittances, which constitute 10 percent of GDP, could fall by as much as 20 percent.

Beyond that, the apology is an admission that businesses will be requested to take up the slack in caring for their employees in the face of a substandard health care system. Covid-19 testing rates have risen to only 2,444 per million population, 129th of 200-odd countries. The government is counting on businesses to do their own testing of employees and bearing the costs to do so.

Under House Speaker Peter Alan Cayetano’s proposed “New Normal Act,” according to a subscription-only risk assessment firm, businesses that reopen are required to submit detailed social distancing plans to government and operate contact tracing systems for their employees, with stiff penalties for non-compliance. The administration’s inability to manage the crisis without major private sector support will likely encourage further public-private rapprochement during the ongoing crisis.

The president’s other feud is with the Lopez family, which holds the broadcast franchise of ABS-CBN, the country’s biggest network, with furious viewers threatening to take to the streets amid the Covid-19 lockdown because of the cancellation.

The network’s franchise, which covers 42 television stations across the country, lapsed on May 4, with the National Telecommunications Commission refusing to renew it. The network, which also includes 10 digital broadcast channels, 18 FM stations and DZMM Radio, the country’s most popular radio station – has been in a protracted squabble with Duterte since the president was elected in 2016 over the network’s refusal to carry his political campaign ads.

The company's other units and subsidiaries can continue operating online because they don't need a congressional franchise including news, entertainment, and sports.  Nonetheless, some 11,000 employees are at risk, the company said in a public statement.

Despite a February apology by Carlo Katigback, the president and CEO of the network, to Duterte, which he accepted in early May, Jose Calida, the solicitor general and a longtime ally of Duterte going back to the Davao City days, ordered that the renewal of the network’s 25-year franchise be held up.  The station has gone black despite an offer by the Congress to provide a provisional five-month franchise while the issues are worked out.

Duterte has long been angered by ABS-CBN’s news division, which has carried what he considers to be unflattering coverage of his murderous drug war, which has taken the lives of thousands of mostly poor and powerless Filipinos who use methamphetamines, called shabu locally.

How long the cancellation will last is unsure. But the betting is that antagonism toward the government is so high that the Senate, which has several bills pending for the renewal of the franchise, will move one of them relatively soon, and Duterte will be given the unappetizing task of having to sign it.

“I feel like the administration and its allies in Congress have totally lost control of this,” a source with a country-risk firm told Asia Sentinel. “It seems like there was an idea to have the franchise renewal hang over the head of ABS-CBN by having the renewal pending indefinitely. However, the NTC didn't want to be the one responsible for that.”

The debate continues in the Senate, with no resolution so far. But, a source said, Duterte has managed the squabble so that the cancellation of the franchise doesn’t look like it was his fault. He accepted Katigbak’s apology. Calida has maintained Duterte had nothing to do with the decision. The franchise renewal is stalled in Congress.

The president, the source said, “has enough of a team of trolls [on social media] to defend him. We know he is the root of it all. But that is the thing. What I do think is the Congress might be pressured by the public to grant that franchise. So they are going to get media mileage so politicians can look good.”