Can a real-estate billionaire transform the Philippines?

(First of two parts) On the face of it, Manuel Villar’s rise from modest economic and social beginnings to a stature of immense wealth and political influence qualifies the man as a model for small businessmen and professionals aspiring for lofty goals in a struggling economy like the Philippines. Such a record could even be a ticket to the presidency of the land. But is it really? Was adherence to sipag at tiyaga values all it took for him to be able to make that giant leap to fame and fortune—and now aiming to land on the doorsteps of Malacañang? Although one cannot disparage his claim of industry and perseverance (sipag at tiyaga) as important factors behind his successes, a closer scrutiny of Villar’s colorful career also shows that connections and influence did help him along, official records and published reports indicate. After getting employed briefly as a finance analyst and then growing a small construction business he had set up in 1975 into a leading provider of low-cost housing, Villar entered politics in 1992. He won a seat in the House of Representatives that was vacated by his father-in-law, Filemon Aguilar who had reached the term limit for his Las Piñas-Muntinlupa congressional district. A year into his first term as congressman, Villar actively participated in the drafting and sponsorship of a bill that eventually became the “Comprehensive and Integrated Shelter Financing Act of 1994." The legislation increased budget allocations for agencies involved in the government’s housing program, aimed at triggering more money flowing into private companies that built low-cost, affordable and socialized housing units for individual buyers or for communities. Villar was reelected twice, propped up by the same political machinery that was instrumental in keeping his father-in-law in office for three consecutive terms (and later Villar’s wife Cynthia, too). In 1998, at the start of his third and last term, Villar was elected House speaker. Not a bad achievement at all, considering that in winning the speakership, the real-estate businessman trounced a highly respected legislator and human rights crusader, Joker Arroyo, who was at the time a congressman representing Makati, the nerve center of Philippine business. It was also in 1998 when Villar’s flagship C&P Homes Inc. and its affiliates struggled with a crippling business slowdown that ravaged the firms’ capability to repay debts estimated at some P16 billion at the time. Short on cash, the C&P group had to give up many of its assets to settle payables. Villar was already House speaker when his companies started working out repayment deals with creditors, a process that took eight years to complete with the emergence of Vista Land & Lifescapes Inc. in February 2007 as the Villar group’s new holding company. From a low-key leadership as House speaker, Villar was catapulted into the limelight in November 2000 when he, at the start of the plenary debate on a move to impeach then-president Joseph Estrada, ignored parliamentary procedural calls and appeals from the floor by speed-reading a resolution against Estrada that sent the case to the Senate for trial. However, Villar himself was unseated later in that day’s session in a vote on his parliamentary conduct. In the national election the following year, on the back of his newfound popularity for his role in the ouster of Estrada, Villar won a seat in the Senate despite his lack of any party affiliation during the campaign. He was elected Senate president in 2006. His term was cut short in 2008, however, owing to weakened support from his peers in the chamber, some of whom accused him later of having allegedly used his position to benefit his own real-estate projects in his hometown. Campaign peg Today, surveys show that Villar is one of the leading candidates for president in the May 10 election. He has waged his amply-financed campaign around the idea of entrepreneurship becoming every Filipino’s route to wealth and prosperity, in much the same way that he has steered his own life—from seafood vendor to office employee to small business owner to “brown taipan" in a business setting where Chinese-Filipinos are the dominant tycoons. Villar nurtured in his younger days a deep admiration for Chinese-Filipino families in his Tondo community who were able to balance hectic personal and business-related activities. Villar observed that the Tsinoys often lived in two-storey apartments where they tended to some commercial shop on the ground floor and maintained their living quarters on the second floor. Young members of Tsinoy families, Villar recalls, would get an early training on the intricacies and rigors of managing and sustaining a business because they automatically got involved in the family shop downstairs. When he set up his own business, an extension of his house served as its office. On the campaign stump these days, Villar repeats the same refrain of “empowerment through entrepreneurship" that he first voiced in the mid-1990s after he became a certified billionaire by virtue of a sharp upvaluation of his and his family’s 80 percent shareholdings in C&P Homes following its listing on the stock exchange. “I have shown that Filipinos can make it big in business," he often proclaims in speeches and in press briefings. “The trick is not to stop until you achieve your goal through hard work, persistence, and determination." When Villar first landed on Forbes magazine’s list of the richest individuals in the Philippines in 2006, he was promptly labelled “the brown taipan" as the first Filipino to join the ranks of wealthy Tsinoy business tycoons. In the latest, 2009 edition of its “The Philippines’ 40 Richest" list, Forbes valued Villar’s fortune at $530 million (equivalent to P25.5 billion in August 2009 when the list was released), good enough to occupy 9th place. In the first edition of the Forbes list in 2006, Villar was No. 24 with total assets estimated at $110 million. In the 2007 list, he roared ahead to No. 5 on account of a 755 percent surge in his wealth to $940 million following a new public offering of shares that year by Vista Land, the reincarnation of C&P Homes that had earlier foundered under a heavy load of debts to banks here and abroad. It would seem that Villar’s fortune has been influenced by the rise and fall of the overall economy—growing when consumer demand is strong (especially when the remittances sent home by Filipinos working abroad increase which enable their families to make payments on their housing loans), and softening when the economic conditions turn sour. It also helped that Villar was a prominent player in an industry whose products are non-perishable and whose leaders knew how to exploit flaws in the government’s policies and regulations on housing. One of those policies allowed a steady flow of government financing to subdivision developers even if their buyers did not have established capacity to pay amortizations regularly. That was the finding of a Special Task Force on Housing in 1993 that was convened by the House of Representatives to find out how the implementation of the national housing program could be fast-tracked. Manuel Eduardo Lunas, then president of the National Home Mortgage Finance Corp. (NHMFC) that served as one of the government’s financing providers for housing, told the task force in its August 2, 1993 meeting that “the present credit system operates on a formula basis [that is] premised on the fact that even if the person does not really have a take-home pay to allocate for housing, he can [still] borrow." “In effect, even we ourselves [at NHMFC] are forced to comply [with mortgage financing] even if we know already that the person may not necessarily be in a position to pay," Lunas told the task force, according to the minutes of that 1993 meeting. More recently, this sentiment was echoed in disclosures by Antonio Hidalgo, former secretary general of the Housing and Urban Development Coordinating Council (HUDCC) which was set up as the main supervisory agency for the government’s housing strategy, the Unified Home Lending Program (UHLP), created by President Corazon Aquino’s Executive Order 90 issued in December 1986. The EO also tasked NHMFC with the development of a system that would attract private institutional funds into long term housing mortgages, and eventually setting up a secondary mortgage market in the country. Hidalgo, who was HUDCC head in 1995-1998 during the administration of Fidel Ramos, said in an interview last month with GMANews.TV that while the concept behind EO 90 was good, its subsequent implementation was exploited by private housing developers whose influence extended into the way funds would be released. That situation came about, one former housing official recalled, because the experts behind the original mortgage financing scheme from which EO 90 was patterned—all former officials at the Marcos-era Ministry of Human Settlements—had left the government. Under the rules that were adopted, Hidalgo said, NHMFC turned into a virtual cash-disbursing agency to the private housing developers who would produce mortage contracts, but without any mandate to screen the mortages and examine the buyers’ creditworthiness or regular incomes. “All the NHMFC was left to do was to handle the cash from the funders—Social Security System, Pag-IBIG Fund (the Home Development Mutual Fund), and Government Service Insurance System—and allocate to the housing developers on the basis of quotas. These quotas were established on the proven capacities of the major developers in low-cost and socialized housing," Hidaldo said. Under that system, Villar’s subdivision companies, Camella Homes and Palmera Homes, became “entitled" to the largest share of those mortgage finance allocations because they accounted for the most housing units erected. One particular update by NHMFC in 1994, for instance, showed Camella topping the list of mortgage takeouts as of July of that year with P2.2 billion and Palmera taking the second highest loan releases with P1.96 billion—or a combined P4.16 billion out of the total P9 billion given to the top ten borrowers for that period alone. By the time the government decided to reform the mortgage financing system, NHMFC had recorded total releases of over P42 billion for mortages over the four years to 1996, more than half of which was to the C&P group’s account—and a large part not being serviced, according to Hidalgo. SSS, the pension fund for private-sector employees, was the source of 63 percent of the funds released while the government employees’ pension fund GSIS accounted for nearly 14 percent. The right model? Claiming a familiarity with what he calls the “political jungle," Villar now says he wants to change the Filipino mindset that puts becoming an employee rather than creating employment as a life goal. He says he wants to make entrepreneurs out of every Filipino if he gets elected president. If that is how it’s supposed to work, how many captains of business have been elected heads of state and succeeded in leading their people into prosperity? Judging by the experience of a few governments that came under the control of rich businessmen, such a philosophy may actually be a nebulous one. In Hong Kong, for example, successful shipping magnate Tung Chee-hwa became the chief executive right after its handover from Britain to China in 1997. Thaksin Shinawatra first became a top police officer and then a billionaire business magnate before being elected prime minister of Thailand in 2001. Both Tung and Thaksin ended their terms (one was forced to resign, the other was ousted in a military coup) with their respective economies not exactly in better shape than when they took over the reins of government. The Thai billionaire politician even left a trail of corruption and “abuse of power" even as he used his authority and influence to protect his own telecoms business while he pursued populist policies that made him a “hero" among the poor in the rural areas of his country where he liberally poured economic largesse. In Italy, Silvio Berlusconi was a successful construction entrepreneur first before he became a media magnate and then prime minister. Scandals and controversy have become synonymous with Berlusconi, and he has been accused of having entered politics to save his companies from bankruptcy. Meanwhile, Italy’s GDP has steadily declined since 2007. Ian Buruma, professor of democracy and human rights at the Bard College in New York, recently wrote about business tycoons getting elected to lead their countries on hopes that “men who managed to accumulate so much personal wealth could do the same for their voters." Buruma said that “without [an ideological basis for] idealism, politics becomes a form of accounting, a management of purely material interests." His study could not cite any success story of a business magnate who made good as a leader of his country. That makes Villar’s campaign philosophy, for all its seductive allure, a flawed one. - VS/HS, GMANews.TV PART 2: Villar profitably combined politics and housing As congressman, Manny Villar shepherded through Congress legislation that would spur the flow of financing into a sector close to the real-estate magnate’s heart (and pocket): low-cost housing and residential subdivision development.