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Thiough seveial coipoiate layeis, the 6S-yeai olu Inuonesian Anthoni Salim who
owns Inuonesia's biggest conglomeiate contiols Nanila Electiic Company (Neialco),
the Philippines biggest piivate coipoiation anu the monopoly in electiicity
uistiibution in metiopolitan Nanila, accoiuing to publicly-available coipoiate
infoimation.

I askeu two people close to Salim's conglomeiate in the countiy two months ago to
comment on this column's topic. They ieplieu that its top official in the countiy
uoesn't caie to iesponu.

It is piobably the countiy's most successful case of coipoiate imaging that the
Inuonesian tycoon's contiol of Neialco -- as well as Philippine Long Bistance anu
seveial othei huge fiims -- has been hiuuen fiom public consciousness.

Neialco chaiiman Nanuel v. Pangilinan, Ni. Salim's point-man anu top executive in
the Philippines, has been been poitiayeu as the face of the Inuonesian's empiie in
the Philippines, that it is casually iefeiieu to as the "NvP uioup of Companies".

Bowevei, Ni. Pangilinan owns only token shaies (2S,uuu out of the fiim's 1.2
million shaies) in Neialco anu less than two peicent in Neialco's ultimate mothei
companies, the Bong Kong baseu Fiist Pacific Co., Ltu. anu the Philippine-
incoipoiateu Netio Pacific Investments.

Salim's contiol of Neialco staits with his 4S peicent contiol of the fiim which is, as
it weie, the "mothei ship" of his empiie in Asia, the Bong Kong-baseu Fiist Pacific
Company Ltu., listeu in that special iegion's stock maiket.

Salim's 4S peicent holuings in Fiist Pacific aie thiough thiee offshoie-fiims, cieateu
in secietive, tax haven countiies. Be is the sole ownei of Saleini Inteinational Ltu.,
oiganizeu in the Biitish viigin Islanus.

Saleini in tuin is the sole stockholuei of Fiist Pacific Investments (BvI) Ltu. also
incoipoiateu in that tax haven, anu S7 peicent ownei of a similaily nameu
coipoiation, but incoipoiateu in anothei tax haven, Libeiia.

The shaies of the two Fiist Pacific Investments anu those uiiectly helu by Salim total
4S peicent of Fiist Pacific's (BK) total shaies..(Anthoni in 2uu2 foi some ieason
bought off shaies in the two Fiist Pacific investments fiom his biotheis, theiefoie
becoming p the unuisputeu sole biggest ownei of the Fiist Pacific conglomeiate.)

That Salim's 4S peicent shaies in Fiist Pacific means total contiol is obvious in that
the next biggest stockholuei aie funu-manageis, who iepiesent thousanus of
poitfolio investois aiounu the woilu: Lazaiu Asset Nanagement with 7 peicent anu
Naiathon Asset Nanagement with 4.4 peicent. Some two uozen funu manageis
own less than 1 peicent. Pangilinan holus 1.4 peicent shaies.

56% *%,.$ 7(0'8'0 /(9%.

The next coipoiate layei foi the contiol of Neialco is the Philippine-incoipoiateu
Netio Pacific Investments, which is, as it weie, Salim's commanu ship in the countiy.

A Salim holuing fiim calleu "Netio Pacific Boluings" has S6 peicent owneiship of
Netio Pacific. (Salim's contiol of the holuing fiim foi some ieason is thiough thiee
othei fiims with inteilocking owneiship: the Amsteiuam-baseu Intalink, B.v,
Enteipiise Boluings Coip., anu Fiist Pacific Inteinational.)

As in the Fiist Pacific layei, that Salim's fiims' S6 peicent holuings in Netio Pacific
iepiesent complete contiol of the fiim is inuubitable: the iemaining shaies aie
uistiibuteu among neaily 4u funu manageis, most of which holu less than 1 peicent
stocks.

The two biggest of these aie T. Rowe Piice Inteinational (0K) Ltu. anu Noigan
Stanley Investment Nanagement, which holu, iespectively, 1.6 peicent anu 1
peicent of the fiim's stocks. Pangilinan has u.u9 peicent of the shaies, the minimum
foi him to have to be in its boaiu.

Salim's thiiu coipoiate layei -- oi his thiiu step -- foi his contiol of Neialco is a
fiim incoipoiateu in 2u1u, Beacon Electiic Asset Boluings. The fiim is effect 1uu
peicent contiolleu by Salim, thiough Netio Pacific Investments, which has Su
peicent shaies anu a 1uu PLBT subsiuiaiy, PLBT Communications anu Eneigy
ventuies, which has the othei Su peicent.

Salim contiols 27 peicent of PLBT. That holuing may seem small, but that makes up
the inuisputable contiolling bloc in PLBT which has thousanus of shaieholueis. Its
next biggest shaieholuei with 1S peicent shaies is the }apanese NTT gioup. Bow
Salim got to contiol the countiy's biggest telephone fiim is yet anothei stoiy.

Anu at the enu of the coipoiate layeis: Beacon Electiic Boluings has Su peicent
contiol of Neialco. The next biggest shaieholuei is the San Niguel Coip. anu its
subsiuiaiies, which togethei has 27 peicent holuings.

:$;%< 0/(" +$"%

Whatevei happeneu the olu-elite Lopez clan, whose name hau been synonymous
with Neialco. Aftei buying Neialco fiom its 0S owneis in 1962, aftei losing it to
Naicos' biothei-in-law Kokoy Romualuez, anu then aftei the EBSA ievolution,
hanueu ovei to it by Piesiuent Coiy, the Lopez clan solu most of its shaies in 2uu9 to
the Inuonesian Salim's fiims. It now holus only 4 peicent of Neialco.

0ne couise coulu believe that Ni. Pangilinan has full autonomy in iunning the Fiist
Pacific empiie, anu he is of couise the most patiiotic of Filipinos. That woulu be
supiemely naive, unless one is in a socialist system.

But ost of Neialco anu PLBT's piofits flow not to Pangilinan thiough his 1 peicent
oi token shaies in those fiims, but to theii owneis. The lion's shaie woulu be
claimeu by Salim, anu the iest by the thousanu oi so 0S anu Euiopean poitfolio
investois in Fiist Pacific.

Pangilinan may be the most patiiotic of Filipinos, but what happens if one moining,
Salim wakes up anu ueciues to ieplace him with the best executive the woilu can
offei. Be can even just pick the list of the best CE0s in the woilu the Baivaiu
Business Review annual ueteimines.

Anu of couise, what if, uou foibiu, Salim passes away, anu we leain that the
Inuonesians hau founu a way foi Salim's holuings to be tuineu ovei to the state of
Inuonesia, which may have a policy of cut-thioat competition with its neighbois.

Theie aie impoitant ieasons why neaily all countiies in the woilu have iestiictions
-- not necessaiily thiough theii constitutions but thiough laws anu iegulations -- on
foieign owneiship of stiategic inuustiies, especially utility companies. (That topic
foi a coming installment of this seiies.)

Anu who is Anthoni Salim. Foibes magazine iankeu him as the thiiu iichest
Inuonesian last yeai. Be is the youngest of the foui sons of ethnic Chinese Liem Sioe
Liong, who took the Inuonesian name of Suuono Salim, anu who hau been foi
uecaues that countiy's iichest magnate.

Liem hau been Inuonesia's most contioveisial magnate. Be hau been vieweu as the
foimei stiongman Suhaito's most successful ciony so much so that he anu even
Anthoni hau to flee Inuonesia uuiing the anti-goveinment, anti-Chinese Nay 1998
iiots that eventually leu to Suhaito's fall. Souices say that because of that haiiowing
expeiience, Anthoni lives mostly in Los Angeles.

The Salim conglomeiate incluues Inuofoou, the woilu's biggest nooule factoiy anu
about Suu fiims in uiveise inuustiies all ovei Asia. In Inuonesia alone the Salim
fiims have a woikfoice of 2uu,uuu.

Quite significant though is that accoiuing to Fiist Pacific's 2u12 annual iepoit, its
piofits fiom its Philippine opeiations have outstiippeu those fiom its Inuonesian
opeiations staiting in 2u11, by about $2uu billion in 2u12.

Take it the way you want it.

52$ '",%.;.%,(,'$"&

Salim's contiol of Neialco anu PLBT -- both utility fiims -- is a mockeiy of oui
constitutional anu legal iestiictions on foieign contiol of stiategic inuustiies. Anu
these aie not only stiategic inuustiies: Salim contiols a a monopoly in electiicity
uistiibution in metio Nanila anu suiiounuing piovinces anu one membei of the
uuopoly in mobile telecommunications (Smait Communications).

0i the othei inteipietation: the iestiictions imposeu by the constitution anu oui
laws aie so full of legal loopholes that all that a foieign investoi wishing to invest in
the Philippines has to uo is to contiact a goou lawyei, oi as some say, a lawyei oi
law fiim with stiong political connections.

Sauly, the issue of Salim's empiie in the Philippines woulu muuule the uebate ovei
amenuing the constitution.

I have heaiu a conspiiacy theoiy that with the weak legal basis foi Salim's contiol of
utility anu mining fiims in the countiy, the solution woulu be to lobby foi amenuing
the constitution so that its existing iestiictions on foieign owneiship in these
inuustiies woulu be lifteu, anu the issue becomes moot.

What kinu of countiy have we become.

A magnate in a foieign countiy which is in oui level of uevelopment -- Inuonesia
with a uBP pei capita of $1.7S1 just a bit biggei than oui $1,Su1 -- takes contiol of
what aie not only the piizeu gems of oui coipoiate woilu, but also the most
stiategic of oui inuustiies.

We aie the only countiy in the woilu in which a foieignei contiols the biggest
powei company anu the biggest telecommunications fiim.

What an iiony: 0ui iestiictions on foieign investments have tuineu off global
investois so much, that it explains paitly why we aie the smallest iecipient of
foieign capital in Asia, baiiing, of couise Cambouia anu Laos. Yet an Inuonesian
magnate contiols oui stiategic inuustiies.

The neeu to keep out of the minu such obvious anomaly is piobably what has
piouueu Salim to go into an inuustiy that contiols public opinion: Neuia. That topic
in coming paits of this seiies.



= = =





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0ne compelling economic justification foi foieign investments is that a capital-
ueficient ueveloping countiy like ouis neeus capital fiom abioau, which uevelopeu
countiies with capital-suipluses can pioviue.

This is not the case though in the accumulation of the contiolling stocks in Nanila
Electiic Co. by fiims contiolleu by the Inuonesian magnate Anthoni Salim. It is a
cautionaiy tale that foieign business uoes not necessaiily entail capital inflows into
the countiy.

Accoiuing to publicly available uata, Salim's fiims acquiieu what makes up now the
Su peicent contiolling stocks of Neialco -- now unuei the coipoiate vehicle
Beacon Electiic Assets Boluings -- thiough the following two main avenues.

Fiist, was a clevei, but I woulu say questionable scheme that involveu the funus of
the Beneficial Tiust Funu of Philippine Long Bistance Telephone Co., the giant
telephone fiim which Salim also got to contiol in 1998.

The Funu was useu in 2uu9 to puichase 1u peicent of Neialco shaies -- which
maue up, as it weie, the Inuonesian tycoon's fiist beachheau in this captuie of
Neialco.

Anu seconu, uomestic boiiowings, both shoit- anu long-teim fiom local banks
totaling at least PSu billion, financeu the iest of the puichase of teh Neialco shaies,
collateializeu by those veiy stocks.

In effect the savings of thousanus of Filipinos, both small uepositois anu coipoiate
investois financeu the acquisition by an Inuonesian magnate of oui biggest powei
fiim.

7:J5 K%"%8'0'(/ 5.I&, ?I"#

PLBT's Beneficial Tiust Funu in Febiuaiy anu Naich of 2uu9 hau quietly bought
Neialco shaies totaling foi 1u peicent of its shaies. To this uay, the cost to the Tiust
Funu of its puichases hau not been uiscloseu, as the piice uuiing that peiiou iangeu
fiom a low of P9u pei shaie to a high of P12S.

Bowevei, PLBT's 2uu9 iepoits to the Philippines Secuiities anu Exchange
Commission as well as to its 0S counteipait, hau not iepoiteu the Funu's puichases
of Neialco shaies. The Funu hau assets of ovei P2u billion at that time,
accumulateu thiough contiibutions both by the company anu its staff, as iequiieu
by vaiious agieements with its laboi unions anu as pait of its compensation scheme.

It is iun by a boaiu of tiustees, which although theoietically inuepenuent, has been
contiolleu by PLBT management, which is in tuin is appointeu by its contiolling
stockholuei -- since 1998, Salim's fiims.

The funu's chaiiman when it bought the Neialco shaies was now Foieign Secietaiy
Albeit uel Rosaiio, who hau been boaiu membei of the PLBT evei since the Salim
empiie got to contiol it in 1998. Be was also uiiectoi of Fiist Pacific, Salim's
flagship foi his Asian empiie since 2uuS -- even when he was Philippine
Ambassauoi to the 0S fiom 2uu1 to 2uu6 -- until 2u11, when he was appointeu
Foieign Affaiis Secietaiy.

It has been wiuely known that uel Rosaiio has been Salim's "Philippine connection"
since the magnate staiteu to move into the countiy.

"Bel Rosaiio is not NvP's man, but Salim's," an investment bankei explaineu. "Be
openeu the uoois in Nanila's business woilu foi NvP," " who then was an obscuie
investment bankei in Bong Kong."

"NvP" is Salim's chief executive in Nanila, the face of his empiie heie, who chaiis
most of the Inuonesian magnates main companies heie. "That's how well connecteu
the Salim empiie heie has been," the bankei saiu.

0ne of Pangilinan's top executives, Ray Espinosa, who has been vice chaiiman of the
funu at that time until now, claimeu then that the funu's Neialco shaies weie
meiely poitfolio investments it bought just like shaies of othei listeu fiims.

Bowevei, seven months latei, in 0ctobei 2uu9, Salim's holuing fiim in the
Philippines, Netio Pacific Investments bought all of PLBT Beneficial Tiust Funu's
Neialco shaies, foi a puichase piice of P14.2 billion, oi P126 pei shaie.

But Netio Pacific uiun't pay the pension funu cash.

*%,.$ 7(0'8'0 &2(;

Payment was in the foim of new shaies in Salim's flagship in the Philippines, Netio
Pacific Investments Coip, which it issueu anu valueu at P9.S billion. It cannot be
ueteimineu how much the Funu gaineu oi lost, since it hau not uiscloseu how much
it spent in buying the shaies in the maiket eaily in 0ctobei.

The Funu though got to tuin those shaies into cash only a yeai latei, when it solu
these in the stock maiket, in tianches in Apiil anu 0ctobei foi a total of P12.9 billion
-- lowei than the P14.2 billion sale piice of its Neialco shaies.

Appaiently encouiageu by the iole of PLBT Beneficial Tiust Funu in acquiiing
Neialco shaies foi the Salim gioup, anu with nobouy opposing such utilization of a
pension funu, his executives have useu it to the hilt, by using its funus to oiganize
what woulu be a veiy aggiessive NeuiaQuest Boluings.

If you've nevei heaiu of it, its investments aie in fiims that you woulu ceitainly
know unless you aie a heimit.

NeuiaQuest wholly-owns Channel S togethei its website inteiaskyon.com, 8u
peicent of the Business Woilu business newspapei (whose euitois it will soon be
ieplaceu), 2u peicent of Philippine Stai (in which it plans to completely contiol soon
by buying the shaies of Speakei Feliciano Belmonte family) anu 18 peicent of the
Philippine Baily Inquiiei.

Business souices say that Salim's meuia holuings coulu explain why he has been
able to iemain below public awaieness heie, while Ni. Pangilinan who has only
micioscopic shaies in his fiims has been the conglomeiate's face.

The use of the PLBT Beneficial Tiust Funu was a biilliant, though contioveisial
financial maneuvei, anu one woulu have to give a lot of cieuit to Pangilinan.

Souices claim though that it was the biainchilu of two Biitish Fiist Pacific
executives who contiol tightly the conglomeiate's finances anu who iepoit uiiectly
to Salim: Chiistophei Young, PLBT's "Financial Auvisoi" fiom 1998 to now anu
Netio Pacific's Chief Financial 0fficei Baviu Nicol.

The bottom-line of it all: It was the thousanus of stock maiket investois who bought
those NPIC shaies helu by PLBT Beneficial Tiust Funu anu exchangeu foi the
Neialco stocks, who financeu Salim's Netio Pacific acquisition of that 1u peicent
bloc in the powei fiim.

-(&6L$I,M N%.$

Bow much theiefoie uiu Netio Pacific in effect spenu foi that block of shaies now
valueu at a minu-boggling PS1 billion.

Zeio.

The financing foi the puichase of the iest of 4u peicent of Salim's Neialco shaies
also came not fiom fiesh capital foim Bong Kong oi Inuonesia, oi the Biitish viigin
Islanus, but fiom the countiy's financial system.

The P21.4 billion that financeu the puichase of 2u peicent of Neialco shaies by
PLBT subsiuiaiy Piltel (latei ienameu PLBT Communications anu Eneigy ventuies,
oi PCEv) bought in }uly 2uu9, accoiuing to PLBT's iepoit to the 0S SEC, came fiom
the telephone company's "cash flows fiom opeiations anu boiiowings".

The iest of the Neialco shaies which the umbiella fiim Beacon Electiic Assets
Boluings in 2u12 bought weie financeu fiist thiough biiuge-financing facilities anu
then thiough Coipoiate Notes with S to1u yeais' matuiity all totaling PSu billion,
mostly aiiangeu by the investment banking units of Netio Bank anu the Philippine
National Bank.

Anu the collateial useu foi these boiiowings.

The veiy Neialco shaies Salim fiims hau bought with the money they boiioweu,

Anu how woulu the Salim fiims pay these loans.

Neialco uiviuenus.

Since the Salim-pickeu management of Neialco late 2uu9, the fiim's uiviuenus have
iocketeu, fiom just P2.8 billion in 2uu9 ,$ 7OAG @'//'$" 9%(./9 fiom 2u1u to 2u1S.

That woulu be, moie than enough foi the Salim fiims to pay off the uebts it incuiieu
to buy the Neialco shaies in the coming two to thiee yeais.

Anu the woulu have still billions of pesos fiist to iemit to Salim's investment
company Fiist Pacific in Bong Kong, anu then to his offshoi fiims in the tax havens
in the Biitish viigin Islanus anu Libeiia.


# # #






























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The Inuonesian Anthoni Salim's empiie has giown since 1998 to be the countiy's
laigest conglomeiate -- contioveisially baseu on public utility fiims wheie foieign
investois aie puipoiteuly iestiicteu by the Constitution.

Chances aie, you won't spenu a uay without a Salim fiim getting a cut of youi
expenses.

When you tuin on light, chances aie, you'll be making money foi a Salim fiim, the
ultimate paient company now of Neialco (see my column Feb. 24). When you use
youi cell phone, you'll likely be paying Salim-contiolleu mobile phone companies --
Smait anu Sun, which togethei has 2S of the maiket. If you live in the westein
pait of gieatei Nanila, in any of its 17 cities anu towns, the watei you pay foi is fiom
his Naynilau Watei Seivices, the countiy's biggest watei concession.

When you tiavel on the expiessways, pait of the toll you'll pay foi goes to Salim,
thiough his Nanila Noith Tollways anu Cavitex, which togethei make up the
countiy's laigest toll way opeiatoi that iuns 64 peicent of the countiy's toll ioaus.

If you get sick (anu if you can affoiu it, that is), you'u be piobably tieateu in one of
his six hospitals, which incluue the most veneiable such as Caiuinal Santos anu
Nakati Neuical centeis, anu the newest, Asian Bospital in Alabang.

Anu if you'ie ieauing eithei two of the countiy's biggest newspapeis, Philippine Stai
anu Philippine Baily Inquiiei oi even the has-been business papei BusinessWoilu,
oi if you'ie watching Tv-S, Salim's executives contiol those too.

In fact, accoiuing to Bong Kong-baseu Fiist Pacific Company, Ltu. in its 2u12 annual
iepoit, Salim's holuing anu "commanu" fiim, its piofits fiom its Philippine
opeiations now exceeu those in the magnate's home countiy, Inuonesia, by about
$2uu million.


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What a countiy we have become.

T69 U3(/'4UD "$, U*V7U

As I hau explaineu in my column last Nonuay, the common meuia iefeience to
Salim's empiie in the Philippines as the "NvP gioup" -- aftei his top executive
Nanuel v. Pangilinan - is the iesult of one of the most successful PR campaign in the
Philippines. It is an uttei misnomei.

Pangilinan owns only !"!# peicent of Salim's flagship fiim Netio Pacific
Investments, anu 1.4 peicent in the paient company, Fiist Pacific. The Inuonesian
tycoon's holuing companies own in those fiim S6 peicent anu 4S peicent
iespectively with the iest of the shaies uispeiseu to thousanus of stock maiket
investois.

Foi his huge iole in builuing up Salim's empiie, Pangilinan has no shaie at all in any
of his thiee offshoie fiims which at the enu of the coipoiate layeis ultimately owns
the empiie.

Insteau, Salim's paitneis in one of these offshoie fiims, the Libeiia-baseu fiim Fiist
Pacific Investments Ltu. aie Sutanto Bjuhai (with his son Teuy) anu the late Ibiahim
Risjau -- both his fathei Suuono's (Liem Sioe Liong) oiiginal collaboiatois in
founuing the conglomeiate in Inuonesia in the 196us.

I uoubt though if Pangilinan is complaining. Fiist Pacific's iepoits inuicate that he
coulu be the highest paiu Filipino executive evei, making P2S million $ &'()*" This
uoes not incluue his salaiies anu uiiectois' fees in at least 4u of Salim's fiims in the
Philippines, especially in the blue-chip fiims Philippine Long Bistance Telephone Co.
(PLBT anu Neialco. (The othei Filipino uiiectoi in Fiist Pacific is Napoleon
Nazaieno, who gets P14 million monthly fiom Fiist Pacific.)

Foieign Affaiis secietaiy Albeit uel Rosaiio was iepoiteuly a key figuie in Salim's
entiy anu expansion in the Philippines, anu foi that he was non-executive uiiectoi
fiom 2uuS until he iesigneu in Naich 2u11 when he became Cabinet membei. Bel
Rosaiio's ieceiveu about P1u million yeaily in uiiectoi's fees fiom Fiist Pacific, even
when he was ambassauoi to the 0S until 2uu6.


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Salim anu his executives must be laughing at the iaging uebate heie that the
Philippines' continues to be pooi because its constitution iestiicts foieign
investments so much.

34(.,%. ,6(" $,6%.&

The ieality: Some foieign businessmen -- such as Salim -- aie just smaitei than
otheis.

Salim's empiie heie is even using huge amounts of local funus -- thiough such
instiuments as PLBT's P1S billion bonu offeiing -- anu biinging out of the countiy
millions of uollais in capital as its piofit iemittances.

Bow can Inuonesian contiol inuustiies, which the Philippine constitution's Aiticle
12, Section 11 ieseives only to companies at least 6u peicent owneu by Filipinos.

No pioblem, Salim anu Pangilinan must have thought moie than a uecaue ago.
"These folks must be living in the 196us, with no iuea how the mouein coipoiate
woilu woik," Salim's two Westein executive uiiectois, ieputeuly his stiategists,
Euwaiu Toitoiici anu Robeit Nicholson, must have thought.

Even in 1987 when the Constitution was foimulateu, its piovisions to ieseive the
opeiation to public utilities to Filipinos weie so antiquateu, anu so vulneiable to an
auuacious foieign tycoon.

Fiist, in mouein coipoiations, especially those listeu in the stock maiket, 6u peicent
oi even 4u peicent is not necessaiy to achieve coipoiate contiol.

Netio Resouices anu Philippine Telecommunication Investment Co. (which Netio
Pacific Investments wholly owns) has 27 peicent of PLBT's shaies. The next biggest
coipoiate owneis aie two }apanese NTT entities, with 17 peicent. The iest aie helu
by ovei 12,uuu stockholueis, mostly bought anu tiaueu in the stock maiket.

With that 27 peicent shaie, Salim has full contiol of PLBT. This was in fact
uemonstiateu when he useu the fiim's 1uu peicent subsiuiaiy Piltel anu even its
Beneficial Tiust Funu to take contiol of Neialco in 2uu9. It is also money fiom that
Beneficial Tiust Funu that was useu to set up Tv-S anu buy into newspapeis.

Anothei example: Fiist Pacific companies -- Asia Link B.v., Naxella Limiteu, anu
Kiitman Limiteu, anu Aitino Limiteu -- altogethei have S1 peicent in Philex Nining
to make up the biggest bloc of shaies. (The seconu biggest shaieholuei is the Social
Secuiity System with 2u peicent holuings.)

With that S1 peicent, Salim's Fiist Pacific has uncontesteu contiol of the company
anu its finances. So much so, that a souice allegeu that even the 12-pageu aus in
Philippine Stai gieeting Pangilinan on his biithuay in }uly weie chaigeu to Philex's
auveitising expenses.

(I hau askeu staiting two months ago people close to Pangilinan oi who woikeu in
his fiims to inteiview him, to get his siue foi this seiies, to no avail.)

3Y- ZI.'&;.I#%"0%

A seconu ieason why an Inuonesian conglomeiate coulu go into public utilities is
the fact that uecisions issueu by the Secuiities anu Exchange Commission in effect
have negateu the spiiit of the constitutional piovisions iestiicting foieign
owneiship in ceitain stiategic inuustiies -- a cleai case of iegulatoiy captuie by the
elites.

It wasn't the Bong Kong-baseu Fiist Pacific Co. that investeu uiiectly into Neialco,
PLBT anu othei public utilities. It was Netio Pacific Investments Coip. (NPIC)
incoipoiateu in the Philippines, with Fiist Pacific subsiuiaiies owning S9 peicent,
(ieuuceu in S6 peicent) with the iest of the shaies helu by hunuieus of investois
who bought them in the stockmaiket.

By setting up a Philippine-iegisteieu coipoiation NPIC (iathei than having his
holuing company Fiist Pacific in Bong Kong uiiectly investing in the countiy),
Salim's flagship fiim "pietenus" to be a Filipino entity.

Common sense says that NPIC is majoiity contiolleu by foieigneis, Inuonesian
magnate Salim's fiims, since it has the majoiity oi S6 peicent shaies. The next
biggest shaieholueis have 2 peicent anu fewei shaies, anu aie even mostly foieign
funu manageis.

No says the SEC iulings woulu say. Amazingly, SEC juiispiuuence says that the
"piimaiy test" whethei a fiim is Filipino is +, +) +- +(.'/0'/$)12 +( )*1 3*+4+00+(1-"
NPIC was incoipoiateu in the Philippines, theiefoie it is Filipino. NPIC theiefoie
can contiol moie 6u peicent of utility fiim as the SEC uefines it as a Philippine
national.

The SEC has iuleu that a case has to be fileu at the SEC, which has juiisuiction in
such matteis, to question whethei a coipoiation is Filipino oi not.

No such case has been fileu at the SEC questioning NPIC's nationality.

No case has been fileu at the SEC whethei Neialco, Naynilau Watei Resouices, anu
the two Salim iollway coipoiations aie violating the constitution by having foieign
owneiship laige than the 4u peicent limit set by the constitution.

(A case though was fileu seveial yeais back alleging that PLBT hau bieacheu the 4u
peicent ceiling on foieign investments. The Supieme Couit hau iuleu in 2u11 anu
2u12 last yeai that PLBT foieign owneiship amounteu to 64 peicent anu theiefoie
violateu the constitution. The SEC though has uefieu the Couit' iuling. Noie on that
in coming installments of this seiies.)

Anu if a case is biought to the SEC, it will apply -- as it has uone in seveial cases --
the calleu "uianufathei Rule".

In the case of Naynilau Watei Seivices, this iule woulu be applieu in the following
mannei.

NPIC, S9 peicent owneu by Salim's subsiuiaiies, took the constiuction fiim BNCI as
a paitnei with the Inuonesian fiim holuing SS peicent of the joint ventuie. It is that
joint ventuie that owns 92 peicent of Naynilau Watei Seivices.

The uianufathei Rule applieu by an SEC sympathetic NPIC woulu mean that foieig
nowneiship totals (S9 peicent) x (SS peicent) x (92 peicent) oi just Su peicent,
below the 4u peicent constitutional ceiling.

*$#I& $;%.("#'

It is the mouus opeianui foi neaily all of Salim's investments in the countiy, peihaps
legal but ceitainly violating the spiiit of the Constitution's piovisions.

No wonuei that Foieign Secietaiy Albeito uel Rosaiio anu Speakei Feliciano
Belmonte (whose family owns Philippine Stai which Salim's empiie is poiseu to buy
contiol of soon) aie vocal in suppoiting a constitutional amenument to lift
iestiictions on foieign investments.

The Salim empiie's holu on public utilities coulu be ueclaieu unconstitutional, oi
illegal by the SEC in the case of PLBT, which it aumitteu as one of the iisks foi its
iecent P1S billion bonu offeiing,

The only way to pieseive Salim's billion-uollai conglomeiate heie is foi the
constitution to be amenueu to lift foieign investment iestiictions, anu theieby
legalize its contiol of public utilities heie.

It's been a long way since the 198us when Salim's fiims in the countiy weie in
humuium sectois such as bottling mineial watei, papei manufactuiing, anu intei-
islanu shipping. A long way since Netio Pacific was on the euge of uefault its huge
loans anu neaily went bankiupt that it hau to give up its Foit Bonifacio that it hau
biu way too high foi,

Iionically, Salim's conglomeiate heie has laigely faileu in the maiket. It has been
phenomenal success though in the highly iegulateu public utility sectoi.

Foi oui nation though it is a painful iiony. A Woilu Bank stuuy ("Investing Acioss
Boiueis" of 87 countiies hau concluueu: "Noie than a quaitei of 87 countiies.. have
few oi no sectoi-specific iestiictions on foieign owneiship of companies.

Bowevei, it noteu: "Woiluwiue iestiictions on foieign owneiship aie stiictest in
meuia, tianspoitation, electiicity anu telecommunications."

But those sectois aie piecisely wheie we have alloweu the Inuonesian Salim
conglomeiate to contiol.


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Anu what -- oi who -- is that emeiging Philippine meuia giant.

It's Philippine Long Bistance Telephone Co., contiolleu by Inuonesian tycoon
Anthoni Salim, thiough its subsiuiaiies NeuiaQuest, Inc. anu Bastings Boluings.

Bastings Boluings, Inc., a wholly owneu PLBT subsiuiaiy of the Philippine Long
Bistance Telephone Co. is poiseu to take contiol this month one of the thiee laigest
bioausheets in the countiy, 6*1 3*+4+00+(1 7)$/.

As PLBT hau uone foi its Tv-S television netwoik, it coulu be a boostei iocket foi
Philippine if it thiows its auveitising funus to the newspapei.

PLBT is a fiim that is 64 peicent contiolleu by foieigneis, the Supieme Couit itself
hau iuleu in 2u12. The biggest bloc of shaies theie, 27 peicent is helu by Salim's
coipoiate vehicles unuei his Fiist Pacific Co. holuing company baseu in Bong Kong.

Nanuel v. Pangilinan, who is the managing uiiectoi anu CE0 of Salim's Bong Kong-
baseu holuing fiim Fiist Pacific Co., is chaiiman of PLBT, anu has a token u.1 peicent
shaies. Its piesiuent is Napoleon Nazaieno, the only othei uiiectoi, though a non-
executive one, in Fiist Pacific's boaiu.

3*+4+00+(1 7)$/ piesiuent Niguel Belmonte confiimeu to this wiitei that Bastings
Boluings is set to buy "an auuitional S1 peicent of 3*+4+00+(1 7)$/8- shaies fiom the
Belmonte family "to biing its stake to S1 peicent."

"The Belmonte family (heaueu by Speakei Feliciano Belmonte) will iemain as
minoiity shaieholuei with 2u peicent," he saiu. The next biggest shaieholuei is the
estate of the late publishei anu uistinguisheu columnist, anu nationalist, Nax
Soliven.

What the PLBT fiim will be contiolling is actually the newspapei's coipoiate vehicle
PhilSTAR Baily, which owns a piinting piess anu thiee tabloius (3+4+0+(' 7)$/
9:$;'(< 3=> 3$(:&$-$, anu ?$($) 91@-). It also owns the veneiable bioausheet
A/11&$(, the fiist anu oluest newspapei in Cebu establisheu in 1919. (Fieeman is
actually the countiy's thiiu oluest newspapei, with Nanila Times the oluest,
followeu by The Nanila Bulletin.)

Belmonte explaineu that the sale to the PLBT fiim has been agieeu on, anu all the
uocuments aie being finalizeu. "But the sale is not a sale, until we'ie actually paiu,"
he saiu.

Bow much. "Nuch moie than P2 billion," Ni. Belmonte saiu. Ny souices claimeu
that the ballpaik figuie foi the puichase is PS billion.

The puichase will give Salim, thiough PLBT, full contiol of two national newspapeis,
the 3*+4+00+(1 7)$/ anu business newspapei ?B-+(1--C'/42. Be has a minoiity -- 18
peicent -- stake in Stai's iival 6*1 3*+4+00+(1 D$+4; E(FB+/1/. Bastings also has an 18
peicent shaies in the Inquiiei.


7$/','0(/ 8$.0%
Salim anu his top executive Pangilinan, souices say, aie on a tack this yeai of
stiengthening anu expanuing the conglomeiate's meuia outfits, in oiuei to be a
majoi foice in the 2u16 piesiuential elections. Last yeai, NeuiaQuest hau amasseu a
wai chest of P8 billion foi this, anu hau maue a move, unsuccessful, to take contiol
of uNA-7, the seconu biggest television netwoik .

Salim's executives have iecently moveu to take full contiol of ?B-+(1--C'/42<
appointing theii euitoi in TvS, Roby Alampay, whose caieei has been mainly in an
Nu0 in Thailanu, as the business papei's euitoi-in-chief.

Anothei PBLT fiim, NeuiaScape, owns two majoi bioaucast meuia companies. 0ne
is Nation Bioaucasting Coip. bought way back in 1998. It has six FN stations in the
countiy's six majoi cities anu a commeicial 0BF television station (NBC-41), calleu
GH-;'(?$4+)$"

The seconu bioaucast meuia outfit, is ABC Bevelopment Coip., which opeiates
television netwoiks Tv-S, the iauio station RauyoS 92.S News FN, satellite
television channels Colouis, Bypei anu Weathei Infoimation Netwoik, anu meuia
poitals Kiistn.com, Balut Rauio anu NewsS Eveiywheie.

It also owns the news web site inteiaksyon.com, which conveits the bioaucast
entity's content incluuing its news viueos to be accesseu in cybeispace. The fiim
also owns Cignal Tv, the "uiiect-to-home" satellite television seivice pioviuei.

The Salim-PLBT meuia complex coulu become the most poweiful one in the countiy,
since it can combine the stiengths of television, piint (both bioausheet anu tabloiu),
iauio, the inteinet, mobile telephony which PLBT thiough Smait anu Sun uominates
--- anu of couise the financial iesouices of PLBT as well othei majoi fiims unuei the
Salim empiie.

Neuia suivives not by subsciibeis, but by auveitisements. Anu what companies aie
among the biggest auveitiseis in the countiy.

PLBT's mobile phone fiims Smait anu Sun, which have a combineu auveitising
buuget of PS billion annually. Neialco has P2 billion, which is incluueu in the
expenses of the fiim on which it bases its electiicity chaiges.

Alieauy, Tv-S's lifeline -- which explains its enuuiance uespite its allegeuly PS
billion losses since NeuiaQuest bought it in 2u1u -- has been PLBT's auveitising
funus of about P9uu million annually since 2u1u. PLBT uiscloseu this in its Naich
26, 2u1S "SEC Foim 17-A":

"In 2u1u, PLBT anu Smait enteieu into auveitising placement agieements with TvS
a subsiuiaiy of NeuiaQuest Boluings, Inc. foi the aiiing anu telecast of
auveitisements anu commeicials of PLBT anu Smait on TvS's television netwoik foi
a peiiou of five yeais. Total piepayment unuei the auveitising placement
agieements amounteu to Php89S million each as at Becembei S1, 2u12 anu 2u11."

39"%.+'<%# 4%#'(

In his column last yeai when news of PLBT's plans to take contiol of 7)$/ bioke out,
}ose Nanuel "Babe" Romualuez, a Stai columnist anu peisonal fiienu of Ni.
Pangilinan, wiote:

"The NvP gioup foiesees syneigizeu meuia opeiations, wheiein the iepoiting pool
of BusinessWoilu, PhilStai anu TvS (the PLBT uioup's bioaucasting netwoik) will
be seiving as content pioviueis while Cignal Bigital Tv will seive as the inteiactive
meuia platfoim. Cignal just iecently maikeu a milestone, ieaching the
Suu,uuu-subsciibei maik in just foui yeais of its opeiation."

What Ni. Romulauez misseu is the immense ieach the news output of Salim-PLBT's
news outfits coulu have thiough the companies' mobile phones. Alieauy, Tv S is
claiming in its aus: "uet fiesh news uaily stiaight on youi mobile. }ust text "News
on" to SSSS." Smait anu Sun opeiates that seivice, anu they'll get P1 foi each news
it senus.

I uoubt though that Salim anu Pangilinan aie ieally that inteiesteu in the income
fiom such mobile phone baseu news ueliveiy.

What if on the eve of elections in 2u16, news aiticle -- even if a fabiicateu one -- in
7)$/ oi ?B-+(1--C'/42 comes out that Piesiuential Canuiuate B has fallen sick. Anu
then this is sent to the S.S subsciibeis of Smait anu Sun.

Why has Salim gone a ciowueu inuustiy, whose piofits woulu nevei be ieally stellai
because of the Philippines' small maiket, wheie the countiy's iichest tycoons like
Beniy Sy, }ohn uokongwei, anu }aime Augusto Ayala uon't uaie go to.

Think about it. Now, uo you still wonuei why most Filipinos, even the elite have
nevei heaiu of the Inuonesian magnate Salim, even if the companies he owns aie the
ultimate beneficial owneis of the biggest public utility fiims. (See my aiticle Naich
S)

0i is that meuia, as one publishei saiu, is a "gun in the holstei." "A politician oi a
company woulu hesitate to shoot you, if you have a gun the holstei," he saiu.

But holu on, how can Salim get into meuia. Boesn't the Constitution's Aiticle 16,
Setion11 totally ban any foieign paiticipation in meuia.

If you think that it is so outiageous that a foieignei can contiol stiategic inuustiies
in the countiy, you will be shockeu how clevei Salim has been -- with the help of
that ienowneu Filipino ingenuity in finuing loopholes in any iestiiction -- in going
aiounu that constitutional ban. That topic on Fiiuay.

What kinu of countiy have we become.

0ui constitution is biazenly uisiegaiueu by a foieignei by exploiting iegulatoiy
loopholes, with help of the best anu biightest of Filipinos. An Inuonesian magnate is
in an inuustiy ieseiveu to Filipinos.

The late Stai publishei Nax Soliven, one of my iuols in oui inuustiy, woulu have
unuoubteuly iemaikeu, 7$($&$:$(I


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Philippine Long Bistance Telephone Co. built its multi-platfoim meuia empiie by
neaily using up its 2u,uuu employees' benefits anu ietiiement funu, officially calleu
the PLBT Beneficial Tiust Funu.

PLBT's contiolling stockholuei since 1998 has been the Inuonesian magnate Anthon
Salim, with his top executive Nanuel v. Pangilinan being his public face in the
countiy.

Company uocuments show that as of the enu of 2u12, PLBT's Beneficial Tiust Funu
hau put P14.47 billion in NeuiaQuest, the holuing company of the Salim-NvP meuia
giant.

That iepiesents 8u peicent of the Funu's P18.4 total assets.

"That's piobably why (NeuiaQuest, Tv-S, anu PLBT Beneficial Tiust Funu vice-
chaiiman) Ray Espinosa can affoiu to pay a P1-billion talent fee to Shaion Cuneta
foi hei "The Chaiiman" telenovela in Tv-S," a souice in the Salim-NvP gioup
quippeu with a giin, only paitly in jest it seems. Television netwoik Tv-S is the
biggest enteipiise in that meuia empiie, anu is the thiiu biggest television netwoik
in the countiy.

Neuia inuustiy executives in fact hau been wonueiing at the huge amount of money
flowing into the Salim-NvP meuia empiie, as if unconceineu about costs. Its Tv-S
iepoiteuly hau iackeu up losses of P8 billion in the last thiee yeais, while its iivals
ABS-CBN anu uNA-7 have been chuining iespectable piofits.

The use of the Funu iisks its capability in pioviuing foi the welfaie of its employees
in theii olu, post-piouuctive yeais. 0nly a tiny u.6 peicent of the Funu has been
investeu in iisk-fiee goveinment secuiities anu 17 peicent in listeu blue-chip fiims.

This is in shaip contiast to the conseivative policy of most companies in investing
its staff's employee benefit funu in iisk-fiee investments, to ensuie that they uon't
get thiown out to the stieets when they can no longei woik.

Foi instance, even in 2uu6, befoie the Beneficial Tiust Funu was tappeu to finance
the buying binge foi meuia enteipiises, 6u peicent of its assets weie in blue chip
companies (incluuing shaies in PLBT itself), 2S peicent in iisk-fiee fixeu income
secuiities, anu 16 peicent in ieal estate.

PLBT's Beneficial Tiust Funu has been accumulateu foi uecaues in oiuei to pay foi
its staff's ietiiement pay anu othei benefits, as agieeu upon in so many collective
baigaining agieements with its unions in the past as well as pait of the company's
incentive scheme foi its employees.

A meuia empiie seems to have been in Ni. Pangilinan's minu since his piincipal
Salim took ovei contiol of PLBT in 1998, thiough a contioveisial sale of the Antonio
Cojuangco family's shaies, iepoiteuly biokeieu by Piesiuent Estiaua's ciony Naik
}imenez.

In 1999, just Nonths aftei the tuinovei of contiol of PLBT, NeuiaQuest was set up.
Pangilinan taigeteu uNA-7 in 2uu1, iepoiteuly offeiing P2u billion. The plan fell
thiough since the Salim conglomeiate was at that time giappling on how to pievent
its losing Foit Bonifacio pioject, foi which Pangilinan biu way too high, fiom pulling
the entiie Fiist Pacific conglomeiate fiom keeling ovei.

NeuiaQuest has been the holuing company foi a vast meuia empiie that incluues the
Tv-S, Rauyo S, Aksyon Tv which has 2S 0BF Tv anu FN iauio stations in eveiy
majoi city of the countiy, satellite-to-home television fiim Cignal, anu even a heavily
financeu news poital, inteiaksyon.com The empiie incluues the BusinessWoilu
newspapei as well as Philippine Stai anu Philippine Baily Inquiiei in which it has
minoiity shaies. Salim-NvP even attempteu to buy last yeai uNA-7, one of the two
biggest Tv netwoiks, anu is set to take full contiol of Philippine Stai.

PLBT management -- anu theiefoie its contiolling stockholuei Salim -- has a tight
holu of the Beneficial Funu as it appoints its Boaiu of Tiustees, which consists of
two membeis of the fiim's boaiu of uiiectois, "a senioi membei of the executive
staff of PLBT", anu two who aie not with the company. PLBT has not uiscloseu who
two othei non-PLBT tiustees aie.

Albeito uel Rosaiio, who hau also been uiiectoi in Salim's holuing fiim Fiist Pacific
in Bong Kong anu in PLBT as well fiom 1998 until in 2u11 when he was appointeu
to the Cabinet, was chaiiman of the Funu's Boaiu of Tiustees, when most of the
Funu's assets weie useu to entei the meuia inuustiy in a big way.

Bowevei, lawyei Ray Espinosa, a PLBT boaiu membei since 1998, souices saiu, was
the aichitect of the use of money fiom the PLBT Beneficial Tiust Funu to funu its
meuia empiie.

Espinosa has been a membei of the Funu's boaiu of tiustees anu Pangilinan's point
man foi his meuia empiie. Be has been Piesiuent anu CE0 of NeuiaQuest, as well
as all of its meuia enteipiises, among them ABC Bevelopment Coip., Nation
Bioaucasting Coip., anu NeuiaScape.

(PLBT management, incluuing its chaiiman Pangilinan, has ignoieu my iequests foi
an inteiview foi them to piesent theii siue on this seiies.)

By using PLBT employees' Tiust Funu to funu his meuia empiie, the tycoon Salim
who contiols PLBT, uiun't have to biing in capital fiom Bong Kong wheie his
holuing fiim is, his home countiy Inuonesia, oi fiom his offshoie fiims in Biitish
viigin Islanus anu Libeiia, that aie the ultimate shaieholueis of his conglomeiate in
the Philippines.

It is the same mouus opeianui, using othei entities' finances, which he useu to buy
the contiolling shaies of Neialco in 2uu9. Be useu PLBT funus, couiseu thiough
Piltel (latei ienameu PLBT Communications anu Eneigy ventuies Coip.) that
initially bought 2u peicent of the powei utility's haies --- anu money fiom the same
PLBT Beneficial Tiust Funu (See my column Feb. 26, "Salim bought in zeio funus to
captuie Neialco.")

Theie is though anothei majoi ieason why the PLBT Beneficial Tiust Funu was
useu: It was a clevei way of skiiting the stiict constitutional ban on foieign
involvement in meuia.

Aiticle 16, Section 11 of the Philippine Constitution is categoiical:

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JC*'44;K'@(12J< which means that a company with a -+(:41 shaie owneu by a
foieignei is baiieu fiom going into mass meuia.

Salim has gone aiounu iestiictions on foieign owneiship in contiolling public
utilities such as PLBT, Neialco, anu Naynilau Watei thiough the expeuient of
incoipoiating his Netio Pacific Investments anu Netio Pacific Resouices in the
Philippines, which classifieu it as a "Philippine fiims".

These fiims then took as minoiity investois othei fiims that weie also his
subsiuiaiies. These utility fiims weie also listeu in the stock maiket, so its shaies
theiefoie weie uispeiseu to hunuieus anu even thousanus of investois. A Salim
company oi companies theiefoie just hau to own a big block of shaies -- 27 peicent
in the case of PLBT -- to contiol the company.

But such aitifice woulu not woik in the case of meuia, as the constitution allows a
fiim in that inuustiy only if it has 1uu peicent Filipino owneiship.

Salim anu his boys founu a loophole though. A company's tiust funu foi its
employees was uefineu by the 1991 Foieign Investments Act as a "Philippine
national" if 6u peicent of its benefits woulu go to Filipinos.

PLBT's Beneficial Tiust Funu was by that uefinition a "Philippine national", which
theiefoie coulu own meuia companies.

But the Tiust Funu's coffeis coulun't be totally emptieu foi builuing up the meuia
empiie. As eaily 2u11, 78 peicent of its funus weie alieauy investeu in meuia fiims,
anu Salim-NvP hau yet not captuieu the big fish in meuia, anu its Tv-S seemeu to be
just iacking up huge losses.

It was a no-biainei though foi Salim's executives. They founu anothei way of
funuing its meuia empiie, so that it coulu even offei to buy uNA-7 anu Philippine
Stai, among the big fish in the inuustiy. That foi Weunesuay.





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>)$;- 957 589:

7:J5 "$2 (" !"#$"%&'("L^(;("%&% Z$'", S%",I.%


7:J5 "$2 '& ,'+6,/9 0$",.$//%# @9 3(/'4R& 0$4;("'%& ("# ^(;("%&% \55 8'.4&A



J 6*1 ,+(1-) )/+.H ', )*1 21L+4 +- )' 01/-B$21 ;'B )*$) *1 2'1- (') 1M+-)"J
KKN*$/41- ?$B214$+/1< OPQ# R0'0B4$/+S12 +( )*1 *+) &'L+1 6*1 T-B$4 7B-01.)-< O##UV"


What the hell has happeneu to oui countiy.

In 1968, the ueneial Telephone & Electionics Coipoiation, then the woilu's laigest
telephone fiim, hau to give up its Philippine Long Bistance Telephone Co., anu sell it
to a Filipino elite clan, because the tieaty that iepiesenteu 0S neo-colonial iule in
oui countiy, the Lauiel-Langley Agieement that alloweu Ameiican fiims to own
public utilities was to enu in 1974.

Fast foiwaiu to the fiist uecaue of the 21st centuiy: PLBT has become one of the
biggest anu most piofitable coipoiations in the countiy --- to a gieat extent because
it is a public utility that uominates the telecommunications inuustiy. Last yeai, its
assets totaleu PS91 billion, ievenues P12S billion, anu net income aftei tax P29
billion.

But thiee uecaues aftei Ameiicans weie booteu out of PLBT, it again got to be
contiolleu by a foieignei: Inuonesian tycoon Anthoni Salim who, thiough his
companies, has the biggest contiolling 26 peicent of the fiim's stocks.

Bis paitnei: the }apanese Nippon Telecommunications anu Telegiaph (NTT) whose
subsiuiaiies togethei own 21 peicent of PLBT. NTT is the woilu's laigest
telecommunications fiim in teims of ievenue. Its two subsiuiaiies with shaies in
PLBT aie NTT Communications anu NTT Bocomo. ("Bocomo", the fiim says, foi
"#$ communications ovei the 4$bile netwoik", anu also foi the }apanese woiu
"2'H'&'", meaning eveiywheie.) The two NTT fiims pioviue all the technical
expeitise PLBT neeus.

The next laigest stockholuei, anu a Filipino, is tycoon }ohn uokongwei, whose
shaies thiough his vaiious fiims aie a fai thiiu of 8 peicent.

Can you believe that. We aie the only countiy in the woilu, in which foieigneis, an
Inuonesian tycoon anu a }apanese conglomeiate, contiol a stiategic inuustiy, one
baseu on oui soveieign powei to extenu a public utility fianchise.

Cellulai (oi mobile) phones have become the game-changing uevice of the 21st
centuiy, anu the Philippines is the 12th countiy with the laigest numbei of mobile
phones -- 1u7 million, moie than oui population.

PLBT, thiough its subsiuiaiies Smait anu Sun, account foi 7u million of those
phones. The Inteinet has become the tool of this knowleuge-baseu eia. PLBT
accounts foi about SS peicent of the 1u million Inteinet connections in the countiy.
It also accounts foi 8u peicent of fixeu lines in the Philippines.

Anu what have we uone.

We've tuineu ovei that inuustiy -- which oui goveinment has absolute powei ovei
because it has soveieign iights ovei the use of such meuium -- to an Inuonesian
magnate, Salim, anu to the woilu's biggest telecoms fiim, the }apanese NTT.

As I will uetail in subsequent columns, company uata woulu inuicate that Salim's
Fiist Pacific fiom 1999 (aftei it bought its PLBT shaies) to last yeai have iemitteu to
Bong Kong as its piofits _B @'//'$". NTT most likely iemitteu $1 billion.

That means that Salim's Fiist Pacific $4/1$2; /1.'L1/12 W; X!!Y the $749 million it
useu to puichase its contiolling stakes in 1998, uuiing Piesiuent Estiaua's watch,
anu all its piofits fiom 2uu8 aie puie income. PLBT has in fact been Fiist Pacific's
cash cow; the $2 billion it geneiates is twice that it gets fiom its Inuonesian
opeiations.

Fiist Pacific's contiol of PLBT is the most enuuiing impact of the iegime of
Piesiuent Estiaua, who, by vaiious accounts, aim-twisteu Antonio Cojuangco's clan
in selling the shaies to Salim, with his ciony Naik }imenez allegeuly getting $Su
million foi his iole in maneuveiing the sale.

Salim even useu PLBT's iesouices foi captuiing anothei utility fiim, the powei
monopoly Neialco. It was PLBT's subsiuiaiy Piltel (latei ienameu PLBT
Communications anu Eneigy ventuies) that bought in 2uu9 2u peicent of Neialco.
PLBT's Beneficial Tiust Funu acquiieu anothei 1u peicent in the same yeai, in
exchange foi Salim's Netio Pacific Investment stocks, latei on solu in the stock
maiket. (See my column Feb. 26, "Salim biought in zeio funus to captuie Neialco."

That quote at above, fiom one of my favoiite poets, the Fiench Chailes Bauuelaiie
was populaiizeu in the movie 6*1 T-B$4 7B-01.)-< in which the "Bevil" was the
Tuikish global ciime loiu, Keysei Soze, as follows: "The gieatest tiick the Bevil
evei pulleu was convincing the woilu he uiun't exist."

Salim anu his top executive in the Philippines, Ni. Pangilinan, ceitainly aien't
"Bevils" in any way. They aie in fact the uemigous in the global anu Philippine
coipoiate univeise.

But a paiaphiase of that quote woulun't be inaccuiate: "Salim's gieatest tiick has
been to hiu fiom Filipinos he uoesn't contiol public utility fiims in the countiy."

0ne way foi this was foi Pangilinan to put into PLBT's boaiu of uiiectois, anu
auviseis, iepiesentatives of the countiy's biggest conglomeiates, even if they have
only minoi of even token shaies in PLBT, to pioject an image -- an aitifice -- that it is
contiolleu by the cieme ue la cieme of Philippine business.

In PLBT's boaiu of uiiectois aie Belen Bee of the Yuchengcos; Peuio Roxas of the
olu Spanish elite; Alfieu Ty of the ueoige Ty-Netiobank conglomeiate, }ollibee
hambuigei magnate Tony Tan Caktiong, anu SSS chaiiman, anu appaiently PLBT's
connection to Piesiuent Aquino's auministiation, }uan Santos. (}ohn uokongwei's
biothei, }ames is in the boaiu, because of theii gioup's 8 peicent holuings in PLBT.)

Not only that, put in PLBT's "auvisoiy committee" aie foimei Chief }ustice (anu
Philippine Baily Inquiiei columnist Aitemio Panganiban), foimei foieign affaiis
secietaiy Robeito Romulo, anu the "senioi business leauei", the 92-yeai-olu
Washington SyCip.

Pangilinan even in effect got the Catholic Chuich -- the }esuits at least -- to bless
PLBT, when he appointeu in 1998 as soon Salim got contiol of it, Fi. Bienveniuo
Nebies, the longest-seiving Ateneo ue Nanila 0niveisity Piesiuent. Nebies iesigneu
only in Sept. 2u12, aftei Pangilinan publicly announceu his "uisengagement" with
his $4&$ &$)1/ that opposeu his suppoit foi mining anu the pio-contiaceptives law.

0nly a genius -- but a bolu one -- coulu evei think of using the countiy's top
magnates anu biains as fixtuies to piettify a company's image, anu keep out of sight
its foieign contiolling ownei,

Theie is not a single Inuonesian oi known Salim peisonality in the boaiu of
uiiectois, although his close associate Benny Sentoso anu Chiistophei Young (who
souices claim ieally contiols PLBT's finances) aie in PLBT's boaiu of auvisois.

But of couise what has been Salim's main mechanism to, as it weie, peisuaue you
that he uoesn't exist, is his vast meuia empiie, foi which his fiims have spent P27
billion to put up. (See my column Naich 1u, "PLBT pension useu foi Salim's PB
meuia empiie."

This meuia empiie, some say, may have anothei big, not impossible, mission to
accomplish: To uium up suppoit to amenu the constitution to lift all iestiictions on
foieign investments, which woulu make questions ovei Salim's q holu on utility
inuustiies moot anu acauemic. That in a futuie installment of his seiies.


= = =


3%S%",6 $8 ( &%.'%& $" ,6% 3(/'4 Y4;'.% '" ,6% 76'/';;'"%&
*(.06 BCD BEFG

3I;.%4% -$I., M 7:J5 4$0Q& -$"&,',I,'$"


3(/'4 8'.4&R 0$.;$.(,% /(9%.& ,$ 0$",.$/ 7:J5D ,$ ;$.,.(9 ,6% 8'.4 (& 0$4;/9'"+ 2',6 ,6% CEL?'/';'"$D
GEL8$.%'+" ;.$S'&'$" $8 ,6% -$"&,',I,'$"A 56% 3I;.%4% -$I., ,6$I+6 2$I/#"R, @% 8$$/%#A





That's how the Supieme Couit calleu Philippine Long Bistance Telephone Co.'s
owneiship stiuctuie, which the fiim's uefenueis hau claimeu complies with the
constitutional ban on foieigneis owning moie than 6u peicent of a public utility.

The Supieme Couit's uecision is ceitainly iionic foi a fiim with a foimei Chief
}ustice, Aitemio Panganiban, as one of its boaiu uiiectois.

The Bigh Couit' views weie expiesseu in its u.R. No. 176S9 piomulgateu }une 28,
2u11 anu, ieaffiimeu 0ctobei 9, 2u12, both of which weie wiitten by senioi justice
Antonio Caipio as 0'(1()1"

Bowevei, as will be uiscusseu in Fiiuay's column, the Secuiities anu Exchange
Commission hau in effect uefieu the Couit's uecision, by inventing in its Nay 2u,
2u1S ciiculai issueu by its chaiiman Teiesita Beibosa its own pieposteious piocess
of ueteimining whethei a fiim is 6u% owneu by Filipinos oi not, which even
stiengtheneu foieign fiims' contiol of PLBT.

The Supieme Couit ciiticizeu PLBT foi mocking the constitution specifically in
iefeience to the aigument by the SEC anu then Philippine Stock Exchange piesiuent
Fiancisco Eu Lim that PLBT uiu not violate the constitutional limits on foieign
owneiship of a utility fiim since Filipinos own just "18 peicent" of the total
outstanuing shaies. This is also the shaie of foieign owneiship PLBT has claimeu in
its official iepoits to the SEC.

But they computeu that peicentage by incluuing %S%" "$"LS$,'"+ ;.%8%..%#
&6(.%& -- pieposteiously going against coipoiate-law anu even common-sense
notions of "capital" that ueteimines coipoiate contiol as iefeiiing only to common,
voting shaies.

Such uefinition of capital, the Supieme Couit iuleu, was absolutely not what
Constitution meant. The thing calleu "piefeiieu shaies" in all countiies on this
planet was inventeu foi coipoiations to iaise funus, without shaiing contiol of the
fiim. The attiactiveness of piefeiieu shaies though is that these weie entitleu to
uiviuenus biggei than those foi common, voting shaies.

(PLBT's chaiiman Nanuel v. Pangilinan's uefense in the suit-- in an inuication of his
confiuence that the SEC woulu iule his fiim's favoi -- was solely that it wasn't the
Supieme Couit that hau juiisuiction ovei the case but the coipoiately iegulatoiy
bouy.)

The Supieme Couit uecision lambasteu that obviously contiiveu uefinition of capital
by the SEC as a veiy flimsy justification foi violating the Constitution:

The Couit pointeu out:

"Foieigneis own |the majoiityj of the common shaies of PLBT, which class of shaies
exeicises the sole iight to vote in the election of uiiectois, anu thus exeicise contiol
ovei PLBT; (2) Filipinos own only a |minoiityj of PLBT's common shaies..., anu thus
uo not exeicise contiol ovei PLBT; (S) piefeiieu shaies, 99.44% owneu by Filipinos,
have no voting iights... This kinu of owneiship anu contiol of a public utility is a
mockeiy of the Constitution."

The legal anu beneficial owneiship of 6u peicent of the outstanuing capital stock
must iest in the hanus of Filipinos in accoiuance with the constitutional manuate.
?I// @%"%8'0'(/ $2"%.&6'; $8 CE ;%.0%", $8 ,6% $I,&,("#'"+ 0(;',(/ &,$0QD
0$I;/%# 2',6 CE ;%.0%", $8 ,6% S$,'"+ .'+6,&D '& 0$"&,',I,'$"(//9 .%`I'.%# 8$.
,6% 3,(,%a& +.(", $8 (I,6$.',9 ,$ $;%.(,% ( ;I@/'0 I,'/',9A The unuisputeu fact that
the PLBT piefeiieu shaies, 99.44% owneu by Filipinos, aie non-voting... giossly
violates the constitutional iequiiement of 6u peicent Filipino contiol anu Filipino
beneficial owneiship of a public utility."

-$",.(S%"%& -$"&,',I,'$"

This uiiectly contiavenes the expiess commanu in Section 11, Aiticle XII of the
Constitution that "|njo fianchise, ceitificate, oi any othei foim of authoiization foi
the opeiation of a public utility shall be gianteu except to ... to coipoiations ..
0iganizeu unuei the laws of the Philippines, at least sixty pei centum of whose
capital is owneu by such citizens.."

The couit uiun't mince woius in conuemning the view that PLBT complieu with the
constitution with its stietcheu inteipietations of what the basic law meant by
"capital." It even alluueu to the Inuonesian tycoon Anthoni Salim, whose fiims
contiol the fiim:

U56% '",%.;.%,(,'$" $8 ,6% ,%.4 b0(;',(/c 2$I/# @.'"+ I& @(0Q ,$ ,6% &(4% %S'/&
&;(2"%# @9 ,6% 7(.',9 d4%"#4%",D %88%0,'S%/9 +'S'"+ 8$.%'+"%.& ;(.',9 .'+6,&
2',6 ?'/';'"$&D @I, ,6'& ,'4% %S%" 2',6$I, ("9 (4%"#4%", ,$ ,6% ;.%&%",
-$"&,',I,'$"A

T$.&%D ,6'& '",%.;.%,(,'$" $;%"& I; $I. "(,'$"(/ %0$"$49 ,$ %88%0,'S% 0$",.$/
"$, $"/9 @9 d4%.'0("& @I, (/&$ @9 (// 8$.%'+"%.&D @% ,6%9 !"#$"%&'("&D
*(/(9&'("& $. -6'"%&%D %S%" '" ,6% (@&%"0% $8 .%0';.$0(/ ,.%(,9 (..("+%4%",&A

d, /%(&, ,6% 7(.',9 d4%"#4%",D (& '4;/%4%",%# @9 ,6% :(I.%/L:("+/%9
d+.%%4%",D +(S% ,6% 0(;',(/L&,(.S%# ?'/';'"$& ,6%$.%,'0(/ ;(.',9 e ,6% &(4%
.'+6,& (& d4%.'0("& ,$ %X;/$', "(,I.(/ .%&$I.0%&D ("# ,$ $2" ("# 0$",.$/
;I@/'0 I,'/','%&D '" ,6% f"',%# 3,(,%& $8 d4%.'0(A

1%.%D ,6(, '",%.;.%,(,'$" 2$I/# %88%0,'S%/9 4%(" ( I"'/(,%.(/ $;%"'"+ I; $8
$I. "(,'$"(/ %0$"$49 ,$ (// 8$.%'+"%.&D 2',6$I, ("9 .%0';.$0(/ (..("+%4%",&A
56(, 2$I/# 4%(" ,6(, !"#$"%&'("&D *(/(9&'("& ("# -6'"%&% "(,'$"(/& 0$I/#
%88%0,'S%/9 0$",.$/ $I. 4'"'"+ 0$4;("'%& ("# ;I@/'0 I,'/','%& 26'/% ?'/';'"$&D
%S%" '8 ,6%9 6(S% ,6% 0(;',(/D 0$I/# "$, 0$",.$/ &'4'/(. 0$.;$.(,'$"& '" ,6%&%
0$I",.'%&A


PLBT appeais to have piepaieu two paiallel, but uiffeient tacks to claim that
foieigneis uo not contiol the fiim, which is a violation of the constitution. The fiist
involveu the aigument by the SEC uiscusseu above that the Constitution by "capital"
iefeiieu not only to common but piefeiieu shaies.

Its seconu tack is that the two fiims which Anthoni Salim contiols thiough seveial
coipoiate layeis, Netio Pacific Resouices anu Philippine Investment
Telecommunications Investment Coip. aie "Filipino" since they weie incoipoiateu
in the Philippines. The accompanying chait shows the obvious fallacy this claim.

?'.&, 7(0'8'0

Salim simply cieateu seveial layeis of six inteilocking companies all of which aie
contiolleu by his Beimuua-incoipoiateu Fiist Pacific Company. Accoiuing to
PLBT's uisclosuies to the 0S SEC, all these fiims aie iepiesenteu by only one man:
Nanuel v. Pangilinan, who owns only less than 1 peicent of these fiims, but is
Salim's chief iepiesentative.

In its 2u12 annual iepoit, anu even in its upuateu website, Fiist Pacific lists PLBT as
its biggest piofit geneiatoi, anu that it's "economic inteiest in the fiim is 2S.6%".

This figuie iepiesents mostly the shaies in PLBT of Philippine Telecommunications
Investments Coipoiation, which is 1uu-peicent owneu by Fiist Pacific anu its
subsiuiaiy Netio Pacific Assets Boluings, anu those of Netio Pacific Resouices,
anothei Salim fiim. About 4 peicent is also helu by Salim fiims thiough Ameiican
Bepositoiy Receipts.

If Pangilinan has biggei shaies than Salim -- as his suppoiteis claim -- theie is
absolutely no uata inuicating this.

The next biggest foieign shaieholuei of PLBT is the }apanese Nippon Telephone anu
Telegiaph (NTT), the woilu's biggest telecommunications fiim thiough its two
subsiuiaiies NTT BoCoNo anu NTT Communications.

Incluuing 7 - 1u peicent (the uefinitive figuie coulun't be ueteimineu) helu by
foieigneis thiough the stock maiket, foieign contiol of PLBT totals 49 - S2 peicent,
bieaching the 4u peicent constitutional ceiling.

(Some 12, 174 stockholueis own 1.2 peicent of the fiim. Tycoon }ohn uokongwei is
the next biggest shaieholuei with 8 peicent, while the state's Social Secuiity System
has 4 peicent, which is iepiesenteu by one of Piesiuent Aquino's iah-iah boys in
business, }uan Santos.)

3(/'4L\55 ;(0,

That foieigneis aie in full, sole contiol of PLBT is also eviuent in a "Stiategic anu
Coopeiation Agieement" enteieu in 2uu6 by the Salim fiims anu the NTT fiims,
which they agieeu to woik togethei as the contiolling stockholuei. The agieement
specifically stipulateu that the Salim-contiolleu management is iequiieu to get the
}apanese bloc's appioval foi most of its majoi actions.


The agieement foi instance iequiieu the Salim-contiolleu management to seek the
NTT fiims' consent foi any capital expenuituie above $Su million anu foi any new
investments exceeuing $2S million. The agieement even iequiieu the }apanese
fiims' appioval foi PLBT to issue new common stocks, anu foi them to be offeieu
fiist these stocks. The two gioups also agieeu to vote as one in oiuei to block what
the agieement teimeu as "hostile" investois intenuing to get moie than Su peicent
contiol of PLBT.

0nfoitunately though, the countiy's political leaueiship, anu mainstieam meuia as
well, anu even the foimei Supieme Couit chief justice in PLBT's boaiu have tuineu a
blinu eye to the fiim's biazen violation of the Philippine Constitution, as shown in
inuisputable facts.

0ne ieason foi such unconscionable position is that the Philippine Constitution
shoulu be ignoieu foi piagmatic ieasons.

Such piagmatism was aiticulateu in the Supieme Couit heaiings by the economist
Bi. Beinaiuo villegas who uefenueu the foieign contiol of PLBT by claiming that
such foieign capital "aie bauly neeueu to save oui ailing economy", anu that, in
contiast to oui neighbois, we haven't been getting enough foieign investments.

}ustice Caipio though uemolisheu that aigument in the heaiings:

}0STICE CARPI0: "I woulu like also to get fiom you, Bi. villegas if you have
auuitional infoimation on whethei this high FBI |foieign uiiect investmentj
countiies in East Asia have alloweu foieigneis to contiol theii public utilities, so that
we can compaie apples with apples."

BR. vILLEuAS: "Coiiect, but let me just make a comment. When these neighbois of
ouis finu an inuustiy stiategic, theii solution is not to "Filipinize" oi "vietnamize" oi
"Singapoiize." Theii solution is to make suie that those inuustiies aie in the hanus
of state enteipiises. So, in these countiies, nationalization means the goveinment
takes ovei. Anu because theii goveinments aie competent anu honest enough to the
public, that is the solution."

You will be shockeu though how the SEC anu the PLBT uefieu the Bigh Tiibunal's
uecision, anu how patently phony the telecom company's action was to pietenu that
it is majoiity owneu by Filipinos.

# # #











Y'+6,6 $8 ( &%.'%& $" ,6% 3(/'4 Y4;'.% '" ,6% 76'/';;'"%&
Apiil 7, 2u14


56% *&)$ ,(Q%L$S%.M d ,6.%(, ,$ 76'/';;'"% 4%#'(


T'// ,.I,6 .%(//9 ;.%S('/] 1$2 ( 8$.%'+"%. 0(" 0$",.$/ 76'/';;'"% 4%#'(
%",%.;.'&%&A






?=-+ '@,+$%-#1 ),< /),)A+/+,& '( /)%% /+<#) %-).. 3+ .#/#&+< &' ;#&#B+,%
'( &-+ 2-#.#11#,+%CD
Aiticle 16, Section 11, Philippine Constitution.


I wiote Naich 4 that the Inuonesian tycoon Anthoni Salim was set to take contiol,
thiough his coipoiate inteimeuiaiies the 6*1 3*+4+00+(1 7)$/< one of the countiy
thiee biggest bioausheets. (Naich 4, 2u14, "The newest meuia mogul to take
contiol of Stai.")

Neaily a month latei Naich 28, Nanuel Pangilinan. Salim's executive iunning his
Fiist Pacific conglomeiate in the countiy, confiimeu Philippine Long Bistance's
PLBT Beneficial Tiust Funu hau signeu an agieement to acquiie the holuings of
Speakei Feliciano Belmonte's family to become the contiolling 6u peicent
stockholuei. A uisclosuie to the Philippine Stock Exchange howevei put the figuie
at only S1 peicent, which still makes the benefits anu pension funu the contiolling
ownei of Philippine Stai. I suspect the auuitional 9 peicent coulu be thiough
Salim's othei vehicles othei than PLBT.)

}ouinalists unueiplayeu oi even uiun't iepoit what a uevelopment that woulu
have fai-ieaching consequences foi theii inuustiy. It is a uevelopment that coulu
mean not just the captuie of the Philippines Fouith Estate by an Inuonesian tycoon,
but the enu of an inuepenuent meuia.

The Philippine Stai's neaiest iival in ciiculation, the Philippine Baily Inquiiei
iepoiteu it as a blanu business-news aiticle:

"PLBT saiu in a stock exchange filing that NeuiaQuest Boluings Inc., thiough wholly
owneu Bastings Boluings Inc., woulu inciease its owneiship in The Philippine Stai
to S1 peicent.NeuiaQuest, which owns othei meuia assets in the countiy incluuing
contiolling stakes in TvS anu Businesswoilu anu a minoiity stake in The Philippine
Baily Inquiiei, is wholly owneu by the PLBT Beneficial Tiust Funu."

The ieal news is that Inuonesian tycoon Salim, thiough the boluness oi
biazenness of his top executive Pangilinan, has skiiteu using legal technicalities
the Philippine Constitution's Aiticle 16, Section 11 of the Philippine Constitution:
"56% $2"%.&6'; ("# 4("(+%4%", $8 4(&& 4%#'( &6(// @% /'4',%# ,$ 0','<%"& $8
,6% 76'/';;'"%&D $. ,$ 0$.;$.(,'$"&D 0$$;%.(,'S%& $. (&&$0'(,'$"&D 26$//9L
$2"%# ("# 4("(+%# @9 &I06 0','<%"&Ac

No foieign company befoie hau uaieu to skiit this constitutional total ban on
foieigneis in meuia outfits.

Theie is no question that at the enu of the layeis of coipoiate venues ( see my
column Naich S, 2u-14 "Bow Salim gioup skiiteu foieign equity limits"), Salim
contiols PLBT.

Bespite Ni. Pangilinan's veiy successful meuia spin that Salim's gioup in the
Philippines is the "NvP gioup", the executive owns less than u.1% shaies in the
telecoms company anu not moie than 1 peicent in any of the Inuonesia's Fiis Pacific
companies in this countiy.

PLBT on the othei hanu contiols anu uiiects its Beneficial Tiust Funu, with
management appointing all five of its boaiu of tiustees, two of whom aie boaiu
uiiectois anu one a top company executive. Now Foieign Affaiis Secietaiy Albeit
uel Rosaiio who hau helpeu Salim anu Pangilinan when theii Fiist Pacific staiteu
to go into the countiy was the Funu's chaiiman when it set up NeuiaQuest, the
holuing company foi its meuia investments. (See my column Naich 9, "PLBT
pension funu useu to builu Salim PB meuia empiie")

The ieason the Beneficial Tiust Funu was useu as PLBT anu Salim's coipoiate
vehicle in going into meuia, is that it exploits a iuling by the Secuiities anu Exchange
Commission. This iuling stipulates that an employees' pension anu tiust funu is a
Filipino entity if the majoiity of its benefits aie foi Filipinos, which the PLBT tiust
funu is, consiueiing that PLBT's employees aie mostly Filipinos.

It's a flimsy justification: It means any foieign fiim woulu simply set up an employee
tiust funu, so this funu coulu set up a fiim that woulu engage in inuustiies wheie
foieigneis aie pieventeu foim enteiing oi aie iestiicteu.

This is the fiist time though that a pension anu tiust funu has been useu by the
fiim's owneis to unueitake a business of its own, anu into a low-ietuin even iisky
fielu as the Philippine meuia inuustiy is. 0ne of Salim's fiist meuia outfit, the
television netwoik Channel S is a case in point, having iepoiteuly lost billions since
it was set up in 2uu8.

Nost tiust funus, in oiuei not to iisk at all its employees' benefits anu ietiiement
kitty, aie put in low-iisk blue chips oi bonus. In the case of PLBT's Beneficial Tiust
Funu, 8u peicent of the money has been useu to capitalize NeuiaQuest so it coulu
set up two television netwoiks incluuing its iauio stations, contiol BusinessWoilu
newspapei anu acquiie a 12 peicent stake in Philippine Baily Inquiiei.

But the Beneficial Tiust Funu was iunning out of money, ABC-S was iepoiteuly
losing billions, anu Salim-NvP neeueu moie funus to expanu theii meuia empiie, at
the same that they neeueu to go aiounu the constitutional piovision that not a single
shaie in a meuia fiim can be foieign-owneu.

The solution: PLBT subsiuiaiy ePLBT investeu P2.S billion in Bastings Boluings
(NeuiaQuest's subsiuiaiy foi its piint holuings) anu P1u billion to funu satellite-
to-home Tv opeiations. But these investments weie maue thiough Philippine
Bepositoiy Receipts, a clevei financial instiument that in effect maue the investoi
meiely the beneficial ownei, but without the iights of an owneis of common, voting
shaies.

The Philippine Stai has hau one of the best euitoiial teams with a fieicely
inuepenuent stance, the legacy of its founueis, haiu-hitting columnists Nax Soliven,
Louie Beltian anu Ait Boijal with Fookien-Times Yeaibook publishei Betty uo-
Belmonte.

Following the thiee columnists' examples, the Stai's stable of columnists is one of
the best in the countiy, such as my iueological fellow-tiavelei Alex Nagno, Caimen
Peuiosa, }aiius Bonuoc, Bobit Avila (the only columnist in a national bioausheet
that infoims us iegulaily of the woiluview in the visayas), foimei Philippine Baily
Inquiiei Bick Pascual, Ka Louie's son Cito Beltian, anu PCuu chaii Anuy Bautista.
The Stai's columnists incluue its euitoi Amy Pamintuan (the only newspapei euitoi
I know to have wiitten a novel) anu managing euitoi Naiichu villanueva, a veiy
knowleugeable veteian iepoitei who hau coveieu so many uiffeient beats.

Will these leauing lights of Philippine jouinalism be foiceu to wiite within
Inuonesian tycoons' paiameteis. I hope not, but the maiket foi senioi euitois anu
columnists isn't that big in oui countiy.

Salim contiols the laigest public-utility fiims: PLBT, Neialco, Naynilau Watei, anu
toll-ioau opeiations. These companies aie monopolies, oi neai monopolies: these
opeiateu not in a fiee maiket that woulu ensuie theii efficiency, anu contain theii
coipoiate gieeu

It is goveinment that iegulates theii gieeu, anu stiives that these fiims offei the
most ieasonable piices foi consumeis, who uon't have a choice but to buy these
piouucts. But what happens if, as it has been happening, theie is the so-calleu
phenomenon of "iegulatoiy captuie": Political elites oi unueipaiu buieauciats
falling unuei the contiol of monopolies.

It is the Fouith Estate that comes to the people's iescue, as has been the tiauition in
the 0S anu Euiope.

But woulu Philippine Stai -- oi BusinessWoilu which Salim inuiiectly has 7u
peicent holuings -- now publish aiticles ciitical of Neialco, PLBT, Naynilau, Salim
toll-opeiations, oi his seven hospitals. Woulu its euitois encouiage investigative
aiticles on how the Inuonesian Salim has come to contiol the Philippines' stiategic
inuustiies.

0i will Stai be now championing chaitei-change, the uigency of which coulu explain
why Salim has been so keen in enteiing the ciowueu, even iisky meuia inuustiy,
even if he' s walking on a constitutional iazoi's euge by uoing so.

The Supieme Couit's uecision questioning foieigneis' contiol of PLBT is a Bamocles
Swoiu ovei the Salim empiie, even it has manageu to skiit even that Bigh Couit's
iuling in late 2u11, ieaffiimeu 2u12 (See my column Naich 26 , "Supieme Couit:
PLBT mocks the Constitution.") Changing the Constitution to allow full foieign
owneiship in all inuustiies, without exception, woulu legitimize Salim's holuings in
public utilities anu meuia.

A Stai columnist tolu me: "But management anu euitoiial contiol will iemain unuei
the Belmontes."

That is hogwash to anybouy who's woikeu in the coipoiate woilu oi in meuia, even
in the 0S anu Euiope wheie entiie euitoiial staffs hau been fiieu when they
uispleaseu theii owneis with theii aiticles. It's a belief contiaiy to the iealities of
capitalism. An euitoi is an euitoi because he oi she shaies the woiluview of the
ownei, anu it is a amateuiish, clumsy ownei who has to tell an euitoi what to
publish oi not, oi an amateuiish euitoi to tell a iepoit what to wiite about.

Salim's meuia empiie have a ciucial euge its competitois uon't: Buge auveitising
funus, on which meuia's suivival uepenu, fiom its sistei companies, mainly PLBT,
especially its cell phone subsiuiaiy Smait, one of the biggest piint anu bioaucast
auveitiseis, anu Neialco.

Salim's contiol of Stai woulu be a boon to the newspapei: It piobably coulu suivive
coulu even suivive solely on Smait anu Neialco auveitising. It coulu howevei be a
gun in the Salim's holstei othei newspapeis woulu cleaily see: "Bit us, anu we'll
staive you of aus."

Alieauy, Tv-S's lifelinewhich explains its enuuiance uespite its losses allegeuly of
PS billion since NeuiaQuest bought it in 2uu9has been getting about P9uu million
annually of PLBT's auveitising funus of since 2u1u, unuei a foimal contiact it
enteieu into with the telecom fiim. PLBT uiscloseu this in its Naich 26, 2u1S iepoit
to the SEC. Yes, if you'ie a Smait subsciibei, you'ie in effect subsiuizing ABC-S.

The Stai takeovei iepiesents a conglomeiate's invasion of meuia. The eia of a
conglomeiate the economic-political elite Lopez clan's owneiship of Nanila
Chionicle anu ABS-CBN befoie maitial law using tii-meuia as a weapon was
enueu by maitial law, although the Lopezes' ABS-CBN hau continueu to wielu it
aftei 1986, but with a much ieuuceu powei with the iise competitoi uNA-7.

The Stai's takeovei by the Salim conglomeiate maiks the ievival of that eia, anu
meuia coulu moie anu moie be a tool of conglomeiates.

It coulu alieauy be the twilight of an inuepenuent Philippine meuia. A foieign
conglomeiate mocks oui Constitution anu takes ovei one of the thiee biggest
newspapeis Anu meuia eithei uiun't' unueistanu its implications, oi just lookeu the
othei way.


= = =





Neialco fiies up $1.2-B 8uu-NW plant...in Singapoie

?%@A FED BEFG



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3$I.0%&M g88'0'(/ .%;$.,& $8 0$4;("'%&AH

Yes, you ieau that iight.

Neialco officials keep whining that its high electiicity bills aie uue to the fact that
Luzon uoesn't have geneiatois anu that because of this we will be suffeiing the heat
because of biown-puts this coming summei.

Yet the fiist of its two bianu-new two natuial-gas-fiieu 4uu-megawatt geneiatois
(foi a total capacity of 8uu NW) staiteu opeiations 6 Febiuaiy in }uiong Inuustiial
Estate in Singapoie, which has the most tightly iegulateu electiicity inuustiy in Asia.


The }uiong complex's combineu 8uu-NW capacity woulu inciease the ioughly
1u,uuu-NW capacity of Singapoie's powei plants by 8 peicent.

If it hau been built in the Philippines, Luzon's 8,uuu-NW capacity by 1u peicent, anu
woulu have significantly uecieaseu both the inciuence of biown-outs anu Neialco's
electiicity iates as it won't neeu to iely on expensive powei of peaking plans. What
uoes a "8uu-NW plant" mean. Accoiuing to the Bepaitment of Eneigy "2u1S
Supply-Bemanu 0utlook", the powei plants cuiiently being built in Luzon foi
completion by 2u1S will have a capacity of hCO *TA

The }uiong electiicity complex, valueu at $1.2 billion, was owneu by owneu by the
Inuian-contiolleu uNR Eneigy, which staiteu constiuction in 2u1u. In Apiil last
yeai, Neialco's affiliate FNP Powei Boluings bought uNR Eneigy foi $S79 million.
FPN Powei Boluings is owneu 4u by Neialco's wholly-owneu subsiuiaiy Neialco
Poweiuen anu 6u peicent by Fiist Pacific Co., contiolleu by Inuonesia's thiiu iichest
tycoon, Anthoni Salim.

The Inuonesian magnate thiough -- as a Fiist Pacific annual iepoit puts it, -- his
"inteimeuiate holuing companies, subsiuiaiies, anu affiliates" has 48 peicent shaies
in Neialco, making him biggest anu contiolling stockholuei since 2u11.

uNR Eneigy ieceiveu $SSu million, while the Fiist Pacific-Neialco joint ventuie
spent anothei $49 million to complete the powei pioject. As a iesult of the sale,
uNR Eneigy maue $242 million in its thiee- yeai investment.

The Fiist Pacific-Neialco fiim woulu also assume the huge $S4S million the Inuian
uNR Eneigy boiioweu fiom a consoitium of banks to finance powei complex's ovei
$1 billion cost.

The }uiong powei company was ienameu last Apiil PacificLight Powei, while its
ietail aim to PacificLight Eneigy.

uNR Eneigy useu to be a company of the Numbai-baseu infiastiuctuie
conglomeiate uNR, acionym foi its founuei anu contiolling stockholuei u.N. Rao,
one of Inuia's billionaiies. Fiist Pacific-Neialco's puichase of his powei pioject in
Singapoie foi $66u million was a boon foi the Inuian conglomeiate which last yeai
hau cash-flow pioblems. Aftei its buying binge in the Philippines in the last five
yeas,= Salim's conglomeiate has been moving into Inuia, mainly in constiuction
piojects.

Accoiuing to a iecent Neialco investois' quaiteily biiefing, the utility will spenu
P8.8 billion ($21S million) foi its stake in the Singapoie powei fiim. Neialco's
exposuie is the biggest single foieign investment by a uomestic company in iecent
yeais, significant enough that the fiim's outwaiu iemittances explain the huge
outflow of uollais towaius the enu of last yeai.

It is not cleai whethei Neialco's P8.8 billion will be souiceu thiough boiiowings oi
its huge piofits in its opeiations in the Philippines.

What iiony. When the announcement was maue of his fiim's exit out of the
Singapoie powei inuustiy, the Inuina conglomeiate gioup's chaiiman u.N. Rao saiu:
"The cash flows (fiom the sale) will help uNR Eneigy to focus on oui uomestic
eneigy business anu acceleiate ongoing (powei) piojects with a S,79u NW
capacity."

In oui case, Neialco is spenuing P9 billion to own a powei plant in Singapoie, when
the Philippines is facing a powei ciisis, since theie aie not enough geneiation plans
aie being built.

The }uiong plant coulu be veiy piofitable foi Neialco, but something must be
teiiibly wiong when oui biggest utility fiim, which contiols 6u peicent of the
electiicity maiket chooses to invest billions of pesos outsiue the countiy.

Coulu this the biggest flaw of having piivate inuiviuuals -- uiiven of couise by
capitalism's piime uiiective of making money -- owing a fiim which has monopoly
ovei the sale of an essential commouity, electiicity.

0i coulu this be just the flaw of having a foieignei -- a citizen of Inuonesia which is
essentially oui competitoi in the global maiket -- contiolling oui biggest electiicity
company.

No one ceitainly can blame him if he steeis Neialco -- with its huge funus fiom
piofits fiom Filipino consumeis anu boiiowings fiom the local capital -- to
piofitable ventuies abioau while the Philippines goes unuei, which is a ieal
possibility with its electiicity costs that is the fifth highest in the woilu, anu five
times that of Inuonesia.