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Indonesian tycoon skirts Charter limits through corporate layers
Second of a Series
Our Constitution is quite categorical: No form of authorization for the operation of a public utility
shall be granted except to citizens of the Philippines or to corporations or associations organized
under the laws of the Philippines, at least sixty per centum of whose capital is owned by such
So, how could Anthoni Salim scion to the wealth of the late Indonesian strongmans biggest crony
Liem Sioe Liong be the controlling stockholder of the Philippines biggest public utility firms that
include such monopolies as Manila Electric Co., Philippine Long Distance Telephone Co. (PLDT),
Maynilad Water Services, and even the firm with the longest toll roads? (For details, see the first part
of this series The Indonesian billionaires behind the MVP Group, June 2, 2016)
The answer is so illustrative of how weak a state we are, how our regulatory bodies are captured by
the elite, and how our laws can be easily skirted. On paper, and on so many World Bank or Asian
Development Bank reports, we appear to have the most restrictions on foreign capital. In reality, our
laws and regulations can be quite easily bent by clever, expensive lawyers and our systems so
porous they can easily be penetrated. We are, in fact, the only country in Asia where the electric
power and telecom industries are controlled by foreign firms.
Salims Hong Kong-based investment firm itself, First Pacific, in its company report boasts it has
55.8 percent beneficial ownership of the Metro Pacific Investments Corp. (MPIC), its Philippine
holding company, and a controlling 26 percent of PLDT. Salim mostly through shares he directly
owns or through firms he owns entirely holds 45 percent of First Pacific, with the rest of the shares
dispersed among thousands of international stock market investors and fund managers.
Using First Pacifics own figures the accuracy of which is required under severe penalties by
Hong Kongs Securities and Futures Commission and including other foreign investors, mostly
through the stock market in the case of MPIC and a big 20 percent held by Japanese firms in PLDT,
foreign ownership in these two firms account for 86 percent and 77 percent, respectively, way above
the 60 percent constitutional limit.
How can Salim get away with this?
Heres how.
The Indonesian tycoon had set up a system of labyrinthine corporate layers that both veil his control
of the Philippine conglomerate and takes advantage of a loophole in our foreign investment laws and
regulations. What else could be the purpose of such layers, the notion of which we first learned
about only in 1986, when Marcos accounts in Swiss banks were found hidden, as a government
official put it at that time, in layers upon layers of companies? Note how transparent firms such as
the Japanese NTT and its subsidiary, NTT DoCoMo, invested in PLDT with not a single intermediary
Indonesian tycoon skirts Charter limits through corporate layers

Layers upon layers: What for?

Step 1. The first entity in the corporate layering labyrinth is a firm organized under Philippine laws
named Pilipinas Pacific Enterprise Holdings (PPEH). Salims First Pacific Infrastructure Ltd. and the
First Pacific Enterprise Holdings, B.V. hold 40 percent of it. The other 60 percent is held by a firm
whose ownership it did not disclose but which it claims is owned by a company organized under
Philippine law that qualifies as a Philippine national.
Indonesian tycoon skirts Charter limits through corporate layers
We will reveal, though, in the next part of this series the surprising, even shocking stockholders of
this company.
Nevertheless, since 60 percent of the stockholders are Filipinos, Pilipinas Pacific Enterprise
Holdings is technically a Philippine firm under the Foreign Investments Act of 1991.
Step 2. Salim sets up a second corporate layer, with PPEH organizing a firm named Enterprise
Investment Holdings (EIH), in which it has 60 percent equity. Another Salim firm, First Pacific
International Ltd., holds the remaining 40 percent.
Voila! Since PPEH is legally classified as a Philippine firm, being 60 percent owned by Filipinos, EIH
is also classified as a Filipino corporation.
Grandfather rule
This is despite the fact that applying the SECs so-called grandfather rule, Salims control is
equivalent to 64 percent: a 40 percent direct holding by First Pacific International in EIH, plus its
indirect 24 percent through PPEH.
Step 3. Salim sets up a third corporate layer, with EIH owning 60 percent of Metro Pacific Holdings.
Salims three firms First Pacific International Limited, First Pacific Telecom Limited and Intalink
B.V. hold the remaining 40 percent.
Going by the SECs grandfather rule, though, and in terms of control and beneficial ownership, Salim
has 78.4 percent of Metro Pacific Holdings with 40 percent directly held by the three firms in this
third-layer company, plus its effective 24 percent through EIH.
However Metro Pacific Holdings is classified, based on the Foreign Investments Law, as Filipino
since 60 percent of it is owned by a Filipino company EIH.
It is this firm that has the controlling 55.8 percent of Metro Pacific Investments Corp., which operates
nearly a dozen public utility firms, including such giant monopolies as PLDT, Meralco and Maynilad
Water Services.
Salim set up two other corporate layers for his control of PLDT, the Metro Pacific Resources Corp.
and Metro Pacific Asset Holdings, the latter being Salims corporate vehicle that in 1998 bought 60
percent of Philippine Telecommunications Investment Corp. (PTIC), which is the biggest single
stockholder of the giant telecom firm.
Salim bought it from the Antonio Cojuangco family in a curious case of the son of a crony of an
Indonesian strongman (Suharto) buying off the son of a crony of a Philippine strongman (Marcos). In
2005, First Pacific bought the remaining 40 percent of PTIC that had determined to be Marcos own
The inanity of our purported restrictions on foreign capital is demonstrated by the fact that Metro
Pacific Asset Holdings, through the system of corporate layering is considered under the Foreign
Investments Act as a Philippine corporation, since a Philippine firm, Metro Pacific Resources, which
owns 60 percent of it, is a Filipino firm as a result of a devious corporate layering scheme.
Indonesian tycoon skirts Charter limits through corporate layers
The reality, though, is that a foreigner, Salim, has effective beneficial ownership of 88 percent Metro
Pacific Asset Holdings. It has 60 percent of PTIC, while the Hong Kong based First Pacific itself
holds the remaining 40 percent. With a further 4 percent in PLDT through the New York stock
market, Salim, through PLDT, has 26 percent of the company, the biggest single controlling
This isnt just arithmetical magic, but the reality since dividends from PLDT and its three dozen
subsidiaries, from Meralco, and the other 40 firms of MPIC, will flow up the layers to the ultimate
beneficial owner Salim.
From 2000 to 2014, in fact, First Pacifics Philippine operations generated $2.7 billion $2.2 billion
from PLDT nearly double the $1.4 billion from its companies in Indonesia. First Pacific had all but
recovered the $749 million it paid to acquire control of PLDT in 1998 and 2005. It was PLDT funds
and those from the stock market that financed First Pacifics acquisition of Meralco.
Meralco funds have even been used by Salim to set up a $1.2 billion megawatt plant in Singapore.
In August last year, PLDT bought for 333 million euros (P17 billion) a 10 percent stake in German
firm Rocket Internet.
Will that help enhance our internet speed here, from being the slowest in Asia? I doubt it. PLDTs
own press release claimed that the investment would help finance Rockets drive for the
development of online and mobile payment solutions in emerging markets. PLDT and Salim with
his 26 percent share of the profitsmay make tons of euros from the investment, but it wont add to
the capital invested in our telecom industry.
There is a term for all thesedecapitalization of the country.
And this column has still been getting comments why we are writing about foreign dominance of
public utility firms. Note that public utility firms mean a captive market.
In its reports to the US Securities and Exchange Commission, which has stringent requirements of
full disclosure of ownership of firms listed on the US stock markets, all these seven investing firms
mentioned and the two invested firms, PLDT and MPIC, are represented only by a single person:
First Pacific Chief Executive Officer, Manuel V. Pangilinan. The name Anthoni Salim appears
nowhere, although he is the ultimate, single biggest stockholder of these firms.
But SEC has that grandfather rule to determine the extent of foreign capital doesnt it? Yes, but in a
still another demonstration of how weak our regulatory systems are, the SEC clarified that this
grandfather rule (also called the control test) applies only when the 60-40 Filipino-foreign equity
ownership is in doubt.
And when will it be in doubt? When a case is filed at the SEC questioning that a company has
violated the constitutional limits on foreign control in companies involved in public utility firms.
Surprisingly, or to the credit of Salims main operative in the country, Manuel V. Pangilinan, or
Indonesian tycoon skirts Charter limits through corporate layers
another indication of the twilight of nationalism in our country, no such case has been filed involving
an Indonesian nationals control of Metro Pacific Investments.
Thats how useless our regulatory bodies are. There is a very high-profile firm operating the biggest
and most strategic public-utility firms in the country. Yet the SEC does absolutely nothing to
investigate if it is violating the Constitution.
However, one concerned citizen, the late Wilson Gamboa an assemblyman in Marcos parliament
did file a case in 2007 protesting PLDTs violation of the Constitution, since even classifying PTIC
as a Filipino firm, First Pacifics direct shares, as well as the 20 percent holdings of two Japanese
firms, plus those held by foreigners, had accounted for 80 percent of the companys stock at that
After more than a decade, with such personalities as Dr. Bernardo Villegas defending PLDT, the
Supreme Court ruled in 2011 with its decision reaffirmed in 2012 that the firm was, indeed,
violating the constitutional limits on foreign investment.
Salims tremendous power over this country apparently has been demonstrated by the fact that the
Supreme Courts ruling hasnt been implemented three years later. (See my columns: PLDT mocks
our Constitution, March 26, 2014 and How Salim skirted foreign ownership limits, March 3, 2014)
There could be a weak link, though, in Salims chain of corporate layers, designed to skirt
constitutional limits on foreign investment in public utility firms.
The corporate layers are based almost entirely on the claim that a Filipino firm, Pilipinas Enterprise
Management Corp., has 60 percent ownership of the first corporate layer, Pilipinas Pacific Enterprise
As I have explained, because this firm is purportedly Filipino, the other companies down the system
of corporate layers are alleged to be Filipino firms as well, through the 60-40 trick.
But is Pilipinas Enterprise Management Corp. really Filipino? If it is, the Salim conglomerate has
hidden billionaires. Or could the stockholders be merely stand-ins, err . . . dummies?
That in the next part of this series.