How Salim group skirted foreign ownership limits

Rigoberto Tiglao

Rigoberto Tiglao

The Indonesian Anthoni Salim’s empire has grown since 1998 to be the country’s largest conglomerate—controversially based on public utility firms where foreign investors are purportedly restricted by the Constitution.

Chances are, you won’t spend a day without a Salim firm getting a cut of your expenses.

When you turn on light, chances are, you’ll be making money for a Salim firm, the ultimate parent company now of Meralco (see my column February 24). When you use your cell phone, you’ll likely be paying Salim-controlled mobile phone companies—Smart and Sun, which together has 2/3 of the market. If you live in the western part of greater Manila, in any of its 17 cities and towns, the water you pay for is from his Maynilad Water Services, the country’s biggest water concession.

When you travel on the expressways, part of the toll you’ll pay goes to Salim, through his Manila North Tollways and Cavitex, which together make up the country’s largest tollway operator that runs 64 percent of the country’s toll roads.

If you get sick (and if you can afford it, that is), you’d be probably treated in one of his six hospitals, which include the most venerable ones such as Cardinal Santos and the Makati Medical Center, and the newest, Asian Hospital in Alabang.

And if you’re reading either two of the country’s biggest newspapers, Philippine Star and Philippine Daily Inquirer or even the has-been business paper BusinessWorld, or if you’re watching TV-5, Salim’s executives control those too.

In fact, according to Hong Kong-based First Pacific Co. Ltd. in its 2012 annual report, Salim’s holding and “command” firm, its profits from its Philippine operations now exceed those in the magnate’s home country, Indonesia, by about $200 million.

What a country we have become.

final salim empire chart 1

Ownership structure of Salim’s conglomerate in the Philippines.
Source: Company Reports, Submissions to US and Philippine SEC.
(Click to enlarge.)


Why ‘Salim,’ not ‘MVP’

As I explained in my column last Monday, the common media reference to Salim’s empire in the Philippines as the “MVP group”—after his top executive Manuel V. Pangilinan—is the result of one of the most successful PR campaigns in the Philippines. It is an utter misnomer.

First Pacific’s revenues, by country, 2011 and 2012.

First Pacific’s revenues, by country, 2011 and 2012.

Pangilinan owns only 0.09 percent of Salim’s flagship firm Metro Pacific Investments, and 1.4 percent in the parent company, First Pacific. The Indonesian tycoon’s holding companies own in those firms 56 percent and 45 percent, respectively with the rest of the shares dispersed to thousands of stock market investors.

For his huge role in building up Salim’s empire, Pangilinan has no share at all in any of the three offshore firms, which at the end of the corporate layering ultimately own the empire.

Instead, Salim’s partners in one of these offshore firms, the Liberia-based firm First Pacific Investments Ltd., are Sutanto Djuhar (with his son Tedy) and the late Ibrahim Risjad—both his father Sudono’s (Liem Sioe Liong) original collaborators in founding the conglomerate in Indonesia in the 1960s.

I doubt though if Pangilinan is complaining. First Pacific’s reports indicate that he could be the highest paid Filipino executive ever, making P25 million a month — nearly P1 million for his day’s work.  This does not include his salaries and directors’ fees in at least 40 of Salim’s firms in the Philippines, especially in the blue-chip firms Philippine Long Distance Telephone Co. (PLDT) and Meralco. (The other Filipino director in First Pacific is Napoleon Nazareno, who gets P14 million monthly from First Pacific.)

The empire, according to First Pacific’s 2012 annual report. (Click to enlarge,)

The empire, according to First Pacific’s 2012 annual report.
(Click to enlarge.)


Foreign Affairs Secretary del a key figure in the Salim conglomerate's expansion into the Philippines

Foreign Affairs Secretary del Rosario: a key figure in the Salim conglomerate’s expansion into the Philippines

Foreign Affairs Secretary Albert del Rosario was reportedly a key figure in Salim’s entry and expansion in the Philippines, and for that he was non-executive director from 2003 until he resigned in March 2011 when he became an Aquino Cabinet member. Del Rosario received about P10 million yearly in director’s fees from First Pacific, even
when he was ambassador to the US until 2006.

Salim and his executives must be laughing over the raging debate here that the Philippines’ continues to be poor because our Constitution restricts foreign investments so much.

Smarter than others

The reality: Some foreign businessmen—such as Salim—are just smarter than others.

Salim’s empire here is even using huge amounts of local funds—through such instruments as PLDT’s P15 billion bond offering—and bringing out of the country millions of dollars in capital as its profit remittances.

How can an Indonesian control industries, which the Philippine Constitution’s Article 12, Section 11 reserves only to companies at least 60 percent owned by Filipinos?

No problem, Salim and Pangilinan must have thought more than a decade ago. “These folks are living in the 1960s, with no idea how the modern corporate world work,” Salim’s two Western executive directors, reputedly his strategists, Edward Tortorici and Robert Nicholson, must have told each other.

Even in 1987 when the Constitution was formulated, its provisions to reserve the operation to public utilities to Filipinos were so antiquated, and so vulnerable to an audacious foreign tycoon.

First, in modern corporations, especially those listed in the stock market, 60 percent or even 40 percent is not necessary to achieve corporate control.

Metro Resources and Philippine Telecommunication Investment Co. (which Metro Pacific Investments wholly owns) has 27 percent of PLDT’s shares. The next biggest corporate owners are two Japanese NTT entities, with 17 percent. The rest are shares held by over 12,000 stockholders, mostly bought and traded in the stock market.

With that 27 percent share, Salim has full control of PLDT. This was in fact demonstrated when he used the firm’s 100 percent subsidiary Piltel and even its Beneficial Trust Fund to take control of Meralco in 2009. It is also money from that Beneficial Trust Fund that was used to set up TV-5 and buy into newspapers.

Another example: First Pacific companies—Asia Link B.V., Maxella Ltd., and Kirtman Ltd., and Artino Ltd.—altogether have 31 percent in Philex Mining to make up the biggest bloc of shares. (The second biggest shareholder is the Social Security System with 20 percent holdings.)

With that 31 percent, Salim’s First Pacific has uncontested control of the company and its finances. So much so, that a source alleged that even the 12-page ads in Philippine Star greeting Pangilinan on his birthday in July were charged to Philex’s advertising expenses.

(I had begun asking asking two months ago people close to Pangilinan or who worked in his firms to interview him, to get his side for this series, to no avail.)

SEC’s sympathetic rulings

A second reason why an Indonesian conglomerate could go into public utilities is the fact that decisions issued by the Securities and Exchange Commission in effect have negated the spirit of the constitutional provisions restricting foreign ownership in certain strategic industries—a clear case of regulatory capture by the elites.

It wasn’t the Hong Kong-based First Pacific Co. that invested directly into Meralco, PLDT and other public utilities. It was Metro Pacific Investments Corp. (MPIC), which is incorporated in the Philippines, with First Pacific subsidiaries owning 59 percent, (reduced since to 56 percent) with the rest of the shares held by hundreds of investors who bought them in the stock market.

By setting MPIC up as a Philippine-registered corporation, rather than having his holding company First Pacific in Hong Kong directly invest here in our country, Salim can pretend that his flagship firm is a Filipino entity.

Common sense says that MPIC is majority controlled by foreigners, Indonesian magnate Salim’s firms, since it has the majority or 56 percent of the shares. The next biggest shareholders have 2 percent and fewer shares, and are even mostly foreign fund managers.

No, the SEC rulings would say. Amazingly, SEC jurisprudence says that the “primary test” whether a firm is Filipino is if it is incorporated in the Philippines. MPIC was incorporated in the Philippines, therefore it is Filipino. MPIC therefore can control more than 60 percent of utility firms since the SEC defines it as a Philippine national.

The SEC has ruled that a case has to be filed at the SEC, which has jurisdiction in such matters, to question whether a corporation is Filipino or not.

No such case has been filed at the SEC questioning MPIC’s nationality.

No case has been filed at the SEC whether Meralco, Maynilad Water Resources, and the two Salim rollway corporations are violating the Constitution by having foreign ownership larger than the 40 percent limit set by the Constitution.

(A case though was filed several years back alleging that PLDT had breached the 40 percent ceiling on foreign investments. The Supreme Court had ruled in 2011 and 2012 last year that PLDT foreign ownership amounted to 64 percent and therefore violated the Constitution. However, the SEC has defied the Court’ ruling. More on that in coming installments of this series.)

And if a case is brought to the SEC, it will apply—as it has done in several cases—the so-called “Grandfather Rule.”

In the case of Maynilad Water Services, this rule would be applied in the following manner.

MPIC, 59 percent owned by Salim’s subsidiaries, took the construction firm DMCI as a partner with the Indonesian firm holding 55 percent of the joint venture. It is that joint venture that owns 92 percent of Maynilad Water Services.

The Grandfather Rule applied by an SEC sympathetic MPIC would mean that foreign ownership totals (59 percent) x (55 percent) x (92 percent) or just 30 percent, below the 40 percent constitutional ceiling.

Modus operandi

It is the modus operandi for nearly all of Salim’s investments in our country. It is perhaps legal but certainly it violates the spirit of the Constitution’s provisions.

No wonder Foreign Secretary Alberto del Rosario and Speaker Feliciano Belmonte (whose family owns Philippine Star which Salim’s empire is poised to buy control of soon) are vocal in supporting a constitutional amendment to lift restrictions on foreign investments.

The Salim empire’s hold on public utilities could be declared unconstitutional, or illegal by the SEC in the case of PLDT, which it admitted as one of the risks for its recent P15-billion bond offering,

The only way to preserve Salim’s billion-dollar conglomerate here is for the Constitution to be amended to lift foreign investment restrictions, and thereby legalize its control of public utilities here.

It’s been a long way since the 1980s when Salim’s firms in the country were in humdrum sectors such as bottling mineral water, paper manufacturing, and inter-island shipping. A long way since Metro Pacific was on the edge of defaulting on its huge loans and nearly went bankrupt that it had to give up its prize catch  Fort Bonifacio in 2003,   for which  it had bid way too high in 1995.

Ironically, Salim’s conglomerate here has largely failed in the market. But it has been a phenomenal success in the supposedly highly regulated public utility sector.

For our nation this is a painful irony.

A World Bank study (“Investing Across Borders”) of 87 countries has concluded: “More than a quarter of 87 countries have few or no sector-specific restrictions on foreign ownership of companies.”

However, it noted: “Worldwide restrictions on foreign ownership are strictest in media, transportation, electricity and telecommunications.”

But those sectors are precisely where we have allowed the Indonesian Salim conglomerate to exercise control.

On Wednesday: Salim in media: Isn’t that unconstitutional? Hm…

Details of Metro Pacific's conglomerate map. Source: Metro Pacific report to the SEC

Details of Metro Pacific’s conglomerate map. (Click to enlarge.)
Source: Metro Pacific report to the SEC.

metrro pacific map2

Other minor Metro Pacific Firms. (Click to enlarge.) and www.


Please follow our commenting guidelines.


  1. Agilang galit on

    The constitution is nothing but a made up agreement by the oligarch and their foreign conglomerates and friends… is used against the people and it gets breached by the rich and powerfull….noynoy and delima breachs that constitution anytime its does not fit to their evil vindictive agenda…..i hate communist….and communism as an ideology……pero if that is the only way to get back at what we lost from this monsters… then sige na….supportahan na ang manga communista… if its going to even out the level of life in pinas., then payag na ako……dahil nasa kanila na ang lahat…maski ang public hospitals,pritivitize narin….taon taon….TRILLION ang budget…pero ni isa WALANG GINAWA ANG UNGGOY NA ABNOY NA YAN……600B umabot ang tacloban donation….pero tinatago nila ang pera….ginugutom nila ang mamayan….pinahihirap nila ang buhay ng pilipino…parapagdating ng election….LAHAT KAKAPIT NA SA PATALIM….MAPAKAIN LANG ANG ANAK NILA…….TAMA NA…..!!!!!!!!!! IT IS EITHER WE RISE UP AND FIGHT BACK OR LAY DOWN AND DIE LIKE A DOG……

  2. Are we so naive to think that such a revelation on the Salim Group would not be “moderated” by USERS from their PR machinery? Some of the comments here seem to indicate exactly that. Great article! Please continue.

  3. No matter what big foreign business are here in PI, as long they pay the right TAXES to our Country they should be allowed to do business here. More Investor more JOBS to create and More Filipino will be benefited, We should appreciate that the foreign investor came to our country to improve our life. These all benefited us our family for not separating any members to seek jobs abroad because, jobs from abroad are the one to come here for the qualified Filipino job seekers. The real problem in our Country today as I seen are the Government, the Citizens of the Republic and the Constitution itself. WHY??? Ask yourself WHY? because I know you know WHY?

    • Alex Alvarez on

      Tollway fees, very expensive, electric rates, very expensive….do we have so many foreign investment here?

  4. Too bad now the Filipino are loser we cannot do anything right the Salim are milking cow the Philippines in all Department Mr. Tiglao, thank you for your nice research, that we are still using Martial law style of dummy, These is a clear violation of foreign ownership, but it’s a big black eye to our countrymen. Better we give Sy, Tan, Gokongwei, Razon as they are born Filipino, and also their income base on the Philippines for Salim. It’s Hong Kong Ltd. so now how we can get back, it’s like a foreign masked corporation.

  5. Mr Nagiisip, bulag ka ba? Natatandaan mo ba na ang newsprint na Manila Chronicle was declared againt the law because Lopez who owns ABSCBN/MERALCO at the time was also the owner of that newsprint, me TV station ka na at may newsprint ka pa ay bawal. Lopez was a Filipino Citizen not like SALIM. In addition to this, Meralco, Water, tollways, minahan pa! Joz ko abang aba na nga kaming mahihirap eh wala na kaming chance to scape this hardships if you are fried in our own fats! MR. Tiglao, MABUHAY KA!

  6. Wow first time Tiglao wrote something that (a) didnt bash Pinoy (b) praise Gloria. I have to say the article seems well researched and is well written. Thank you very much sir!

  7. Unfortunately, aside from being history Amnesiacs, Filipinos have brains that would rather store Teleserye and movie data, hence we have actors winning the elections. These are very good details though, which would matter only if all of us knows how to read. Or, in the case of those educated, knows how to read but not politically stupid and cares for the country. May God help us..

    • money pangilinan on

      wonder why many businessman and politicians have may charities? Because they can pour in their wealth to evade taxation :)

  8. too bad these economic restrictions / prohibitions are unlike gun and drug laws ie the latter hardly deters what they are supposed to deter. i want to see more employers / entrepreneurs / investors, does not matter if they are foreign or local.

  9. This is time to revisit our corporation laws and plug holes in the Constitution. Foreign investments are welcome but not to monopolize industries.

    • lol. think again. it is the government that create monopolies. economic restrictions / prohibitions makes it hard or impossible for new businesses to enter. economic restrictions / prohibitions make it costly for new businesses to compete. why there is only one electric distributor in mega manila? who granted the exclusivity? why do we only have two major telecoms player (ayala and pldt)? who grants the franchise? see tha point?

      the solution is for the government to get out of the way. less government, more freedom. let the people vote with their wallet everyday.

  10. Eddie de Leon on

    If what Salim has done is legal as judged by the SEC, then all your attacks against them have been unjust and unfair, Mr. Tiglao, right or wrong?
    Have you just been preparing the public mind to accept amendments to the Constitution?

  11. look forward to the next of the series — on media. MREALCO asked for P1.4 BILLION advertising budget, got P1.7 BILLION approved by ERC. more BILLIONS of ad money from PLDT, Smart, Sun, Maynilad, tollways…. is the BIGGEST media buyer also the BIGGEST media mogul? another GSM – guisa sa sariling mantika.

  12. mario manansala on

    there’s always something fishy about this one,of course,as influential this person is,money talks.whoever goes on his way,money talks.good work mr. tiglao,good work.let the people know more.

  13. Bakit hindi ito ang imbestigahan sa Senado. Lalo na at may nilulutong amyenda sa Konstitusyon ang mayorya ni belmonte. Nakakasuklam ang nangyayari. Bakit hindi ito ang iprotesta ng mga nagrarally? Hindi lang pala ninanakaw ang kaban ng bayan dahil sa korapsyon, niluluto pa tayo sa saring mantika ng dayuhan dahil sa pagbebenta sa bayan ng mga ganid na Pinoy.

    • ..think again, these are the people who invested heavily on the Ph during the time when no one, i repeat NO ONE would like to invest, local or foreign. these are the guys who placed the Ph in the investor’s map .. is this how we want to say, “thank you”..?