[Intl-tobacco] Philippines: Lucio Tan, Master dealmaker (fwd)
Wed, 11 Apr 2001 11:00:58 -0400 (EDT)
Lucio Tan, Master dealmaker
by Hugh Williamson
Source: Financial Times, Wednesday, 2/28/01
It seems that Lucio Tan still relishes a challenge. Although he was the
best-known of Joseph Estrada's business cronies, the Filipino-Chinese
tycoon has been quick to cosy up to the people who last month deposed the
actor-turned-president in a military-backed popular uprising.
The morning after Alberto Romulo was named finance minister, Mr Tan sent
him a congratulatory bunch of flowers. The tycoon followed that with a
visit to Gloria Macapagal-Arroyo, the new president, in her palace, to
"hail and congratulate" her on taking office.
This display of bravado is typical of the man who has risen in his 50-year
career from poor immigrant labourer to arguably the richest man in the
Philippines and one of south-east Asia's most powerful business
personalities. Mr Tan has an estimated wealth of $7bn, built from his
patchwork of more than 50 companies in the airline, beer, tobacco,
banking, hotel, property and other sectors in the Philippines and around
The reactions to Mr Tan's apparent about-face were also typical,
reflecting his status as one of the Philippines' most controversial
figures. For anti-corruption activists - and many in Manila's monied elite
- he is top of the list of businessmen Mrs Macapagal should bring to book
for alleged tax evasion and corruption. Yet to many in the Chinese
community, and to poor Filipinos dependent on his companies for jobs or
products, Mr Tan remains a hero who is willing to work hard, cut a deal
and move with the times.
This need to make new political friends is possibly the last big challenge
of the 66-year-old's career. It will cast new light on the business and
political skills of one of the few remaining old-style taipansin
south-east Asia's influential overseas Chinese business network. And it
may help answer a question about Mr Tan: is he a crook who built his
fortune on corrupt political deals, or a crafty entrepreneur with an eye
for a deal and a willingness to use unorthodox means?
An answer would be welcome, because the controversial Mr Tan remains a
complex, mysterious figure. Often dressed simply in a white short-sleeved
shirt and ill-fitting black trousers, Mr Tan commonly appears reserved and
awkward in public gatherings outside Chinese business circles. This is
partly, say his friends, because of his lack of fluency in both English
and the Filipino language.
Yet this simplicity barely hides Mr Tan's love of the good life. He
travels everywhere by helicopter. In private, he is a flamboyant host. In
addition, friends admit, he is the father of many children by several
mistresses. Mr Tan is deeply private. Few of his large companies are
publicly listed, he has ignored rules on filing company accounts and his
spectacular takeovers in recent years of Philippine Airlines (PAL) and
Philippine National Bank were both mounted covertly using front companies
and proxy votes. He rarely talks to journalists - he refused repeated
requests to be interviewed for this article.
As with many older members of Asia's overseas Chinese business community,
Mr Tan's explanation of his success is rooted in his rags-to-riches past.
Last year, in a rare full-length interview, he explained what this meant
to him: "I grew up in poverty. I had no choice but to work harder than my
peers, to endure more hardships and probably harbour bigger dreams."
Born Tan Eng Tsai in Fujian province, eastern China, he emigrated to the
Philippines as a small boy. Although his parents struggled, he worked his
way through college, at times being employed as a stevedore.
In the late 1950s, he set up a scrap-metal business. He later found a job
in a cigarette factory and it was probably on trips to the northern
Philippines to buy leaf tobacco that he met a young congressman called
Critics say his friendship with the future president-cum-dictator
underpinned his successful empire. He set up Fortune Tobacco in 1966, a
year after Marcos became president, and saw it grow rapidly thanks to tax
breaks and other incentives. By 1980, Fortune was the country's largest
Before the country's "people power" revolt removed Marcos in 1986, Mr Tan
had also partly used his friend's help to move into, among other things,
brewing, pig farming and banking - paying the government a knock-down
price to acquire what is now Allied Bank.
With Marcos gone, subsequent presidents tried to sequestrate some of Mr
Tan's companies, claiming they represented assets stolen from the state.
They also filed huge tax evasion cases against his companies. These moves
failed - indeed, Mr Tan was able to expand his empire, for instance by
acquiring PAL in the mid-1990s.
This is evidence of Mr Tan's skills as a rich, political operator. It is
also evidence, say his critics, of the vulnerability to powerful and rich
individuals of Philippine instit utions, especially the courts, tax
collection agencies and Congress. "Tan has gotten to a science the ability
to go around the laws but it is that kind of behaviour that has kept the
Philippines from joining the tigers of Asia," says Solita Monsod,
economics professor at the University of the Philippines, who has pressed
government officials to prosecute Mr Tan.
Mr Tan's return to respectability came in 1998, after he spent about 1.5bn
pesos ($32m) in helping Mr Estrada to win the presidency. He reaped quick
benefits, with Mr Estrada taking PAL's side in an air dispute with Taiwan.
An investigation by the tax office into alleged evasion of 25.3bn pesos of
taxes has been tied up in court, on technicalities, since the early 1990s.
The leadership change is bad for Mr Tan, not least since it undermines
what appears to be his chief remaining ambition: to establish a legacy as
a legitimate business figure who helped pull the Philippines out of
poverty and who warrants international respect. Mrs Macapagal says she
will pursue any outstanding charges against Mr Tan, who denies any
Mr Tan, who often speaks in private of how he has helped the Philippines,
"wants to be remembered as a benefactor", says Teresita Ang See, a
Filipino-Chinese historian who knows him well. He gives several hundred
million pesos a year to various charities, making him the most generous of
Filipino-Chinese businessmen, she adds.
Ultimately, however, Mr Tan's legacy depends on an answer to the question
of whether he is corrupt or a clever entrepreneur. While few doubt he has
a shar p business sense and is a risk-taker, there is also evidence from
testimonies to various government enquiries and senate hearings that he
made deals to share his wealth with Marcos and used questionable
bookkeeping and shell companies to avoid paying billions of dollars in
"He took maximum advantage of the country's shortcomings. One can get into
business and follow the rules. He followed the unwritten rules of
patronage, using proxies and cronyism," says Roberto De Ocampo, president
of the Asian Institute of Management (AIM) in Manila and a former finance
secretary. However, he adds that in a country where corruption is so
common, Mr Tan "was not alone in doing this, of course".
Apparently aware of the drawbacks of being a first-generation
entrepreneur, Mr Tan - who rarely uses a computer - has recently backed
his son in launching several new-economy ventures, perhaps in the hope
that at least the next generation will gain respectability.
For Mr Tan himself, however, while his money and power are likely to keep
him out of jail, his tarnished image is also likely to keep him out of the
histories of business heroes.