"But if you're not a crony, the government takes everything."
"The government takes all the lemons and lets them keep the plums," Ongpin said. He said the deals generally favored cronies, who were allowed to preserve the profitable companies in their empires. Many of these distressed companies, including several large "non-crony" firms, were taken over on Marcos' orders to convert government-guaranteed debt into equity, Ongpin said. "The most damaging impact of crony capitalism," Villegas said, was that it "emasculated the free- enterprise system and discouraged a lot of would-be investors" by restricting their access to credit and confronting them with unfair competition.Ĭompounding the damage, according to Ongpin and a number of other businessmen and bankers, were government bailouts of crony companies that got into debt trouble. Yet, many businessmen, bankers and economists say, the economic damage of crony capitalism has already been done.Īccording to Jaime Ongpin, a prominent businessman and critic of the system, $6 billion to $7 billion of the country's $26 billion foreign debt has been "wasted because of misallocation to crony-type projects." An independent economist, Bernardo Villegas, estimates, however, that the cronies have accounted for no more than $3 billion of the foreign debt, which he says now approaches $30 billion.
Indeed, there are signs that the system is changing, largely out of economic necessity.Īsked recently if the days of special favors and privileges in the economy were over, Prime Minister Cesar Virata said, "I think so." Waste and corruption, for years largely ignored or taken for granted, have become subjects of close public scrutiny and harsh criticism. Several cronies have fallen out of favor, and others are under pressure to dismantle or scale down their empires. Now, with the Philippine economy on the skids since the assassination last year of opposition leader Benigno Aquino, there is a widespread perception that the country can no longer afford crony capitalism, and critics of the system are pushing Marcos to abolish it. The favoritism has continued to benefit some cronies through government bailouts even after their firms went belly up. It is a system that has allowed certain friends and relatives of President Ferdinand Marcos and his wife to acquire great wealth and economic power through special favors and privileges extended by the government. The failures reflect the weaknesses and excesses of what Philippine businessmen have dubbed "crony capitalism," a system that many feel is largely responsible for the country's current economic mess. More than 100 companies owned by friends of the Marcos family have failed since Imelda Marcos made her oft-quoted remark, and many of these firms were taken over by the state when they were unable to repay loans guaranteed by the government. Since then, events have shown that the smartness of these friends and relatives - the Marcos "cronies," as they are called here - lay more in developing close ties to the presidential palace than in any special business acumen. "Well, some are smarter than others," she said. When Imelda Marcos, the wife of the Philippine president, was asked by an interviewer in 1979 how it was that many of their relatives and friends had become so rich, her reply indicated it was all in the nature of things.