Duterte takes on Philippine elite and ends up even more popular

MANILA (BLOOMBERG) - President Rodrigo Duterte is cracking down on some of the Philippines' biggest businesses, pushing a populist agenda that's endearing him to his supporters while putting off investors.

The nation's stock market has dropped as much as 11 per cent from its 2019 peak and valuation has fallen to its lowest since 2011 relative to peers as Mr Duterte stepped up his attacks last month.

The 74-year-old leader whose drug war has killed thousands saw his popularity hit a new high last quarter.

The benchmark index fell 1.6 per cent on Tuesday, its second straight day of decline. Mr Duterte is scheduled to have a televised interview with his spokesman later on Tuesday.

Scrutinising contracts and forcing concessions for taxpayers, as Mr Duterte is doing with water companies, bolsters his appeal to his support base, said Mr Calixto Chikiamco, a director of the Institute for Development and Econometric Analysis in Manila.

"He could ratchet up those attacks even more to warn businesses" not to back politicians going against his bet in the 2022 presidential vote.

An arbitration victory requiring the government to reimburse Manila Water 7.39 billion pesos (S$197.66 million) for delayed tariff increases was the start of Ayala's recent nightmares.

Mr Duterte last month ordered the renegotiation of the contracts of Ayala's Manila Water and Maynilad Water Services, which were extended by a previous administration until 2037.

Since Mr Duterte's attacks, Manila Water's market value has shrunk to nearly half its size as of Tuesday, even as it dropped the arbitration award and promised not to increase the rate this year.

Those concessions didn't appease Mr Duterte, nor his spokesman Salvador Panelo, who on Jan 19 said he will look into a land lease contract of Ayala Land with state-run University of the Philippines.

The property company lost 61.1 billion pesos in market capitalisation in three days after Mr Panelo's comments, even as it said it would welcome a "transparent review and assessment" of the deal.

Mr Duterte recently attacked Ayala and businessman Manuel Pangilinan, chairman of Metro Pacific Investments, which is the biggest shareholder of Maynilad, which provides water services to half the capital Manila, and PLDT.

Shares of Metro Pacific and Ayala sank further after Mr Duterte said on Jan 17 their venture's elevated mass transit contract would be reviewed next.

"The Philippines has been gravely fooled by the rich people in the Philippines. Just like Ayala and Pangilinan who own Globe and Smart," Mr Duterte said on Jan 23, referring to Globe Telecom and PLDT's Smart Communications.

"They are all thieves, those sons of b******," according to the official transcript of his speech.

Mr Panelo said people shouldn't take Mr Duterte literally and that contracts would be respected except for those disadvantageous to the public.

Since Mr Duterte's censure of the water contracts in early December, Metro Pacific has lost 36 billion pesos in market capitalisation and Ayala has given up 65.7 billion pesos as of Tuesday.

Both companies have said they are willing to work with the government to find a compromise.

Even before assuming the presidency, Mr Duterte in June 2016 already asked telecommunications provider PLDT and Globe to improve their service or face foreign rivals.

In 2018, a venture of China Telecommunications Corp and Duterte-allied businessman Dennis Uy won the bid for the Philippines' third mobile-phone licence.

Mr Duterte renewed his attacks on PLDT in February 2018, when he threatened to audit the company if it didn't surrender frequencies without any cost to the government.

The company, which was supposed to get three billion pesos for the frequencies, eventually waived its rights to the band that ended up with the third player.

In February 2019, Mr Duterte threatened to shut PLDT if it didn't address frequently busy lines on the government's complaint hotline - causing its stocks to sink to a 15-year low.

Shortly after Mr Duterte's tirade, PLDT's Mr Pangilinan apologised and said the company will add more lines to the complaint call centre.

Mr Duterte warned DMCI Holdings chairman Isidro Consunji on Jan 10 to prioritise safety standards or face a ban after a residential condominium that his family built in Davao City suffered "major cracks" following a series of strong earthquakes in October 2019.

A settlement has been reached with over 20 per cent of Ecoland 4000 residents and talks are ongoing with the others, the company said.

DMCI also owns a stake in water provider Maynilad.

Mr Duterte has been criticising ABS-CBN since 2017, alleging that it didn't air his campaign advertisements and accusing it of unfair reporting.

The President has also repeatedly threatened to block the renewal of the company's franchise expiring in March - causing its shares to drop.

ABS-CBN, in a 2016 statement before Mr Duterte took office, said it believes the government will uphold freedom of speech in its franchise renewal.

Mr Duterte in late December said the renewal was uncertain and urged its owners to sell before the permit expires.

The President has also targeted privately-owned Philippine Daily Inquirer and Rappler Holdings.

Mr Duterte hit the airline owned by billionaire Lucio Tan's PAL Holdings in September 2017 with over 6.9 billion pesos in unpaid fees to government.

Mr Tan agreed to pay six billion pesos worth of dues.

Months after getting elected in mid-2016, Mr Duterte singled out then PhilWeb Corp Chairman Roberto Ongpin in his campaign to end the influence of big businesses on the government.

"I was hit by a lightning," Mr Ongpin, a trade minister under former president Ferdinand Marcos and one of the country's most prominent tycoons, said at the time.

Mr Ongpin was later forced to step down and sell his gaming assets after Mr Duterte targeted him in his bid to shutdown online gambling in the country.

PhilWeb is less than a third of its size by market capitalisation as of Jan 27 compared to before it was attacked by Mr Duterte.