Amidst the sea of rosy news reporting on our economy, this recent item caught my eye. To quote:

The Philippine government may lose the “investment grade” rating it worked so hard to achieve if a debt default by one of the country’s handful of major conglomerates should erode investor confidence. In a report released Friday, debt watcher Standard & Poor’s (S&P) said that while the Philippines remained one of the strongest markets in the region, the structure of the country’s economy -being dependent on family-owned conglomerates – was a source of vulnerability.  “We may… lower the ratings if problems at one of the large conglomerates impair investor confidence,” S&P said in a supplementary analysis report on the Philippines.

Rarely do we find family-owned conglomerates portrayed as a liability to the country’s economy. More often than not, they are exalted as paragons of progress. We are told to look at the Sy family as model philanthropists and admire the Ayala-Zobels as “green” corporate trailblazers. And now Standard & Poor’s offers us this stern warning?

The recent pork scandal brought to light the dominance of certain social institutions in politics and governance. From a systemic sociological lens, we can see the power of the family as an institution, and how the interests of political families have overshadowed the political process. But strong families and weak institutional channels of political representation are just one side of the coin. A less talked about facet is the predominance of powerful family interests in the business scene. In looking at these family-owned conglomerates, a systemic view is also useful.

The problems associated with the concentration of corporate ownership in the hands of a few families are old. It does not simply concern the country’s economic fate, which is seen to rise and fall with the debts of a handful of conglomerates. From an institutional perspective, the business literature on Asia has long ago identified a link between the high degree of concentration of ownership and the low potential for development of weak state institutions.

At the practical level, the preponderance of highly diversified conglomerates has given our bureaucrats a headache. The administration of Noynoy Aquino has repeatedly been criticized for delays in rolling out much-touted Public-Private-Partnership projects, in which the government builds key infrastructure through private companies. These private companies will build or develop public facilities such as highways, train systems, and airports, and will earn from these for a particular lease period, before the facility reverts back to government control. One of the problems of the rolling out of PPPs has been in designing guidelines.  For instance, in the recent Mactan airport project, there have been too many private bidders with existing business interests in the airline industry.  How do we then ensure attractive but competitive business conditions in such a complex field of property relations?

When it comes to corporate governance, the internal practices of family-owned conglomerates also warrant further scrutiny. Family-owned conglomerates in the Philippines typically have several listed corporations to their name, as well as a number of unlisted companies. Cross-subsidiary activities among these different business entities make for thorny transparency issues. Other issues will arise from opaque ownership arrangements in which the family’s holding company effectively pulls the strings across operations.

I leave the detailed analysis of these business practices to those more knowledgeable on the tricks of the trade used by accountants and corporate lawyers. What is striking from a sociologist’s perch is how the framework of the Filipino family provides a powerful tool of analysis across the various spheres of our collective lives. To understand the challenges we face as a nation today, it is crucial to also understand the stature of the Filipino family as a social institution vis-à-vis the economy and politics.  A close reading of our society’s institutional landscape would allow us to see beyond mainstream mantra. It will enable us to contextualize the kinds of political and corporate groups that we have, and to link these to the various organizational practices and cultures that such set-ups engender. It’s all in the family, as they say.

If only the Philippines was as neat and orderly as an SM operation. If only our country was as progressive as a gated community developed by the Ayalas. I have heard these sentiments floated many times. Really now? Macro-sociological analysis invites us to reconsider the implications of these alluring propositions.