From Philippine Industrialization: Foreign and Domestic Capital, by Kunio Yoshihara, Ateneo de Manila University Press, Quezon City, 1985, pp. 108-112
6
Domestic Capital: Filipino
Non-Malay Filipinos
As explained in Chapter 2, my sample consists of the top 250 manufacturing companies based on the turnover for 1968. The ownership of these 250 companies by nationality as of early 1971 was investigated, and the results are shown in Table 3. It was found that 83 companies, about one-third of the sample, were Filipino-owned. This may not be as high a proportion as Filipino nationalists desire, but compared with such countries as Malaysia and Indonesia where at this period the ‘sons of the soil’ hardly participated in the modern economy, it was high. Naturally one wonders why the Filipinos responded better to industrialization.
One major reason is that many immigrants and their descendants are included under the term Filipinos. The Chinese discussed in the previous chapter comprised immigrants from China and their children (including those by Filipino wives) who were Chinese-speaking; but Chinese mestizos, or their descendants who did not speak Chinese (usually from the third generation down), were included under ‘Filipinos’. In addition to the Chinese, the Philippines attracted many other foreigners: first Spanish, and then, from the mid-nineteenth century, British, Americans, Swiss, Lebanese, Indians, and others. The immigrants from these countries and their descendants are also classified as ‘Filipinos’. . I call these Filipinos non-Malay Filipinos in order to emphasize that they are not full- blooded Malays. It is a unique feature of the Philippines that these non-Malay Filipinos have become an important pillar in its industrialization.
Among the non-Malay Filipinos, Elizalde was the most active in manufacturing investment. Six Elizalde companies are included in the sample: Elizalde Iron & Steel, Elizalde Paint & Oil, Tanduay, Elizalde Rope, Central Azucarera de Pilar, and Central Azucarera de la Carlota. Elizalde’s first ventures into manufacturing were liquor production (Tanduay) and rope manufacturing. These started around 1860. In the late 1910s and carly 1920s, Elizalde went into sugar milling, and several years later, pioneered paint production. Around this time Elizalde also bought a cement factory but gave it up a few years later, selling it to Madrigal (this became Rizal Cement). In the early 1960s Elizalde began tinplate production, and in the late 1960s, as a step of backward integration, opened Elizalde Steel Rolling Mills to produce cold-rolled sheets and coils needed by manufacturers of tinplate, Gl sheet, and other metal products.
Elizalde’s history starts in 1854 when Juan Bautista Yrissary arrived in Manila with his nephews, Joaquin Marcelino Elizalde and Valentin Teus. They obtained financial assistance from Joaquin Ynchausti, a Spanish businessman well established in Manila, and established a ship chandlery business under the name of Ynchausti y Cia. It went into rope and liquor production relatively early, probably because liquor and rope were domestically produced items which it had already handled and which it decided it could produce on its own. Joaquin Elizalde, who was mainly responsible for the expansion of the company in the first phase, seems to have been a dynamic manager. To take advantage of expanding business opportunities in the second half of the nineteenth century when the Spanish government pursued a more liberal economic policy, Joaquin Elizalde diversified his business quickly; in the 1890s when he retired and handed over management to his nephews (Jose Joaquin, Tiburcio and Santiago Elizalde), the company was involved in shipping, sugar production, abaca production, and general trading, in addition to liquor and rope production.
How Ynchausti went into sugar is not very clear. Probably, like Tabacalera, it did so when it became apparent that sugar was going to be a major export. Trading seems to have led to production. As Ynchausti became a major trading concern, it must have become a financier for sugar planters and when they could not repay the loans, it foreclosed. Then, either as an integration process or to facilitate sugar export, it went into muscovado production. By the late 1910s, when the first centrifugal mills were being built, Ynchausti was deeply involved in sugar cultivation and milling. To expand its sugar business, Ynchausti established Central Azucarera de la Carlota in 1918 and Central Azucarera de Pilar in 1924.
Initially, the Ynchausti family provided capital, but was not greatly involved in management which it left to Elizalde. Then in 1934 Elizaide bought out Ynchausti’s share and in the following year the name was changed to Elizalde & Co. By this time management had been handed to the third generation Elizaldes: Joaquin Miguel, Manuel, and other sons of Jose Joaquin.
Elizalde’s venture into import-substitution began with the establishment of Ynchausti Paint Factory in the mid-1920s. Around this time, it became clear that paint could be manufactured from the oil extract of the lumbang (candlenut) tree, which grows abundantly in the Philippines. Paint was one of the hardware items Elizalde had been handling. Metal products were also handled as hardware items, but as they were manufactured under the post-war import-substitution policy, Elizalde went in for the importation of more basic metals. Finally, as backward integration in the production of metals was pursued, Elizalde embarked first upon tinplate production, then production of cold-rolled sheets and coils.
Madrigal also entered various manufacturing activities. His first venture was coconut-oil production. In 1918 he acquired an oil mill in Cebu and modernized it (this became Madrigal Oil Mill). Ten years later he acquired a cement factory from Ynchausti y Cia against cancellation of its debt, and renamed it Rizal Cement Co. A year later Madrigal bought a cotton mill in Tondo from the Philippine National Bank, which had acquired it from an English firm unable to settle its debts. Madrigal renamed it Philippine Cotton Mills. Finally in 1940 he bought another coconut-oil mill (Cristobal Oil Mills) and a sugar estate (Canlubang Sugar Estate).
Vicente Madrigal built up his fortune on his own. He was born in Albay in 1880, the son of a Spaniard named Jose Maria Madrigal. His family was not very well off, but he was able to go to San Juan de Letran and the University of Santo Tomas (UST), partly supported by scholarship. When his father died, however, he left UST and went into business. He first worked for his uncle in abaca trading in Albay, then returned to Manila to work for an English trading firm. After learning English and gaining some experience with this firm, Vicente decided to become independent and go into the coal business. This led him into shipping, and from coal and shipping he made a fabulous fortune during the First World War. By the late 1910s he had ample funds to invest in other fields.
In contrast with Elizalde and Madrigal, Ayala did not invest much in manufacturing. Ayala is one of the three major families that originated from Domingo Roxas (1782- 1843). Of the other two, the Roxas family started sugar-milling, whereas the Soriano family established a beer brewery and a few other manufacturing ventures. Originally Ayala had a large distillery (which was famous for Ginebra San Miguel), but sold it to Carlos Palanca in 1924. Ayala also invested in a few sugar mills (including Central Luzon Milling and Central Azucarera Don Pedro), but did not hold a majority interest. After the mid-1920s, in particular after selling the distillery, it became more involved in real estate and insurance. After the war Ayala made a large profit by developing Makati. Then, it further diversified into banking, hotels, and securities, but scarcely into manufacturing. The only company owned by Ayala in the sample is Pure Foods. Insular Life Assurance, a company in the Ayala group, was involved with this company from the beginning as a financier, and had become the major shareholder by the early 1970s.
Why did Ayala stay away from manufacturing, while Elizalde and Madrigal were heavily involved? One might argue that it had been typical for wealthy Filipinos to avoid manufacturing, and that Elizalde’s and Madrigal’s heavy involvement was somewhat extraordinary. One might try to explain the case of Madrigal and Elizalde in terms of the predilections of Vicente Madrigal and of Manuel Elizalde and other members of the family. But why were these predilections different from others? The route into manufacturing from trading and shipping, in which they had made money, was not predetermined. Madrigal, for example, could have shifted a large part of his funds to real estate (he did to some extent) instead of investing heavily in manufacturing. His and Elizalde’s decisions to go into manufacturing seem to have been influenced by their relationship with Manuel Quezon.
Joaquin Miguel Elizalde was close to Quezon, who appointed him President of the National Development Co. (1934-7) and as an economic adviser (1937-8). Subsequently, he was Philippine Resident Commissioner in Washington (1938-44) and a member of the Quezon War Cabinet (1942-4). After the war he became the first ambassador to the United States, and then Secretary of Foreign Affairs. Through Quezon, Joaquin Elizalde also became involved in governmental affairs, and in doing so he and his family came strongly to identify themselves with the Philippines. This identification seems to have propelled them to participate in industrialization, which was an important national goal under Quezon and the other presidents Joaquin Elizalde served.
Vicente Madrigal was a classmate of Quezon at UST. After making a huge fortune during the First World War he contributed generously to Quezon. In return he was rewarded in various ways. For example, he was appointed Chairman of the Philippine National Bank in 1931. His purchase of Calamba Sugar Estate was clearly at the insistence of Manuel Quezon. His other purchases cannot be documented but it is very likely that Quezon influenced him. It is thought that Quezon did not want the cement factory, the textile mill, or some of the other manufacturing establishments that Madrigal acquired to be bought by foreign interests.
Madrigal’s post-war disengagement from manufacturing was somewhat dramatic. All of his factories were either destroyed or heavily damaged during the war, and a considerable amount of money was needed to restore them. The only factory he rehabilitated was Rizal Cement. He decided not to rebuild Philippine Cotton Mills and others, and sold Canlubang Sugar Estate to Jose Yulo. Immediately after the war he was accused of treason for his activities during the Japanese occupation and was imprisoned for some time. Later, by being elected to the Senate he was vindicated but by this time he had been hurt financially and seems to have lost enthusiasm for industrialization.
