The Philippines: Manila's Loss, Makati's Gain

Reflecting an understandable fear of Japanese economic domination, the Philippine Senate has dragged its feet on ratification of a proposed commercial treaty with Japan for more than six years. Yet even without a pact, business ties between the two countries have grown so fast that Japan now accounts for 42% of the Philippines' total foreign trade. That trade particularly rankles Manila's mayor, Antonio Villegas, 40, who has shown his displeasure by noisily trying to expel from his city 17 major Japanese firms.

Villegas' attack is directed almost as much against Philippine President Ferdinand Marcos, a bitter political rival, as against the Japanese. Marcos sees Japan as a source of sorely needed investment capital, last year issued an administrative order that enabled the 17 Japanese businesses, which include such well-known trading firms as Mitsui & Co. and Sumitomo Shoji Kaisha Ltd., to operate in the Philippines. The Japanese obtained government licenses and moved in quietly; most of them discreetly left corporate name plates off their office doors, instead put up signs reading simply "Welcome, walk in."

Open-&-Shut Case. To Villegas, who has ambitions to run against Marcos in next year's presidential election, the President was guilty of "undercutting Filipinism." Last month the mayor revoked the business permits of the 17 firms, forcing them to shut down their Manila offices. He then left on a trip to the U.S. During his absence, Marcos persuaded Manila's vice-mayor to allow the Japanese to reopen for business. On his return two weeks ago, Villegas once again ordered their offices closed. He also threatened to sue the companies for tax evasion, said that he might even launch proceedings to deport their executives to Japan.

Whatever the effect on his political aspirations, Villegas' Japanese-baiting tactics can onlv hurt the city he leads. With the Manila offices of the Japanese firms closed down, the municipality stands to lose well over $350,000 a year in taxes. Eight of the harassed Japanese firms have already taken up new offices in the fast-growing suburb of Makati (pop. 150,000), and most of the rest are expected to follow suit.

Cockroach Inspections. The Japanese are not the first to look upon Makati as a welcome escape from Manila. Once largely swampland, Makati has been developed since World War I by its most recent owners, the immensely successful (insurance, banking, cattle ranching and oil refining) Ayala family. Now one of the Philippines' most desirable residential and commercial areas, Makati lacks Manila's traffic jams, boasts lower taxes, cheaper office rentals and better telephone service. Over the past five years, the Ayalas have attracted such leading firms as the beer-making San Miguel Corp., Colgate-Palmolive, IBM and Eastman Kodak. As a result, Makati's Ayala Avenue is sprouting a forest of office buildings that are taller and more modern than most commercial buildings in downtown Manila.