Mixing the sand into the hardened soil

That is Mao Zedong’s poetic description of the Communist Party’s strategy of infiltrating institutions so as to control them. In Vietnam on Nov. 10, Xi Jinping addressed the Asia-Pacific Economic Cooperation CEO Summit: “The new round of technological and industrial revolutions is unfolding before us. Digital economy and sharing economy are surging worldwide, and breakthroughs have been made in new technologies such as artificial intelligence and quantum science. We in the Asia-Pacific cannot afford to be just onlookers.” In this regard, movements in China and now in the Philippines help flesh out what Xi meant.

Writing in the London Review of Books on Nov. 16, Qi Gua suggests that the “first task will be to bring the tech giants to heel” for the next five years of Xi’s rule. A month before the Communist Party congress that resulted in Xi being elevated to the status of Mao Zedong and Deng Xiaoping, Tencent, Baidu and Weibo were fined by the Cyberspace Administration of China. Tencent game Honour of Kings was accused of “dragging Chinese youth into a mass gaming addiction,” and government criticism led to shares plunging 4 percent; the company tried to mollify the government by releasing a game, Applaud for Xi Jinping. Gua says Beijing has proposed to increase its holdings in Alibaba (1.3 percent), Tencent (0.8 percent) and Baidu by an additional 1 percent each: “The objective is to penetrate the two companies and oversee every key decision they make.” Foreign companies operating in China may also be required to report their earnings precisely so that dues owed the Communist Party for membership (calculated on the basis of corporate earnings) can be charged and spent on party activities.

Jack Ma during his Manila visit did not mention these goings-on that took place after his October visit. But nothing happens overnight so it now becomes clear why, attending a meeting with local telecom partners, he criticized internet service in the country. He was doing so to pave the way for what has been quietly unfolding, and which has now kicked into high gear with a Palace announcement: the entry of China into the telecommunications field as the “third player,” as the Palace put it, when it announced that an agreement to this effect had been signed on Nov. 15 during Chinese Premier Li Keqiang’s visit after the Association of Southeast Asian Nations Summit. The Palace pledged a swift 45-day evaluation period for offers, adding that interested companies will have to comply with the 40 percent cap on foreign ownership of utilities.

For now, but not for much longer. House Bill No. 5828 was passed in early September. It amends Commonwealth Act No. 146 (the Public Services Act) by limiting its coverage to electricity distribution or transmission, and water pipeline or sewerage pipeline systems. What this means, according to critics, is that the amendment effectively removes telecoms, power generation, transport and possibly even broadcast media from ownership restrictions that require such firms to be 60 percent Filipino-owned (or in the case of media, 100 percent Filipino-owned). That the House measure’s sponsors were Gloria Macapagal-Arroyo, Joey Salceda, Arthur Yap, Feliciano Belmonte Jr., and Monsour del Rosario suggested to critics that the bill was meant to benefit the Salim Group and Singtel, which already have a presence either in telecoms, media, or both. But these critics seem to have overlooked the real motivation, which is strategic on the part of the Chinese government.

(Senate Bill No. 1261, a similar measure sponsored by Sen. Richard Gordon, is still pending at the committee level.)

The House bill’s passage comes after months of softening of the ground, so to speak, at the highest level of government. Recall that President Duterte fired Rudy Salalima, first secretary of the Department of Information and Communications Technology, last September on grounds that he was too slow in breaking up the telecom duopoly. DICT OIC Eliseo Rio Jr. has focused on the shortage of cell sites, pitching for government to build towers and thousands of Wi-Fi access points (all requiring equipment from China), and a newly-announced scheme with Facebook to build a new internet pipeline leading to the network to be built by government, which could then be privatized once foreign ownership limits are lifted. NBN-ZTE looks crude in comparison to this scheme.