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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

ENTREPRENEURS

From Backwater to Fantasy Isle
After a Near-Death Experience, a Filipino-Chinese Tycoon Makes an Audacious Move

By Antonio Lopez / Manila


BY RIGHTS, SAYS TAN Yu, he should have died more than a year ago. In 1994, the Filipino-Chinese tycoon was admitted to the Hermann Medical Center in Houston for a kidney transplant. "Three days after the operation, the new kidney apparently failed," he recalls. "Doctors told me I would live for only 20 days unless I had another operation. But that would extend my life only for six months. I refused the operation." Instead, he made a deal with God: "If I live, I would work 17 hours a day so I can help people." Tan Yu recovered -- "the only one to do so out of 3,000 cases of failed kidney transplants in Texas." Now in his 60s, he has high blood pressure, a quadruple heart bypass -- and a new mission.

Tan Yu wants to transform two Philippine islands he owns, Fuga and Barit, into the "Hong Kong and Hawaii of the 21st century." The Fuga Island Project is meant to jump-start the economic development of northern Philippines. It will be a haven for foreign investors, including those from Taiwan and Hong Kong who want permanent-resident status in a friendly country at a time of uncertainty over China's intentions. Fuga and neighboring islet Barit form part of the Cagayan Special Economic Zone. Investors need pay a flat levy of only 5% of gross income and can import goods and materials tax free. And Fuga is just 45 minutes by air from Taiwan and less than two hours from Hong Kong (see map, next page).

"We'll build a city from scratch, without squatters, pollution, traffic, government red tape," says Tan Yu. Because he owns the islands, he can construct anything on them without government permission or interference. But the cost could give even a tycoon a heart attack. The Fuga project will require some $50 billion -- the amount Manila hopes the private sector will invest in public works for the entire country in the next four years. Fuga and Barit boast pristine beaches but hardly any infrastructure. Tan Yu and partner Tuntex, the Taiwan property, petrochemicals and textile company that owns 30% of Fuga Internationale Group, must build an airport, seaport, power plants, a water system, phone lines, roads, bridges -- the whole works.

Tan Yu, who has made an estimated $12-billion fortune from property, hotels, finance and textiles, says Fuga Internationale -- there's an "e" so the name will not have 13 letters -- will spend $5.7 billion of internally generated funds from 1997 to 2000. He and Tuntex chairman Chen Yu-how hope to raise another $19 billion through borrowings and land sales in 1999. They are counting on concessionaires to take care of the remaining $25 billion. "In 50 years, Fuga will be a city of at least 3 million people," says Tan Yu. He envisions high-rise condominiums overlooking the ocean, hotels, golf courses, a casino, shopping malls, office towers and light-manufacturing industries such as semi-conductors.

But skeptics abound. "This is the first big news since the reclamation project," says a property analyst in Manila. "There was lots of loud noise at the time and then nothing." In 1989, the tycoon said he would develop 173 hectares of reclaimed land overlooking the famed Manila Bay into a city within a city. It would have eight-lane streets, six apartment blocks, a 2,577-room five-star hotel, a 1,000-bed hospital, shopping malls and a financial district. Seven years on, only two condominium towers and a townhouse complex have been completed. Tan Yu blames the nearly successful coup by military rebels in December 1989 for derailing the project. For now, he wants to build eight more residential towers on the property. He has bought more lots and did reclamation work to expand the area to 200 hectares.

In Taiwan, the business community is taking a wait-and-see attitude. Some executives are rather negative on the Philippines . Others are wary of Tan Yu. "Asiaworld is notoriously difficult to deal with," says a Taipei property consultant, referring to Tan Yu's hotel group. "Hyatt backed out of a deal because of this." Tan Yu says the deal was scuttled because he decided his own executives can manage his hotels. "Tuntex and [Tan Yu flagship] Asia Trust make money through risky speculative investments," says another source. Tan Yu was accused of pulling strings when the Taiwan government bailed out financially troubled Asia Trust in 1982. He regained control in 1989.

For all the carping, Tan Yu has a lot going for him. Fuga is a tropical paradise of 10,000 hectares. The island was a favorite playground of the jet set during Ferdinand Marcos's 20-year rule, which ended in 1986. The president had declared Fuga a marine reserve. It is surrounded by 70 kms of fine white beaches and has numerous sites for scuba diving, snorkeling, wind surfing and game fishing. There are thick stands of rare narra trees, cliffs, waterfalls and valleys. Tan Yu vows to preserve Fuga's environment and says he has hired an ecosystem specialist to make sure it is protected.

Influential Filipinos are backing the project. Former president Diosdado Macapagal leads a group that owns 5% of Fuga Internationale subsidiary Fuga Development Corp., which will build up the islands. Renato Cayetano, Fuga Internationale's legal counsel, was recently named to the cabinet as President Fidel Ramos's chief legal counsel. Sen. Juan Ponce Enrile, who hails from Cagayan, pushed the Cagayan Special Economic Zone Act of 1995 that Ramos signed into law a year ago. The Act governs the granting of permanent resident status, tax exemptions and certain fiscal incentives.

Tan Yu also has clean title to Fuga, which is a third larger than Hong Kong island, and 700-hectare Barit. In a presidential decree, Marcos had stopped the practice of individuals

OWNING ISLANDS, BUT SAID those already in private hands before 1981 will not be affected. Fuga and Barit had been owned by two businessmen for decades. Tan Yu bought the islands in 1990 from a Filipino-Chinese businessman who was facing bank foreclosure and government sequestration of his properties. Tan Yu says he never met the seller and declines to identify him or the amount he paid. At the current price of up to $3.80 a square meter, the islands are worth more than $400 million.

Tan Yu got them far cheaper. Still, a lot of money changed hands. From his commission, the broker who arranged the sale reportedly bought a hotel and financed his winning bid for governor of a large province south of Manila in a special election last year. Tan Yu bought the islands without seeing them. There was just one consideration: location. "He looked at the map of the Philippines and Southeast Asia and said, O.K.,'" recalls an aide. The Fuga airstrip could accommodate only small planes and Tan Yu did not want to ride in one. So he asked his friend Chen to inspect the proposed purchase. The Tuntex chairman "landed on the airstrip, ate sashimi and then left," says the aide. Chen liked what he saw and accepted Tan Yu's offer of a 30% stake.

Tuntex has a lot of financial muscle. It is a large property developer, construction group, hotel operator, textile manufacturer and petrochemicals maker. The 85-story tower it is building in Kaoshiung will be Taiwan's tallest. Last year, Tuntex made a commitment to construct a $4-billion petrochemicals plant in Thailand, where it already has $1.2 billion in investments. The Taiwan group is also building a $1-billion cement plant in the Philippines. Part of its annual output of 6.8 million tons is earmarked for the Fuga project.

"Fuga will be a major international resort," says James Chang, a senior adviser to Tuntex's Chen and a director of Fuga Internationale. A key target is Asia's Chinese: "They gamble a lot and also love to play golf." Last year, more than 6 million Taiwan residents traveled abroad, many to play high-stakes games in Macau and Las Vegas. Plans for Fuga and Barit include the world's biggest casino, 17 golf courses and at least 12,000 hotel rooms. "But tourism will only be 10% of the development," says Tan Yu. In addition to light industry, he wants to attract foreign retirees -- a Philippine law grants permanent-resident visas to people 50 and older who put $50,000 into the country -- and Filipinos who want to enjoy the good life in a well-appointed and safe community.

If Tuntex is bullish, Tan Yu is even more so. "Fuga will be the most beautiful city in the world, a garden, a paradise," he says. Because Fuga and Barit are privately owned, government will have a minimal role in their development and operation. Tan Yu cannot call on the state's financial resources, but he is also free from the permits, public bidding, land rights and politics that often hold back major infrastructure deals. The islands have 1,540 inhabitants, most of them poor fishermen. Tan Yu says they are eager for development and the job opportunities it will bring. He intends the private sector to take care of security and other services, and not depend on the national police and other agencies.

An indication of Tan Yu's commitment: he has agreed to become chairman of Fuga Internationale subsidiary Fuga Island Holdings. The tycoon has always refused to formally head any of his more than 100 companies, preferring to install his 14 children or relatives instead. (Daughter Emilia "Bien-Bien" Roxas, who is in her late 30s, is chairman and chief executive of main holding company Asiaworld Internationale. As chairman of Fuga Island Holdings, says Tan Yu, "I report to her.") Why is the project so close to his heart? Tan Yu says Fuga is the vehicle to fulfill the promise he made God after his kidney transplant: "The first 20 years of my life were for myself. The next 30 to 40 years were for my family. Now it's the turn of my fellow men."

Tan Yu says he is ready to use his own money for Fuga. There is a lot of it. In the Philippines, his total property holdings of 20,000 hectares make him the country's largest landowner after the government. Tan Yu says he owns 37 pieces of prime real estate in Taiwan, 3,845 hectares of residential and commercial land in Texas and 50 hectares in downtown Vancouver. He holds leases on 8,000 hectares of land in China. "I'm no longer interested in manufacturing," he says, though he still owns a textile mill near Manila. "Real estate is the best business. You can make 10 billion pesos [$385 million] in just one year."

Property is a consuming passion. Ten days after his kidney transplant, he donned his $1,000-Stetson hat, sneaked out of his hospital suite and spent $100 million on two 19-story office towers in Houston's business district and 100 lots in the city's Sweetwater housing estate. Tan Yu has a photographic memory when it comes to his real estate holdings. He remembers the size and cost of each lot, though he does his calculations with pencil and paper, muttering the numbers like the Chinese merchants of old. One thing he cannot say with accuracy: his age and those of his children.

None of his companies are listed, so it is difficult to estimate Tan Yu's net worth. Because of the capital's property boom, some analysts value the 200 hectares of reclaimed land he owns near Manila Bay at some $7 billion. Tan Yu had bought 173 hectares of the property, now known as Asiaworld City, for only $68 million at a 1988 government auction. The next year, he bought 2.8 hectares in Ortigas Center east of Manila at a time when land there was selling for $1,150 per square meter. Ortigas is now a financial center that hosts the headquarters of the Asian Development Bank and the Philippine Stock Exchange. Real estate prices in the district have soared to $5,719 per square meter.

Daughter Elena Tanyu Coyiuto, who is in her mid-30s, is chief executive of AIC Realty. She plans to erect eight condominium buildings in Ortigas Center. Other commercial and residential projects are on the drawing board. "We will build an AIC tower in every major block in Ortigas, the Makati business district and Manila," she says. "Each will be a showcase of elegance, prestige and high quality and will be my monument to my father." Says her dad: "When you develop, you increase the value of your property by 100 to 1,000 times." Spun off just two years ago from the Philippine holding company AIC Group, AIC Realty aims for profits of $385 million on annual sales of $1.28 billion.

Actual work on Fuga starts next year. A team of international consultants led by the RBA Group, an engineering and architectural firm based in New Jersey, is now on the island drafting a $10-million master plan. One priority is an international airport with a 4-km runway for jumbo jets. Can Tan Yu really transform a backwater into a world-class fantasy resort and business island? He dismisses the doubters with a hearty laugh. Look at my record, he says. Through Fuga, the man who says he has come back from the dead is determined to live forever.

With reporting by Chris Bodeen/Taipei and Alexandra A. Seno/Hong Kong


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