Exclusive Development(s): Special Economic Zones and Enclave Urbanism in the Philippines

Abstract

Special economic zones (SEZs) and gated communities both constitute ‘spaces of exception’, but have rarely been analysed together. As both processes have empirically converged in the form of mixed-use urban enclaves, I connect disparate literatures to understand the fragmented and exclusive nature of the Philippines’ economic development in general, and Metro Manila’s urbanization trajectory in particular. Based on grounded qualitative research, I explicate the rise of ‘spaces of exception 2.0’ that form globally connected but locally disembedded wealthy enclaves. I show how the integration of the Philippines into global capital flows, its historically grown ‘anti-developmental’ state, and the rise of a powerful real estate sector together have led to a proliferation of exclusive and exceptional spaces. The contemporary enclave spaces epitomize an urban and national development model of ‘exclusive development’, based on spatial processes of post-industrial capital accumulation in enclosed spaces, presenting a stark contrast with discourses on inclusive development.

Keywords

special economic zones gated communities enclaves real estate exclusive development Manila Philippines

Introduction

Taking an aerial view of the Philippines, we can see a natural archipelago comprised of more than 7500 islands. From this vantage point, a second archipelago structure, a man-made one, becomes visible that shows unevenly distributed islands of elite spaces that peak into the sky in the form of central business districts with skyscraper office towers, and gated communities with high-rise luxury condominiums. The current real estate boom gripping the Philippines manifests itself through the relentless rise of new office towers, special economic zones and information technology parks, large-scale residential condominiums and townships, colossal malls, luxury hotels, and casinos, adjacent to tourist resorts and golf courses.

Considerable urban transformations, in particular in and around Metro Manila, the Philippines’ capital region, are visible. Several integrated mega-projects are under construction, such as a new central business district, Bonifacio Global City, and a casino-tourism resort on reclaimed land, Entertainment City. This article engages with the question of how to explain the fragmented landscape that characterizes the Philippines economic development in general, and Metro Manila’s neoliberal urbanization trajectory in particular.

Despite constituting a seemingly diverse set of spaces, the above-mentioned production, entertainment and residential spaces share some important commonalities. All of them can be conceptualized as ‘islands’ – spatially distinct, globally connected spaces for elites which aim at distancing themselves or ‘escaping’ from the immediate national or urban surroundings through referencing globality, modernity, and exclusivity. While they perform different functions as economic enclave spaces for production (in the case of special economic zones), or consumption and leisure (in the case of residential enclaves and/or malls), they all act as key nodes for articulating the Philippines into transnational flows of capital. Finally, they all constitute ‘spaces of exception’, which function according to special laws and regulations and have the power to exclude and/or regulate the entry of different population groups.

As globalized production and consumption enclaves are empirically converging and overlapping, it is useful to bring together two sets of literatures that have so far remained largely disconnected, namely the literature on special economic zones (SEZs) on the one hand, and on gated communities on the other hand. SEZs have been used by many governments as a strategy to industrialize their economies by creating favourable investment conditions to articulate local economies into global production networks. Scholars have analysed the rise of these production sites as neoliberal ‘zones of exception’ and ‘graduated sovereignty’ and sites of labour exploitation (Ong, 2006). Over time, SEZs have changed their form and function considerably, transforming from export-processing zones to knowledge and information technology parks, to adapt to the new demands of the post-industrial economy (Bach, 2011; Easterling, 2014; Neveling, 2015).

Concurrently, but in a largely disconnected debate, urban scholars have discussed the secession of primarily urban elites into gated communities, more recently developing the concept of ‘enclave urbanism’ (Douglass et al., 2012; Wissink et al., 2012). Providing a case-study of exclusive developments in the Philippines’ mega-urban region of Metro Manila, this article engages both approaches to generate a meaningful understanding of the rise of different types of integrated mixed-use enclaves that combine an export-oriented strategy of enclave development with upper-class spaces of living, consumption and entertainment. The creation of new enclave spaces needs to be better theorized and requires, above all, a closer engagement with historical and contemporary political, economic and social contexts, as well as key actors operating at multiple scales.

Enclave spaces are crucial sites of capital accumulation, based on the attraction and capture of transnational capital flows both for production and consumption purposes. Spatially uneven development on a macro-level can be explained through global, and potentially even planetary, processes that accompany the extensification and intensification of global capitalism, such as neoliberal urbanization and gentrification (see e.g. Lees et al., 2016). To these structural perspectives, this article adds a grounded perspective of a situated analysis of ‘actually existing spaces of neoliberalism’ (Brenner and Theodore, 2002), based on the case of a post-colonial state in Southeast Asia.

The Philippines, dubbed an ‘anti-development state’ (Bello, 2009), constitutes a contrasting case to the developmental states in East Asia, which have been discussed as exemplary SEZ policy users. SEZs are often portrayed as a mobile technology that has spread around the world (Ong, 2006; Easterling, 2014), which this case-study aims to amend with a more contextualized analysis. I argue that the rise of enclave spaces in the Philippines is best understood as a historically rooted process of fragmented development, which has recently intensified into exclusive ‘spaces of exception 2.0’. The argument advanced in the following is that contemporary enclave spaces in Metro Manila epitomize an urban and national development model of ‘exclusive development’, based on post-industrial capital accumulation in enclosed spaces facilitated by an elite-captured state.

The findings presented stem from data collected during several months of fieldwork between June 2011 and May 2013, with additional data collection in November 2016. I conducted interviews with policy-makers, real estate advisors, consultancies and brokers, real estate developers and their marketing divisions, to understand the ongoing urban and economic changes in Metro Manila. Moreover, I attended presentations and high-level events on foreign investment policy and on urban planning in Metro Manila. In this article, I draw on information from ten qualitative interviews, one focus group discussion, and observations during extended stays in three different areas of Metro Manila (the central business district of Makati, Eastwood City, and Bonifacio Global City). Secondary data was compiled from government and corporate bodies and from the annual reports of real estate developers.

The structure of the article is as follows. The next section connects different bodies of literature that are relevant for an analysis of the Philippines’ enclave development trajectory. Following the genealogy of the Philippines’ socio-spatially exclusive development trajectory, empirical illustrations of Metro Manila’s ‘spaces of exception 2.0’ are presented. The penultimate section discusses the critical and expanding role of (urban) real estate, before the final section concludes by demonstrating the usefulness of the notion of ‘exclusive development’ for further research.

Revisiting Spaces of Exception: SEZs and Enclave Urbanism

Special economic zones are ‘spatial capital accumulation machines’ (Bach, 2011), created by states to attract foreign investments. They provide an attractive regulatory environment and select infrastructure adapted to the needs of foreign investors. The first export processing zone (EPZ) was opened in 1959 in Shannon, Ireland, but since then the policy-tool of geographically demarcated tax incentives and special legislation to facilitate production for world markets has spread around the globe and has, in particular, been used by developing countries as a way to attract foreign investments (for a genealogy of SEZs see e.g. Bach, 2011; Easterling, 2014; Neveling, 2015). Following a global reorientation from more inward-looking development policies towards export-oriented development advocated by key international institutions, free trade zones, EPZs, and SEZs were promoted as the preferred policy option for developing countries to become articulated in global supply chains of labour-intensive sectors, such as textiles and electronics (see e.g. UNIDO, 1971).

Above all, SEZs have become associated with China’s ascendance as a world leader of production through the experimental, gradual and selective opening of its economy. SEZs were initially conceptualized as spatial and temporal exceptions, intended as a transitory instrument to kick-start economic development. They were envisioned to be capable to spread gains to the entire national territory and were to dissolve, after a few years, into the nation state. Primarily developmental states eager to fast-track national economic development based on exports introduced SEZs. Drawing on examples of SEZ creation by developmental (or strong) states, Ong (2006) uses the concept of ‘spaces of exception’ to explain the state’s sovereign creation of positive exceptions for privileged groups in society, thereby leading to a flexibility of state practices. The question arises, however, to what extent it makes sense, in the case of a weak state like the Philippines, to understand the creation of enclave spaces as a sovereign Schmittian ‘exception’ (Schmitt, 1985), or whether the zones rather reflect a weak state’s inability to act independent of elite interests.

Today, SEZs have proliferated across the globe. In 2006, an estimated 3500 SEZs were in operation in 135 countries (Farole and Akinci, 2011); more recent figures estimate a total of 4300 SEZs globally (The Economist, 2015). The seemingly universal uptake of SEZs as a global strategy obscures the substantial variations in geographical spread, size, and type of zones. China is responsible for the predominant share of SEZ employment, accounting for approximately 40 million workers out of a total of 66 million (data for 2006, in Neveling, 2015). SEZs range in size from entire cities, such as the Chinese mega-city of Shenzhen in the Pearl River Delta, to large-scale industrial parks, to individual factories and buildings. Moreover, they cater to different industries, fulfil variegated purposes, and take on various shapes, from sweatshops to high-tech research and development facilities. Bach (2011) argues that SEZs can be read along a continuum from low-wage export-processing ‘modular zones’ to high-end ‘ex-cities’, such as Shenzhen, Dubai or New Songdo City (see also Easterling, 2014). Most analysis has focused on the former zones for manufacturing production to the neglect of urban SEZs, despite zones increasingly occurring in and even constituting the urban through ‘“nested exceptionalisms” – [the] interplay of exception and rule that creates intersections for networks, markets and political rule […] these intersections turn the Zone into a form of new urban imagination’ (Bach, 2011: 100). As SEZs become more urban, they increasingly coincide, or start to overlap, with other types of urban enclave spaces, suggesting a fruitful avenue to discuss them in relation to the literature on enclave urbanism.

Gated communities constitute visibly secured ‘exceptions’ to the general public urban environment. Inside, privatized services and security are offered to affluent residents, while entry for non-residents is restricted. Urban enclaves, however, are not limited to segregated residential spaces. Caldeira (1996: 308), for example, defines enclaves as ‘privatized, enclosed and monitored spaces for residence, consumption, leisure and work, which tend to be socially homogeneous environments, that serve primarily the rich, middle and upper classes’. The concept of ‘enclave urbanism’ is similarly broad, including work, leisure, shopping and housing as constitutive elements of enclaves (Wissink et al., 2012: 161).

Despite the capacious definition, empirical investigations of enclave urbanism have almost exclusively focused on residential enclaves. Gated communities in the Global South are often aggressively marketed as ‘exclusive developments’, offering a superior standard of living for a select few amidst a sea of poverty and informality. Explanations for the rise of gated communities have primarily been sought at the urban scale (e.g. as a response of urban middle and upper classes to fears of crime and the desire for security, status, privacy, and the reliance of private rather than public service delivery), with little attention to the (national) state’s role in remaking cities as a strategy to attract global flows. In addition to malls and entertainment hubs, which clearly draw on global flows, even gated communities increasingly rely on transnational flows of people and capital (Ortega, 2016; Pow, 2011).

Enclave urbanism and SEZ development, previously largely understood as two disparate processes, occur simultaneously in mixed-use urban enclaves and are indeed related phenomena. Zoomers (2010) has argued that SEZs, tourism enclaves and foreign capital flows into residential gated communities, among others, are elements of the ‘foreignization of land’. This is a very fruitful starting point to conceptualize both production zones (such as foreign-leased agricultural zones for food and biofuels, industrial and service-based SEZs) and consumption zones (tourism resorts, overseas retirement homes, and housing financed by remittance flows) as imbricated processes.

Given a transition to services-based economies, SEZs and enclave urbanism have increasingly converged in the creation of urban mixed-use enclaves, which combine ‘live, work, play’ functions (Kleibert and Kippers, 2016). These integrated developments constitute ‘spaces of exception 2.0’, which are not fundamentally new, but signal an intensification of a development trajectory based on socio-spatial exclusions and exceptions and are qualitatively different from earlier mono-functional enclave spaces. Following this brief discussion of the broader genealogy of an enclave-strategy to development, we now turn to how this policy has been used and adapted in the Philippines.

The Anti-Developmental State

The Philippine state differs significantly from its East Asian ‘developmental state’ neighbours, which managed to engineer socio-economic transformations through state-led policies (e.g. Amsden, 1989; Wade, 1990; Woo-Cumings, 1999). Combining infant-industry protectionist policies with strategic integration into the global economy, Japan, South Korea, and Taiwan managed to develop competitive export-oriented economies. The core of these countries’ developmentalist strategies was a strong bureaucratic state led by a technocratic elite, which intervened in the economy to support and, at the same time, discipline domestic industrialists.

The absence of a strong state in the Philippines coupled with powerful elites has limited opportunities for economic development. The Philippines has for long time been recognized as an outlier in the region with respect to its economic development outcomes, which ‘have been disappointing by any yardstick’ (Balisacan and Hill, 2003: 4). When compared to its neighbouring countries and, in particular, the East Asian developmental states, the failure of the Philippines to industrialize and achieve economic growth is striking (King, 2007; Medalla et al., 1995). Real per-capita GDP in 2000 in the Philippines was on the same level as in 1980 and has, since the 1950s, been overtaken by South Korea, Taiwan, Thailand, Indonesia and China (Balisacan and Hill, 2003). Several explanations have been advanced to explain the developmental failure of the Philippines, which can broadly be distinguished as exogenous and endogenous factors. Whereas scholars differ in the weight they attribute to external geopolitical and internal political factors, most agree that colonialism, debt repayment, and cronyism in combination have prevented the Philippines from achieving economic development.

The Philippines was a Spanish colony (1565–1898) and was subsequently ruled by the United States until 1946 (with increasing autonomy from 1935 onwards). Following the stated aim of colonial ‘exceptionalism’ and ‘benevolent assimilation’, the US administration created political institutions and an education system modelled on its own (Diokno, 2011; Hedman and Sidel, 2000). Bello (2009: 4) argues that installing a US model of government has precluded the formation of an East Asian-type ‘developmental state’, and instead brought about an ‘anti-development state’:

The American pattern of a weak central authority coexisting with a powerful upper-class social organization […] was reproduced in the Philippines, creating a weak state that was constantly captured by upper-class interests and preventing the emergence of the activist ‘developmental’ state that disciplined the private sector in other societies in postwar Asia.

Bello sees continuous debt repayment as the most critical factor preventing Philippine economic take-off. Abinales and Amoroso (2005: 16) similarly argue that today’s economic development policies are seriously impeded by a lack of state resources due to foreign debt accumulated during the Marcos era and ‘the state’s inability to collect taxes from well-connected corporations and wealthy families’.

Elite families have played a crucial role in controlling economic and political power in the Philippines and have undermined efforts at economic development to protect personal gains (McCoy, 1994; Krinks, 2002). The political clout of powerful land-owning elites has effectively blocked much-needed agrarian land reform, leading commentators to argue that ‘the Philippines is probably the most extreme example of land policy dysfunction in Southeast Asia’ (Studwell, 2014: 39). Political scientists have grappled with the role of elites and oligarchs in the Philippines and developed a multitude of concepts describing their strong influence over the political-economy of the Philippines such as ‘crony capitalism’, ‘cacique democracy’, ‘booty capitalism’, or ‘bossism’ (Anderson, 1988; McCoy, 1994; Hutchcroft, 1998; Sidel, 1999). Elite interests have persistently been able to dominate the Philippine political economy (Raquiza, 2011; Van Helvoirt, 2009) and domestic entrepreneurs have concentrated their efforts on obtaining protection and subsidies from the state through rent-seeking, rather than competing based on production capabilities and technological innovation.

SEZ Policy: From Manufacturing to Services

Land-owning elites have been able to substantially evade land redistribution by converting their land into SEZs (Bello, 2009; Kelly, 1998; Ortega, 2016). SEZ creation in the Philippines thus is intimately related to political power structures and has always also been a vehicle to prevent land reform and secure the power-position of elites, in addition to its function as a tool for attracting foreign direct investments and spurring industrialization. Other non-economic and geopolitical rationales also play a role in the creation of SEZs in Asia, as, for example, in the border zones of North and South Korea and in the Mekong Region (Arnold, 2012; Doucette and Lee, 2015). The geopolitical situation of the Philippines paved the way for the development of SEZs on former US military bases. Subic Naval Bay was the first converted base, in 1991, to be transformed by the Subic Bay Metropolitan Authority into a hub for Korean investments and the Hanjin Heavy Industries Shipyard (Casanova, 2011). Since 1995 neoliberal policies in the Philippines have shifted SEZ development from the public to the private sector. With this step, the number of SEZs increased drastically, leading to an ‘intensification of the “enclave economy” approach’ (McKay, 2006: 60).

SEZ development in the Philippines has thrived tremendously over the past decade, despite questions about the relevance of SEZs as an economic tool and reports of illegal activities facilitated through their existence (e.g. smuggling in free ports or money laundering in casinos) (Manasan, 2013). In total, 348 SEZs (including 234 information technology parks and centres, 19 tourism economic zones, and two medical tourism parks) operated in the Philippines in July 2016, with an additional 148 under development (PEZA, 2016). Whereas manufacturing SEZs were largely concentrated in the suburban provinces surrounding Metro Manila, the new generation of SEZ spaces is predominantly found in the Metro Manila’s central business districts, where they tend to occupy offices in the most expensive high-rise buildings. The spectacular rise of service-based SEZs is related to a structural economic transformation into an urban service-based economy. Three newly promoted service sectors, dependent upon global capital flows and incentivized through SEZ policy, are information technology and business process outsourcing (IT-BPO), health and retirement tourism, and casino complexes.

IT and Business Process Outsourcing

Since the turn of the millennium, the Philippines has managed to attract investors in the IT-BPO sector exporting services to the United States and several other countries. This relatively new sector is primarily driven by lower-cost English language skills and ‘cultural affinity’, resulting from the period of US colonization and its enduring legacy. In a little over a decade, the sector has risen to employ one million workers (in 2014), the majority of whom are middle-class urban graduates. IT-BPO zones are heavily concentrated in Metro Manila and other urban agglomerations. To allow for the creation of smaller-scale SEZs within the existing urban high-rise office buildings (instead of Greenfield investments into large-scale industrial parks) a reduction of the minimum size requirement for SEZs and a creative re-interpretation of space from horizontal to vertical space was introduced (Kleibert, 2015). The recent real estate boom is heavily dependent on the IT-BPO sector, which is estimated to account for 95 per cent of total new office demand between 2005 and 2012 (interview with country head, real estate consultancy firm, March 2013).

Health and Retirement Tourism

In addition to incentivizing tourism enclaves and beach resorts through the creation of tourism-SEZs, the Philippine Board of Investment has identified overseas health and retirement tourism as a promising strategy for economic development and as an opportunity to generate employment for the large number of unemployed Filipino nurses and caretakers (Padojinog and Rodolfo, 2004). The Philippine Retirement Authority (PRA), a dedicated government body operating under the Department of Tourism, was founded with the mission ‘to attract foreign nationals and former Filipino citizens to invest, reside and retire in the Philippines […] providing them the best quality of life in the most attractive package’ (PRA, n.d.). Japanese, Chinese, Korean and English-language forms are available online for potential wealthy retirees (with a minimum age of 35 years). ‘World class’ hospitals complying with international standards (such as St. Luke’s in Bonifacio Global City, a classified SEZ) have opened to cater to global clients. Real estate firms have started to construct ‘retirement villages’, which take the shape of enclaves, mimicking the style of the retiree’s home country. Megaworld’s Mactan Boulevard development in Cebu is one example catering to Japanese seniors which features, in addition to medical facilities, a bonsai garden, a koi pond, a Japanese-style tea room, and origami and ikebana rooms (Kacho, 2013). So far, however, the strategy of attracting health and retirement tourists has not proven very successful and the sector remains small.

Casinos

Casino development has recently become a strategy to attract foreign money and tourists, especially tapping into the market of Chinese gamblers who escape increasing restrictions in Macao (Dela Peña, 2015). A boom of integrated casino developments has engulfed Metro Manila (e.g. Entertainment City, Resorts World in Newport City). Despite the social costs of the casino industry (Hannigan, 2007; Wu and Chen, 2015), the development of these enclave spaces is incentivized by the Philippine Economic Zone Authority (PEZA). The integrated resort spaces have some resemblance with the themed urban landscapes of Las Vegas and Dubai, where privatized urban planning and a heavy investment in the tourism and real estate sectors have led to a proliferation of privately-owned casino-cum-hotel landscapes. The casino complexes form artificial ‘stimulus-intensive surrogate worlds’ (Schmid, 2006: 347) that cater primarily to foreign tourists and consumers. Large-scale real estate construction in hotels and resorts is required to create the infrastructure to support the Philippine’s bet to become the fourth largest casino destination globally by 2018 (Philippine Daily Inquirer, 2016).

Urban Enclaves: From Gated Communities to Condominiums

Metro Manila’s history of enclave development dates back to colonial times, when the Spanish ruled the country from the walled city of Intramuros (‘within the walls’), excluding native Filipinos and other Asians, who were bound to live in segmented spaces of the Extramuros. The first ‘modern’ gated communities were developed after the Second World War, most famously Forbes Park, the elite enclave inhabited by upper-class Filipinos, American military and expatriate diplomats (see Hogan et al., 2012). The restrictions have thus continually been based on both class and race. More exclusive gated ‘villages’ or ‘subdivisions’ followed suit in the 1960s, such as Dasmariñas and Bel-Air in Makati. Private urban development has traditionally been very strong and the entire neighbourhood of Makati was privately developed by Ayala Land Incorporated, a Filipino conglomerate. Murphy and Hogan argue that the legacy of neo-patrimonial power has played a crucial role in transforming Metro Manila into ‘the world’s most fragmented, privatized and un-public of cities’ (2012: 28). Metro Manila’s profound transformation under neoliberal urbanization has been well-documented by urban scholars (Choi, 2014; Michel, 2010; Shatkin, 2008, 2011; Van den Muizenberg and Van Naerssen, 2005). Since the 1990s, countless gated communities have arisen in Metro Manila’s peri-urban fringe, marketed as exclusive, secured and privatized Western-themed suburban dreamscapes (Connell, 1999). Neoliberal suburbanization critically depends on transnational real estate investments by overseas Filipino workers and on accumulation by dispossession (Ortega, 2016).

In addition to suburban gated communities of low-rise housing, luxurious and highly securitized housing proliferates in the form of skyscraper luxury condominiums in inner-city areas. Condominium development in the Philippines forms part of a larger trend of ‘condo-ism’ that redirects growth to the urban core and favours densification in post-Fordist cities (Rosen and Walks, 2015). The Philippine boom has also been enabled by the Condominium Act of 1996, which enables foreign ownership of units within apartment complexes in the previously fully-protected domestic housing sector. Developers have focused on constructing upper-class condominiums, leading to an undersupply of social housing units in Metro Manila (Cardenas, 2011). Despite legislation that stipulates augmented requirements for social housing development, between January and May 2016 an overwhelming 37,631 licenses to sell were issued by the Housing and Land Use Regulatory Board in the mid- to high-end condominium segment, in contrast to only 1365 low-cost condominiums (Colliers International, 2016).

Spaces of Exception 2.0 in Metro Manila

‘Spaces of exceptions’ in various shapes have existed for a long time in the Philippines, and new ones often overlap with or supersede earlier spaces of exception, such as former military zones. Private sector interests have historically been able to realize their own interests in Metro Manila, given weak (metropolitan) state authorities unable to steer and control the urban development process. But what is new in the 21st-century enclave urbanism in the Philippines? The argument advanced here is that we currently witness an intensification and amplification of the enclave strategy to economic development, which is more urban-focused, more pervasive and all-encompassing, and increasingly integrated into mega-projects. These ‘spaces of exception 2.0’ have morphed into exclusive developments, combining service-based SEZs, gated communities, and entertainment functions within a single structure. Real estate conglomerate Megaworld Corporation alone, for example, boasts 21 integrated ‘township’ developments across the Philippines. In the following, three cases of mixed-use enclave development, or ‘cities within the city’, are presented.

Eastwood City is the first ‘township’ development in the Philippines that, following the Asian financial crisis, became a SEZ for IT-BPO services in 1997. Developed by Megaworld Corporation as a ‘live, work, play community’, it constitutes a globally-oriented 24-hour enclave space from where offshore services are delivered, largely to North American clients. The 17 hectare mixed-use urban enclave provides office space for more than 100 firms, from call centres to back-offices of international banks. In addition, entertainment, shopping, and residential spaces have been constructed. The privately-owned township reflects an Americanized model of modernity, and is simultaneously integrated into US service provision (through call centres) and US service consumption (through McDonalds, Starbucks, and other high-priced food outlets). Eastwood City is a ‘globalized’ urban enclave, integrated into transnational flows, and constitutes a node in multiple global flows of value extraction, which cannot be understood through an analysis of locally-bound processes alone (Kleibert and Kippers, 2016).

Access to Eastwood City is controlled by security guards and, as a private development, several activities possible in public spaces, such as street vending, begging, or demonstrating, are prohibited. A private security force, called Megaforce, and plain-clothed investigators patrol the enclave to prevent any unwanted behaviour or occurrences: ‘Because at the end of the day, this is still a private property […]. If people want to have a rally, if they want to protest, they cannot do that here. Because we will stop them at the entrance’ (interview, property developer, March 2013). The roads are only open to private cars and taxis; public transportation (e.g. jeepneys, tricycles and buses) have to let their passengers disembark in front of the gate. Allowed to enter are a fleet of private shuttle-buses that connect Eastwood City to other enclaves operated by the same real estate developer, for example to Resorts World, an entertainment and casino enclave close to the airport. Simultaneously, the SEZ remains disconnected and virtually inaccessible for poor communities located in direct geographic proximity across the river.

Entertainment City is a land reclamation and waterfront redevelopment project at Manila bay that has acquired many different names, including Bagong Nayong Pilipino (Filipino New Town), Bay City, and Entertainment City. The 120 hectare Las Vegas-style integrated casino development by the Philippine gaming corporation PAGCOR is currently under development in Parañaque City. Delays were brought about by financial troubles following the Asian crisis, but today a number of projects have been realized, and several more are expected to open in the near future. In total, the ‘city’ consists of five resorts (City Dreams Manila, Solaire Resort and Casino, Resorts World Bayshore, Manila Bay Resorts, and Westside City) located adjacent to each other. All encompass relatively similar features, with casinos and gambling infrastructure forming the central anchor. Equipped, moreover, with luxurious hotels, shopping malls, bars and night-clubs, they are intended as ‘one-stop-shop’ places for international (gambling) tourism.

The developments are clearly modelled on similar resorts in Macao, Singapore and Malaysia. The enclave spaces are operated as joint ventures between Filipino real estate conglomerates and foreign investors (Resorts World, for example, by Alliance Global Group and Genting Hong Kong). The entire Entertainment City area is classified as a tourism-SEZ. Over the next four years an estimated 15,000 new hotel rooms will be added in Metro Manila, half of these in Entertainment City’s hotels along Manila bay (Colliers International, 2012).

Bonifacio Global City (BGC) is situated on the territory of a former military enclave – the Fort William McKinley base of the US military. After the Second World War, the base was returned to the Philippines and renamed Fort Bonifacio (after the Filipino revolutionary) and subsequently privatized through what was ‘considered the biggest real estate deal in Asia in 1995’ (Casanova, 2011: 110). In a spectacular bidding process, Metro Pacific Group acquired the land for PHP 39 billion. Soon after, land prices dropped due to the Asian crisis, forcing the winner to sell the land again. The 55 per cent privately-owned part of BGC was acquired in equal shares by two Filipino conglomerates, Ayala Land Incorporated and Evergreen Holdings.

In order to establish its image as the premier central business district in the Philippines, the move of the stock exchange from Makati and Ortigas, the two formerly most important central business districts, to BGC is an important step. Moreover, luxury hotel developments are planned and construction is ongoing, including a Grand Hyatt and the 63-floor Shangri-La (intended to become the tallest building in the country). One of the newest developments in BGC is a 62-floor construction by Ayala Land Premier:

The studio units are 25 million peso. The most expensive units, the penthouse unit with your own pool is 150 million peso!¹ It was sold out in four days. And people are wondering: ‘Are you really a poor country?’ [laughs] Cause yeah, we have all these developments. (interview with business development manager, April 2013)

In order to vacate land for these large-scale developments, the urban poor are often forced to leave and resettle outside the city’s boundaries with fewer opportunities for income generation. According to data by the Urban Poor Associates, an estimated 10,000 slum dwellers have been evicted to vacate the land for the BGC development (in Shaktin, 2008: 395). Informal settlers tend to be relocated to distant social housing projects at the fringes of the city, far away from employment opportunities. The construction of these new ‘world-class’ exclusive developments in Manila is therefore only possible through a simultaneous dispossession and exclusion of population groups based on class and race, exacerbating existing socio-spatial inequalities (Bello et al., 2014; Choi, 2016; Ortega, 2016).

The future does not seem to hold any alternatives to this urban development model. Instead, we can observe a further intensification and a spread of the enclave model to second-tier cities. The newest strategy of the most powerful real estate developers is to interconnect their individual private exclusive developments, leading to an intensified form of ‘implant-bypass urbanism’ (Shatkin, 2008). In a focus group discussion, respondents note that:

These big real estate developers […] are creating centres everywhere. We have seen the push to the North, there is definitely presence in the South [of Metro Manila], so now the big groups are starting to stitch these centres together. […] They are defining their territories, in a way almost like little fiefdoms. (November 2016)

Exclusive Development(s) and Urban Real Estate

The Philippines, in 2011, manifested the highest income disparities in Asia, as the 40 richest families together accounted for 76 per cent of GDP growth (Agence France Presse, 2013). In 2012, a further concentration of wealth occurred, with an increase of 12 per cent in total wealth recorded among the richest 50 families over the previous year, bringing their collective wealth to $74 billion (Forbes, 2014). This wealth is primarily amassed in a range of sectors that are largely protected from foreign competition and can be classified as rent-seeking.² Filipino business conglomerates have diversified into rent-generating sectors, above all real estate (Bello et al., 2014; Gutierrez and Rodriguez, 2013).

In recent years, the real estate sector has been one of the fastest growing sectors in the Philippines and has generated a PHP 423 billion income in 2013, while receiving PHP 970 million subsidies (Philippine Statistics Authority, 2016). Ortega (2016: 3) argues that ‘real estate has emerged as an effective circuit of accumulation by political-economic elites, created and sustained by strategic alliances between the state and market forces and among old and new taipan elite families’. The following figures illustrate the extreme profitability of the sector for three prominent commercial and residential real estate developers (based on the respective company’s 2015 annual reports): Ayala Land Inc. reported a net income of PHP 17.6 billion (an increase of 13%), SM Prime Holdings Inc. reported PHP 20.9 billion (an increase of 14%) and Megaworld Corp. reported PHP 10.5 billion (an increase of 11%). Although data by The Economist (2016) reveal a recent decrease in crony-sector wealth globally, the Philippines moved up to become the third-highest country on the index, based on a high ratio (more than 10% in 2016) of crony-sector derived billionaire wealth.

In particular, urban real estate has become a new profit opportunity eagerly embraced by the existing oligarchic elite of the Philippines, who have access to land, sufficient financial resources, and the necessary political connections and insider’s knowledge to be able to develop the land. In interviews, real estate developers’ narratives usually attribute their success to their ‘vision’ for and inside knowledge of a particular place. The city has become the epicentre for island spaces of privatized luxury enclaves in different constellations. Whereas previously SEZs were erected on the semi-urban fringes outside of Metro Manila, nowadays, service-based SEZs are found in the heart of the financial district of the capital city. Gated communities are no longer limited to sub-urban low-rise housing ‘villages’ but are increasingly vertical gated communities in the form of high-rise condominium towers. Also, new SEZs for casino and health tourism are increasingly found in urban areas.

Urban commercial and residential real estate development (and speculation) is intertwined with national economic development strategies involving the creation of sites of exceptions, such as SEZs and technoparks (see also Hsu, this issue). Speculative and transnational capital assumes an increasing role in contemporary real estate developments in the Philippines. The real estate sector in Manila is increasingly shifting from being an enabler of economic development to a driver of capital accumulation, corroborating Smith’s argument that urban real estate is becoming ‘the centerpiece of the city’s productive economy, an end in itself, justified by appeals to jobs, taxes and tourism’ (Smith, 2002: 443). Whereas previously the creation of SEZs was seen as a means to an end, aiming to ultimately result in economic growth through the attraction of foreign investments and employment generation, the game today has changed profoundly and the transformation of rural or devalued urban land into ‘spaces of exception’ itself has become a key driver of economic growth. Goldman (2011) has shown the transformation of the metropolitan region of Bangalore into a speculative real estate markets as part of a ‘worlding’ strategy. Both in India and the Philippines, accumulation by dispossession is argued to be constitutive of the creation of enclave spaces, including SEZs and gated communities (Goldman, 2011; Levien, 2013; Ortega, 2016).

Conclusion: From Spaces of Exception to Exclusive Development

The above discussion has shown how the Philippines state has been carving out ‘spaces of exception’ for export-production, for segregated residences, and for urban mixed-use developments. The current political-economic moment signals not a deviation from but an intensification of earlier processes. The development of exceptional and exclusive spaces is a continuation of earlier national strategies by the Philippine government. Already during the Marcos era, mega-projects to increase the status of the regime with the international community were prioritized over the delivery of basic services to the city’s inhabitants. Exclusive enclave development policies thus follow long-term government strategies to hide poverty and the urban poor (e.g. resettlement at the fringes of the city, walling off of squatter settlements) instead of focusing on eradicating poverty (Michel, 2010). The attraction of foreign flows capital, the gains of which remain unevenly shared in the current political-economy of the Philippines, is seen as the ultimate goal by which to judge the country, whereas concerns about reducing poverty and improving livelihoods are side-lined. Recent economic growth (5.8% GDP growth in 2015) fuelled by real estate and other services sectors have helped the Philippines to shed their image as the ‘sick man of Asia’. The major credit rating agencies, moreover, gave the country ‘investment grade’ in 2015, the highest rating in the country’s history. However, as unemployment and poverty figures remain very high, economic growth has been far from inclusive. As the Philippine Development Plan 2011–2016 states, inclusive development remains:

An ideal which the country has perennially fallen short of, and this failure has had the most far-reaching consequences, from mass misery and marginalization, to an overseas exodus of skill and talent, to political disaffection and alienation, leading finally to threats to the constitution of the state itself. (NEDA, n.d.: 1).

The Philippines’ history of ‘anti-developmentalism’ presents a contrasting case to Ong’s ‘zones of exceptions’ deployed for developmental purposes. Nevertheless, the Philippine case may not be unique, as other countries are experiencing gentrification and similarly engage in the development of new cities, townships, and mega-projects, driven by a finance–real estate nexus. The Philippines’ enclave strategy to economic development is however peculiar in that it hinges both on the creation of exceptional spaces for production (expanded to include almost all export activities) and for urban living (with a proliferation of gated communities and condominiums), and their integration into mixed-use super-enclaves, which promise a ‘live, work, play’ environment that minimizes engagement with the ‘non-exceptional’ spaces outside of the enclave – and their inhabitants. The study reveals a convergence of residential and production zones to amalgamate into ‘exclusive developments’ for elites, reflecting a shift from an enclave strategy based on spaces of exception to one based on spaces of exclusion. In almost ironic contrast to the international development paradigm of ‘inclusive development’, the Philippines today follows an ‘exclusive development’ strategy. The fault-line of inclusion and exclusion runs between, on the one hand, existing privileged classes and those individuals plugged into global capital flows (either through participation in the remittance economy or as virtual migrants working night-shifts in call centres servicing overseas clients) and, on the other hand, the ‘disposable’ rest of the population (see also Ortega, 2016).

Several open questions remain, requiring further research. The new spaces of exception actively market themselves as ‘exclusive’ privatized and luxurious developments, but it remains an important empirical question how exclusionary these ‘spaces of exception 2.0’ are in reality. To what extent are these permeable or porous enclaves (Harms, 2015) and to what extent can these spaces offer alternative forms of ‘publicness’ (Hogan et al., 2012)? The historically-grounded and contextualized study of Metro Manila’s enclave urbanism has shed light on the important role of the state in bringing about an ‘exclusive development’ strategy. Comparative research could engage in understanding the differences in shape and outcome under different institutional settings to elaborate on the state’s role. Finally, how more inclusive economic development strategies can be realized in the context of the Philippines remains an issue for further debate.

Footnotes

Funding

This research received funding from the Netherlands Organisation for Scientific Research Research - Research for Development (grant number W01.65.329.00).

Notes

References

Abinales

Amoroso

(2005) State and Society in the Philippines. Lanham, MD: Rowman & Littlefield.

Agence France Presse (2013) Philippines elite swallow country’s new wealth. Philippine Daily Inquirer, 2 March. Available (consulted 10 July 2015) at: http://business.inquirer.net/110413/philippines-elite-swallow-countrys-new-wealth

Amsden

(1989) Asia’s Next Giant: South Korea and Late Industrialization. New York, NY: Oxford University Press.

Anderson

(1988) Cacique democracy in the Philippines: Origins and dreams. New Left Review 169(3): 3–31.

Arnold

(2012) Spatial practices and border SEZs in Mekong Southeast Asia. Geography Compass 6(12): 740–751.

Bach

(2011) Modernity and the urban imagination in economic zones. Theory, Culture & Society 28(5): 98–122.

Balisacan

Hill

(2003) The Philippine Economy. Oxford: Oxford University Press.

Bello

(2009) The Anti-Development State: The Political Economy of Permanent Crisis in the Philippines. Pasig City: Anvil Publishing.

Bello

Cardenas

Cruz

Fabros

Manahan

Militante

Purugganan

Chavez

(2014) State of Fragmentation: The Philippines in Transition. Quezon City: Focus on the Global South and Friedrich Ebert Stiftung.

10.

Brenner

Theodore

(2002) Cities and the geographies of ‘actually existing neoliberalism’. Antipode 34(3): 349–379.

11.

Caldeira

TPR

(1996) Fortified enclaves: The new urban segregation. Public Culture 8(2): 303–328.

12.

Cardenas

(2011) Globalization, housing markets, and the transformation of a South City: The case of 21st century Manila. Paper presented at the International RC21 conference, Amsterdam, 7–9 July.

13.

Casanova

(2011) Special economic zones and freeports: Challenges and opportunities in the bases conversion and development experience in the Philippines. In: Carter

Harding

(eds) Special Economic Zones in Asian Market Economies. Abingdon: Routledge, 108–123.

14.

Choi

(2016) Metro Manila through the gentrification lens: Disparities in urban planning and displacement risks. Urban Studies 53(3): 577–592.

15.

Colliers International (2012) Philippine Real Estate Market Overview 4Q 2012. Research and Forecast Report. Makati City: Colliers International.

16.

Colliers International (2016) Philippine Property Market 2Q 2016. Makati City: Colliers International.

17.

Connell

(1999) Beyond Manila: Walls, malls and private spaces. Environment and Planning A 31(3): 417–439.

18.

Dela Peña

(2015) Philippines on verge of a casino boom. The Philippine Star, 13 April. Available (consulted 2 December 2016) at: http://www.philstar.com/business/2015/04/13/1443060/philippines-verge-casino-boom

19.

Diokno

(2011) ‘Benevolent assimilation’ and Filipino responses. In: McFerson

(ed.) Mixed Blessing: The Impact of the American Colonial Experience on Politics and Society in the Philippines. Quezon City: University of the Philippines Press, 90–106.

20.

Doucette

Lee

S-O

(2015) Experimental territoriality: Assembling the Kaesong industrial complex in North Korea. Political Geography 47: 53–63.

21.

Douglass

Wissink

Van Kempen

(2012). Enclave urbanism in China: Consequences and interpretations. Urban Geography 33(2): 167–182.

22.

Easterling

(2014) Extrastatecraft: The Power of Infrastructure Space. New York, NY: Verso Books.

23.

Farole

Akinci

(2011) Special Economic Zones: Progress, Emerging Challenges and Future Directions. Washington, DC: The World Bank.

24.

Forbes (2014) Wealth of Philippines’ 50 richest on Forbes list rises to US$74 billion. Forbes, 28 August. Available (consulted 10 July 2015) at: http://www.forbes.com/sites/forbespr/2014/09/02/wealth-of-philippines-50-richest-on-forbes-list-rises-to-us74-billion/

25.

Goldman

(2011) Speculative urbanism and the making of the next world city. International Journal of Urban and Regional Research 35(3): 555–581.

26.

Gutierrez

BPB

Rodriguez

(2013) Diversification strategies of large business groups in the Philippines. Philippine Management Review 20: 65–82.

27.

Hannigan

(2007) Casino cities. Geography Compass 1(4): 959–975.

28.

Harms

(2015) Porous enclaves: Blurred boundaries and incomplete exclusion in South East Asian cities. South East Asia Research 23(2): 151–167.

29.

Hedman

E-LE

Sidel

(eds) (2000) Philippine Politics and Society in the Twentieth Century. London: Routledge.

30.

Hogan

Bunnell

Pow

Permanasari

Morshidi

(2012) Asian urbanisms and the privatization of cities. Cities 29(1): 59–63.

31.

Murphy

Hogan

(2012) Discordant order: Manila’s neo-patrimonial urbanism. Thesis Eleven, 112(1): 10–34.

32.

Hsu

J-Y

(this issue) Hsinchu technopolis: A socio-technical imaginary of modernity in Taiwan? Critical Sociology.

33.

Hutchcroft

(1998) Booty Capitalism: The Politics of the Philippines. Ithaca, NY: Cornell University Press.

34.

Kacho

(2013) Megaworld invites retirees. The Mactan New Town Megaworld. Available (consulted 8 December 2016) at: http://themactannewtownmegaworld.blogspot.de/2013/10/megaworld-invites-retirees.html

35.

Kelly

(1998) The politics of urban-rural relations: Land use conversion in the Philippines. Environment and Urbanization 10(1): 35–54.

36.

King

(2007) Making sense of the failure of rapid industrialization in the Philippines. Technology in Society 29(3): 295–306.

37.

Kleibert

(2015) Islands of globalization: Offshore services and the changing spatial divisions of labour. Environment and Planning A 47(4): 884–902.

38.

Kleibert

Kippers

(2016) Living the good life? The rise of urban mixed-use enclaves in Metro Manila. Urban Geography 31(3): 373–395.

39.

Krinks

(2002) The Economy of the Philippines: Elites, Inequalities, and Economic Restructuring. London: Routledge.

40.

Lees

Shin

López-Morales

(2016) Planetary Gentrification. Cambridge: John Wiley & Sons.

41.

Levien

(2013) Regimes of dispossession: From steel towns to special economic zones. Development and Change 44(2): 381–407.

42.

Manasan

(2013) Export Processing Zones, Special Economic Zones: Do We Really Need to Have More of Them? Makati City: Philippine Institute for Development Studies.

43.

McCoy

(1994) An Anarchy of Families: State and Family in the Philippines. Quezon City: Ateneo de Manila University Press.

44.

McKay

(2006) Satanic Mills or Silicon Islands? The Politics of High-Tech Production in the Philippines. New York, NY: Cornell University Press.

45.

Medalla

Tecson

Bautista

Power

(1995) Catching up with Asia’s Tigers. Makati City: Philippine Institute for Development Studies.

46.

Michel

(2010) Global City als Projekt: Neoliberale Urbanisierung und Politiken der Exklusion in Metro Manila. Bielefeld: Transcript Verlag.

47.

National Economic Development Authority (NEDA) (n.d.) Philippine Development Plan 2011–2016: In Pursuit of Inclusive Growth. Available (consulted 12 December 2016) at: http://devplan.neda.gov.ph/about-the-plan.php

48.

Neveling

(2015) Free trade zones, export processing zones, special economic zones and global imperial formations 200 BCE to 2015 CE. In: Ness

Cope

(eds) The Palgrave Encyclopaedia of Imperialism and Anti-Imperialism. Basingstoke: Palgrave Macmillan, 1007–1016.

49.

Ong

(2006) Neoliberalism as Exception: Mutations in Citizenship and Sovereignty. Durham, NC: Duke University Press.

50.

Ortega

(2016) Neoliberalizing Spaces in the Philippines: Suburbanization, Transnational Migration, and Dispossession. Lanham, MD: Rowman & Littlefield.

51.

Padojinog

WCB

Rodolfo

CLS

(2004) Developing the Japanese market for Philippine tourism and retirement services: Prospects and impediments. Discussion Paper Series No. 2004–31. Makati City: Philippine Institute for Development Studies.

52.

PEZA(2016) List of operating economic zones, on 31 July 2016. Available (consulted 8 December 2016) at: http://www.peza.gov.ph/index.php/economic-zones/list-of-economic-zones

53.

Philippine Daily Inquirer (2014) 55% of Filipinos believe quality of life worsened. Philippine Daily Inquirer, 21 January. Available (consulted 10 July 2015) at: http://newsinfo.inquirer.net/566879/55-of-filipinos-believe-quality-of-life-worsened

54.

Philippine Daily Inquirer (2016) Casino tourism driving more hotels to be built in PH. Philippine Daily Inquirer, 12 March. Available (consulted 8 December 2016) at: www.business.inquirer.net/208484/casiono-tourism-driving-more-hotels-to-be-built-in-ph

55.

Philippine Retirement Authority (PRA) (n.d.) About PRA. Available (consulted 10 December 2016) at: http://www.pra.gov.ph/main/about_pra

56.

Philippine Statistics Authority (2016) 2013 Annual Survey of Philippine Business and Industry (ASPBI) – Real Estate Activities: Final Results. Manilla: Philippine Statistics Authority.

57.

Pow

C-P

(2011) Living it up: Super-rich enclave and transnational elite urbanism in Singapore. Geoforum 42: 382–393.

58.

Raquiza

(2011) State Structure, Policy Formation, and Economic Development in Southeast Asia: The Political Economy of Thailand and the Philippines. London: Routledge.

59.

Rodriguez

(2010) Migrants for Export: How the Philippines State Brokers Labour to the World. Minneapolis, MN: University of Minnesota Press.

60.

Rosen

Walks

(2015) Castles in Toronto’s sky: Condo-ism as urban transformation. Journal of Urban Affairs 37(3): 289–310.

61.

Schmid

(2006) Economy of fascination: Dubai and Las Vegas as examples of themed urban landscapes. Erdkunde 60: 346–361.

62.

Schmitt

(1985) Political Theology: Four Chapters on the Concept of Sovereignty. Chicago, IL: University of Chicago Press.

63.

Shatkin

(2008) The city and the bottom line: Urban megaprojects and the privatization of planning in Southeast Asia. Environment and Planning A 40(2): 383–401.

64.

Shatkin

(2011) Planning privatopolis: Representation and contestation in the development of urban integrated mega-projects. In: Roy

Ong

(eds) Worlding Cities: Asian Experiments and the Art of being Global. Oxford: Blackwell, 77–97.

65.

Smith

(2002) New globalism, new urbanism: Gentrification as global urban strategy. Antipode 34(3): 427–450.

66.

Sidel

(1999) Capital, Coercion and Crime: Bossism in the Philippines. Stanford, CA: Stanford University Press.

67.

Studwell

(2014) How Asia Works: Success and Failure in the World’s Most Dynamic Region. London: Profile Books.

68.

The Economist (2014) Planet plutocrat. The Economist, 15 March. Available (consulted 8 December 2016) at: http://www.economist.com/news/international/21599041-countries-where-politically-connected-businessmen-are-most-likely-prosper-planet

69.

The Economist (2015) Special economic zones: Not so special. The Economist, 4 April. Available (consulted 8 December 2016) at: http://www.economist.com/news/leaders/21647615-world-awash-free-trade-zones-and-their-offshoots-many-are-not-worth-effort-not

70.

The Economist (2016) The party winds down. The Economist, 7 May. Available (consulted 8 December 2016) at: http://www.economist.com/news/international/21698239-across-world-politically-connected-tycoons-are-feeling-squeeze-party-winds

71.

Tyner

(2000) Global cities and circuits of global labor: The case of Manila, Philippines. Professional Geographer 52(1): 61–74.

72.

Van den Muizenberg

Van Naerssen

(2005) Metro Manila: Designers or directors of urban development? In: Nas

PJM

(ed.) Directors of Urban Change in Asia. London: Routledge, 142–165.

73.

United Nations Industrial Development Organisation (UNIDO) (1971) Industrial Free-Zones as Incentives to Promote Export-Oriented Industries. Geneva: UNIDO.

74.

Van Helvoirt

(2009) Regions, institutions and development in a global economy: Divergent regional business systems in the Philippines. PhD thesis, Utrecht University, The Netherlands.

75.

Wade

(1990) Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. Princeton, NJ: Princeton University Press.

76.

Wissink

Van Kempen

Fang

S-M

(2012) Introduction: Living in Chinese enclave cities. Urban Geography 33(2): 161–66.

77.

Woo-Cumings

(ed.) (1999) The Developmental State. Ithaca, NY: Cornell University Press.

78.

S-T

Chen

Y-S

(2015) The social, economic, and environmental impacts of casino gambling on the residents of Macau and Singapore. Tourism Management 48: 285–298.

79.

Zoomers

(2010) Globalisation and the foreignisation of space: Seven processes driving the current global land grab. The Journal of Peasant Studies 37(2): 429–447.