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What’s Ramos Doing in Carlyle?

Former president Fidel V. Ramos sits as adviser in Carlyle Group’s Asia advisory board. Carlyle, the world’s largest private equity firm which had Osama bin Ladin’s family as client, is active in Asia where it rakes in big profits in the midst of financial crisis and sells weapons of mass destruction in the midst of war. Like other chiefs of state who have joined the Washington-based company, Ramos’s role in Carlyle raises more touchy questions than the ex-general is willing to reveal.

By BOBBY TUAZON
Bulatlat.com

Fidel V. Ramos, the president who championed globalization in the Philippines, was probably only telling half of the truth when he said last week that he only sits in the Asian advisory board of Carlyle Group and has nothing to do with the firm’s operations and management.

The Washington-based Carlyle Group, described by Industry Standard as the world’s largest private equity firm, is also the 11^th largest defense contractor in the United States and at one time had the Saudi family of Osama bin Laden as among its high-profile clientele.

According to Asia Times, the Asian advisory board’s task is to find investors for the firm’s Asia fund and identify potential companies to buy. The board plays a critical role in determining Carlyle’s investment strategies in Asia. Quoting an insider, the newspaper said that the advisers “strategize about how to create and nurture companies with a global reach.”

In short, as the New York Times also reported, the advisers help raise money and find and review deals.

In a report by a Philippine daily, Ramos said he joined the board in 2000 “because it’s good for the country, because that’s investments.”

To the former president, who is now President Gloria Macapagal-Arroyo’s travelling special envoy, investment is a $4 million infrastructure project in Basilan which is part of Balikatan 02-1. The project, Ramos conceded, is too small for a group as big as Carlyle.

But last week, Stratfor revealed that U.S. armed forces plan to build a military base on the southern Philippine island of Basilan. Road-building projects, passed on as “civic action,” will start the process of reestablishing a U.S. military base as part of America’s power projection and “forward basing” in Southeast Asia, the Texas-based think tank said.

Likewise, there is increasing evidence of private defense contractors who, aside from supplying Pentagon’s military hardware, are now involved in building new U.S. military installations and providing security in many parts of the world.

World leaders

Carlyle Group is indeed big. Formed in 1987, the company is led by former world leaders as well as top bankers and CEOs. Serving as senior adviser and head of the Asia advisory board is former U.S. President George Bush, Sr., who is also a former CIA director and father of the present White House occupant. Other top officials are: John Major, former British prime minister, chair of the Carlyle Europe board; Frank Carlucci, defense secretary of Ronald Reagan who was also a wrestling teammate of current U.S. Defense Secretary Donald Rumsfeld, as chairman/CEO; James Baker III, Reagan’s state secretary, as senior counselor;

Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission; William E. Kennard, the former chairman of the U.S. Federal Communications Commission; and Afsaneh Beschloss, the former chief investment officer and treasurer of the World Bank.

Carlyle’s advisory boards in Europe, Asia and Japan are peppered with top executives from major global corporations, such as Nestle, Roche, BMW, Toshiba and Fujitsu and Germany’s Bundesbank.

Bush Sr. and Ramos are joined in the Asian advisory board by former Thai Prime Minister Anand Panyarachun, the executive director of the Abu Dhabi Investment Authority, and other leading bankers and tycoons in the region. Park Tae Joon, a former South Korean prime minister, was also an adviser to Carlyle. Also in the board are Oscar Lopez, chairman/CEO of the First Philippines Holdings Corporation, and other senior executives and investment authorities from Singapore Technologies Ltd., Abu Dhabi and Kuwait.

Aside from Middle East autocrats and tycoons (such as the bin Laden family), Carlyle counts as among its partners George Soros, the multi-billionaire financier of right-wing NGOs in Eastern Europe and accused by Malaysian authorities as having engineered the Asian financial crisis in 1997; and Fred Malek, Bush Sr.’s campaign manager.

After only 15 years, Carlyle is now worth $13.5 billion. The private empire, which operates in the shadows of the iron triangle of government, industry and military spans three continents and includes investments in most corners of the world. It has ownership stakes in 164 companies which last year employed more than 70,000 people and generated $16 billion in revenues. About 450 institutions – mainly large pension funds and banks – are Carlyle investors. Since 1987, Carlyle has invested $5.4 billion in 233 transactions, with a rate of return of 36% on its investments.

As a major defense contractor, Carlyle owns companies making tanks, aircraft wings and other military hardware. It is also heavily invested in telecommunications, another industry that is strongly affected by government policy. Nearly two-thirds of the company’s investments are in defense and telecommunications.

Business strategy

Carlyle’s known business strategy which brings it huge revenues and fat incomes for its executives and advisers is to buy up companies in private deals and resell them – a “high-end business” open only to the rich.

Currently attracting Carlyle and its investors is Asia. According to Ray Hood, director of Asian investments for State Street Bank, Asia is where “the rewards will be in the next few years. Investment returns will be a complete steal.” In the aftermath of the financial crisis, family-controlled conglomerates are giving way to smaller companies while governments are abandoning state-subsidized social programs in favor of privatization.

Carlyle has become one of the largest foreign investors in South Korea and Taiwan and is positioning itself to become a major player in mergers and acquisitions in Japan. It also hopes to cash in on China’s entry into the World Trade Organization to make a big investment plunge in that country.

Asia is also where renewed militarism is under way in the light of the broadening of Bush Jr.’s “war on terrorism.” As the United States expands its military presence in the continent, it is also expected to require more military installations, arms and infrastructures. Governments, particularly those backing Bush’s war such as the Philippines, will embark on more military spending, including funds for “civic action” infrastructures such as the ones being built in Basilan where Carlyle is involved. The Armed Forces’ modernization program is being implemented jointly with major defense contractors. For Carlyle, war time is indeed boom time.

To its many critics and competitors in the United States and elsewhere, however, Carlyle is using its star force of former world leaders and multinational bank officials as a clout to clinch major deals and grow into a global empire. To illustrate, Carlyle’s major arms investor, United Defense, was able to revive its frozen project – the controversial Crusader – right after the Sept. 11 attacks. Pentagon’s decision to use the Crusader – a 42-ton, self-propelled howitzer that operates much like a tank and can lob ten 155-mm shells per minute as far as 40 kilometers – was made after a meeting between Carlucci and Dumsfeld. It will be used in Afghanistan and other U.S.-initiated war fronts. And Pentagon will shell out $470 million for the project.

At the very least, New York Times reports, Carlyle’s executives act as “door-openers” and help seal future investments. But Asia Times goes further by saying that Carlyle’s forte is not only money-making – its executives also influence policy.

“It should be a deep cause for concern that a closely held company like Carlyle can simultaneously have directors and advisers that are doing business and making money and also advising the president of the United States,” says Peter Eisner, managing director of the Center for Public Integrity, a Washington think tank. “The problem comes when private business and public policy blend together. What hat is former president Bush wearing when he tells Crown Prince Abdullah not to worry about U.S. policy in the MiddleEast?”

A similar question might as well be asked of former president Ramos. Is there, for instance, a possible conflict of interest with the former general wearing two hats – as Arroyo’s special envoy for investment opportunities (and, hence, is an extension of the presidential office) and as a Carlyle adviser? Bulatlat.com

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