privatization
THIEVES IN GOVERNMENT
By Ray L. Junia, Publisher
THIEVES continue to steal the future of this country.
Nothing can be more unreal than the government claim of economic gains trumpeted by Malacañang spin masters as the best in our part of the world.
The latest gesture of courtesy by an honored guest to his host, a World Bank top official saying the Philippines is on its way to become Asia’s economic tiger, made the headlines in our national media. This made us laugh. This WB seer is either the worst prophet or best in PR that envoys are trained to be.
Motoo Konishi, WB country director for the Philippines, cited macroeconomic strength of the economy for his trust in our future. He fails to see the sick trees inside what appears to be a beautiful forest. This is unfortunate as we expect bankers to be more forthright and honest and if they cannot be honest they better just shut up.
Tail ender
The Philippines is doomed to become tail ender in the race for economic gains in Asia if not the world. It is our destiny to be always poor. We have our reasons to believe so.
Corruption is the root cause of the country’s economic miseries. Cost of living, driven by high cost of basic necessities, is too high, seventy percent of the population has been declared poor.
Stealing from government coffers has not abated, even got worse with the President illegally spending Php177 Billion on DAP from the national budget. To think that other agencies are victims of the same thievery that ultimately ends up with the people suffering.
This thievery and corruption is the first reason responsible investors are not coming in and may even be packing up.
Latest report from the Philippine Statistics Authority on the foreign investments (FI) shows a sharp decline in the first quarter of 2014 compared to same period last year.
In the first quarter of 2014, FIs approved by seven investment promotion agencies amounted to Php37.4 Billion. This is 25.6 percent lower than the take in the same period last year. In 2013, FIs were Php50.3 Billion.
FDIs tell the story
On foreign direct investments (FDI), the Philippines is the tail ender, far way below the second lowest.
The average take by the country on FDIs between 2002 and 2012 was US$2.7Billion, the lowest while Singapore, a city state, got the highest at US$52.8Billion. Vietnam got second lowest with US$8.5B, better by over US$5B.
Even the numbers on FDIs in relation to the Gross Domestic Product (GDP) can cause investors to shy away from us. In the first two years of the Aquino administration, we registered again the lowest in ASEAN countries.
In 2010, net FDI was 0.7 percent of GDP and this declined to 0.6 percent in the following year, 2011. Compared with neighbor countries our net FDI was the worst and almost sick situation. Our neighbors did much better: Singapore 25.1%, Vietnam 6.2%, Malaysia 4.3%, Thailand 2.8% and Indonesia 2.2%.
In the measure of impact of the FDI to population or per capita shares, it will tell a clearer picture of the cause of our economic woes. On this measure, our FDI per capita is lowest at US$ 13.3 while Singapore registered the highest at US$ 12,347.00.
These figures covering the period ended 2011. Three years after, when poverty incidence has gone up and prices of basic goods and services have hit the ceiling, this situation could be lot worse.
The first look at our numbers will not encourage serious investors to come in. discouragement will set in when they find out why we are the cellar. The reason is massive corruption that has worsened during the Aquino administration.
It’s corruption, stupid!
Pulling down interest and trust by foreign investors in our country and national leadership are several reasons: high cost of electricity, lack of infrastructure and worsening peace and order and corruption.
While corruption is last in the list of reasons, it is the principal cause of reasons the country is losing the trust of investors.
The cost of electricity in the Philippines being highest in Asia and second highest in the world can be traced to massive corruption in the highest offices of the land, from Malacañang to Congress, down to the Energy Regulatory Commission (ERC).
On infrastructure, the national leadership has turned over this responsibility to the private sector. From supply of power, to supply of water, to use of roads, to building of transport, and airports, these are all now being given out to private investors.
It’s rape!
Our national leaders call this Public-Private Partnership or PPP. This is one marriage that was intended to legitimize rape.
How else would one describe a situation like what the Filipinos are going through now. Before privatization, cost of electricity was one of the lowest in Asia, roads were free to use, cost of water was affordable and cost of living allowed free money to spend outside of the essentials.
The national economy is now controlled by forty families. Eighty percent of national wealth is owned by 10 percent of the population. Ninety percent share the remaining 20 percent of national wealth. This situation has led to daily “rape” of every poor Filipino’s right to a decent living.
Now we have to pay for use of highways we call toll roads. The national leadership intentionally stopped building big roads to the big city to justify entry of toll roads.
Planned robbery
What happened to cost of electricity and cost in use of roads are examples of well planned grand robbery. Government neglected building new power stations while neglecting national roads, stirring consumers to demand for better services. Privatization became the only solution, offering lower cost that never happened and, worse, cost doubled if not tripled.
Government leaders said privatization saves the government of funding services that are obligations of government. These government duties are supposed to be supported by our taxes. This cost transfer led to savings that allowed Malacañang to “steal” Php177 Billion for DAP and tens of billions for PDAF.
Theft came from many points: at the privatization arrangement when investors would show interest and put his money where his mouth is. Second, at the national budget that would have been spent for these basic services given to the private group. This savings turns out be pork barrel of Malacañang, in the case of Aquino is Php177 Billion in two years, misappropriated and misspent.
Even when privatization became a solution to our infrastructure needs, still serious investors are saying the country is short of what are needed to gain their trust.
One leading complaint is our problem in communications. Even when Smart earns billions of pesos for Manny V. Pangilinan and Globe has multiplied several folds the billions of the Ayalas, the foreign groups are not still happy with our communications system.
Truth is not only the foreign investors are complaining but the locales are also complaining of being short changed by these telecom companies.
Privatization not free
Privatization is not free to the taxpayers. In 2012, President Aquino gave the DOTC Php8.6 Billion and the DPWH Php3 Billion for the preparation of business cases, pre-feasibility studies and feasibility studies for various PPP ventures.
In inviting private sector participation, the government waives many requirements that would have earned the national treasury billions of pesos. Of course these exemptions are always suspect to be products of under-the-table negotiations that line up the pockets of government executives and legislators.
The sum total of reasons this country will not move forward and bring economic relief to the poor is we have elected officials who serve the interests of their masters and not the interests of the people. We have national leaders who boldly steal, unmindful of constitution and laws, as if the public does not exist.
The “theft” of Php177 billion by Malacañang is just a symptom of a more serious malady. The effect of this disease is a society that will always be abused and used to enrich further enrich the billionaires and make new millionaires of those we trust to lead our government. This is because we have elected thieves to run our government.
PPP BAD FOR PH HEALTH
By Andrea Lim
The privatization of public hospitals under Aquino’s Public-Private Partnership (PPP) program makes it clear that the government is not concerned with developing the country’s health sector, which it considers a burden and not a service that needs to be improved.
Among the first PPP projects implemented in the health sector was the construction of a private Philippine Orthopedic Center inside the National Kidney Transplant Institute compound in Quezon City, which will replace the government-run POC in Banawe Street in the same city.
Aquino’s health secretary Enrique One declared that 72 public hospitals were subject to privatization, and defended the P5.69B budget allotted to privatize the POC to winning bidder Megawide Construction Corp.-World Citi Inc, saying that it will be used to build a 700-bed tertiary hospital within the NKTI compound.
The new POC will be called the Center for Bone and Joint Diseases, Trauma and Rehabilitation Medicine. Once it becomes operational, it will permit Henry Sy’s Megawide to allocate only 10% of its beds to impoverished patients, while the rest will be allocated to paying patients who will either be shelling out cash or paying through PhilHealth or other private insurance accounts.
Labor group Kilusang Mayo Uno (KMU) condemned the Aquino administration for its anti-poor program, saying that the privatization of health services is a “death sentence to workers and the poor.”
KMU Secretary-General Roger Saluta says that the privatization of the POC is the first step in the government’s abandonment of its responsibility to subsidize health services.
Selling out public hospitals to big capitalists is proof that the administration has decided to put the fate of its patients in the hands of private businesses that will certainly prioritize its profits over services.
Department of Health (DOH) Assistant Secretary Enrique Tayag claims that the new POC will still remain a ‘government hospital’ despite being part of the PPP program. However, the question is not whether it will remain a government hospital or not, but if health care will still remain accessible.
Aquino has made it evident that his real interest in privatizing public hospitals is to help big corporations gain more profits at the expense of sick Filipinos.
The Universal Declaration of Human Rights emphasized that healthcare is a human right and should be provided by the state.
The administration actually has the funds to modernize the country’s public hospitals, but instead these funds are going to the pork barrel of Aquino and other politicians, other sources of corruption, and payments for foreign debt.
EDITORIAL
Taken for a ride
The government may not realize it, but its privatization tack for toll roads raises more questions than answers in light of how motorists are taken for a ride.
In far north, commuters are raising hue and cry over how they are being shortchanged by a foreign-backed toll road operator, despite the prying eyes of the state-run Toll Regulatory Board (TRB).
A critical look at the numbers of Manila North Tollways Corp. (MNTC) betrays the supposedly socialized pricing policy of privatized public highways.
Pocketing profits at enormous levels smacks of callousness and corporate greed in the face of runaway inflation rate that has exacerbated a woeful life in the countryside.
Linking Manila to northern Luzon, the 94-km North Luzon Expressway typifies how contractors had turned privatization of infrastructure projects into a multi-billion pesos enterprise.
At the very least, the NLEX should serve as a benchmark, a moral compass for the government before selling off contracts to private parties.
Possible lessons range from how toll rates should be kept at a reasonable level, not beyond the means of ordinary wage earners who comprise the bulk of the daily commuters traversing through the expressway.
Not surprising why some corporate titans are locked in a bitter rivalry to corner the sale of profit-driven toll road contracts.
More than prestige, their ever-widening chase for greater wealth is also at stake.
Certainly, the proposed multi-billion pesos Cavite-Laguna Expressway would pose a challenge to those who frame its privatization, mindful of how it would affect the commuters’ daily routine –and the economic costs it would entail.
Bearing in mind the project’s multiplier effects, those at the helm of its proposed sale to the private sector must account for whatever consequence it would ensue later – adverse or favorable.
CONSPIRACY
By Miguel Raymundo
Yearly, the government allots billions of pesos in taxpayer’s money to build roads, but it’s the private contractors who are making a killing at public’s expense.
Take the 94-km North Luzon Diversion Road, built in 1996 by the government which has fattened the pockets of its new owners, Indonesian conglomerate Salim Group.
Renamed North Luzon Expressway, the project has emerged as a cash cow of listed Metro Pacific Tollways Corp. (MPTC), the group’s infrastructure unit in the Philippines.
Last year alone, the MPTC saw profit bursting at the seams, surging sharply, thanks – or no thanks – to the government’s benevolence in allowing with impunity the company to jack up its toll rates amid mounting protests from motorists.
Buoyed by robust revenues, the Salim firm even went to the extent of proposing to stretch its franchise to cover the lucrative Manila-Subic-Clark-Tarlac expressway under a 50-50 revenue sharing deal with the government.
Bottomline
But the proposal hardly took off the ground, shot down in no time at all by a government wizened to the profiteering ways of private contractors.
Typical of its insensitivity to public welfare, the state-run Toll Regulatory Board allows a toll road operator every two years to raise its rates without the need for the agency’s prior approval.
Cashing in on a hefty traffic volume, the MPTC’s bottomline, up by a hefty 32 percent to P2.784 billion year-on-year, only showed how the government’s infrastructure program has turned out to be big business for the private contractors.
In short, a conspiracy exists between government and the private contractors by cashing in on the commuters’ gullibility to take any toll rate increase without raising a whimper.
Admittedly, the privatization of public utilities only leads to huge profits for big foreign and local corporations – and, effectively, widen rich-poor gap.
Other than TRB’s automatic approval of any toll rate increase every two years to allow operators a fair return on their investments, another contentious issue is the 12 percent value-added tax on toll approved by the Supreme Court which has been passed on by operators to the already financially burdened commuters.
Benchmark
Ultimately, the country’s public roads and highways should be taken over by the government to prevent corporations from increasing their profits at public’s expense.
The toll road operator’s wallowing in profits amid complaints of rising rates could have provided a benchmark, a caution for the government in tempering privatization of its public infrastructure projects.
But that appears not to be the case as more and more projects are up for grabs, ranging from toll roads to ports, airports, to the highest bidders in the private sector.
Apparently, profitability is key reason why there’s a mad rush among the country’s corporate titans to bid for the proposed P35.42 billion, 44.6-km Cavite-Laguna Expressway (Calex).
Auctioned off by the Department of Public Works and Highways (DPWH), the project has attracted four qualified bidders, including powerhouse San Miguel Corp. (SMC).
Best Deal
Jockeying for the highly lucrative contract is so intense that the Salim Group has sought SMC’s disqualification for allegedly submitting a non-compliant bid.
The Indonesian group has argued that SMC’s bid did not contain a valid bid security, a bond that protects the government in case a winning bidder decides not to proceed with the project.
But SMC, which has adopted infrastructure as an integral part of its core businesses, has disputed its rival’s contention.
“We are compliant. We have a very competitive bid and we are confident we can give government the best deal for the benefit of the taxpayers and the country,” it says in a statement.
Irked over the rivals’ raising of petty issues, the conglomerate admonished them not to waste energy pulling each other down, saying “we want our countrymen to get the best price from several, not a few bidders.”
Cavite-Laguna
Other bidders expected to give competitors a run for their money are the joint venture of Ayala Corp. and Aboitiz Group and Malaysian infrastructure firm MTD Bhd.
Part of the government’s public-private partnership (PPP) program, the project starts from Kawit, Cavite, and ends at the Mamplasan interchange of the South Luzon Expressway in Biñan, Laguna.
Based on DPWH’s terms of reference, private investors will finance, design, construct, operate and maintain the expressway that will connect Cavite and Laguna directly, greatly reducing travel time between the two provinces.
The two highly industrialized and urbanized provinces are home to hundreds of international and multinational electronic, semiconductor, automotive and manufacturing companies, in addition to residential developments.
With infrastructure deemed as a key component of economic growth, the government is projected to invest about P750 Billion for projects between 2011 and 2016.
Budget
Separately, the Department of Budget and Management (DBM) is also proposing about P403 billion in infrastructure projects in 2014 to boost the country’s competitiveness, spur investments, create jobs and improve the country’s economy.
The budget outlay would result in a five percent infrastructure spending in relation to gross domestic product (GDP) ratio and increase revenue effort to 17.1 percent by the year 2016.
But somehow, the government has rationalized what it says is the essential role of the private sector as the main engine for national growth and development.
Under the PPP, the government will provide incentives to stimulate private resources for financing the construction, operation and maintenance of infrastructure projects.
To a large extent, the government is even willing, on a project basis, to protect investors from certain regulatory risks such as court orders or decisions which prevent them from adjusting tariffs to contractually agreed levels.
Risks and Regulations
Such regulatory risk insurance could take the form of make-up payments from the government to PPP investors, other guaranteed payments, and adjustments to contract terms.
The specifics of the type of protection to be offered by the government, and the mechanisms through which such protection will be offered will be part of the contract terms for each project. Such protection will only be offered for solicited projects which undergo a competitive bidding process.
But certain advocacy groups had criticized the PPP, saying the public is being held hostage by private corporations whose overriding purpose is only to amass profits as much as possible.
In effect, the responsibility to build roads is being handed over by the government to private concessionaires who are only too eager to squeeze money from the financially depressed people.
OpinYon - The Philippines' first and only weekly opinion paper. 
On last week’s cover story ‘Nationalize Power Industry’ (Vol. 4 No. 40/ June 2-8, 2014)
Posted on
Allan Reyes: Nationalization=Crony Capitalism.
Arnel Endrinal: Sometimes funny about people who want nationalization of industries… They are the same people who say government is very corrupt and inefficient yet often they want government to run everything.
Anders Juhl Jensen: Allan Reyes, nationalization is bad, but it is not crony capitalism. How can it be? The debate is destroyed, when we use terms wrongly. It renders the term crony capitalism meaningless, if used to cover every thing we don’t like. If we are to fight crony capitalism, we need to understand precisely what is crony capitalism. The first step is to differentiate it from other phenomena. The power industry is a complex issue. A state run power sector has problems with resource utilization etc., privatization has big problems with corruption and crony capitalism, nationalization of private power companies has sinister problems concerning property rights and concealed political power struggle etc, unregulated private power sector will have huge problems with monopoly and collusion. There is no perfect way to organize the power sector. No simple answers or solutions.
Trevor Bailey: There is a solution, and it is a mix, some parts are managed by the government and others are privately owned and operated. It is again just a matter of thinking outside the box. For example the infrastructure which carries the power from source to the delivery points is a government managed network, but the supply to the consumers is not, it can be competitive. The various sources can be privately owned as well or PPP. The idea is the suppliers buy load capacity on the network, the company’s selling to the end user buy load from the suppliers, and pay a fee to the government for using their network to deliver it. You could have numerous companies in the retail market competing for the consumer dollar, the suppliers are competing to get the retailers to buy from them, all the government does is provide the “highway” to deliver it. It is then a matter of who owns the meter box at each house, change retailer, you get your meter changed.
Steven Egay: I think one solution is that government should maintain control of the NGCP (not 100% just controlling share). So that government have more leeway in power distribution instead of being controlled by some private concerns. And at the same time open up investments in power generation to as many players as possible. This way the supply availability and costs are addressed. This will work if the power distribution sector does not influence the power generation companies which is a big possibility if NGCP is privately controlled.
Trevor Bailey: Yes I visualize it like agriculture. A farmer grows his crop, he uses a government owned road to drive his truck to the wholesale market, once there he sells it to whoever retailer gives him the best price. The same works with water and telcos, it levels the playing field and generally keeps a lid on costs.
Anders Juhl Jensen: Trevor Bailey, in North Europe we have the Nord pool spot market. It works pretty good. Power producers will bid in according to their marginal cost, (except wind power that will just flood the market whenever the wind blows). The only problem is that you cannot get people to invest in new capital intensive power plants such as nuclear or wind farms, unless you get a subsidy, which will basically pay the capital cost (http://www.nordpoolspot.com)
Trevor Bailey: You do not say what the infrastructural mix is, in the places I am familiar with the producers are a mix of private, PPP and government. Demand drives construction. Often the government is the one who builds, but once established will sell off into PPP with the private company providing the management and maintenance and the government the asset, the Private part does not perform, the government finds a new manager.
Trevor Bailey: It is kind of funny, everyone wants the cash flow, but no one wants to invest the capital.
Anders Juhl Jensen: If government builds and then sells, you will have the problem with corruption and rigged bids.
Trevor Bailey: In the cases I am familiar with they register a State owned Corporation, then sell shares. Almost using a co-operative concept, preference is given to the individual, and what is not sold on the open market is then offered into the corporate market. They seldom let more than 49 percent go however.
(Courtesy of Get Real Philippines Community Facebook Page)
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This entry was posted in articles and tagged commentary, crony capitalism, Government, Philippines, PPP, privatization.