Privatization

The ineptness and corruption of government has made the idea of privatizing some essential services attractive. I am old enough to remember how bad our water services in Metro Manila had been before the private sector took over.

I had to buy a pump and a water tank, otherwise, we would have to do laundry in the wee hours of the morning when water was available if we were lucky.

NAWASA and its successor MWSS, the government agencies responsible for water distribution, charged an exorbitant rate to cover their losses due to inefficiency and corruption. When Ayala took over the service in our zone, our water rates went down significantly and we actually got water out of our faucets at all times of the day.

But some privatization efforts, like that of the national power grid, turned out to go against the national interest.

The grid was privatized because the government did not have the finances to invest in modernizing this vital infrastructure. But the NGCP consortium has been slow in carrying out improvements in the grid even if their capex is passed on to power consumers.

Indeed, the NGCP has been earning tons of money. Sen. Risa Hontiveros said NGCP has paid its shareholders P187.8 billion in dividends over the last 10 years. This has already exceeded the P168.9 billion total amount of concession fees the government should realize until 2034.

And it is not a real privatization. A Chinese government company is a major stockholder and it controls the technical aspects of operations. That sounds like a real national security risk.

Going back to the New Year’s air control fiasco, there are renewed calls to privatize airport management. Of course, the fiasco was not a NAIA problem, but a CAAP problem. A privately managed NAIA would not have been able to avoid the consequences of a failure by the government-run agency responsible for air traffic control.

Interestingly, in Mactan International Airport, which is privately managed, vital facilities like the Instrument Landing System or ILS are still in the hands of a government agency, the Mactan Cebu International Airport Authority.

Unfortunately, this government agency, which has become redundant after Mactan airport services were privatized, has reportedly failed to recalibrate the ILS and an accident may just happen because of this neglect.

Putting airports under private management is now appropriate. Airports today are like malls. The best experts in mall management are in the private sector.

Government is just milking NAIA, forcing it to remit profits to the national government. NAIA should use its earnings to improve its facilities and service delivery. It has been operating beyond its rated capacity in terms of numbers of flights and passengers served. Yet, it is unable to keep up with the increased requirements.

Privatizing CAAP is another thing altogether. CAAP has many functions, the most basic of which is regulating the licensing of airline pilots, mechanics and undertaking accident investigation. That should remain the government’s realm.

CAAP operates airports all over the country. CAAP’s airport operations should be privatized. A private operator will be quicker to react to urgent needs and new market demands.

CAAP also manages air traffic control. There are strong arguments for and against keeping that in government hands. There are those who say managing our skies has strong national security implications, so it is best served by a government-run institution.

On the other hand, CAAP is unable to quickly buy spare parts for equipment, hire or keep vital trained personnel and insulate the institution from incompetent political appointees. Privatization may protect the national interest better.

Indeed, CAAP has become a formal and informal milking cow of government. It had been ordered to remit to the National Treasury more than what it earns from operations. It reportedly had to borrow from the Land Bank at one point, so it could pay its staff.

Privatized air traffic control in private hands is nothing new. Canada privatized air traffic control by allowing a non-stock, non-profit entity, NavCanada to assume the responsibility. The Canadian experience was good, but it is not immune to glitches like what happened the other week shortly after the US had to stop all flights when a 30-year-old computer system developed a problem. Still, the Canadian experience is worth looking at.

An article in The Air & Space Lawyer, Volume 30, No. 2, 2017, by the American Bar Association observed:

“Ever since NAV Canada assumed responsibility for ANS operations from the federal government, it has increased the pace of technological modernization, dramatically improved the system’s efficiency and productivity, and achieved a one-third reduction in user fees. Much of this success can be attributed to the new corporate structure and its broad stakeholder representation model, which ensures that the interests of all stakeholders are considered.

“In addition, the integration of management … into one single management entity has significantly reduced administrative overhead, increased flexibility, and reduced unnecessary bureaucratic requirements.”

Our politicians do not want to privatize CAAP because this removes a government agency from their clutches. But taking politics away from this very technical agency will improve air travel safety in the country.

This very vital function is facing serious challenges as air travel demand outpaces the ability of the existing system to expand capacity. We are losing trained air traffic controllers and the ones we have are overworked and underpaid. We could be facing a disaster in the making due to physical fatigue and low morale.

An article in philippineflightnetwork.com points out that: “The best way to address this issue is to remove the Air Traffic Control system out of the hands of government…”

The article suggests a system where “fees for air traffic control services would be paid directly by customers to a new self-sustaining Air Traffic Control organization. This would enable revenue to grow at a consistent pace with increased flight activity.

“In addition, commercialization would also address management problems such as the labor shortage, enabling a new organization to attract the best skilled labor necessary to adequately satisfy the demands of the industry.”

Privatizing airport operations, including air traffic control, deserves serious consideration. Our lives may actually depend on it.

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco