Privatization
FIRST PERSON - Alex Magno (The Philippine Star) - January 28, 2020 - 12:00am

A word has to be said about the merits of privatization amidst all the noise we hear about “onerous” contracts.

In the nineties, all our chips were down. Barely climbing out of the debt crisis of the eighties, we had to make do with astronomical interest rates and restrictive austerity measures.

From the debt crisis of the mid-eighties to the Asian financial crisis of the late nineties, government had scarcely enough to meet overhead costs. There was no money to invest in basic infrastructure to make our economy competitive. Public services – from education and health to mass transport to water distribution – were crumbling.

These were, for those who remember, miserable times.

We began the nineties with electricity rationed through rotating brownouts. Only two-thirds of customers received any water, and even then for only a few hours daily.

There is no way we could grow the economy if we did not have enough power supplies and power costs were among the highest in Asia. With no long-term investments, our construction industry was stagnant and the housing shortage ballooned. With currency volatility, the only secure sector to invest in was retail.

The only way out of this hole was to privatize. But to execute that properly, government had to yield sweeteners to induce the international investment community to participate.

We solved the power crisis eventually but at the price of take-or-pay provisions that people quibbled about only when electricity supply was sufficient. We eventually worked down these provisions through the life spans of the generation contracts.

We achieved full water distribution in the metropolitan area only after we privatized the distribution business. During the time this happened, commercial interest rates were at 14 percent. A 12 percent return on investments seemed, at that time, completely reasonable.

Today, with commercial rates under 7 percent, the contracted returns might seem “onerous.” But no one would have staked huge sums in the nineties without robust returns.

One by one, we rebuilt the foundations for economic growth through private sector participation. Today, however, those who risked investing while the times were tough have become the targets for vilification.

The LRT-1, which has been privatized, is now the best performing of the three light rail lines operating. They have less breakdowns, better service and enjoy more investments, including in modernizing the toll system.

Compare this with the quality of service at the MRT-3. This commuter train line combines the worst of all possible worlds: it is privately owned but managed by government. It became the target for fund raising by the former ruling party. Now the line is barely serviceable to the detriment of the commuting public.

The LRT-2, entirely government owned and managed eventually succumbed to bad maintenance. Several stations remain out of service because apparently the transformer oil was not replaced on schedule.

We can always renegotiate the terms of privatization contracts – but not in an atmosphere of vilification. The context of the contracts must be taken into account.

Trolls

We have become a nation of trolls, it seems. Trolls are those despicable creatures of cyberspace who are always quick to find fault in everything, hiding behind anonymity.

When the House of Representatives resumed sessions on Jan. 22, it was decided that the chamber convenes in Batangas City as a committee of the whole. Taal Volcano just threw up a large cloud of ash and over a hundred thousand were in evacuation centers.

Taking the session out on the road was unprecedented. Speaker Alan Peter Cayetano thought that meeting in Batangas would be a great show of solidarity and sympathy for the victims of the natural calamity. He thought the House must “listen to the first responders, listen to those directly affected” by the eruption.

Bringing the session closer to the disaster zone might help underscore the urgency of a legislative response to the calamity. The chamber after all prided itself as the House of the People.

Not everyone agreed with holding the session outside the comfortable confines of the Batasang Pambansa. The trolls were out in force, criticizing the Batangas session as a form of grandstanding. They claimed holding the session there would disrupt the relief operations in the disaster area.

 A total of 204 congressmen turned up for the session in Batangas, impervious to the inconvenience of assembling in the beleaguered province. The assembly did not hamper relief work and the session proved to be a productive one.

In that session, the House adopted two resolutions. HR 655 urged the immediate release of funds for the air, relief, resettlement, rehabilitation and livelihood programs in the calamity zone. HR 662 supported the commitment of the House to work with the concerned government agencies and pass a supplemental budget to ensure a comprehensive response to the natural disaster.

Speaker Cayetano assured the full support of the chamber for the President’s request for a P30 billion supplemental budget. In addition, the congressmen informally agreed to deploy the collective nationwide influence of the chamber’s 300 members to help mobilize support for the stricken region.

Cayetano committed swift approval of the measure creating a Department of Disaster Resilience. The House committee on appropriations approved the funding provisions for setting up this agency, considering the possibility natural calamities could scale up because of climate change.

The Batangas session deeply impressed local officials of the province and was appreciated by the local communities directly affected by the eruption. It was, for them, a touching gesture of support.

Meanwhile, we have yet to hear from that other legislative chamber what their members are doing to help rebuild Batangas.

PRIVATIZATION
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