DOTr, LTO captured by firms that they regulate – senators

The Land Transport Office came under fire from senators on three counts. First, the costly vehicle roadworthiness tests by select contractors. Second, delayed production of motorcycle registration plates. Third, the sudden imposition of specialized child seats in private cars.

All have been called “arbitrary,” “suspicious,” “shady.” They have a common thread: regulatory capture.

Regulatory capture is when the industry comes to control the regulator. Nobel laureate economist George Stigler coined the term in the 1970s while studying US trends. Regulated entities have a keen immediate interest in influencing regulators, whereas ordinary citizens are less inclined, he noted. Minority sectors win; the general public loses.

Sweet talk and aggressive lobbying are basic tools for regulatory capture. It can graduate into corruption. The law prohibits bribery, conflict of interest, undue favor especially to the unqualified, negligence and contracting that is grossly and manifestly disadvantageous to the government.

Notorious, for instance, was the National Food Authority’s grant in 2014 of rice import monopoly to big-time grains smuggler alias David Tan. When admins changed hands in 2016 so did the privilege – to a trader in Iloilo, till import liberalization killed it. Stinky too were the error-filled textbooks by a clique of favored publishers. Crusading educator Antonio Calipjo Go kept exposing them for two decades. Regulatory capture kills, as when the Armed Forces bought faulty bulletproof helmets, and the National Police substandard handcuffs from a fly-by-night supplier in the 2000s. That seller moved up to become the foremost fixer of congressional pork barrels, then down to prison.

Most tragic of regulatory captures are in maritime. Interisland ferries collide, run aground, go adrift, catch fire and sink. Dozens, sometimes thousands, perish in one blow. Reasons: loose licensing of crewmen, inspection of vessels and enforcement of load limits. Due to low sea travel during pandemic even in off-monsoon, there has been no major incident of late. Still the Department of Transportation must modernize shipping as decreed as far back as 1975.

About the Land Transport Office, also under DOTr, senators said:

• LTO’s aim of road safety was laudable in expanding emission testing to 72 other roadworthiness criteria. Yet despite having the funds, it delegated the motor vehicle inspection system to private operators. Accreditation was opaque. Thus was “created a favorable environment for an oligopoly where only very few players can enter and succeed.” Vehicle registrants suddenly were charged three-and-a-half times more for tests, then flunked and made to pay again.

DOTr was implicated in the “policy alteration” and “questionable evaluation process.” It even officially issued last Feb. 21 the press statement of the private operators’ association. Approved was the recommendation of public services committee head Senator Grace Poe for a graft investigation.

• On non-issuance of motorcycle plates, LTO and DOTr are repeating the sins of the past admin. In 2013 the DOTr contracted a blacklisted Filipino firm and its undercapitalized Dutch partner for P3.8-billion platemaking. Only a few were produced – late and substandard. (That was exposed in Gotcha, along with two other P3.8-billion scams, the MRT-3 non-maintenance and the faulty Dalian trains. Refer to book compilation below.)

Now a new P979-million contract hangs, as legalities blocked the favored plate maker. Yet the “swindle” continues of collecting fees for plates that never come, fumed Blue Ribbon committee head Senator Richard Gordon. LTO officials were held liable for graft in delegating motorcycle registration to manufacturers, assemblers, importers and distributors. “You allowed big businesses to devour your functions,” Gordon growled.

• On specialized car seats, the LTO’s aim also was lofty: child safety. But there was no prior info, despite DOTr and LTO’s yearlong rulemaking. Fines on violators were announced on the eve of enforcement date. Parents scrambled for age- and weight-suitable models. Prices quintupled to P60,000 apiece within days. Senators demanded to know which suppliers were being favored and for how much. President Duterte deferred the imposition.

Another DOTr adjunct, the Land Transport Franchising and Regulatory Board, often is accused of regulatory capture. In 2014 then-Metro Manila chairman now Senator Francis Tolentino denounced its exemption of truckers from licensing. In 2018 Rep. Jericho Nograles bared its bias for one ride-hailing service that led to the death of the sole competitor. Loose regulation of bus lines, taxis and tour coaches have been reported.

The ombudsman is mandated to probe and prosecute sleazy regulators. But the anti-corruption agency too can be remiss. Recently it dismissed charges for the P3.8-billion MRT-3 maintenance fiasco. Exonerated were the unqualified Filipino constructor, general merchandiser, agricultural supplier and plumber who allegedly dummied for a Korean railway firm. Complainant Bayan Muna secretary general Renato Reyes had pointed up the irregular alteration of terms during closed-door negotiations in 2015. The ombudsman ruled that the shoddy upkeep occurred in 2015-2017 after the contracting. DOTr said nothing.

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