Failure to deliver

Public-private partnerships (PPPs) are entered into by our government with the private sector primarily to develop vital infrastructure projects which the public sector would not be able to afford, much less manage and operate efficiently.

A recent report by the Commission on Audit on a company called PrimeWater Infrastructure Corp., which so far has entered into 30 joint ventures under the PPP program with local water districts, unfortunately has revealed that not all such partnerships necessarily redound to the benefit of the populace.

A COA report on PrimeWater’s JV with the Marilao Water District in Bulacan revealed that not all PPPs benefit the government and its constituents. For one, PrimeWater is averaging 36.12 percent non-revenue water as against the maximum acceptable NRW of 30 percent which means an income opportunity loss of P50.55 million for the local water district during the first year of the JVA. This of course had to be passed on to the customers.

It likewise pointed out PrimeWater’s failure to pay its franchise tax when prior to the takeover, the water district was punctual in its payments.

This failure to pay the tax was not isolated since another COA report on the Meycauayan Water District which also has a JV with PrimeWater revealed that the latter failed to pay P4.2 million worth of franchise taxes to the Bureau of Internal Revenue despite gross sales of P210 million.

From 159.2 million in 2017, Meycauyan’s assets dropped to P134.4 million in 2018. Total income declined to P63.8 million in 2018 from P205.3 million in 2017 due to increased leakage.

Meanwhile, residents of Lingayen have criticized the odor and turbidity of their water. Cabanatuan residents slammed PrimeWater for increasing tariffs by 12 percent despite a noticeable decline in water service. Camiling citizens reported 12-hour water service interruptions accompanied by a water bill increase, while Sorsogon locals lamented a lack of improvement in water services three years into its JVA with PrimeWater.

PrimeWater has promised under its different JV agreements to rehabilitate and upgrade water services by the respective water districts but has obviously failed.

Ill-advised

Last year, President Duterte issued Executive Order 58 merging the Home Guaranty Corp. (HGC) and the Philippine Export-Import Credit Agency (Philexim), with the latter as the surviving entity.

The said EO also transfers the guarantee functions, programs and funds of the Small Business Corp. (SBC) as well as the administration of the agricultural guarantee fund pool and the industrial guarantee and loan fund to Philexim and renames the latter as the Philippine Guarantee Corp.

Philexim, attached to the Department of Finance, guarantees foreign loans for development purposes. SBC, attached to the DTI, assists micro and small and medium enterprises (MSMEs) in the areas of finance, information services, training and marketing. Meanwhile, HGC, attached to the HUDCC, guarantees the payment of mortgages and loans for residential housing purposes.

According to the EO, the merger of HGC and Philexim is in the best interest of the state since this would result in economies of scale, removal of operational redundancies, among others.

To give Philexim a fresh start, the EO increases its authorized capital stock from P10 billion to P50 billion. Meanwhile, to clean up its balance sheet, Philexim will establish a subsidiary to manage its non-performing assets and outstanding loans.

Sounds good so far. But if HGC has been performing well financially and Philexim is seriously buried in debts and NPAs, then why allow Philexim to survive? In fact in 2018, HGC posted a net income of P2.19 billion versus P516.9 million in 2017. Its total assets stood at P36 billion as against liabilities of P26 billion. Why insist on retaining Philexim? Shouldn’t HGC be the surviving entity after the merger?

Both Philexim and HGC have their respective contractual obligations as well as guarantees that have been issued. What will happen to all these? Shouldn’t there be an honest-to-goodness audit to determine the extent of their obligations before they are all muddled up under this new merged entity?

Unfair competition

A bill granting a 25-year renewable energy distribution franchise to Solar Para sa Bayan Corp. (SPSB) is currently awaiting presidential action after both houses of Congress ratified the bicameral conference committee report on House Bill 8179 giving the company the license to establish and operate distributable power technologies and mini-grid systems throughout the country.

Last year, several lawmakers tried to block the bill’s approval claiming that it grants an unconstitutional super franchise to SPSB, adding that its provisions violate the EPIRA law. Surprisingly, during the plenary ratification, no one objected in the Lower House. In the Senate, senators Sherwin Gatchalian and Risa Hontiveros thumbed it down.

So how does the bill violate the EPIRA, which is supposed to act as a safeguard against monopolistic practices in the power sector? For one, the law prohibits any entity to generate, supply, and distribute power at the same time. Unfortunately, HB 8179 allows SPSB to do all of these simultaneously.

The EPIRA also limits a franchise’s area of operation, while SPSB is given license to operate anywhere in the country. Lawmakers have also pointed out that SPSB is not under the jurisdiction of the Energy Regulation Commission, that SPSB was granted automatic membership into the wholesale electricity spot market or WESM , where it may sell power below ERC-approved rates, and that it will not be bound to the obligations in service contracts and will be exempt from taxes and other industry fees.

How can there be free and fair competition if SPSB will be allowed to play under different set of rules?

Big shoes to fill 

When Ricky Vargas, who served as head of PLDT’s human resources group for many years and then as president of Maynilad, resigned as head of the Philippine Olympic Committee (POC), many were saddened.

A president of the POC who has the full backing of one of the country’s biggest and most successful business conglomerates, the Metro Pacific Group, and who was not a politician was good for the image and the future of the Philippine sports. Unfortunately, some good things never last.

Whoever will replace Ricky as POC head definitely has very big shoes to fill. But the hunt for a suitable replacement appears not that easy.

After Ricky’s resignation, POC chairman, Rep. Bambol Tolentino, called for the conduct of special elections since the vice-presidents were not eligible under the by-laws. However, a faction in the board moved to have 1st VP Joey Romasanta be recognized as president. Unfortunately, Romasanta is only VP for the national sports association for volleyball and the by-laws require the POC president or chairman must be an incumbent NSA president representing an Olympic sport.

 If and when the special elections push through, the POC would need a fresh start to regain its good stature not only in the local but the international sports community as well. In fact, the International Olympic Committee and the Olympic Council of Asia have already admonished the POC for the chaotic situation that the organization has found itself in. 

 A candidate that can clean up the POC should be the one running for president. Tolentino, who served as POC chairman when Vargas was still its president, may be the one that the POC needs.

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