POSTSCRIPT / July 18, 2002 / Thursday


Philippine STAR Columnist

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Corruption: Common political denominator?

INSIDER TRADING?: It’s hard to believe that Manuel V. Pangilinan, president/CEO of Philippine Long Distance Telephone Co., had engaged in insider trading, but here is this document from the HK bourse showing some unusual stock transactions of one Pangilinan Manuel Velez.

The Pangilinan in the exchange’s transaction report, copy of which we got from the Internet, was recorded to have bought on May 16, 2002, a total of 10,000 PLDT common shares at P445 and P442 per share.

This is curious because MVP (if he is the person on the transaction report) was an active participant in the April board meeting of First Pacific, where he is executive chairman, wherein First Pacific decided to sell its PLDT shares to the group of taipan John Gokongwei.

Pangilinan knew of the impending PLDT deal of Gokongwei with the Salim group controlling First Pacific. If he bought PLDT shares a few days after that board meeting, that could be insider trading, which we understand is a crime.

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LOOKS LOGICAL: Looking at the Salims’ decision to sell their shares in PLDT (and Fort Bonifacio), we see it as a logical move of businessmen caught in a tight situation.

A foreign shareholder in a public company (that’s First Pacific in PLDT) wishes to sell shares that have lost 2/3 of their value in four years without paying dividends. The shareholder has found a buyer who is more than happy to pay above market — P1,140 per share vs today’s P320 per share, or a premium of almost 300 percent — for the chance to assume control of the company whose shares are for sale and try to improve its fortunes.

The deal is good for the seller, the buyer, the company (of course, only if the buyer is successful but he surely will do his best, if he’s spending $616.6 million of his own cash). It’s also good for Fort Bonifacio where the values surely must have a better chance of being achieved with a seasoned developer than left with the foreign owner who cannot put more money into it.

Metro Pacific, First Pacific’s local arm, already defaulted on the “Larouge loan” of $105 million due December 2001, lent it by First Pacific through its subsidiary, Larouge BV.

As it stands, PLDT owes $3.4 billion as a group, of which $1.3 billion is due by 2004 for PLDT, and $400 million for Smart and others in the PLDT group. Shareholders can’t expect cash dividends for at least three more years. They have not received cash dividends since 1998, when First Pacific bought PLDT.

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MVP REALLY THAT GOOD?: All that stands in the way is a salaried manager, who has somehow managed to build a reputation as a go-go miracle worker. But if he really had accomplished so much, his employer would not be selling the company the manager is running.

Insiders in PLDT have told us that chairman Antonio O. Cojuangco had retained Bain & Co. as consultants to advise on streamlining and modernizing the telecommunications firm. That made it easier for Pangilinan, who simply had to carry out Bain’s work.

But still we cannot understand why the PLDT under Pangilinan’s supposed expert hand was not able to give the usual dividends for the past four years he has been running it.

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WHAT’S THE DIFFERENCE?: On governance, one basic item the Arroyo administration should work on fast is product differentiation. If a new product is not any different from, or better than. the rest, why would people buy it?

Is the Arroyo dispensation any different from, or better than, the Estrada administration? There is a creeping perception that it is not — at least in terms of official corruption.

Unfortunately for President Gloria Macapagal Arroyo, this perception was validated by the critical remarks last Monday of US Ambassador Frank Ricciardone before Manila-based foreign correspondents.

Once the impression sets in that the Arroyo administration is just as corrupt as the one(s) before it, true or not, GMA will lose the moral high ground, find difficulty governing and might just fumble in 2004.

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INSATIABLE LEECHES: There was actually nothing new in what Ricciardone said about corruption and related matters. His remarks hit the headlines because they were made by the ambassador of a supposedly friendly country before the public (media) instead of being conveyed, say, in a confidential note to Malacanang or his home office.

In fact, the foreign investors who he said were complaining about corruption have input the cost of corruption in their planning and costing. They do this all the time when they do business in countries where official corruption has been endemic.

The difference is that while there is also corruption in varying degrees among our neighbors, the cost of corruption over there is fixed. You pay off a minister or a general — or the Big Boss himself — and that’s it. He stays bought and sticks to the agreed price.

In this country, an investor’s problem does not end after he bribes an official or gives an advance on his commissions. The official and his runners, sometimes even his relatives, keep coming back for more. The costing becomes unpredictable, and corruption becomes a variable expense that is so hard to explain to the home office.

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AMEND B.O.T. LAW: President Arroyo grabbed Ricciardone’s mention of the courts to divert scrutiny of the Executive. Of course there is corruption in the judiciary, as there is corruption everywhere else, but it would be myopic to just look at “hoodlums in robes.”

She is asking Congress to amend the laws cramping legitimate business. She did not say it, but legal loopholes have always been used by all administrations, including the present, to extract bribes, commissions and such exactions from local and foreign businessmen.

We mentioned this point when we had the chance to talk to the President some time back. We specified the Build-Operate-Transfer (BOT) law that has been expanded by legislation and administrative discretions to net in more millions in less time for grafters.

When we suggested that the BOT law be amended to remove money-making loopholes inserted into it, she did not sound interested. Now, after Ricciardone’s remarks whipped a storm, she is suddenly asking for amendments.

The BOT law has become the cover of big-time grafters in government. Examine the defense of top officials charged with graft and such offenses – they are all saying that the law allowed what they did.

With that, do we leave the law’s rewriting to the same thieves who wrote it?

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INITIATIVE WITH HEAVY HAND: Merely reacting to every blast won’t do the President, or the country, any good. She should dictate the agenda and not merely react to what the media, the opposition and heavyweight diplomats throw into the arena.

She should take the initiative, and take it with a heavy hand, to be able to nip the developing perception that her administration is no different from the last one in terms of corruption.

How does she do it? There are obvious points and lines and areas around her where she can start a cleansing campaign with dramatic impact. She knows where to begin, but we sense that she still has to muster the will to do it whoever gets hurt.

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PAYING FOR CORRUPTION: Take the Skyway segment of the South Luzon Expressway that raised its toll last Tuesday by a hefty 15 percent without any explanation.

Up on the Skyway, from Villamor (Nichols) airbase to Bicutan some five kilometers away, the toll is now P75 (from P65), or P15 per kilometer, although no marked improvement has been introduced to the elevated road.

We’ve asked some Skyway personnel, including toll collectors, if their wages have gone up with the increased toll, and their answer was a big No! So where’s the additional exaction going?

Of course it goes to the operator, who must have spent a fortune during the Ramos administration getting what was thought to be a fat cash cow. We don’t blame the operator, who has to recover some “necessary business expense” placed conservatively at 30 percent of the project cost.

Are we motorists being made to pay for the high cost of corruption? The wonder of it is that we consent to it.

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(First published in the Philippine STAR of July 18, 2002)

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