POSTSCRIPT / September 23, 2004 / Thursday


Philippine STAR Columnist

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Somebody has to lead in solving fiscal crisis

SLOW DRAG: Why is the cash-strapped government not drawing the $120-million performance bond posted by Maynilad Water Services Inc. now that it has given up its concession on half of the water and sewerage service in Metro Manila?

The Water for the People Network raised this question in light of (1) the recent Supreme Court decision removing all legal bars to government’s confiscating the bond and (2) government’s own precarious fiscal situation.

The network also questioned Maynilad’s collecting from its customers P8.28 per cubic meter in foreign currency differential adjustment (FCDA) and accelerated extraordinary price adjustment (AEPA) that are allowed only if the water firm has been paying concession fees.

The people’s network said Maynilad’s unpaid concession fees had grown to P8.5 billion, while it continued to collect an estimated P7 million daily from consumers.

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COURT IN CONTROL: The explanation seems to be that the Maynilad case is sub judice (for those who believe in the sub judice rule) and the parties are thus restrained from making moves that would disturb the status quo .

We checked with the Manila Waterworks and Sewerage System and learned that even while the dispute had been elevated to arbitration, Maynilad filed a case with the Quezon City Regional Trial Court for rehabilitation (milder term for near-bankruptcy).

The RTC ordered the MWSS to first submit a business plan to ensure there would be no service interruption in the Maynilad area whatever happens. The court also ordered that water fees being collected by Maynilad be placed in escrow with it.

The MWSS has just submitted the business plan as prepared by the Department of Finance. As soon as the RTC decides, the MWSS said it should be able to draw on Maynilad’s $120-million performance bond plus the water fees in escrow with the court.

Anybody who wants to delay collection of the bond and the escrow fund would, I guess, have to work out a delay in the court’s handing down a decision.

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FRENCH CONNECTION: From the very beginning, Maynilad, which is controlled by the Lopez holding firm Benpres, was not earning enough to be able to pay its concession fees and make a profit.

Maynilad blamed the financial disaster on the depreciation of the peso vis-à-vis the US dollar (note that MWSS loans assumed by the concessionaires were in dollars) and the refusal of the government to allow a water rate increase.

To win the concession, Benpres had tied up with an experienced French water-services firm. But sources said Benpres’ French partners are now pulling strings and maneuvering to take over the concession.

(The other concessionaire of the MWSS area is Manila Water, which is controlled by the Ayala group. Manila Water is doing well financially and is not beset by as many service-related complaints from consumers.)

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ADDED DEFICIT BURDEN: The people’s network blamed government indecision for the Maynilad mess that contributes to aggravating the fiscal crisis gripping the country.

It pointed out that Maynilad had agreed to service 90 percent of MWSS debts through payment of concession fees as part of a privatization deal. But MWSS is now forced to carry this burden through more foreign borrowings.

In 2003, MWSS borrowed $190 million and plans to borrow $230 million this year to cover for maturing obligations and unpaid concession fees of Maynilad.

According to the network, from a zero deficit in 2000, MWSS posted P5.6 billion in deficit for 2001 and 2002. For 2003 and 2004, MWSS is expected to incur a deficit of P7.7 billion.

The MWSS deficit, like the overdue loans of government-controlled corporations enjoying sovereign guarantee, adds to the consolidated public sector deficit. Last year, this deficit reached an all-time high of P244.6 billion.

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DELIVER IT 1-2-3: Maybe I was not paying attention or I happened to be absent whenever President Arroyo talked about how she plans to solve the Debt & Deficit crisis that she and a number of economists said could push the country off the cliff in two years.

Or maybe, like most people distracted by having to make a living, I simply cannot cope with the big words and numbers being thrown at us at random by both government critics and the government apologists competing for attention.

All this while, I have been waiting for something as simple as this 1-2-3:

  1. A consolidated list showing how much we need, for what obligation (unbundled figures, please), and at what date the payment is due. Total figures are needed.
  2. A revenue plan outlining how the President proposes to raise the money needed, say from improved collections, compromises and amnesty, new or higher taxes, sale of government property, and the like. Give the totals to be raised from this plan.
  3. An expense plan telling us how we can save money, and by how much, by cutting on this and that specific expense. Give us total savings per action plan, please.

Give it straight and cut out the embroidery. Some of us may then want to compare the totals of Nos. 2 and 3 with the total in No. 1 above, and proceed from there.

When all the figures are in, it might even turn out that we do not need new taxes to carry the nation over the hump. We will not know until we make a detailed count.

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SCATTERED SALIVA: Maybe all of the three items above have been discussed and dissected to the bone at some time or another by the President, her Cabinet officials, even her critics, her defenders, and everybody else crowding around the mike.

That is just the trouble. It is all saliva scattered in the wind.

It seems everybody, including the President!, is talking at the same time. Or is talking on only a small part of the problem or only a part of the solution. Or is questioning what somebody else has said. Or is simply blabbering to project an illusion of thought or a semblance of activity.

The President should gather her scattered notes, take a deep breath, grab the mike and proceed to present her Recovery Plan — if any — in a clear, simple and comprehensive 1-2-3 fashion.

That should not be too difficult if she and/or her speechwriters have a total grasp of the situation.

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LEADER NEEDED: Until people understand exactly how the President plans to get us out of the hole, it would be difficult to make them listen and cooperate, especially if that would entail making personal sacrifice.

Because the President has failed to take the lead, as she should, in solving the crisis, there is a proliferation of approaches being offered from various directions. That compounds the confusion.

Recently, there was a congressman who stood up to present a Road Map to Recovery that he himself drew up. We grant the lawmaker good faith and we assume that he had studied the problem in depth to be able to draw a systematic approach to the problem.

He must have been emboldened to plot his own master plan because of the absence of a Road Map from the President herself.

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SENATE INITIATIVE: In the Senate, Majority Leader Francis Pangilinan said he and several colleagues have set a two-day planning session during the congressional recess to study the situation in earnest and come up with a comprehensive solution.

They might just beat Malacanang to it. That could be ironic, since Ms Arroyo has been president more than three years and must have seen at least the outline of the incredible hulk as it grew before her eyes while she was in the Palace.

Pangilinan said: “We are starting to comprehensively outline the problems. Next in line would be the bold and radical solutions. We need to move forward and take on the role of problem-solvers. We’re starting to diagnose the ailments so we can prioritize the cure. These may be painful cures but these are things we need to administer.”

He offered a “laundry list” of urgent issues that require immediate legislative action. These are: (1) education; (2) health (preventive health, immunization, maternal and child health care, killer diseases), (3) fiscal reform (efficient tax collection); (4) financial reform (5) peace, security and law and order; (6) job and income generation (investments, agricultural reform, tourism, infrastructure, energy).

As sure as night follows day, there will be a similar move in the more populous House of Representatives to fill the leadership vacuum in the matter of attacking the fiscal crisis.

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(First published in the Philippine STAR of September 23, 2004)

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