POSTSCRIPT / August 28, 2011 / Sunday
By FEDERICO D. PASCUAL JR.
Philippine STAR Columnist
BOT, PPP concepts in need of updating
SUBIC BAY — A number of foreign investors claim that they find unattractive the Public-Private Partnership program of the Aquino administration.
On the practical level, this means – if their hesitation is for real – that they do not see the present PPP terms conducive to making oodles of money.
To illustrate their point, they add that until now not a single big ticket PPP project has snagged an investor.
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BOT UPDATE: The technical working group of the House public works and highways committee, meanwhile, has been reviewing for updating the Build-Operate-Transfer Law (RA 7718), which is the only law governing all PPP projects.
Some businessmen and their legislator friends say they find RA7718 in dire need of an overdue overhaul. Passed in 1989, its financial assumptions are based on the situation during those times.
After the global financial crisis that is still rocking the developed countries, which are the source of capital and investments in PPP, that situation has drastically changed. For example, the BOT law sets the rate of return at a maximum of 12 percent.
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PLUS & MINUS: In 1989, US interest rates hovered at 8-9.5 percent, implying that as an alternative investment, private entities could go into PPP and make a spread of about 2.5-4 percent. Today it stands at .25 percent, a quarter of 1 percent!
Without amendments, PPP offers private investors too high a return, about 11.75 percent! The law further guarantees this rate of return to investors.
There are downsides to this. First, investors are free to charge the public rates to meet that 12-percent return. Second, if they recoup their investment too soon, they can divest (and laugh all the way to the bank), leaving the government to find another investor, which will take time; and in the meanwhile maintain the infrastructure, which they may not be tooled to do.
On the upside, this at least ensures that government earns from its assets, from private investments in exchange for the right to build (or lease) and operate infrastructure.
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PPP SPIRIT: It is baffling therefore that the administration was considering earlier a scheme to operate both the MRT and the LRT which involved the government’s paying the winning operator P14 billion over four years.
Nagpatayo ka na ng bahay, binabayaran mo pa para gamitin at pagkakitaan! DOTC Secretary Mar Roxas apparently saw this, pointing out that instead of earning from privatized government resources, it would be paying out a huge amount at the public’s expense.
That does not seem to be private-led development as it runs counter to the spirit and intent of PPP! Under PPP, private investors will have to put up or match resources to aid government in establishing big ticket infrastructure programs for a reasonable return.
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INTELLIGENCE WHAT?: Muntinlupa Rep. Rodolfo Biazon raised a valid point when he asked during a budget hearing why the Office of the President was being given P600 million in intelligence funds and the armed forces only P133 million and the police P270 million. Biazon, a former senator, general and armed forces chief, expressed surprise that the military, the principal security agency of the government, seems to have been relegated to the bottom in the allocation of intelligence money. He also noted that “during the first six months of 2010 (under the Arroyo administration), the Philippine Charity Sweepstakes Office spent P180 million in intelligence funds, nearly P50 million more than what the armed forces will have for the entire year next year.”* * *
DIVERSION: Executive Secretary Paquito Ochoa Jr., defending the President’s budget, explained that the outlays in the AFP budget were submitted by the armed forces, as if to disclaim any responsibility for the figures. In Malacañang, deputy presidential spokesperson Abigail Valte also said the Palace was not about to give up its P600-million intelligence fund allocation. Much of the capital outlay, she said, will be spent on social services. It looked odd that Valte was saying that intelligence funds will be diverted to social services, which are already covered by another hefty allocation in the budget.* * *
FORMULA FOR GRAFT: To many of us plan folk, intelligence work and the funds for it properly belong to security agencies such as the military and the police. But these days, almost every agency in government has an “intelligence” fund. The label “intelligence” renders the money virtually exempt from the usual rigorous auditing scrutiny. Even under the vaunted “tuwid na daan” of the Aquino regime, that is a sure formula for wanton graft. If Malacañang needs intelligence or spying services (hopefully not targeting only its political foes), can it not just ask the military or the police to do the job after giving these security agencies ample funds for the purpose? The answer to that is that “intelligence” – whether in the previous or the present dispensation — is just a false cover for tons of taxpayers’ money being used for whatever the President wants, intelligent or not.* * *
HARASSMENT?: Some people at the National Printing Office are crying harassment after a blacklisted contractor filed cases against them at the Office of the Ombudsman.
They cite NPO director Emmanuel Andaya and six other officials, all of the bids and awards committee, as alleging that the cases filed by businessman Guillermo Sylianteng Jr. were “motivated by ill will.”
The NPO had blacklisted the Sylianteng company Ready Forms Inc. The firm was banned from participating in government printing projects after it submitted allegedly “falsified, or fictitious, documents of eligibility.”
The NPO officials said that from that time on, the complainant has been “vengeful,” filing cases with the Office of the Ombudsman and the Department of Justice.