October 23, 2015 BLOG
WHO’LL SAVE THE FILIPINOS FROM PRIVATIZATION???
It’s a sad storyline the Philippine ruling class inflicts on the Filipino people, played out often and wreaking havoc on the lives of Filipinos and their economy--but the tragedies and lessons are quickly forgotten.
It’s that recurrent story: Mainstream media trumpets government inefficiency and corruption while bestowing glowing praises on privatization and its promises. But, after privatization to the oligarchs, the companiescommit wanton abuse followed by operational collapse. Mainstream media, owned by the same oligarchs, cover up by obfuscation and corrupt oligarchy-controlled politicians sponsor measures to save these oligarch-masters’ thick hides.
The 1997 privatization of water services under Maynilad Water Services, Inc. was one such story. Set up by the Lopez family (of the infamous privatization-of-all-privatizations,Meralco) through holding company Benpres,it took control of the West Zone of Metro Manila’s water services. Three years later, under the dismal management of Rafael Alunan, and after failing to provide the services and improvements as promised, Mayniladsuffered currency losses due to the 1997 Asian Financial Crisis and went bankrupt.
Government later infused $31 million to assist the company and then took it back to have it re-bid. When it was awarded to D.M. Consunjiand Manny Pangilinan (a.k.a. the dummy fronting for Indonesia’s Salim Group), the Philippine government and taxpayers not only failed to recover the$31-million golden parachute, but on top of that also had to fork out another $31 million in interest payments for loans that the MWSS (Metropolitan Waterworks and Sewerage System) shouldered,owing toMaynilad’s unpaid concession fees. The Lopezes, thus, walked away without any scratch while the Filipino people all became poorer by $62 million in an instant.
Now it’s the MRT: $1.26-B (₱56-B) gov’t buyback from fattened “privateers”
The past week the DoTC (Department of Transportation and Communications) announced that it would obtain a ₱56-billion loan for the buyback of the MRT-3 project. In 1997 the B-O-T (Build-Operate-Transfer) commuter train line running from Taft to North EDSA was launched. Filipinos were given the impression that the private sector financed the whole thing costing $678 million. The truth was that these private “investors” shelled out only $190 million while it was government that borrowed $488 million, which it had since fully paid.
When the project was completed, government through DoTC leased and paid rent for the infrastructure and rolling stock from the Metro Rail Transit Corp.(MTRC) of the Ayalas, Sobrepeñas, Agustines, Camposes, and a few others. Thus, after 20 years, government and taxpayers paid the lucky company the following sums: ₱85 billion in rental payments;₱32 billion in state-guaranteed private sectorloans;₱20 billion for private sector taxes; and ₱10 billion for maintenance. As a result, these original private “investors” have earned at least 10 times their “investment.”
Under Gloria Arroyo, the MRT-3 infrastructure and rolling stock had begun to breakdown, but the worse was seen after the second year of the BS Aquino administration. By 2014, only 8 out of 48 carriages were in running condition while signaling equipment broke down on a daily basis at its worst point. New carriages were ordered from China; but even this the private investors tried to block. Then, a politically sourced maintenance contractor made the breakdowns much worse, slowing down the running speed of the trains tremendously.
Thisman-made catastrophe in the MRT’s operations was blamed on government’s management; Mar Roxas and mainstream media tried to sic the provincial peoples against Metro Manila MRT riders for the false charge of “unfair subsidy” (this as commuters’ fareshave left enough surplus profit for the MRT, despite government actually subsidizing the privateinvestors’ guaranteed profits); and the crisis was touted as the compelling reason for government’s“buyback”of the MRTC from the private investors.
How investment bankers, oligarchs, and corrupt politicians connive
It’s really a triumvirate of greed and evil of Wall Street bankers, the oligarchy, and corrupt politicians that rules this land with the support of “civil society” and the neoliberal academic community that have called for “privatization, liberalization and deregulation” that all came with the anti-State, Western-oriented, bourgeois eliteEdsa Uno revolt.
For all the imperfections of the 21-year Marcos regime, it had some of the basic qualities of many post-World War II Third World governments that were inspired by the 19th and 20th Century struggles of emerging nations: It aspired for emergence from the colonial era as the country led in initiatives and hosted a 1954 meeting in Baguio on the road towards the historic 1995 Non-Aligned Nations meet in Bandung, Indonesia.
While necessarily accommodating the demands of the United States (the dominant power of the post-World War II world), Ferdinand Marcos had tried to slowly wean the country away from that power and its economic domination. Like many Third World leaders, Marcos had to gradually strengthen the State, especially after the lesson of the early ‘70s U.S. Dollar and Oil Shock Crisis, which led government to establish many State economic institutions.
Marcos expanded the role of such government corporations and entitiesas the National Power Corp., MWSS, Philippine National Oil Corp. (PNOC), Bataan Shipyard and Engineering Co., National Steel Corp., and many more, which was clearly not to the advantage of the global economic power then, the U.S. Moreover, the Central Bank and its Monetary Board was still dominated by government at that time. But all this has been reversed as all these State entities have been privatized since Edsa Uno.
The main U.S. instrument to destabilize Marcos from 1983 on, using the U.S.-facilitated assassination of Ninoy Aquino, as the U.S. Dollar was (and still is essential) to the Philippine financial system was financial destabilization through capital flight. The U.S. banks in the Philippines easily triggered this, and this caused the crash of the Philippine Peso and the subsequent economic crisis, which in turn created massive disenchantment.
With the fall of Marcos, the Wall Street bankers with their Philippine subalterns went to work dismantling the economic foundation of a strong State, removing tariffs on 1,000 import goods that caused hundreds of billions of lost government revenues; the takeover of government functions (as seen through Ernesto Aboitiz’ taking charge of National Power Corp.); the removal of the foundations of energy sovereignty through themothballing of the Bataan Nuclear Power Plant; and, under Ramos, the selling off of PNOC, Petron, ad nausea.
Wall Street investment bankers back local oligarchs and “finance” takeovers of government assets signed over by corrupt politicians from Cory Aquino to Ramos, Arroyo, and Aquino on tax-free, giveaway terms with sovereign guarantees for profits, loans, price, and rate increases. All three of them have happily laughed all the way to their banks, again, with the Filipino people picking up all the bills.
Wall Street and oligarchy vultures pick MRT flesh
The MRT was owned by the MRTC consortium. It was Fidel V. Ramos who signed thecontract guaranteeing the company’s 15% profit on the basis of a ₱60-maximum fare from Taft to North EDSA, which, Joseph Estrada reduced to ₱20, to make the MRT financially viable with hordes of commuters filling the erstwhile empty carriages. But then, he was ousted early on in his term.
It should be underscored that just four years into the MRT’s operations, the original “investors” (except Ayala)had already securitized or monetized their future dividends with the MRT III Funding Corp (MRT3FC). Thus, the dividends in the coming years directly go to the MRT3FC’s financiers--who they are we don’t know.
To illustrate the opaqueness of these financial vultures, here is an excerpt from a 2009 Philippine Starnews article by Zinnia delaPeña: “The asset-backed notes issue is a securitization of future dividends from Metro Rail Transit Corp. (MRTC) which flow through a series of holding companies and special purpose vehicles, to MRT III Funding Corp., the Issuer of the Notes.”
Even though theSobrepeñas, Ramoses, Camposeset al.had already sold their future profits, they still retain ownership of MRTC shares, which Manny Pangilinan’s MPIC (Metro Pacific Investment Corp.) bought and accumulated 48% ownership over.
At about the same time, the Gloria Arroyo governmentwas said to have fallen behind its Equity Rental Payments to the MRT3FC,allegedly due to currency problems and commuter subsidy (even as the DoTC then admitted that the financial crisis was due to financial obligations and not operational costs).
And so MRT3FC’s bondholders filed for arbitration in Singapore and The Netherlands for $230 million in damages.Ayala, on the other hand, sold its share to Wall Street top gun Goldman Sachs, reportedly to use its clout to pressure Arroyo’s thenFinance secretary, Gary Teves, ostensibly to reduce the financial obligations proposed to buyout MRT3FC bonds and 80% preferred shares of MRTC without voting rights. Meanwhile, MRTC is still controlled by MPIC of Manny Pangilinan, from whom current DoTC Secretary Jun Abaya now wants to borrow ₱53 billionfor the MRT’s buyout.
A few years ago, the DBP and Land Bank (both being GFIs or government financial institutions) were reported tohave fundedGary Teves’ buyout plan, extending a $180-million loan (₱8.6 billion then) to an offshore company,Global Air Services (GAS),with $2 in capital and $400,000 debt obligations (and where Bobby Ongpin’ssecretary Josephine Manalo and his lawyer Rodolfo Ponferradawere company signatories).In April 2009, the GFIs bought GAS by offsetting the loan against the purchase price. So why did the GFIs need GAS to intermediate in the first place? Gary Teveswas reported to have later become a director of Ongpin’sAlphaland Corp.
So let’s sum up this Triumvirate of Evil’s take for its$190 million investment in 1995: (a) the financial transfer of $488 million paid for by the Philippine government and taxpayers to complete the financing for MRTC; (b) $2.5-billion return-on-investment via a 15% profit guarantee by government; (c) $780 million in “equity rental payments” paid for by the Philippine government; (d) $200 million for the first 10 years to private contractual management; (e) $200 million in maintenance contracts; and now (f)₱53 billion for the “buyback.” But here’s the clincher: After the buyback and rehabilitation,the DoTC says it will privatize the MRT again. What idiocy!
Such have been the disastrous consequences of privatization. With more of it under the new name, PPP (Public-Private Partnership), what will be left for Filipinos?
WHO’LL SAVE FILIPINOS FROM PRIVATIZATION? ONLY FILIPINOS THEMSELVES REVOLTING AGAINST THIS EVIL TRIUMVIRATE.