Credibility suffers more blows - DEMAND AND SUPPLY By Boo Chanco

The anchors covering the daily stock market show and the stock analysts they interview are sounding pretty desperate each day. They keep on saying that there is as yet, no market moving good news. It is almost as if there is no point to what they are doing beyond confirming our worst fears.

What we do have is a deluge of bad news. A mafia-type turf war over jueteng is boiling over. As if that’s not bad enough, there’s the accusation that administration people may have collected commissions on ransom payments for the Sulu hostages. The administration’s tattered credibility has just suffered new blows.

The front page stories confirm what the world believe to be the case about high level corruption in this country. The sad thing is, most of us would be very reluctant to go out on a limb and reassure investors or even ourselves that there is absolutely no truth to all the sickening allegations being thrown around. After all, we’ve had our suspicions.

My own reaction is, that’s par for the course. Nothing surprising. Confirms my worst suspicions. The protagonists are jueteng lords whose reputations are far from pristine. It even allows us to heave a sigh of relief that maybe, just maybe the truth may finally come out as the crooks speak out of their own experience. Not good for the country’s image in the short term but there is a very slight possibility something good may come out of it. Like they may wipe each other out.

The only wise thing to do in this sort of situation is to stay out of the line of fire. This word war can become a shooting war without any warning. In fact, I think clean cut guys like Tito Guingona are out of their elements in these sort of things. I can’t understand why he got himself involved this deeply. He could end up high and dry and maybe even banished from the Senate if the jueteng lords decide to just kiss, make up and divide the goodies.

But an early resolution to this episode is imperative for business. Buti na lang, business is bad already so the damage isn’t something we can feel really bad about. They can have one big shootout with no survivors enabling us to start fresh and get going with our lives. Of course I am daydreaming. That’s what everybody’s doing these days, to save devalued pesos that would otherwise pay to buy Prozac.

How bad could things still get? I get asked that question often and I haven’t figured out an answer. One thing’s sure. Things won’t begin to get better until we win back a significant level of credibility to get the investors back. On our own we simply don’t have what it takes to mobilize the amount of capital we need to get the economy humming... not even if Atong Ang gives everything he gets from his two balls (bingo, that is) to the cause of jumpstarting the economy.

Governor Chavit can do us all a big favor by laying out everything he knows quickly instead of in bits and pieces, in telenovela fashion. Let’s hope he delivers his hard evidence today as promised. If he does, let’s hope Congress acts decisively so the country can move on. Not only is that jueteng controversy seen as a corruption problem, it is also a peace and order problem and unless it is resolved quickly, could be a politically destabilizing factor. Investors don’t like that.

Investors’ woe

While we are on the subject of investor confidence, look at what some low level Napocor managers are saying. I don’t think Freddie Puno knew his managers would talk to the press in this manner because what they are saying do not make sense for investors that this government is supposedly trying to attract.

They are saying that Napocor can’t transmit the Meralco IPP production because they are not ready with transmission facilities due to right of way problems. Further, they are saying that Napocor has the right to refuse transmitting Meralco IPP production if they saw fit.

So what happens to the $1.5 billion that Filipino and British shareholders of First Gas invested in a power plant that was approved by the government as a desirable investment from the private sector? What happens to the $500 million the American owners of Quezon Power invested in their power plant? A hundred billion pesos (at P50 to $1 for easy computation and since we are almost there), think of all the Ford Expeditions that could buy.

Neither of these investments would have been made unless there was firm commitment from Napocor to transmit the power produced. Meralco wouldn’t have been stupid to sign a take or pay supply agreement with both IPPs without a firm Napocor commitment to transmit.

The timing of operations must have also been agreed upon with Napocor because it makes no sense to have all that money sitting idle in a power plant that can’t be used. Right of way problems are expected in infrastructure projects here but government is never helpless if the right buttons are pushed in a timely manner. There is such a thing as time value of money, and if that isn’t important for Napocor oldtimers, it is something the private sector takes very seriously.

It is obvious the lower level Napocor guys, who were involved in the Ramos era mad rush to build power plants, are trying to change rules after the fact and trying to make excuses for failure to deliver vital infrastructure on schedule. That’s not good for private sector investors who could have more productively used their funds elsewhere.

No amount of investment incentives will attract investors here unless our track record with past investors is good. How we treat the investors who actually poured billions of dollars here will determine our ability to attract more investors today and in the future.

Good news

Dr. Ernie came up with this one.

The doctor took Bill into the room and said, "Bill, I have some good news and some bad news."

Bill said, "Give me the good news."

"They’re going to name a disease after you."

(Boo Chanco’s e-mail address is [email protected])