Uncertainties for private sector investments

Private sector investment in infrastructure will continue to be the most plausible option for the Philippine government as it strives to facilitate the country’s economic growth.

However, sprucing up policies that guide and encourage privatization must be seriously done. Private investors, at the end of the day when they have spent their money to complete a project, don’t want to hear that their contracts will be amended, or worse, abrogated.

Recent developments that question the sanctity of contracts made between the private sector and government, however, put at risk the prospect of bringing in private funds to support infrastructure projects.

In air travel alone, for example, while deregulation has influenced lower fares for travelers, the condition of our numerous airports in the country remains wanting.

We may be looking forward to the services of a sophisticated terminal at the Ninoy Aquino International Airport (NAIA) at the end of the year, but with the agonizing experience that the project investors went through, it might take awhile before we get a bid to upgrade our other airports.

An optimist in our midst

An early but lengthy reaction to my column "Twisting and turning trail of PIATCO" last Monday, Sept. 23, 2002 was sent by reader David Michael Murphy. Here’s part of what he wrote:

"Like many outsiders, I’ve followed the PIATCO drama with a mixture of confusion and frustration, spiced with a dollop of amazement. To someone not familiar with the intricacies of the circus known as Filipino politics, the charges and countercharges are difficult to sort out.

"It also appears that Fraport ultimately lost out because too much of their influence money went to middle men and because the individuals their money was ultimately supposed to influence either didn’t stay in office long enough to complete their end of the bargain or never had the influence they claimed.

"I agree with you that foreign participation in large-scale projects in the Philippines will be adversely affected by continually changing the rules in the middle of the game.

"However, I think that a better example of this is the business with Comelec (Commission on Elections) and the VRIS (Voters Registration and Identification System). Although the truth is never clear in the Philippines, it appears that this was a legitimate, clean contract that was abrogated after the foreign company had in good faith spent a great deal of money, time and effort.

"This is the kind of rule changing and inconsistency that discourages foreign participation.

"In the case of PIATCO and probably in the case of the power generation plants that you cited it seems that the message that foreign investors are receiving is that the old system is changing and that the 25 to 50 percent overhead previously allotted for bribery and influence is now at risk.

"The end result should be that reputable, competent foreign companies would be less willing to accede to these demands. There are already legitimate companies who have declined to participate in large-scale projects in the Philippines because of the corruption and politics involved."

End of an era of corruption

"I foresee one of two possible outcomes to these changing conditions. In one scenario, the corruption continues, with or without subsequent exposure and renegotiation.

"In that situation, only unscrupulous foreign companies will be willing to participate in Filipino projects. Their work will be as shoddy as their ethics and the Philippines will continue to have overpriced, badly constructed infrastructure, inefficient plants and non-competitive industries.

In a second scenario, a sustained drive against corrupt practices in the awarding of large-scale projects makes it possible for reputable, legitimate companies to make a fair profit while providing reasonably priced, high-quality work without the rule-changing and political interference that has often (but not always) marred foreign investment in the past.

"Infrastructure will support efficient business and transportation, government budget deficits will diminish and the amazing capacity of the Filipino to adapt and create will make the Philippines competitive in the developing global economy."

The writer ends on a high note. He is optimistic that "the younger Filipinos who are just beginning to achieve influence in Filipino politics and business have a different, larger view of how to achieve success."

I share your optimism, David, although I would like to be a bit guarded. Most of the young Filipino politicians you have in mind are either sons or daughters of the dying out "trapos". We just have to hope that, although blood is thicker, these young ones will have seen the harsh realities of the old corrupted politics and will not take the easy road to riches and power.

Sometimes, it pays to be an optimist and who knows, you may get what you wish for.

‘Isyung Kalakalan at iba pa’ on the web

If you didn’t catch this week’s feature on "Isyung Kalakalan at iba pa" (IBC 13 News, 5 p.m. and 11 p.m., weekdays) highlighting the maritime disasters we face because of our too old sea-faring vessels, we will be uploading the broadcast commentaries on the BizLinks website, with address below, early next week. Visit the site.

Should you wish to share any insights, or want to suggest topics to tackle, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. If you wish to view the previous columns or telecasts of "Isyung Kalakalan at iba pa," you may visit my website at http://bizlinks.linkedge.biz.