A world class expressway in 20 months

No more delays. In 20 months from now or about the second quarter of 2008, there will be a fully remodeled, world class South Luzon Expressway that would be as good as the North Expressway is now. This is the promise of Art Aguilar, PNCC chairman in a briefing I recently had with him on how they are transforming the problematic government infrastructure company.

Art Aguilar actually heads the National Development Co. (NDC) which had been tasked by Ate Glue to spearhead the infrastructure development in the industrial areas of Southern Luzon. Art said that Ate Glue is tired of hearing the old complaints from the business sector about the sorry state of the South Luzon Expressway and how this has become a major business disincentive.

This is also why Ate Glue transferred supervision of PNCC from DPWH to DTI and how Art Aguilar found himself responsible for PNCC. But before PNCC can be utilized fully in government’s infrastructure program, it needed to be cleaned up and its finances strengthened. So far, they seem to be on track with this assignment.

Aguilar, who is retaining his PNCC chairmanship even as he replaces Alan Ortiz at Transco (but he is giving up NDC), is one of the more productive economic managers of Ate Glue. What he has done, and is trying to do at PNCC today is nothing short of miraculous. Years of neglect and mismanagement have dissipated the company’s finances and impaired its ability to carry out its mandate.

Now that PNCC needs to renew its franchise, it must prove to Congress that it is worthy of a new mandate. The appointment of Art and his team has proven to be timely. In the short period of time since he has been given the responsibility, Art has made progress in cleaning up the mess at PNCC and transforming it into government’s main institution that will manage the development of the Lingayen to Lucena expressway backbone, through private sector-financed BOT deals.

For the South Luzon Expressway, Art is confident that they have now finally ironed out the contractual kinks in its modernization by the Malaysian company MTD Capital Berhad. The Malaysians will invest some P8.3 billion to rehabilitate and expand the South Luzon Expressway. Mobilization for the first phase, to include massive work on the Alabang viaduct, starts this month.

Rehabilitation of PNCC itself, however, will take a little more time. But the important thing is, Art has started the process with full support from Ate Glue. I went through the details of the mess and it is unbelievable… or maybe, that’s just par for the course with typical bureaucratic incompetence. There are financial obligations that were simply neglected by past PNCC management as well as deals entered into that are disadvantageous to PNCC; an inherited obligation from CDCP Mining; and a bloated manpower force it could no longer afford.

One of the financial obligations that got first attention is a loan from PNB worth P800 million, has ballooned to P2.4 billion because it was not serviced for seven years. This was money used to buy equity in the Skyway venture with Citra in the early 1990s. Clearly a bad deal, PNCC is not expected to earn a centavo back from that investment until close to 2020. Negotiations with PNB have started to settle the obligation through dacion en pago, or payment in kind, offering its 1.2 hectare complex at EDSA Mandaluyong.

Its biggest problem however, is an old loan of CDCP with Marubeni for its Basay Mining which has gone up to over P13 billion. It has gone through the courts and a compromise agreement is now awaiting approval by the Supreme Court. Though the agreement will skim off from whatever little assets are left with PNCC, it would remove a big question mark that would otherwise hound PNCC’s future prospects.

In the meantime, Art has also started to pay off PNCC obligations to the government, notably the Bureau of Internal Revenue and the Bureau of Treasury. Apparently, past managers of PNCC were not remitting withheld taxes of their employees, among others, to the BIR. There were also unpaid concession fees to the Toll Regulatory Board that are only now being settled. Don’t ask what they did with the money.

What to do with the large staff is the other big problem. Two years ago, they had about 2,200 employees and it is now down to 1,200 and will be further trimmed to just about 30. Separation benefits will consume a tidy sum but there is no choice. PNCC has ceased to be what it used to be and has become a holding company, requiring a much leaner but more effective staff.

Once Congress grants it a 25-year extension of its franchise, PNCC can start its new life with its new mandate. A new franchise, provided the management remains as professional as Art’s group, gives government a chance to recover its past losses in PNCC.

A new franchise also means there is a government entity that the private sector can talk to and provide help in managing BOT contracts. Imagine if in the absence of PNCC, the private sector will have to deal with DPWH!!! The bureaucratic frame of mind that’s prevailing at DPWH would discourage more private sector investment in the ambitious infrastructure program of Ate Glue.

Hopefully too, whoever is in Malcañang would have learned by now the danger of using PNCC to accommodate political appointees with no capability in infrastructure development and no professional dedication to the job. Hopefully too, the clean up job now being done by Art’s group would be completed and capped by an extension of its franchise.

VAT leakage

The ship of state must be leaking badly. First, there was the leak in the nurses examination, damaging the professional reputation of a principal export. Then there is the leak of Petron fuel oil that is damaging the livelihood of people in Guimaras as well as the environment. Then there is this leak in VAT collections.

According to BIR Commissioner Jojo Buñag, the VAT leakage is from P60 billion to P75 billion a year. But unlike the other leaks, this one’s not going to be a problem much longer. Commissioner Bunag has promised to reduce this leak to P11 billion or by P7 billion this year.

At least, here is one government official who is on the ball, so to speak. Jojo explained that they have now vastly improved their ability to plug tax leaks with their computer information system. They are now better able to detect fake or undervalued receipts issued by businesses. This is why Jojo is confident he will be able to file tax evasion cases against the erring businesses and be able to demand that they pay the deficiency tax plus penalties.

And Jojo backs up his words with performance. The Bureau of Internal Revenue surpassed its collection goal for the six-month period from January to June this year by P1.15 billion. The BIR chief said that it collected P302.028 billion during the first semester of this, surpassing its goal of P302.028 billion for the period by P1.15 billion or 0.38 percent. Based on total collections of P243.8 billion for the same period, in 2005, the BIR increased its tax take by a whooping P58 billion this year.

Guimaras liability

I got this e-mail from Eduardo F. Hernandez and Adriano M. Hernandez, authors of books on Philippine Shipping laws.

As an oil refiner, Petron knew or ought to have known that an oil cargo can be dangerous or hazardous to life and environment. Petron cannot exculpate itself from liability by alleging that it is merely the owner of the oil cargo, had nothing to do with the navigation of the vessel and therefore the responsibility for pollution belongs to the carrier.

Even if Petron insured itself against its total loss of cargo or against pollution liability, still marine insurance laws require that when an insured peril such as the Guimaras disaster occurs, vessel and cargo, have the obligation to exercise "sue and labor": they must exercise due diligence to avoid further loss or damages such as pollution against the environment.

They cannot just wash their hands and claim that the vessel and cargo Protection and Indemnity Insurance (P & I) covers the liability to third parties like the residents of Guimaras. It is their duty to stop or prevent any continuing damage to the environment and the people of Guimaras; otherwise, the insurers may refuse or reduce the payment of their claim for reimbursement.

Sisters

Here’s Dr. Ernie E.

A busybody visited her bachelor neighbor and said, "You’re 45 years old and have never been married. I have a lovely niece your age. Just say the word and I’ll introduce you."

"Don’t bother," the bachelor said. "I have two sisters who look after all my needs."

The meddlesome woman replied, "That’s all well and good, but all the sisters in the world cannot fill the role of a wife."

The bachelor said, "I said two sisters. I didn’t say they were MY sisters."

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