Commentary: The invisible hand of corruption

Manila Mayor Isko Moreno Domagoso is riding on a wave of popular support from residents of Manila and beyond with his clean-up operations. Notable is in the erstwhile crammed Divisoria, usually teeming with illegal vendors. 

Many are speculating that—like many new politicians in the past—this is only ningas cogon, a level of enthusiasm that gets snuffed out as easily as it started. Often, when this happens, it is safe to assume that the invisible hand of corruption is wielding its influence.

Domagoso concedes that, if Divisoria reverts to its filthy and chaotic state, it means he has succumbed to bribery. This is something former Manila mayor Lito Atienza confirms. According to him, criminal syndicates are behind the illegal vendors in Manila’s commercial centers.

In theory, Domagoso seems to have a full grasp of how the system works. Illegal vendors are given the go-ahead by an organized criminal syndicate to occupy spaces beyond the commerce of man and conduct their illegal trade there for a fee. The amount that the illegal vendors pay daily ranges from P20 to more than P100 a day, primarily depending on space size and location.

It has become an open secret that the aggregate amount collected is distributed to the members of an elite group with an established totem pole, where membership is based on the official and legal capacity of the position to wield disruption to the illegal operations. Like the mafia, this money protects the continuity of the illegal operations without any real threat of arrest or criminal liability. 

As Domagoso has narrated and exhibited with the recent capture of suspects in this racket, the syndicate even issues a receipt for the payment received from the vendors, presumably to lend credence to the collection.

In effect, the syndicate has been functioning as a government regulatory body, bestowing an imprimatur on the operations of those who are issued the “authority” or “permit” that comes in the form of a receipt. If public selling were a public utility, it is as if the syndicate has granted a local franchise to engage in selling. 

The problem, of course, is that they do not have the authority to do so. Those who collect the payments pretending to be acting with the authority and on behalf of the city government of Manila should be charged with usurpation of authority. And, in this analogy, the bigger problem is that selling is not a public utility and does not require a franchise. 

What is a franchise anyway? It is legally defined as a special privilege to do certain things as conferred by government on an individual or a corporation and which does not belong to citizens generally of common right. 
In the Philippines, the power to grant franchises—not in the commercial sense—belongs to Congress, to the extent given by the Constitution. A legislative franchise is needed to operate a public utility. 

The Supreme Court has defined a public utility in the case of National Power Corporation v. Court of Appeals, as “a business or service engaged in regularly supplying the public with some commodity or service of public consequence such as electricity, gas, water, transportation, telephone or telegraph service.” The term implies public use and service.

The issue of franchises was deeply felt by the public last month when there was a brouhaha in connection with the transport network vehicle services (TNVS) that deactivated about 5,000 TNVS units, making booking for a Grab ride less appealing because of non-availability of units, longer waiting times, and higher prices.

The Land Transportation Franchising and Regulatory Board ruled that only TNVS units registered with the LTFRB can operate, saying that proper registration is “imperative for the safety and security of the riding public.” 

The Department of Transportation also weighed in on the public debate saying that “acquiring a franchise to operate as a public transport is a privilege, as it carries the responsibility and accountability of safely transporting commuters to their destinations.”

But the process of granting franchises by the government has not always been rational. The grant and renewal of Congressional franchises is highly exposed to arbitrariness, discretion and the invisible hand of corruption. Sorely lacking in the process are technical expertise, transparency and accountability. 

The entire process and all those who participate in it would reek of incompetence and corruption if Congress were to grant a legislative franchise without the benefit of technical expertise. 

In the House of Representatives, there are committees that come closest to subject matter experts. Electricity-related franchises, for instance, stand to benefit from vetting by the Committee on Energy. Railroading the grant of a franchise will betray other considerations.

Moreover, suspicions of corruption and betrayal of public trust would run even higher when things stick out like a sore thumb. For instance, Republic Act No. 9136, or “An Act Ordaining Reforms in the Electric Power Industry, Amending for the Purpose Certain Laws and for Other Purposes,” explicitly states in Section 6 that “any person or entity engaged or which shall engage in power generation and supply of electricity shall not be required to secure a local or national franchise.” 

Insisting on granting a legislative franchise when one is not needed becomes an irregularity. Proceeding with it would, most likely, be interpreted as an intention to bestow special status on the concerned entity. When this situation happens, I am anticipating that Congress will defend the grant of the unnecessary franchise on grounds that it is non-exclusive and does not preclude other entities from operating without it. 

However, I also strongly suspect that the holder of the unnecessary franchise would eventually invoke freedom from competition from an entity that does not have a valid franchise to compete. At the very least, a franchise—though illegitimate—confers an undue advantage over other entities.  

Granting an authority when such authority should not be granted comes eerily close to the grant of “authority” by the criminal syndicates in Manila to the illegal vendors to sell their wares. In both cases, I think the invisible hand of corruption is at play. Well, maybe, some political pressure could be present too.

Edwin Santiago is the executive director of Stratbase ADR Institute, a partner of Philstar.com.