When agencies break rules, public suffers

Government sets rules to protect public interest. If an agency breaks them, it can only be for suspicious motives. That’s what’s happening to the plan for a government broadband network, and in the soap industry.

The broadband complex would hew together government’s landline, cellular and Internet infrastructure. Administrations had long dreamed of it, and launched three smaller but failed types: Telecom Office, Municipal Telephone Public-Calling Office, Telepono sa Barangay. Enter Amsterdam Holdings Inc., proposing to take over the work from the Dept. of Transport and Communications, and erect a bigger one. AHI’s "Orion Project" directly would interconnect all provincial capitols, city halls, and first- and second-class municipios. Geared to support health and education, it would cover all state colleges, half of public high schools and hospitals, and most private hospitals. Wireless service also would be given to 1,203 national agencies and state firms, 2,000 post offices, 350 state colleges, 2,643 high schools, 200 hospitals, 117 city halls, 41 provincial capitols, 465 municipios, and 5,000 barangay halls.

All this AHI promised to build in four years for $240 million under a build-own-operate scheme. It would set up the network on its own, turn it over to DOTC, then run it for a fixed period of cost recovery.

In the unsolicited proposal of Dec. 5, AHI pledged to bill government a percentage below the lowest rate of local telecoms firms: 50¢-70¢ per call. This would cut by a fourth the P3.5 billion that government spends on calls. All AHI needs is an assurance of executive performance, as stated in the Build-Operate-Transfer Law, that government would use half of Orion’s capacity. The other half would be sold to private users, to subsidize the discounted government rate.

Under the law, DOTC must start studying the unsolicited proposal within 60 days. Then, it must submit the papers to the National Economic and Development Authority, for a Swiss challenge that allows the original proponent to match the lowest bid. Seventy-five days from receiving AHI’s papers, DOTC has not moved. Worse, it accepted another unsolicited bid, prohibited under the BOT Law, from a Chinese firm.

More violations emerge. The new proposal, from ZTE Group, offers a government-to-government loan, which in turn would require a sovereign guarantee of repayment. The BOT Law forbids so in unsolicited proposals. The ZTE plan is only to erect the broadband facility then let DOTC run it. This runs counter to government policy of privatizing its telecom assets. ZTE’s price is even higher, $262 million, and would take longer to finish. Yet DOTC is rushing to endorse it to NEDA. DOTC bigwigs even set up a presentation to President Arroyo by ZTE managers — in obvious favoritism.

Last Mar. 18 AHI complained to DOTC Sec. Leandro Mendoza about the bias. If the latter does not respond by next week, he would be in breach of yet another law that requires officials to act on mail in 15 days.

The graver law against corruption is being broken. Talk in telecoms circles has it that a Comelec man and a cohort in the failed poll automation are interfering in the bidding.

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On the other incident, Chemphil Group is shutting down its factory of soap ingredients. A local industry will fade out — all because Trade and Industry Sec. Peter Favila broke his word and tariff rules on dumping.

Chemphil’s woes began in 2001 when big countries began to dump sodium tripolyphophate at subsidized rates for mixing in detergents. Since the ’70s Chemphil alone has been producing the component, and so began to hurt when imports surged 700 percent, from 3,000 MT in 2001 to 20,210 MT in 2005. It lost P33 million in 2003 to P135 million in 2005, when soap makers were selling P2 billion a year.

The firm cried for help against unfair trade in Nov. 2005. In July 2006 the DTI saw merit in imposing for 200 days a safeguard tariff of P14,150 per MT of dumped STPP. Detergent retail prices were considered. The DTI noted then: "The safeguard measure will not be an additional burden to consumers... There is no clear indication that (its) imposition will create political and economic crisis. The impact on the consuming public will be negligible." After all, STPP makes up only a tenth of soap ingredients.

The Tariff Commission then stepped in to study a longer three-year safeguard, as was done before for the ceramic and cement industries. Last Jan. the TC recommended the lengthier shield, noting the severe damage dumping had caused. In fact Chemphil’s soap-ingredient operations had been on shutoff mode since Oct. 2005. Only a three-year breathing spell could sharpen it against foreign competition.

To Chemphil’s surprise, Favila this month ditched the TC proposal that requires his final nod. Factory managers wrote to ask why he had misled them to believe he was on their side all along. He has not replied to them. Interestingly, the item in the Safeguard Measures Law that Favila used to junk the tariff is one that applies to users of agricultural goods. STPP clearly is not a farm produce, but Favila got away with it anyway. Somebody’s phone call was weightier than the law.

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