Napocor’s debt soared as government assumed all the project risks related to building and operating a power plant in its rush to attract private investors. Thus, Napocor agreed to pay for 70-100 percent of generation capacity of independent power producers (IPPs) even if electricity is not actually produced (take-or-pay). The state power firm also consented to pick up the tab for the IPPs’ fuel needs (fuel-cost guarantee). Without these guarantees, private investors would not take interest in the country’s power sector which has a relatively small market.
Similarly, while Aquino criticized the MWSS officials’ many abuses, including P160.1 million in questionable allowances and benefits, he did not mention that billions of pesos in taxpayers’ money had been used to save the failing privatization of water in Metro Manila. In 2004, Malacañang bailed out the Lopez family, one of Aquino’s perceived political patrons, to the tune of P8.3 billion by temporarily taking over the heavily indebted Maynilad Water Services Inc. The bailout was meant to preserve the integrity of the country’s water privatization program.
In short, PPPs may provide immediate fiscal relief but actually burdensome in the long-term for the perennially bankrupt government. These types of projects are often heavily funded by foreign debt, including official development assistance (ODA) and require practically no equity from private contractors. Thus, while Aquino claimed in his SONA that government will not shell out a single peso in these PPPs, the reality is that government would assume the risk of the foreign debt and pass on the burden to the people through taxes.
The private sector builds and operates roads, hospitals, utilities, etc. not out of altruism but out of expectation to earn profits. Thus, PPPs in infrastructure development often result in exorbitant user fees including tolls, fees, rentals, and other charges – burden shouldered by the people on top of paying taxes to government.
Consumers of power and water, for instance, have been forced to shoulder fluctuations in inflation, foreign exchange, fuel prices, etc. In the case of power, households are forced to pay for unused electricity and bear monthly increases in rates while water bills in Metro Manila have soared by 449 to 845 percent since MWSS was privatized in 1997. (Read here and here)
Furthermore, starting next month, motorists plying the South Luzon Expressway (SLEX) will have to endure an increase of 233 percent in toll fees imposed by the private operator. (Read here) Power, water, toll roads are all charged with the onerous 12 percent value added tax (VAT) along with other basic commodities and services in the Philippines.
In his SONA, Aquino also criticized the over-importation of rice by the National Food Authority (NFA). Before the SONA, Cabinet officials have announced that NFA rice subsidies would be scrapped because they are prone to pilferage and abuse. (Read here) These moves set the tone for the implementation of the longstanding plan to privatize the NFA, which the Department of Finance (DOF) said is in deep debt worth P125 billion. Note that corruption, mismanagement, and indebtedness were the same reasons used to justify the privatization of Napocor and MWSS.
Aquino’s promotion of PPPs and privatization in his SONA has further reinforced the view that his administration is incapable of introducing new policies that will reverse the old pro-business, pro-market neoliberal policies of the past administrations, including the Arroyo administration. (Bulatlat.com)