The failed promises of privatization

Bulatlat perspective

bu-op-icons-benjiePrivatization, by whatever name – Build-Operate-Transfer or Public-Private Partnerships – was touted to be the solution to the inefficient, monopolistic management by government of public utilities and services. It was supposed to be the opposite of how the dictator Marcos monopolized and profited from basic utilities such as electricity, water, transport, among others.

Succeeding administrations from that of the late Cory Aquino to Fidel Ramos, Joseph Estrada, Gloria Macapagal-Arroyo, and the current Benigno Aquino III promised that privatization would result in more efficient services as corporations are supposedly more efficient, and rates would purportedly go down because of competition.

However, the monopoly of the Marcos family was merely transferred to a few families and their foreign partners. For example, when the government water company the Manila Waterworks and Sewerage System (MWSS) was privatized, water services in the National Capital Region was divided between two concessionaires: one owned by the Ayala group of companies and its British and Japanese partners, and the other by the Lopez group of companies and its French partner, which later gave it up and passed it on to the partnership of DMCI and Metro Pacific Investments Corporation.

Did the provision of water services greatly improve? It somehow improved but not as promised. However, the rates have increased by 400 percent since privatization.

The distribution of electricity in the National Capital Region and 22 other cities and 89 municipalities is controlled by Meralco, which Metro Pacific Investments took over from the Lopez family. The Lopez groups of companies, on the other hand, bought most of the big power plants formerly owned by the National Power Corporation. Other big power producers are San Miguel Corporation, which also has a 27 percent stake in Meralco and the Aboitiz group, which owns power plants and other distribution utilities. Slowly establishing their foothold in the industry are the Ayala and SM group of companies.

Did this improve the provision of electricity? Well the country has experienced a power crisis in 1991, a mere four years after the privatization of the power industry began when the Cory Aquino government allowed private corporations to own power generation facilities in 1987. Worse, the government has been claiming that the country is about to experience another power crisis next year.

Did the rates go down? After the Ramos administration sweetened the contracts with independent power producers (IPPs), power rates went up as the government agreed to a “take or pay” provision, sovereign debt guarantees, and to pay for the fuel being used by IPPs. Worse, it allowed IPPs to pass on the costs of fluctuations in foreign exchange rates and fuel costs. Electric distributor Meralco has also been allowed to pass on changes in the rates of power it buys.

Moreover, since the Electric Power Industry Reform Act (EPIRA) was passed in 2001, power rates have already increased by 100 percent.

Now the Aquino government is doing the same with government hospitals and the MRT and LRT commuter train systems. Since the maintenance and operations of the MRT was privatized, the people have been suffering from breakdowns and worsening queues. And the government’s answer to this is more privatization.

Already the contract being signed with private contractors for the MRT, LRT train systems include provisions for immediate as well as regular fare increases, real property tax exemption, annual standby fund, payment of changes in costs of electricity, and the government will shoulder the purchase of the right of way acquisition, coaches, civil works, among other perks.

Every time the government commits to pay for something, guess who actually pays for it? It’s the people who pay for these through taxes and increases in the rates and fares. It is actually a double burden on the people.

So the question is, why does the government enter into blatantly onerous, disadvantageous contracts with private corporations? What do they gain from it? Or the more pointed question is: Who gains from it?

Surely, government officials are not merely following the recommendations, nay dictates, of the IMF-WB to privatise government services. Since they have the power to determine who gets the contract and what are the provisions of the contract, they must be getting something out of it; some high government officials must be personally benefiting from the awarding of these contracts.

And when bribes are given by corporations to be able to corner these contracts and concessions, it is again the people who suffer as the private concessionaire would then try to recoup it through higher rates and charges.

Thus, privatization by whatever name – Build-Operate-Transfer or Public-Private Partnerships – is actually a burden to the people, if we let the government get away with it. (

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  1. You are absolutely correct that privatization of public enterprise will always fail if it is “Corporatocracy” not a “Free Market.”

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