Power Reform - An Act of Betrayal?

Bulatlat.com - If the controversial Power Reform Bill was passed and signed hastily by President Gloria Macapagal-Arroyo last week, blame it on powerful foreign financial interests.

Economist Danilo Arao of Ibon Foundation accused over the weekend the International Monetary Fund (IMF), and Asian Development Bank (ADB) and other foreign creditors of tightening the squeeze that finally led to the passage of the bill.

The bill, signed into law last Friday by Arroyo, seeks the restructuring of the Philippines’ power industry and the privatization of its government arm, the debt-ridden National Power Corporation (NPC).

With the bill now a law – after nearly five years of legislative intramurals and opposition by militant and consumer groups – the Arroyo administration can now avail of almost $1.2 billion in financial loans. The amount represents loan pledges by the ADB, IMF and other foreign creditors.

The loans were tied to the power reform bill, Arao, who is also a University of the Philippines professor, said.

Before the bill’s passage, the ADB and other foreign creditors had withheld $950 million. Of the amount, $200 million is earmarked for the revenue-starved government’s budgetary purposes while another $200 million is allocated for NPC. The balance will be used for the NPC’s Leyte-Mindanao interconnection project, Arao said.

In 1999, the Ibon economist said, the ADB and the Japan Export and Import Bank stalled the release of the second and third tranches of the Power Restructuring Program loans. At that time, the Estrada administration failed to comply with the condition that the power reform bill be passed by June 1999. The two loans amount to $600 million, he added.

Similarly during the same year, the IMF, in a letter to Rep. Arnulfo Fuentebella, conditioned the release of a $300 million rehabilitation loan on the bill’s early passage. (As a new House speaker late last year, Fuentebella vowed to prioritize the bill’s passage.)

In a press statement last April, the IMF stressed that it is engaged in post-program monitoring with the Philippines, and that this “involves periodic reviews of economic developments and policies.”

The IMF, Arao said, identified the power sector as a priority area for structural reform. It also argued that the challenge is “to implement plans which…require determination on the part of government as well as effective consultation and cooperation with Congress.

Allowing the next Congress to decide on the power reform measure may delay further its approval especially because Arroyo could not ascertain whether it could muster enough support. That would also send “very bad signals to the international financial community regarding the economic policy agenda,” Arao said citing a government statement.

To prevent rough sailing later – and to comply with foreign financial pressures – the special session of Congress was convened late May. Proceedings were interrupted by militant groups who tried to storm Congress to dramatize their opposition to the bill.

But Senate and House leaders seemed to have outmaneuvered the oppositors by making sure the bill was passed by cutting corners. “Railroaded,” the militant groups said in denouncing the bill’s approval.

Late last year, Congress figured in a scandal when some legislators accused their colleagues of an attempt to rush the bill’s approval through a multimillion-peso bribery.

The power reform bill has been opposed not only because of the inevitable power rate increases but also due to the imminent mass lay-off of NPC employees. Bulatlat.com