Babe's Eye View article

With President Aquino’s SONA pronouncement that he would like to see more public-private partnerships, the time to aggressively privatize major public assets is now. Chile and Bangladesh went through privatization, and even Britain resorted to selling public assets during the time of Margaret Thatcher in the ’80s, an option that the United Kingdom is contemplating once again with the sale of its motorway networks to the private sector.

Privatization can take on a broad spectrum with numerous methods of engagement like build-operate-transfer schemes, asset lease, outsourcing, management contracts and the sale of public assets. Ideally, these involve public-private partnerships which, according to experts, are increasingly being resorted to by governments to ensure more efficient delivery of products or services to the public.

Naturally, the private investor is allowed to turn in a profit but without sacrificing public interest. Even in the United States, there is a growing push to privatize assets especially by local governments faced with bankruptcy and huge budget deficits like California, New Jersey and New York.

Every year, the government runs on a huge budget deficit caused by non-performing assets. But the biggest drain comes from paying the salaries of over a million government employees with at least one fourth considered to be “non-performing assets.”

Selling public assets is definitely one way of cutting down on the budget deficit. Businessmen’s interest in privatization, for instance through leasing the Philippine Navy’s property along Roxas Boulevard and in Fort Bonifacio or building a superhighway to connect the NLEX and SLEX, will jumpstart the economy towards a new dimension.

The appointment of Law professor Maria Lourdes Sereno as the new Supreme Court Associate Justice is a clear indication that President Aquino is serious about improving international confidence in our justice system. With no “padrino” to back her up, the president appointed Professor Sereno purely on her track record, in particular her major role in the Piatco-Fraport case at the ICC in Singapore which the Philippine government won recently. The AIM executive’s expertise in economics and international law augurs well for our international commitments. This kind of appointment adds tremendously to the atmosphere of hope and trust prevailing in the Aquino administration.

While some senators are in favor of privatizing PAGCOR, I agree with Senator Serge Osmeña that the gaming firm’s assets must be audited to determine its true market value, and that it should retain its regulatory functions. PAGCOR though is facing a lot of controversies and is perceived by the public as a “cash cow.” In fact, the perception of impropriety hounds government owned and controlled corporations (GOCCs) and government financed institutions due to the bloated salaries and fat bonuses directors and executives have been giving themselves.

You can’t really blame people for crying out loud at revelations that executives and board members of the MWSS and the SBMA have been receiving such generous perks and eye-popping allowances amounting to millions. In the case of the MWSS, the revelation came at a time when three million Metro Manila residents were suffering from acute water shortage reinforcing the perception that the more government is involved in running such corporations, the more prone these are to inefficiency and corruption.

People who are against privatization point to the National Power Corporation that has turned into a white elephant, saddled by a P200-billion debt. However, the example of Napocor should serve as a (costly) lesson about the need to conduct a very thorough study of the risks related to privatization and not rush into an agreement that would later turn out to be disadvantageous to government.

Several agencies such as the National Food Authority, the LRT, MRT and other GOCCs have been in the red for so many years, acquiring debts that have ballooned to billions of pesos and requiring bigger and bigger subsidies to operate—which is why their abolition is inevitable. Finance Secretary Cesar Purisima said they might deactivate other “non-performing” GOCCs like the Quedan Corp., the Philippine Crop Insurance Corp. and other unheard of agencies that seem to have no function at all other than to add to the already bloated bureaucracy.

Many irrelevant agencies have become such a burden to maintain, compounded by corruption that seems to occur from the top down to the lowest rung of the ladder. Other than corruption, mismanagement has contributed to the failure of these state-owned agencies. This is exactly what happened to government television stations IBC 13 and RPN 9 where I started out as a news reporter many moons ago. These networks should be privatized before they become extinct. They should have been sold a long time ago before their debts ballooned to hundreds of millions.

However, employees of the sequestered stations are hoping a joint venture with a private developer (who plans to modernize the station and turn the 4.1-hectare Broadcast City into a mixed commercial and residential complex) would give all of them a new lease on life. After all, the property has been idle all these years, and there’s no reason why it shouldn’t be given an opportunity to become productive and profitable.

Admittedly, the risks involved in privatization should compel government to study the partnership terms and maintain regulatory or oversight functions for key sectors and services such as water, energy and transportation. Yet no one can dispute that private corporations are more successful because they are managed professionally and tend to be more efficient and reliable in delivering products or services at manageable costs. The privatization of many public assets, especially those where government has no business being in, will definitely make a huge difference in cutting down the chronic budget deficit that has plagued the government for so long.