PRIVATIZATION: END OF THE ROAD LOOMS

The Philippine Star
11/23/09

More than two decades since the privatization of government assets started, the country is far from accomplishing what it had set out to do.

We’re still deep in debt, and stuck to simply trying to close the gap towards a balanced budget. Certainly, we’re not moving towards getting the right infrastructure investments going to power future growth.

This year, the plan was to sell about P30 billion worth of assets – again, to help keep the budget gap within target. But as the global downturn has robbed investors of their appetite, and with elections just around the bend, any plan to cash in on government properties or equities has been pretty much abandoned.

Privatization, or more specifically the sale of government assets, is no longer an option this year by government bureaucrats as part of the measures (together with improving tax collections) to keep the fiscal deficit for 2009 within target.

In fact, the full-year aspired budget deficit cap of P250 billion, which had already been adjusted a couple of times, was breached as early as end-October. If additional funds are not found quickly, this will mean that the deficit will be over 3.2 percent of the estimated gross domestic product (GDP) for the year.

Intention to sell

Early this year, the finance department had announced its intention to sell P15 billion of national assets, but had to revise this mid-year to P30 billion when collection revenues from taxes and duties appeared to be falling behind.

The sale of 103 hectares of the 120-hectare Food Terminal Inc. (FTI) complex in Taguig City was expected to fetch P13 billion, while 40 percent of the PNOC-Exploration Corp. was seen to earn P11 billion. The government had already sold earlier PNOC Shipping and Transport Corp (PSTC), PNOC’s shipping unit, for P2.6 billion.

The finance department had also expected to sell the Fujimi property in Japan but is now just looking at a long-term lease after encountering protests. The Fujimi property was acquired in 1958 as part of the Japanese indemnity for Philippine loss of life and property during World War II.

Botched plans

Finance Secretary Gary Teves puts on this brave face when talking about his targets. After all, the chances of getting a passing grade on his scorecard seem dismally poor, at least this year. More blame for the current financial crisis.

The privatization push, thus, may have to wait until global economic conditions get better. Teves’ best year still stands to be 2005, his first year in office, when the government reined in about P200 billion from the sale of various assets.

With the exception of the 550-hectare New Bilibid Prisons property, valued at P110 billion, and the sequestered San Miguel shares, at P50 billion, the government has reached that stage when most of the state’s valuable assets have been sold.

The move towards privatization started in the last two years of the Marcos presidency. The Cory government picked up the effort as a means to raise revenues for an almost bankrupt treasury, but managed to raise less than P15 billion.

Bulk sale

It was during the time of President Ramos that hefty amounts exchange hands. During Ramos’ term, Philippine Air Lines was sold to tobacco mogul Lucio Tan for P9.65 billion. The 160-hectare Fort Bonifacio property was tendered for P34 billion to the Metro Pacific consortium.

Property developer Fil-Estate bought Camp John Hay in 1994 under a long-term lease agreement for an estimated P50 million a year in rentals. The following year, Malaysians as investors acquired National Steel Corp.

The government also privatized Metropolitan Waterworks and Sewerage System in 1997, with Ayala’s Manila Water Company Inc. (MWCI) operating the east zone concession and the Lopez’s Maynilad Water Services Inc. (MWSI) getting the west zone.

Manila Hotel was likewise auctioned off 1997, and is now owned by businessman Emilio Yap who also runs the Manila Bulletin.

Under Joseph Estrada’s short term, several assets were slated for the auction board. But nothing much moved. Thus, state-owned entities like IBC-13, RPN-9, the Journal Group, and Philippine Phosphate Fertilizer Corp. remained with government.

The stellar performance thus, when talking about privatization, came during the Arroyo administration. In 2006 alone, revenue from privatization totaled some P120 billion. This helped keep the budget deficit during the year to only P62.2 billion, almost half of the target maximum of P125 billion.

In 2007, the sale of four power plants plus the long-term contract to run the National Transmission Corp. or Transco totaled $5.99 billion. The government also sold Philippine Telecommunications Investment Corp. to First Pacific Co. for P25.2 billion.

Last year, the government unloaded its shares in Manila Electric Co. (Meralco) for P6 billion and sold its Petron shares to British investment group Ashmore for $550 million.

Last call

Just how long before our government will dispose of all its assets will certainly be the next administration’s (or administrations’) hands.

One thing is sure, unless revenue collections by the Bureau of Internal Revenue and Bureau of Customs are able to match government spending, we can already see future budget deficits widening by leaps and bounds. And with no more valuable assets to dispose.

2009 Philippine Collegiate Championship update

The “Sweet 16” Finals starts today at the Ynares Sports Arena, Shaw Blvd., Pasig City. General admission is free while the courtside and ringside tickets are available on a first-come-first serve basis for nominal fee of P50.00, which will go to the PCCL Development Fund.

The first game starts at 2 p.m. with the FEU Tamaraws trying to knock out qualifier, Arellano U Chiefs while the second game pits the San Beda Red Lions against another qualifier, the San Sebastian College-Recoletos Cavite Baycats. The winners will advance to the round of eight while the losers go home.

ABS-CBN will cover all the “Sweet 16” games live on Studio 23, with a replay in the evening on the Balls channel.

PCCL is also inviting collegiate basketball fans and students to join for free the two contests recently launched. “Pick the Final Four” contest is now open. Simply log in at www.CollegiateChampionsLeague.net to submit your choices. Those with the correct “picks” will receive surprise gift items.

The other contest is for amateur camera enthusiasts who may submit their action shots of players during the games of the “Sweet 16” Finals.

og in at the PCCL website for details.

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, SalcedoVillage, 1227 MakatiCity. Or e-mail me at reydgamboa@yahoo.com. For a compilation of previous articles, visit www.BizlinksPhilippines.net