Those optimistic that elections show the people’s will and that democracy is at work should turn to events in between. They would soon find out that disdain for democracy is the norm, as vividly illustrated in the recent attempts to conceal from the public the fate of water utilities. Reality rarely springs its stark raving hand, grasping the ordinary observer with electricity.
The Maynilad case shows the prevailing system at work, and belies the ruling elites’ adherence to free market principles, when the power base is threatened. On the contrary, the elites believe in socialism, the perverted version that is, in the sense of socialization of costs and risks along with the privatization of benefits, in this case in the form of the bail-out for a politically and economically powerful family. The “sweetheart deal” between the Lopezes and the government reveals with great clarity the easy abandonment of professed predilections for the “free market” in favor of state intervention to bail out the rich and powerful. It’s called “making the best out of the way things turn out,” at the expense of the people’s interest, even legal and business principles.
Inspite of protests against the privatization of water services, the Lopezes, through Benpres Holdings, acquired the provision of water services that was formerly the responsibility of the government-owned Metropolitan Waterworks and Sewerage System (MWSS). Maynilad boasts of increasing by 15% the coverage of water services --- though it’s pointed out that this was paid for by water consumers, besides the illegally collected P6.4 billion, in the form of the P4.07 per cubic meter in foreign currency differential adjustment (FCDA) and the P4.21 per cubic meter in accelerated extraordinary price adjustment (AEPA), along with the MWSS-allowed P3.30 in the special transitory mechanism (STM). The FCDA, AEPA and STM are mechanisms set up by the MWSS so that Maynilad could presumably recover its foreign exchange losses arising from its dollar-denominated loans.
Maynilad was supposed to pay P8 billion in concession fees to the government, alongside bridge loans for the 1999 capital expenditures. This was loaned from banks, including BNP Paribas, Barclays Capital, Citibank N.A., Tokai Bank of Japan and Coface of France. A $120 million (P6.6B) performance bond to the government was then set up.
Unable to recover losses, Maynilad entered into what is termed a “sweetheart deal” with the government, allowing the Lopezes to save P2.4 billion, since the government will now only collect $50 million of the performance bond. This is in exchange for the Lopezes’ and Ondeo’s (Benpres’ French partner) withdrawal of legal objections to the bond’s disbursement. The P2.4 billion is 60 percent of the $70 million that won’t be collected. The remaining 40 percent goes to Benpres’ partner, Ondeo Services, who preferred to convert its debt to equity, allowing it a 20 percent share in the water utility. With the deal, water consumers will also not be able to recover the illegally collected P6.4 billion.
Albay representative Joey Salcedo, informal adviser to President Macapagal-Arroyo, justified the concession, claiming that the P3.8 billion (the $70 million which will not be collected) was a “reasonable price,” not minding - if it’s even thinkable - that this could buy a month’s rice supply for 3.8 million households.
The Department of Justice also claims that the government was better off with the deal than without, since fully drawing the $120 million (P6.6 billion) would mean a net loss for the government. The P6.6 billion performance bond is P1.4 billion short of the P8 billion in concession fees that was supposed to be paid to the government. There’s also the P5 billion owed to banks that the government will incur upon takeover.
Subsequently, QC RTC Judge Reynaldo Daway refused to publicly disclose the rehabilitation deal, drawing protests from politicians running for elections and business groups who’d prefer public exposure since the business sector will also want to know movements - and possible opportunities - in the industry. There are also calls from party-list groups representing people’s interests to the effect that the proceedings remain open for public scrutiny.
Daway’s act exhibit a typical scorn for democracy, as issues that affect many people can’t be exposed to the shining light of the public sun. People may want to know if they’re being given the short end of the deal or not, but they’re made to understand by a court judge that that’s not the way things work in a democracy.
With the wider service area provided by Maynilad, it seemed to confirm that privatization was more efficient. But private control efficiency seems the more demonstrable compared to a corrupt and bureaucracy ridden government corporation, and the public paid for the wider services albeit at the expense of higher rates. Looking at how business is really done in the real world we see the takeover of state companies by private corporations. If it profits, everything’s fine, though people may well complain of the increasing concentration of power in private hands. But once subjected to market discipline and subsequent losses, the state as class executive will rush to save the company and be willing to pay the duties it has incurred from foreign banks. This is standard, since we don’t want to lose our reputation of paying our debts, whether people benefited from them or not. The Bataan Nuclear Power plant’s ghost is exorcised.
In this way, risks and costs are socialized, the government becomes guarantor and we can go on with our lives. P3.8 billion can easily be waived. You won’t even get that kind of heroic act when little people ask for a wage hike or for minimal social services or for subsidy for education. The rules in the real world resemble something like this: Big investors can invest virtually risk-free, even losing financially would summon the class executive in the form of the state that will afford them the opportunity to save face, and then they can still proclaim the virtues of the market and that the system works. That’s actually existing capitalism, for those who don’t know their economic ABC.
CB
The Maynilad case shows the prevailing system at work, and belies the ruling elites’ adherence to free market principles, when the power base is threatened. On the contrary, the elites believe in socialism, the perverted version that is, in the sense of socialization of costs and risks along with the privatization of benefits, in this case in the form of the bail-out for a politically and economically powerful family. The “sweetheart deal” between the Lopezes and the government reveals with great clarity the easy abandonment of professed predilections for the “free market” in favor of state intervention to bail out the rich and powerful. It’s called “making the best out of the way things turn out,” at the expense of the people’s interest, even legal and business principles.
Inspite of protests against the privatization of water services, the Lopezes, through Benpres Holdings, acquired the provision of water services that was formerly the responsibility of the government-owned Metropolitan Waterworks and Sewerage System (MWSS). Maynilad boasts of increasing by 15% the coverage of water services --- though it’s pointed out that this was paid for by water consumers, besides the illegally collected P6.4 billion, in the form of the P4.07 per cubic meter in foreign currency differential adjustment (FCDA) and the P4.21 per cubic meter in accelerated extraordinary price adjustment (AEPA), along with the MWSS-allowed P3.30 in the special transitory mechanism (STM). The FCDA, AEPA and STM are mechanisms set up by the MWSS so that Maynilad could presumably recover its foreign exchange losses arising from its dollar-denominated loans.
Maynilad was supposed to pay P8 billion in concession fees to the government, alongside bridge loans for the 1999 capital expenditures. This was loaned from banks, including BNP Paribas, Barclays Capital, Citibank N.A., Tokai Bank of Japan and Coface of France. A $120 million (P6.6B) performance bond to the government was then set up.
Unable to recover losses, Maynilad entered into what is termed a “sweetheart deal” with the government, allowing the Lopezes to save P2.4 billion, since the government will now only collect $50 million of the performance bond. This is in exchange for the Lopezes’ and Ondeo’s (Benpres’ French partner) withdrawal of legal objections to the bond’s disbursement. The P2.4 billion is 60 percent of the $70 million that won’t be collected. The remaining 40 percent goes to Benpres’ partner, Ondeo Services, who preferred to convert its debt to equity, allowing it a 20 percent share in the water utility. With the deal, water consumers will also not be able to recover the illegally collected P6.4 billion.
Albay representative Joey Salcedo, informal adviser to President Macapagal-Arroyo, justified the concession, claiming that the P3.8 billion (the $70 million which will not be collected) was a “reasonable price,” not minding - if it’s even thinkable - that this could buy a month’s rice supply for 3.8 million households.
The Department of Justice also claims that the government was better off with the deal than without, since fully drawing the $120 million (P6.6 billion) would mean a net loss for the government. The P6.6 billion performance bond is P1.4 billion short of the P8 billion in concession fees that was supposed to be paid to the government. There’s also the P5 billion owed to banks that the government will incur upon takeover.
Subsequently, QC RTC Judge Reynaldo Daway refused to publicly disclose the rehabilitation deal, drawing protests from politicians running for elections and business groups who’d prefer public exposure since the business sector will also want to know movements - and possible opportunities - in the industry. There are also calls from party-list groups representing people’s interests to the effect that the proceedings remain open for public scrutiny.
Daway’s act exhibit a typical scorn for democracy, as issues that affect many people can’t be exposed to the shining light of the public sun. People may want to know if they’re being given the short end of the deal or not, but they’re made to understand by a court judge that that’s not the way things work in a democracy.
With the wider service area provided by Maynilad, it seemed to confirm that privatization was more efficient. But private control efficiency seems the more demonstrable compared to a corrupt and bureaucracy ridden government corporation, and the public paid for the wider services albeit at the expense of higher rates. Looking at how business is really done in the real world we see the takeover of state companies by private corporations. If it profits, everything’s fine, though people may well complain of the increasing concentration of power in private hands. But once subjected to market discipline and subsequent losses, the state as class executive will rush to save the company and be willing to pay the duties it has incurred from foreign banks. This is standard, since we don’t want to lose our reputation of paying our debts, whether people benefited from them or not. The Bataan Nuclear Power plant’s ghost is exorcised.
In this way, risks and costs are socialized, the government becomes guarantor and we can go on with our lives. P3.8 billion can easily be waived. You won’t even get that kind of heroic act when little people ask for a wage hike or for minimal social services or for subsidy for education. The rules in the real world resemble something like this: Big investors can invest virtually risk-free, even losing financially would summon the class executive in the form of the state that will afford them the opportunity to save face, and then they can still proclaim the virtues of the market and that the system works. That’s actually existing capitalism, for those who don’t know their economic ABC.
CB
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