Aquino’s priority bills: PPP sweeteners

First published on Blogwatch.ph

At first look, the President’s list of 23 priority bills which was submitted on Monday to the Legislative Executive Development Advisory Council (LEDAC) seems harmless, if not entirely vague. But as the expression goes, the devil is in the details.

Particularly alarming is the fact that included in the basket of priority measures are sweeteners for public-private partnerships (PPP), in the form of fiscal incentives and “rationalization” of utilities like electricity and water. This is what the mainstream media and observers have noticeably overlooked. Or perhaps the regime’s languange is just too deceitful.

Many of the measures included in President Benigno “Noynoy” Aquino’ III’s “LEDAC 23” are in fact designed to pique the interest of foreign investors and multi-lateral institution. Yet while they are juicy news to capitalists, they are also grim headlines for the people.

Take for instance the “Consolidated Investments Incentives Code of the Philippines” or House Bill 4152 filed by House Speaker Belmonte. The Code requires all Investment Promotion Agencies (such as the Philippine Economic Zone Authority or PEZA and Board of Investments) to grant foreign profiteers a host of hefty fiscal incentives. Included in the tasty package are full income tax holiday, reduced income tax, five percent tax on gross income earned in lieu of all other taxes and “tax incentive combination.”

Incentives rationalization

Expectedly, these incentives will compliment the infrastructure projects which the Aquino administration chalked up late last year for potential partnerships under the PPP framework. Simply put, the incentives are enticements for foreign corporations to invest in PPP projects.

Yet such rationalization of incentives would prove to be revenue-eroding as it would translate to foregone tax collections. This wouldn’t make the budget deficit less nigthmarish in the long-run. And the irony of this is that while the Bureau of Internal Revenue (BIR) is holding ordinary taxpayers and small businesses by the neck, the government is letting big fishes profiteer tax-free.

It should be noted also that the provisions of HB 4152 aren’t entirely new. In fact, foreign corporations operating in the country’s economic zones have been enjoying hefty incentives since the enactment of the Special Economic Zone Act (SEZA) in 1995. Essentially, HB 4152 will just expand the happiness of profiteers.

The interesting catch of Aquino’s drive to rationalize incentives is that former president and now Pampanga Rep. Gloria Macapagal-Arroyo is actually actively pushing for basically the same piece of legislation in Congress (she has a similar version, HB 3162). And so while bashing Arroyo for her supposedly poor economic policies, Aquino is treading the same discredited framework of goading investments through incentives to supposedly promote growth.

Well, this is not surprising considering that Aquino and Arroyo both subscribe to the policy prescriptions of the World Bank (WB) and the International Monetary Fund (IMF).

IMF dictate

Just last Thursday, the IMF reiterated through its Public Information Notice its dictate to the Aquino administration as it pushed the government to rationalize fiscal incentives. The multi-lateral agency also stressed that the public-private partnership program can play an important role in raising potential growth and generating jobs.

“The authorities recognize the essential role of the private sector as an important partner for economic development and job creation. The program seeks to address the gap on development investments by tapping resources of the private sector and capitalizing on renewed foreign investor interest in the country,” the IMF said in its report.

Well, such pronouncement by the IMF can be disputed by our experience with previous PPP projects, one of the glaring examples of which is the construction of the Metro Rail Transit (MRT). The MRT project, which is a build-lease-transfer arrangement, has saddled the government with huge debts and sucked billions from the people’s pockets. The looming fare hike will not in any way support the IMF’s argument.

Another PPP sweetener which the Aquino administration wants pressed out of Congress is the bill amending certain sections of Republic Act No. 6957 entitled “An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector.” (RA 6957 contains the various modes of PPP such as built-operate-transfer, build-leas-transfer, etc.)

Such measure takes the mold of Aquino’s PPP framework, which pushes infrastructure projects under various partnerships with the private sector.

‘Projects of National Significance’

In a briefer on LEDAC 23 posted on the government website, the Palace said the measure will grant the President the authority to classify certain projects as “Projects of National Significance” on two conditions: (1) the project’s total cost must be least P5 billion (2) the project must be located or affects 2 provinces.

From this twisted rubric by the Aquino administration, any infrastructure project can be of “national significance” even if it tramples on national sovereignty and the people’s interest, as long as it is presumably big enough to displace fellow countrymen in at least two provinces.

“Projects of National Significance” will also enjoy a host of incentives including real property tax exemption, maximum of 50% of 1% of gross sales/receipts imposable local tax and automatic grant of business permits. Needless to say, this is yet again a come-on for foreign investors at the expense of the people.

TRO-free profiteering

Not only does the priority measure provide specific projects an express lane, but it also insulates the infrastructure deal from temporary restraining orders (TROs), “preliminary injunction and preliminary mandatory injuctions.” This reminds us of Aquino’s promise of “regulatory risk guarantees” to investors during the PPP summit last year. In a nutshell, the legislation undermines the power of the courts to suspend or junk projects which can be found contrary to existing laws. So even if the private partner raises user fees up to astronomical heights, the government will not bother questioning the hike at the very least.

Aside from that, the legislation provides for the creation of a “Special Fund” which will be supposedly used in case the government fails to comply with its obligations. Of course, this fund will be sourced from the government coffers which we taxpayers will ultimately bear.


PPP in the AFP

Also included in Aquino’s LEDAC 23 is the act which strengthens the modernization of the Armed Forces of the Philippines (AFP). The Palace said the measure will authorize the defense department and the AFP “to enter into and execute contracts of sale, lease and joint venture agreements involving defense real properties, and to enter into public-private partnerships in order to raise additional proceeds needed for the Modernization Program of the AFP.”

Such PPP in the armed forces is nothing new. In fact the US army has already published a handbook on “Army Public-Private Partnering.” In the Philippine context, enabling PPPs in the defense sector would basically widen business opportunities for private military contractors. These private partners would presumably exploit military housing, ammunition sourcing, and supplies upgrade as new vistas for profit-making.

While accomodating foreign investors’ interest in his priority bills, President Aquino has utterly left out the simple demands of the people in his list of priority bills. His basket of legislative priorities, for the most part, is all about PPP – profits, profits and profits.


One thought on “Aquino’s priority bills: PPP sweeteners

  1. The monopolies of Henry Sy, the Lopez and other local businesses hinders the globalization of the Philippine Market. High commodity prices results from lack of international competition and slow technological and infrastructure especially highways that blows transportation costs. The high energy costs associated with the poor power infrastructures will continue to be a problem – in fact the Philippines has the highest energy prices in the region. The laws preventing the full participation of international investors limits the countries’ capital base rendering the slow albeit recent increase in economic growth. Through competition and proper policies aimed at safeguarding the stability of the Philippine financial sector will balance these risks. Besides who said that taxation and the revenues associated with it are the measure of general economic welfare or the projects’ overall benefits? Economic welfare is not measured by Profits especially not all benefits are measurable in money terms. It is the careful and intelligent crafting of policies that will give the most benefits for both sides -the people and the foreign investors. Why settle for we against them if we can settle for the best? We need negotiation skills, As simple as that.

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