Review of privatization laws urged amid increases in utility costs

With the series of increases in utility costs, including the use of Metro Manila’s light rail mass transport and its expressway system, a party-list lawmaker on Thursday recommended a review on existing laws on privatization, build-operate-transfer (BOT) scheme and other related arrangements between the government and the private sector to ensure that public interest remains as the overriding consideration in future Private Public Partnership (PPP) deals especially on projects that involve public utility services.

“Public welfare should not be sacrificed in exchange for capital investments. The government should exercise caution on its future privatization plans and Private Public Partnership arrangements and see to it that public interest is fully protected,” said Ang Kasangga party-list Rep. Teodorico Haresco.

Haresco, vice-chair of the committee on small business and entrepreneurship development of the House of Representatives, said that although critical services which are now in the hands of the private sector such as water, electricity and even expressway management have improved in terms of quality and efficiency, public utility companies are rushing too much in their bid to recover their investment costs and immediately rake in profit.

“That’s the problem in allowing the private sector to run key public utility services because while they are more efficient, private companies are doing business purely for profit, in which case, public welfare is completely set aside. This is something that the government should consider before entering into privatization and PPP arrangements on projects that have direct public impact,” he said, noting that the PPP is just a revised tag for the BOT scheme which he helped conceptualize.

The BOT Law is covered by Republic Act no. 7718, or An Act Amending Certain Sections of RA 6957 entitled An Act Authorizing The Financing, Construction, Operation And Maintenance Of Infrastructure Projects By The Private Sector, And For Other Purposes signed into law on May 8, 1994.

According to Haresco, there might now be a need to review or even revise the implementing rules and regulation (IRR) of the BOT Law which is the only available law that sustains the plan of President Benigno S. Aquino to enter into massive PPP deals to ensure that all contracts will provide for the protection of the public.

“For example, I think that there should be a certain cap on the amount and frequency on the increase of their service charges. This will ensure a steady profit for the companies who enter into PPP deals with the government without causing too much shock to the public. In short, things like toll fees, electricity costs and even MRT fares should be moderate and predictable,” he said.

At present, Haresco said private companies that are under BOT arrangements with the government “simply impose their will on the public and the worst part of it is the fact that the government cannot do anything to stop them.”

“It’s very understandable because certainly, these companies are not not doing business for charity but for profit. On the other hand, the government cannot do anything because this is sending the wrong signal to potential investors. Therefore, I think that the keyword on these PPP arrangements is moderation and predictability. The private sector would moderate their greed for profit while the government returns the favor by making certain that they will be able to recover their investments and make profit in the long run,” he said.

Besides, the Kasangga party-list solon said that when the BOT Law was passed in the mid-1990’s, US treasury bills’ interest rates are in the vicinity of 4-5 percent.

Now, US treasury bills interest rates is near zero percent and therefore, greater reduction should be made in the 12 percent rate of return prescribed under the BOT Law, he said.

“On one hand, we will encourage massive influx of foreign direct investments. On the other, we are committing our country to the proverbial ‘Dutch disease’ — we will hallow out our export competitiveness particularly on the fast rising BPO (Business Process Outsourcing) sector,” he said.

A 300-percent increase in toll fees at the South Luzon Expressway (SLEX) will be implemented on a staggered basis.

Malacañang also recently endorsed fare increases in the light rail transit (MRT 3, LRT 1 and 2) plying the Metro Manila’s major routes.

Those taking jeepney and buses are likely to pay more as a result of rising fuel prices and the increase in toll rates.

The Land Transportation Franchising and Regulatory Board (LTFRB) also approved a hike in the flagdown rate of taxi from P30 to P40, and the per kilometer charge, from P2.50 to P3.50. Lilybeth G. Ison, PNA

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