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Charter change creates illusion of change – Ibon exec

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By April Burcer

The proposed constitution creating a federal Philippine government is President Rodrigo Duterte’s response to a growing discontent against his government, Ibon Executive Director Jose Enrique Africa said in a forum at UP Diliman Thursday afternoon.

“There is a limit to flattery, to disrespect, to insults, to bullying and to terrorizing. It underscores what this charter change is all about. It becomes important for Duterte to push the charter change because of this sort of discontent,” Africa said.

Africa explained that the more disgruntled and dissatisfied the people are, the more Pres. Duterte needs a new Constitution to create the illusion of change.

Contributory to growing discontent against the Duterte government is the lack of genuine economic growth, Rosario Bella Guzman, another IBON executive, said during the think tank’s Midyear 2018 “Birdtalk”.

“[The government says] we have the highest growth rate in Asia, with 6.8 percent. The truth behind that highest growth rate [however] is joblessness, poor quality of work, very low wages and 5,460 Filipinos leaving the country everyday to look for work,” Guzman said.

“Imagine this scenario, and then you slap the TRAIN Law, so now we also have the highest inflation rate,” she added.

Cha-cha’s major flaws

Africa said Duterte’s charter change and drive for federalism have three major flaws.

The first flaw, he said, is the concept of an ‘imperial Manila’ where so-called wealth distribution would emanate from.

“What resources are they going to redistribute from imperial Manila? Are we that rich? No. There are a lot of poor people in Manila,” Africa said.

The second flaw, he said is the need for a new Constitution to redistribute resources.

“Even [former chief justice Ma. Lourdes] Sereno said there are enough laws in place and legal bases to distribute resources, authority and responsibility to the regions,” Africa added.

The third flaw is the government’s refusal to change its anti-poor policies, according to Africa.

“Our policies are pro-elite and anti-people. It’s not about imperial manila versus the poor regions. The main contradiction is the elite vs the poor Filipino,” he explained.

In the end, the government’s charter change is not about federalism, national development and for redistributing resources to the poor regions, Africa said.

“Federalism is about political self interest,” he said. #

TRAIN-driven rising cost of living makes wage hike urgent

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Research group IBON said that tax-driven inflation is making the meager wages of poor Filipinos fall even further behind the rising cost of living.

The group said this makes it even more urgent for the government to immediately raise wages even as it revisits the Tax Reform for Acceleration and Inclusion (TRAIN) law behind the increase in consumption taxes.

The Duterte administration would be insensitive if it continues to resist the clamor for a decent national minimum wage, the group added.

IBON said that accelerating inflation has increased the family living wage (FLW) in the National Capital Region (NCR) and elsewhere.

IBON computations show that as of June 2018, a family of six needs Php1,175 to meet their basic needs, while a family of five needs Php979.

The FLW has increased by Php65 for a family of six and by Php54 for a family of five in June 2018 from the same period last year.

As it is, said the group, the NCR nominal minimum wage of Php512 is falling even further behind the rising cost of living.

The NCR nominal wage is only 44 percent of the FLW for a family of six, and 52% of the FLW for a family of five with a wage gap of Php663 (56 percent) and Php467 (48 percent), respectively.

The wage gap will continue to widen as inflation erodes the minimum wage.

Reacting to economic planning secretary Ernesto Pernia who said that a wage hike is not necessary, the group said that an immediate wage hike will help poor Filipinos cope with price spikes.

The Duterte administration can respond to the demand of labor groups for a Php750 national minimum wage.

IBON stressed that there are enough profits in the economy and among corporations to support the substantial increase in the minimum wage needed by workers and their families.

IBON also belied claims by the country’s economic managers in their joint statement on the June 2018 inflation that TRAIN’s reduction of personal income taxes, cash transfers, and allocation for free social and economic services “should help in coping with the rising prices of goods.”

The group said that their assertion that TRAIN “increased the take-home pay of 99 percent of income tax payers” is grossly deceitful because they know that only around 7.5 million or one-third (33 percent) of Filipino families are income tax payers.

Of these, some two million were already exempt from paying income tax even before TRAIN because they were only minimum wage earners.

This means that 17.2 million or over three-fourths (76 percent) of Filipino families suffer inflation but without any increased take-home pay.

IBON also said that the government should stop hyping TRAIN’s cash transfers because when they are ended by 2020 the higher prices of goods and services due to TRAIN will remain.

The group said that the Duterte administration’s unrepentant defense of TRAIN is daily affirmation of its callousness to the plight of tens of millions of poor Filipinos and its refusal to replace TRAIN with a more genuinely progressive tax package that is unafraid to tax the rich. #

 

Duterte’s TRAIN to blame for highest inflation in nearly 10 years — IBON

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Research group IBON said that the government’s insistence on higher taxes especially on the poor is among the factors driving inflation rates to their highest in nearly a decade.

The group said that runaway inflation is due to the peso depreciation and rising global oil prices combined with the Tax Reform for Acceleration and Inclusion (TRAIN) law.

Among these, TRAIN’s higher consumption taxes are directly within the government’s control and it can immediately arrest the tax-driven portion of inflation if it chooses to do so.

The Philippine Statistics Authority (PSA) has reported a 5.2 percent inflation rate for the month of June.

The biggest price increases were in food, especially in corn, vegetables, meat and rice; alcohol and cigarettes; transport; housing, water, electricity, gas, and other fuels; and education.

This 5.2 percent inflation rate is more than double the 2.5 percent in the same period a year ago and four times the 1.3 percent inflation rate in June 2016 at the start of the Duterte administration.

The June inflation rate appears as the fastest in only five years because available estimates using the current base year [2012=100] are only until 2013.

But IBON noted that inflation today would already be the fastest in nearly a decade, or since March 2009, using inflation data according to the previous base year [2006=100] as an approximation.

Sonny Africa, IBON executive director, explained that the TRAIN-triggered increase in consumption taxes, especially on fuel products, is an inflation factor immediately within the government’s control.

“The Duterte administration’s insistence on TRAIN makes it directly accountable for the highest inflation in almost ten years,” said Africa, “and its pushing the higher taxes last year amid already rising global oil prices and a depreciating peso only underscores its insensitivity to the poor.”

Africa stressed that the runaway inflation hits poor Filipinos the hardest because their incomes are so low already that any price increase means they will be consuming less.

Moreover, food spending accounts for over half the expenses especially of the poorest households so that food prices are rising even faster than other commodities is particularly alarming.

The poorest are hit worst, Africa said, adding, “The cumulative impact of high inflation is that the poor will eat less, walk more, forego spending on medicines and treatment, scrimp on their utilities, and have nothing for emergencies.”

In the short-term, government can suspend TRAIN to moderate inflation and provide relief to millions of poor Filipinos. Even better, it can work towards eventually reforming the tax reform package to become genuinely progressive rather than regressive and anti-poor, said Africa.

Africa added that the government can also take measures to moderate inflation over the longer term. It can manage the impact of rising global oil prices through responsible regulation of the oil industry.

Arresting the peso’s steady decline will, he said, require a more comprehensive approach.

 

This includes identifying and overcoming: the long-standing agricultural and industrial backwardness at the root of the country’s chronic trade deficit; the over-reliance on overseas remittances for foreign exchange; and the over-reliance on foreign debt and investment. #

Group to MWSS: Show us the numbers

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The Water for the People Network (WPN) expressed dismay that the Metropolitan Waterworks and Sewerage System – Regulatory Office (MWSS-RO) would not readily reveal the numbers involving water companies’ petitions for tariff increases in public consultations that the MWSS-RO itself convened this week.

The group said that by doing so, the government agency effectively hindered the consumers’ right to know.

Instead of genuinely consulting the people, it seemed to be conditioning the public to blindly accept the impending water rate hikes based on the petitions of the Manila Water Company (Manila Water) and Maynilad Water Services Inc. (Maynilad), said the group.

The WPN is composed of groups and individuals promoting people’s control over water services and resources.

A concession agreement (CA) between government and water concessionaires warrants the rate rebasing process every five years.

The process pertains to the determination of new tariffs based on the Manila Water and Maynilad’s past and future expenses, as well as a rate of return that will allow the firms to recover their investments.

The MWSS-RO has conducted public consultations before and during the past rate rebasing periods purportedly to grasp the public pulse with regard to the implementation of new tariffs.

The private companies’ petitions have historically been approved, resulting in water rates increasing manyfold through the years, except during the 2013 rate rebasing period.

In September 2013, the MWSS prohibited Maynilad and Manila Water to collect their corporate income taxes and company incentives such as recreation and travel expenses through pass-on charges.

The rate rebasing results reflected amounts lower than both companies’ petitioned rates.

Teddy Casiño, WPN spokesperson, said, “Show us the numbers. If water regulators truly prioritize public interest and want consumers involved in the rate rebasing process, they should make information in Maynilad and Manila Water’s petitions readily available to the public. Otherwise, these public consultations are a PR gimmick.”

During this period’s rate rebasing public consultations, water regulators and the consultants they hired to review water concessionaries’ proposals were reluctant to share pertinent details such as the rate increases requested and basis for the rates such as company earnings, expenditures, and future expenses.

They were also hesitant to answer if questionable charges prohibited in the 2013 rate rebasing process were also included.

WPN said that without vital rate rebasing information from the MWSS-RO, water consumers will be left in the dark and made vulnerable to the water companies’ onerous fees.

The group urged water regulators to uphold their mandate to protect public interest and ensure that Maynilad and Manila Water will not pass on unwarranted expenses to already burdened water consumers. #

Stop water rates hikes until onerous fees resolved – WPN

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Advocacy group Water for the People Network (WPN) is appealing to the Metropolitan Waterworks and Sewerage System – Regulatory Office (MWSS-RO) to halt the ongoing rate rebasing process that is expected to raise water rates in Metro Manila and its environs, saying the basis for determining future water rates remains unresolved.

Concessionaires Maynilad and Manila Water continue to contest the MWSS-RO’s 2013 decision to prohibit water companies from passing on their corporate income tax and other questionable expenses to consumers.

Both companies took to international arbitration to protest government’s denial of their petitioned rate hikes, with Maynilad demanding government to pay Php72 billion in lost revenues and Manila Water demanding Php10 billion. Both cases are still pending in the courts.

WPN said that pending resolution of both controversies, any rate rebasing scheme would be conjectural and would burden the public with unjust and unnecessary increases in the midst of soaring prices.

“With continued lack of transparency in the rate rebasing process and petitions, water companies could make another attempt to pass on questionable charges to consumers through their water bills,” said former party list representative Teddy Casiño, a convenor of the WPN.

For the 2018-2022 rate rebasing period, Maynilad is seeking an estimated Php12 per cubic meter increase, while Manila Water is seeking and Php8 per cubic meter increase.

Rate rebasing pertains to the periodic computation of water rates based on government’s review of the concessionaires’ petitioned new tariffs.

The latter supposedly covers the companies’ past and projected expenses and a guaranteed rate of return.

However, due to water consumers and advocates’ clamor during the rate rebasing process in 2013, previous water regulators disallowed corporate income tax and other expenses unrelated to the delivery of water from being computed into the water bill.

Casiño said that since 1997 when water utilities were privatized, basic or average water tariffs have soared by as much as 596 percent under Maynilad and 970 percent under Manila Water, contrary to the promise of affordability.

Studies also showed urban poor families end up shelling out thousands of pesos beyond their means for either fetched water from the community pump or sub-meter water access in the absence of direct water connections.

“WPN hopes that the government will look upon the rate rebasing petitions with public interest foremost in mind,” Casiño said. He added that the network will guard against the inclusion in the bill of the Php82-billion uncollected funds which both private companies have pleaded international arbitration courts to demand from the government.

According to Casiño, government’s accession to the companies’ demands would certainly entail higher user fees. “This will double the burden on poor Filipinos who are already struggling with price hikes due to the new taxes,” he said.

Casiño challenged the government to not allow companies to impose onerous fees for profit. # (ibon.org)

Jobs crisis intensifying under Duterte – IBON

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Research group IBON said that despite recently hyped growth of 6.8 percent in first quarter 2018 the country’s jobs situation continues to worsen under the Rodrigo Duterte administration.

The Philippine Statistics Authority (PSA) reported that the employment rate grew slightly to 94.5 percent in April 2018, while the unemployment rate was lower at 5.5 percent.

The jobs situation seemed to improve as the number of employed Filipinos rose by 625,000 and the number of unemployed declined by 83,000.

The government largely attributed this to increased infrastructure spending.

According to IBON estimates correcting for government underestimation, however, the number of unemployed actually grew by 82,000 to 4.1 million in April 2018 from 4 million in April 2017.

Official unemployment figures do not reflect discouraged workers or those who have dropped out of the labor force after failing to find work after six months.

The agriculture sector, which is the second largest source of employment among the country’s sectors, had the most job losses, said the group.

Official data shows that the number of employed in agriculture fell by 723,000 to 9.8 million in April 2018 from 10.5 million in April 2017.

The sector has been plagued with job losses for the past four consecutive rounds of the labor force survey.

IBON also noted that the agriculture, hunting and forestry subsector lost 558,000 jobs, while fisheries lost 134,000.

The fisheries subsector had notable job losses for all labor force survey rounds under the Duterte government.

Poor quality work or jobs that are insecure, lack benefits and have low wages persists, said the group.

The number of underemployed or those looking for additional work increased by 466,000 from around 6.5 million in April 2017 to 6.9 million in April 2018.

IBON noted that among underemployed persons, those who worked 40 hours and over in a week grew by 758,000 from 2.4 million last year to 3.2 million this year.

The growing underemployment despite the increase in full-time work may indicate that much of reported full-time work still does not give enough income for the employed to meet their basic needs.

The number of part-time workers who worked less than 40 hours in a week decreased but still comprised 52.5 percent of total underemployed in April 2018.

The group also noted that nearly half or 47.1% of underemployed for this round were in the services sector, 32.4 percent in agriculture, and 20.5 percent in the industry sector.

Both services and industry sectors registered increases in underemployed persons from April last year.

IBON said that government has been content with minimal job generation in the non-productive sectors such as the kind offered during job fairs.

According to the group, government should instead ensure sustainable and decent jobs and livelihoods for Filipinos.

This can be done by embarking on a solid economic program that genuinely boosts the agriculture and fisheries sectors and develops the country’s vastly rural economy to build strong and vibrant domestic industries. #

Php750 minimum wage possible, non-inflationary and good for the economy–​IBON​

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Contrary to government and big employers’ claims, research group IBON said that raising minimum wages nationwide to Php750 is doable, need not spike prices further, and will benefit millions of Filipino workers and the economy.

The group cited the following reasons:

  1. Raising minimum wages nationwide to Php750 is doable if owners of establishments allow a small portion of their profits to go to their workers instead.

    Firms and the economy as a whole have more than enough profits to support this.

    Data from the 2015 Annual Survey of Philippine Business and Industry (ASPBI) of the Philippine Statistics Authority (PSA) shows that the 34,740 establishments employing 20 or more have Php1.7 trillion in total profits and 4.5 million employees.

    Raising the average daily basic pay of wage and salary workers from the nationwide average of Php378.71 to Php750 transfers just Php473.2 billion to workers’ pockets, which is only a 28.3 percent decrease in profits.

    Workers will meanwhile get to take home an additional Php8,076 per month on average.

    This still falls short of the family living wage and does not necessarily bring everyone up to a decent standard of living but such an increase will provide immediate relief to millions of Filipino workers and their families.

  2. Raising minimum wages nationwide to Php750 will not necessarily hike inflation. Prices need not go up and workers need not be laid off if employers accept the slight cut in profits.

  3. As it is, wages are not even keeping up with the rising productivity of workers so their ever-growing contribution to the economy increases employer profits more than improves workers’ welfare. For instance, according to the Labor Productivity Statistics of the PSA, the contribution of each worker to total gross domestic product (GDP) increased from Php196,179 in 2015 to Php198,215 in 2016 (up by 2.2 percent). This means that the average daily contribution of each worker to the economy amounts to some Php759.44 per day, which is more than double the average daily basic pay and more than the proposed national minimum wage.

  4. The economy will also benefit by increasing workers’ purchasing power and aggregate demand which stimulates higher production and increases economic activity. Raising minimum wages nationwide also reduces inequality by transferring wealth overly concentrated in a few to millions of workers and their families.

According to IBON, the country’s largest corporations and the wealthiest families owning these can easily absorb the substantial wage hike.

Smaller producers in micro, small and medium enterprises (MSMEs) will also be able to afford the wage hike with government support such as immediately providing cheap and easy credit, giving marketing support, nurturing locally-integrated supply chains, and improving their scientific and technological capabilities.

MSMEs will also benefit from increased worker demand for their goods and services in the domestic market, said the group. #

Substantial wage hike urgent, gov’t told

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Research group IBON said that the government’s recently announced plan to respond to labor’s clamor for an increase in the minimum wage is welcome but underscored that this move is urgent amid rising prices.

The group said that the hike should be meaningful enough to keep up with accelerating inflation and worsening poverty.

Amid the three-year-high first quarter inflation, widely perceived to be caused by the government’s Tax Reform for Acceleration and Inclusion (TRAIN) among other factors, and labor’s demand for a wage hike, the Department of Labor and Employment (DOLE) said that a wage increase is coming up within the month.

According to IBON, it is urgent for government to ensure the legislation of a minimum wage hike that is sufficient for the working people to cope with the rising cost of goods and services.

Recent price spikes have been brought about by government’s own market-oriented policies such as the oil deregulation and tax reform laws that press prices up while wages remain low.

The group however stressed that the wage increase should be substantial, as the recent inflation rate will only continue to erode a paltry increase.

IBON explained that despite the last increase of Php21 in October 2017, which raised the National Capital Region (NCR) minimum wage to Php512 from Php491 per day, the real value has eroded by Php16.25 from Php464.19 in October 2017 to Php447.94 as of April 2018.

IBON also noted that the TRAIN has inflicted a heavy blow on the workers’ purchasing power as the real value of the NCR minimum wage lost a significant Php18.79 since the Duterte administration took office in July 2016.

According to IBON, initially increasing the minimum wage nationwide to at least Php750 as recently proposed by progressive lawmakers is the more practical measure.

This will allow wage earners to cope with inflation and increase their purchasing capacity.

It will also help bridge the gap between the nominal minimum wage and the family living wage (FLW) of Php1,173.14 in the NCR, for instance, as of April 2018 computed by IBON.

While the amount still falls short of the FLW, a Php750 minimum wage can be an initial important step towards increased economic activity and more vibrant economic growth that shall ensure a more stable price situation, said the group. #

Php750 national minimum wage a legitimate call

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(IBON Facts & Figures excerpt)

The demand of progressive workers’ federations for the re-installation of a national minimum wage and pegged at Php750, along with the abolition of the regional wage boards, is an immediate, important and doable step towards making economic growth genuinely inclusive and addressing worsening inequality in the country.

Based on IBON estimates, raising the average daily basic pay from the nationwide average of some Php367.35 to the proposed Php750 national minimum wage transfers just Php448 billion to workers’ pockets – this is only 27.4 percent decrease in profits, which still leaves employers with a significant 72.6 percent (Php1.18 trillion) of their clean profits.

On the other hand, each worker will be able to take home, on average, an additional Php8,364.00 per month.

The amount of profits transferred to workers’ wages was computed based on data from the latest (2014) Annual Survey of Philippine Business and Industry (ASPBI) of the PSA. The census shows that 35,009 establishments with employment of over 20 or over had Php1.63 trillion in total profits and 4.13 million employees.

The country’s largest corporations and wealthiest families are the most able to absorb the wage hike. In fact, the total cost of proposed Php750 national minimum is only equivalent to 20 percent of the total net worth of the 10 richest Filipinos.

Meanwhile, the government can ensure special support for small producers of micro, small and medium enterprises (MSMEs) to help them cope with the proposed national minimum wage. This includes immediately providing cheap and easy credit, giving research, development and marketing support, nurturing locally integrated supply chains, and improving their scientific and technological capabilities. (Excerpt from Continuing Wage Depression, IBON Facts & Figures, April 2017.)

Unsolicited projects for favored business interests to rise under Pres. Duterte?

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By Arnold Padilla / IBON Features

When President Duterte said last month that “all projects of the Philippines would be something like a Swiss Challenge”, media attention has focused on the Swiss Challenge and its implications. But what the presidential statement implied was that in order to supposedly fast track his ambitious Build Build Build program, the administration may encourage more unsolicited proposals and negotiated contracts.

And there lies the real and bigger problem. Unsolicited proposals and negotiated contracts are the worst form of public procurement of infrastructure under the public-private partnership (PPP) scheme. These negotiated deals are the most prone to bureaucratic corruption and to patronage for favored business interests.

Close ties

San Miguel Corporation (SMC) president Ramon Ang, for instance, is among the closest to Malacañang. He is publicly known as one of the (unofficial) major campaign contributors of Pres. Duterte and patron of the Chief Executive’s controversial anti-drug campaign. SMC, a Php255-billion diversified conglomerate and known to cultivate close ties with whoever is in power, is currently implementing theunsolicited Php62.7-billion MRT-7 while awaiting government approval of two more unsolicited mega infrastructure projects.

Based on the revised (2012) Implementing Rules and Regulations (IRR) of the Build-Operate-Transfer (BOT) Law, unsolicited proposals are “project proposals submitted by the private sector, not in response to a formal solicitation or request issued by an Agency/LGU (local government unit) and not part of the list of priority projects as identified by Agency/LGU, to undertake Infrastructure or Development projects.”

A third party could challenge the offer of the original proponent of an unsolicited proposal through what is called the “Swiss Challenge”. In order to bag the contract, the original proponent should match the counter-offer of the third party. In practice, however, all unsolicitedprojects concluded in the Philippines since the 1990s were clinched by the original proponent except in the case of the controversial NAIA Terminal 3 where the challenger (Philippine International Terminals Co. Inc. or PIATCO) won but the contract was declared null and void by the Supreme Court (SC) due to irregularities.

At the start of its term, the Duterte administration’s economic managers already announced that the government is open to unsolicitedproposals aside from its so-called hybrid PPP – i.e. mobilizing official development assistance (ODA) to build infrastructure and later bidding out its operation and maintenance (O&M) to the private sector. Ang, however, called hybrid PPP as “complicated” and expressed preference for unsolicited proposals for supposedly faster delivery of projects.

Following the President’s pronouncement of openness to unsolicited projects, the latter flooded the government, with project proposalsreaching a total of as much as Php3 trillion in the first year of the Duterte administration according to a news report last year. But most of these are just concepts or ideas, with actual proposals under evaluation by the Investment Coordination Committee (ICC) reaching only three as of the latest (January 2018) projects status report from the PPP Center.

But these three unsolicited proposals are among the just five PPP projects that the PPP Center said could probably be rolled out this year. Two of these unsolicited proposals have SMC as the original proponent – the Php700-billion New Manila International Airport and the Php338.8-billion Manila Bay Integrated Flood Control, Coastal Defense and Expressway Project. The third one is the Php51.17-billion East-West Rail Project of Megawide Construction Corp.

A separate news report said that SMC has an unsolicited proposal to the state-run Philippine National Construction Corp. (PNCC) to expand the Metro Manila Skyway and the South Luzon Expressway (SLEX) for Php554 billion.

Combined, the indicative cost of SMC’s reported unsolicited proposals (Php1.59 trillion) already account for 53% of the cost of all unsolicitedproposals (Php3 trillion) reportedly being pitched to the Duterte administration. To get a better grasp of how huge these two projects are, note that the total amount of all (16) PPP projects that have been awarded since the Aquino administration is “just” Php323.06 billion.

Beyond transparency and corruption

Even PPP advocates while recognizing that the presence of unsolicited proposals is on the rise warn governments to use them with caution and within a strict regulatory framework. In a review of unsolicited projects worldwide, a study commissioned by the Public-Private Infrastructure Advisory Facility (PPIAF) of the World Bank noted that among the common concerns on unsolicited proposals are: (1) lack of transparency in selection and implementation of projects; (2) avoidance of competition; (3) avoidance of due diligence processes; (4) opportunities for corruption and political patronage; and (5) acceptance of poor quality projects (design and/or execution) that do not even meet minimum requirements of any sort, in the name of expediency. The World Bank reportedly prohibits the use of unsolicited proposalsin projects that they fund.

Beyond transparency and corruption issues, however, the greater impact of unsolicited proposals involve how such procurement method further weakens the mandate and capacity of the state to design and implement a rational infrastructure program that is responsive to the long-term needs of the people and the economy. Unsolicited proposals also represent how corporate interests that are mainly driven by profit motivation take over infrastructure development and operation, often at the expense of the country’s overall development and social agenda.

Ideally, infrastructure projects are determined by and consistent with the development plan of a country, meaning projects are initiated and prioritized (including in terms of resource allocation) by government based on such plan. Government’s role goes beyond identification, resource mobilization and construction, and extends to operation and maintenance of the infrastructure.

This has been the practice in many countries including the Philippines until the advent of neoliberalism in the 1980s and its rapid expansion in the 1990s. Government’s role has been reduced to listing down of infrastructure projects and soliciting private investors to build and operate them through bidding or direct negotiation. This is already problematic by itself as it essentially privatizes the infrastructure and distorts its economic and social purpose as commercial viability becomes the primary consideration.

Tailor-made public infra for private interests

Unsolicited proposals thus further detach infrastructure development from specific public needs and interests. With the private proponent initiating the process of identification and conceptualization, unsolicited projects are often not reflective of priority infrastructure needs. In addition, unsolicited proposals reinforce the undue concentration of infrastructure development in urban centers and more developed regions at the expense of poorer regions or areas that need more infrastructure, but where commercial prospects or interests are less for private sector proponents.

There are cases where big business proposes infrastructure projects that are not just meant to supply public needs (and directly profit from it) but are also tailor-made to bolster its other private commercial interests. One example is the unsolicited proposal jointly submitted by SM and Ayala groups to build a Php25-billion 8.6-kilometer elevated toll road that will supposedly help decongest traffic along EDSA. But the project will actually benefit the two conglomerates’ property development interests as the proposed toll road would also increase access to the SM Mall of Asia complex and Ayala’s Makati business district. SMC is questioning the SM-Ayala proposal because it will allegedly duplicate the existing SMC-operated NAIA Expressway and affect traffic volume (and profits).

But while SMC is questioning the need for the SM-Ayala’s unsolicited toll road, the wisdom of its own unsolicited New Manila International Airport is also questionable. Under its proposal, SMC will build a massive Php700-billion airport spanning thousands of hectares along Manila Bay in Bulakan, Bulacan with six parallel runways and an initial 100-million passenger capacity (thrice of NAIA’s). But it will also just duplicate the recently awarded Clark International Airport Expansion Project (a solicited PPP deal bagged by Megawide) whose further expansion has lower social (as a new infrastructure, the Bulacan airport could potentially displace more communities) and financial costs (e.g. there are three separate unsolicited proposals to develop Clark airport from JG Summit, Megawide, and Manny Pangilinan’s group with costs ranging from Php187 billion to Php337 billion).

For SMC, the agenda is not just to build and operate an airport that would be an alternative to the highly congested and inefficient NAIA. What SMC wants to build is an “aerotropolis” or a metropolis revolving around an airport. Aside from the 1,168-hectare airport, the plan includes a 2,500-hectare city complex which gives the giant conglomerate additional potential profits from property development as well as a toll road that will link with NLEX, on top of running the airport.

No guarantees

According to the BOT Law and its IRR, unsolicited projects are not entitled to direct government guarantee, subsidy or equity. Nonetheless, like solicited PPP projects, they are still eligible for other perks including investment incentives under the Omnibus Investment Code and performance undertaking (i.e., a government guarantee that it will assume responsibility for the performance of an agency’s obligations under the contractual arrangement including the payment of monetary obligations, in case of default) such as what SMC’s unsolicited MRT-7 project enjoys. They even enjoy “security assistance”, or the deployment of police or military forces in the vicinity of the project site to provide security during the implementation of the project up to completion.

The BOT Law requires as well that proposals be innovative and offer a new concept or technology. But it is unclear what is particularly innovative in an airport in Bulacan or an MRT along Commonwealth Avenue to pass as unsolicited projects. Indeed, a 2012 assessment ofunsolicited projects prepared for the PPP Center (with support from the Asian Development Bank or ADB) concluded that “most (unsolicited)proposals did not really offer new technology”.

What is clear is that there are no guarantees that the country’s chronic infrastructure crisis, which is being used to justify more unsolicitedproposals and negotiated deals, would be solved with more unsolicited projects. On the contrary, undue public burden could increase as numerous but disjointed or impractical networks of roads, airports, and other infrastructure are built through self-serving unsolicitedprojects by big business interest.