I'm flagging the whole artile so I can return to it later in the event the weblink goes dead. This is the kind of client I want.
Monday, October 25, 2004 11:17 PM
BUSINESS
Make sure big projects have enough collateral–Concepcion
By LAWRENCE AGCAOILI and LENIE LECTURA
TODAY Reporters
Industrialist and consumer advocate Raul Concepcion Monday said the government should make sure that investors in big-ticket projects that involves sovereign guarantees should have enough collateral to absorb the debt, in case these projects are abandoned.
Concepcion told reporters Monday that all infrastructure projects and public utilities affecting consumers should be covered by enough collateral so that the government would not absorb the debt once the proponents decide to abandon the project.
“When sovereign risk is involved, the government must make sure that investors have enough collateral to be used to absorb the debt should they decide to abandon the project,” he stressed.
He cited the P598-billion losses of the state-run National Power Corp. (NAPOCOR), the P8.5-billion unpaid concession fees and the $800-million assumed debt of the Lopez-controlled Maynilad Water Services Inc., among others, which he said would penalize consumers with higher power and water rates.
He pointed out that his group, the Consumer and Oil Price Watch, would work closely with the economic managers, regulatory agencies, the National Economic and Development Authority (NEDA), as well as various committees in both the Senate and the House of Representatives.
He added that the price watch would focus on issues, such as electric power, the privatization of the National Transmission Corp. (TRANSCO), rising domestic shipping rates, higher toll fees both at the North and South Luzon expressways, the rising fares for MRT and LRT passengers.
Concepcion said the rationale of a sovereign guarantee should only be acceptable when the projects involved have passed the litmus test of project viability, wherein true costs are reflected and the government would not absorb any debt from the start to the completion of the project.
He stressed that the primary reason for the huge financial debt of the Philippines is the major projects approved by the NEDA-Investment Coordinating Committee in the previous administrations.
He explained that the sovereign risks in these projects were not communicated or explained clearly to the public from the start.
Due to the country’s ballooning budget deficit, the consumer advocate said there is no other recourse but to approve pending petitions for increases in the cost of basic services so that the Philippine economy would get back on track.“Therefore, we have to accept pending petitions for increases in the cost of basic services in order to reflect their true cost and there is no choice but to reduce the growing budget deficit in order for our economy to get back on track,” he added.
The government expects this year’s budget deficit to hit P197.8 billion from P199.8 billion last year. The country’s budget deficit rose to P141.9 billion for the period covering January to September this year.
Concepcion also called on the government to be transparent in its dealings with prospective investors interested to take part in the privatization of the NAPOCOR.
Specifically, he wants the identities of the interested bidders disclosed and the tag price of each generating asset of the NAPOCOR.
Also, Concepcion wants the bids for the transmission business and the generating assets to be evaluated by a foreign party.
“They [Power Sector Assets and Liabilities Management Corp., or Psalm] should announce who submitted bids. They should get an international institution to assist them in evaluating the bids. We are working closely with [Psalm] to ensure that the privatization of TRANSCO is transparent and the safeguards that will guarantee maximum value to the government are in place.”
“Once NAPOCOR obligations that were absorbed by Psalm have been stabilized, we want a commitment from Psalm as to when the profits will be plowed back to the consumers in the form of lower power costs,” Concepcion said.
He added that his group is closely working proactively with the NAPOCOR, Manila Electric Co., Psalm, the Energy Regulatory Commission and the Department of Energy in order to be informed of the issues in the power sector.
“We have received positive response from Psalm president Raphael Lotilla. We hope that we will put in black and white all that we have agreed and discussed during our meetings,” he said.