Rule of Law vs Rule of Man

Rule of Law vs Rule of Man image

Text: Tito F. Hermoso / Photos: | posted October 10, 2012 11:22

Win-win and the big picture

Why we suck

One of the biggest problems of our business environment vis-a-vis other ASEAN members is that ours isn't perceived as hospitable to the rules of fair play. Implementation of our laws is hostage to the whimsy of the changes of the people in power.

Mar to the rescue

That's why, rotten deal or not, it was an admirable example of word of honor when DILG secretary and ex-DoTC secretary Mar Roxas said 'Amen' to the USD500M penalty for canceling the North Rail contract with a Chinese company. It may not look like a win-win conclusion now but the Government is looking at the big picture.  After all, with or without the conflicts in the West Philippine Sea, China's Ministry of Railways not only manages the world's biggest and most modern rail network, it also has the know how to build railroads everywhere in the world. An opportunity to tap that expertise and finance is now open to us.

Our reputation as an expense?

Contrast this to the slew of court cases that bedraggle NAIA 3 which has cost us not only the ire of many German businesses, but our international reputation as well. We all know that the rule of law states that no one gains at the expense of another. We have a partly finished airport that we have not paid for while we accumulate the expense of mounting years of ruined reputation. Like it or not, we are a small fish in the world's geo-political ocean.

The long arm of the 'dead ma'

Whether the affected parties are local or international, big or small, the State must dispel the impression that it only respects lawful commitments at its own convenience.  Both foreign and domestic investors in STAR and SLEx expressways have every right to expect that the government apply toll rate increases approved in January this year. This has yet to happen, pushing the expressway operators to apply for even higher toll fee increases owing to this year-long delay at the TRB. Can we consider this long delay another conditional transfer or government freebie to the public at the private sector's expense? Patently unfair, we say.

Back to win-win?

It was good news that the new DoTC Secretary Abaya is looking into the proposals of the owners of the MRT long-term Build-Operate-Transfer franchise to accelerate expansion plans to greatly improve service. This should be the approach rather than disregarding previous, long standing existing commitments and trying to recast what is an existing BOT as a new PPP.

The dead hand of the PNCC

Though the PNCC is no longer in operation, its approved projects and contracts are still valid as enforced by TRB and DoJ. This is why the Skyway Stage 3 from Buendia to A. Bonifacio is essentially a previously approved project which cannot be made into a new PPP. The same applies to Citra's NAIA Skyway extension to the new Entertainment city by the Bay. But the DPWH is proceeding with its own PPP.

More PPP, the better

It is understandable that Government would like to maximize the PPP for as many mega buck projects that it can. But why the need to disregard or sidestep the previous BOT projects? There are hundreds of other newer and grander projects that would lend itself well under the PPP. Besides, disregarding previously approved BOT contracts would lead to costly and time consuming litigation, delaying the project further.

C-5 NAIA expressway

For example, if Citra Metro-Manila Skyway were to stand firm on its approved mandate to build the Skyway NAIA extension and challenge the DPWH's award to a PPP bidder, it would only delay the said project. Better yet, DPWH should recast the NAIA expressway project under the PPP as an elevated toll expressway westward from the Skyway end of C-5, bypassing the  subdivisions by the NAIA perimeter to an interchange on Ninoy Aquino Ave. , crossing over Paranaque and on to the Coastal Road connecting to the new Cyber City, possible PAL airport and Entertainment City. Incidentally, this is the original alignment of the so-called C-5 extension before it was diverted further south by Senator Villar. This expressway will relieve traffic on the old airport roads where the Skyway NAIA extension is to be built. It would also provide a 'loop' and alternative route for those wishing to access NAIA 1 and 2, without passing through NAIA 3 and 4. Traffic exiting CAVITEx would now have a direct route to C-5.

Connector and Stage 3

The private sector seems to be better at business driven win-win compromises. Take the case of Metro Pacific's NLEx-SLEx connector and Citra's Skyway Stage 3. Their alignments overlap between Pandacan and Plaza Dilao. Building two expressways side by side from Plaza Dilao to Buendia over the Osmena highway and the railroad tracks also doesn't make sense. So Metro Pacific and Citra are discussing ways to share construction and revenues on a common alignment,  over Osmena highway. Moreover, if the sharing agreement between Citra and Metro Pacific work on this southern end, it may also apply to the C-3 link between Stage 3 A. Bonifacio and the NLEx Harbor link on the northern end. Its important at this stage that the Swiss challenger to the NLEx-SLEx connector respect this revenue-construction sharing agreement over common/shared alignments.

DoF has a say?

We suppose that all the above are continuously covered in Cabinet cluster discussions and monitored by the DoF. After all, it is the DoF, whose raison d' etre focuses on making collections, that will need to finance the majority of government departments which produces expenses.

Military intelligence tactics

In its quest to augment finance, the DoF's BIR has taken draconian pseudo totalitarian methods to run after tax evaders employing marauding agents to photograph luxury cars at the Polo club, golf clubs and hospital parking lots. The Taxman has also resorted to investigating sales records of luxury car dealers, though how ownership/registration of a car under attractive financing deals can be construed as tax evasion, well, evades us. So far, the taxman's secret police tactics have managed to crimp luxury car sales, reduce the BIR's share of luxury car sales taxes and scare away cash buyers who are not always AMLA or tax evaders. Well and good, but what about the big fish?

The forest, not the trees

Meantime, big government expenses evade the spy glass eyes of the bookkeepers of the DoF. There's the PHP7.5B annual payments of the DoTC to LBP and DBP. Its a guaranteed rate of return for financing the previous O&M or MRT-3. The new owners of MRT would gladly take care of extinguishing that bond and upgrade the MRT, given an extension of their franchise. There's also the huge interest and principal due to JICA for building the SCTEx. Again, Metro Pacific's 2009 proposal to integrate O&M of SCTEx to NLEx was supposed to take care of that on top of more improvements. That's been sitting in Malacanang for over a year now and BCDA will have to cough up yet another huge payment to JICA for another year, three years and counting.

Stuck in the details

In hindsight, we wonder what role DoF could have done to improve the proposed local version of REITs [Real Estate Investment Trust] which died a premature death because all its investment sweeteners were neutered with all kinds of clauses. Having REITs would have made home financing more affordable. REITs was our chance to emulate the fast home building growth that had powered the US economy for over a hundred years. The US experience proves that a stable home credit market has multiplier effects on financing other business sectors of the economy, not to mention overall quality of life. These opportunities for business to expand were opportunities for BIR to enhance collections and increase DoF's finance. The DoF should go beyond just collecting the uncollected but ensure a healthy unharassed business atmosphere that would allow business to post incomes, ripe for taxation. The DoTC, DPWH, DoH, DoE, DTI, DepEd, etc. may have their parochial concerns regarding their PPP's but the Executive, prodded by the DoF, should never lose sight of the big picture. And part of that big picture is for the State to enhance its reputation by keeping its commitments. Honoring commitments is part of the process of creating opportunities to make win-win solutions.