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Books on The Philippines
REPUBLICAN REFERENCE
Area (sq.km)
300,000
Population
84,619,974
Capital
Manila
Currency
Philippine peso (PHP)
President
Gloria
Macapagal-Arroyo
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Update No: 032 - (31/08/06)
August should have been a good month for the Philippines. The
economy-at least in the short term-is performing better than many people dared
hope for. GDP growth in the first half year was above the 5 percent level, the
budget deficit has been reduced below the target level earlier anticipated and
exports continue to grow at a robust pace. The Philippine peso is now at a
four-year high against the US currency and the government is claiming that it is
awash with funds to pour into new infrastructure projects.
But with the smell of an election in the air, is it any wonder the government is
talking up the economy? In Cebu last week for a business summit sponsored by the
Mandaue Chamber of Commerce, House Ways and Means Chairman Hon. Joey Salceda,
one of the most influential people in Congress and a close ally of President
Arroyo was ebullient. In an address, to an audience of local business and
government leaders and clearly meant as the opening shots of an election
campaign, he informed his audience that the government was awash with funds and
had Php1.2 trillion (£13 billion approx) available to local government for new
infrastructure projects. "We will solve the problems of the country by
throwing money at them" he told his audience. No need for foreign
investment was the message-with a record inflow of remittances the country is
awash with savings that can be reinvested in the country.
Leaving aside an analysis of the numbers for the moment (which are impossible to
verify anyway) and welcoming the fact that the economy does appear to be
improving, why are foreign companies not beating a path to the Philippines in
order to invest? Possibly it is because foreign investment is no longer welcome
in this country, which would make it unique in the world, or perhaps there are
other reasons to consider, like a phenomenal reputation for world class
corruption?
Let us look at some of the issues that have made international headlines over
the past month.
First of all there is the issue of the role of the Professional Licensing Board
in leaking the questions (and the answers) from two papers (from what are
acknowledged as being the most difficult subjects in nursing (medical-surgical
and psychiatric nursing) ahead of the June nursing examinations to candidates
from a number of cram schools which, when revealed by whistle blowers, threw the
entire credibility of the professional licensing system into question. This was
not the first time it had happened in professional exams and the solution
adopted in this present instance was the same as that adopted the last time
(involving bar exams) a scandal broke. It was not a matter of having the
candidates retake the discredited test papers, rather the results from these two
papers were simply ignored and the overall results recomputed.
As a result, the PLB has revealed that instead of some candidates flunking out,
a further 499 examinees were moved from "failing" grades to
"pass" grades. In the process, the pass rate increased from 41.24
percent to 42.42 percent. The rest of the world, and much of the Philippines we
should hasten to add, stands aghast at this act of bravado which has called into
question not only the efficacy of Philippines nursing licenses but the entire
professional licensing system of the country. Doors are closing rather than
opening. Is it any wonder?
Next came the oil spill off the Guimaras in Central Visayas area that has now
been elevated into a national calamity - a calamity that was entirely avoidable
we might add, but which appears to have done long term damage to the marine
environment of the area.
NOT THE RULE OF LAW BUT THE RULE OF THE GUN
Another issue to hit the headlines was the controversy surrounding the
take-over of the port operations at Poro Point, a converted US military base in
Northern Luzon. In early August, a group of armed men, believed to be in the
employ of Ilocos Sur Governor, Luis Chavit Singson, raided the Poro Point
seaport. Governor Singson, together with his allies on the boards of the Bases
Conversion Development Authority (BCDA) and the Poro Point Management
Corporation (PPMC) have been agitating for some time to nullify the contract
made in 1999 with an overseas private investor Bulk Handlers Inc. (BHI) claiming
that the deal was disadvantageous to the government. This is despite the fact
that since BHI took over port operations overall port revenues and payments to
government have increased significantly.
BHI manages the Poro Point port and associated bulk terminal on the strength of
a 25-year contract. In 1999 the PPMC and the BHI formed a joint venture, the
Poro Point Industrial Corp. (PPIC), to manage the port and build an industrial
park in the former US naval facility. The industrial park has not been built but
only because the BCDA has not turned over the 80 Ha of land for the facility
that it was obligated to do so under its own contractual obligations.
This is not the place to go into detail of this complex dispute except to note
that instead of allowing commercial disagreements to be resolved by legal means,
politicians appeared to be using armed agents Russian Kremlin style, to force
their own solutions. But August brought more of the same.
Some time ago, PNOC Exploration Corp. chose a consortium led by Mitra Energy Ltd
of Singapore as partner for an oil extraction project in Camago-Malampaya off
the western Philippine island of Palawan. Camago-Malampaya natural gas is now
being used for electricity generation on the island of Luzon. Shell Exploration,
a major partner in the development of the Malampaya Gas Field chose not to
involve itself in the extraction of the associated oil and the project was rebid
to other interested parties. Mitra, which is believed to be of Malaysian origin,
won the bid. Based on Mitra's estimates, 41 million barrels of oil can be
extracted from the reservoir over four years, with the cost of the project
estimated at $684 million.
Production of oil was due to start before the end of next year. That was until
the Administration of President Arroyo stepped in and nullified the contract.
Executive Order 556 effectively terminated Mitra's rights to take part in the
development of oil deposits in the Camago-Malampaya field. The contract was only
signed back in June this year. Mitra, we might add, is rumoured to have links to
local political leaders on Palawan who, shall we say, are not exactly considered
part of the Administration's camp. Could this have been a factor in the contract
cancellation?
NO MORE INTERNATIONAL ARBITRATION
Finally, this week came the news that the administration of President Gloria
Macapagal-Arroyo had rejected the decision of the Singapore Arbitration Court in
relation to the mothballed Ninoy Aquino (Manila) International Airport Terminal
3 that would have allowed the PIATCO Consortium - which includes both local and
German investors - to take over and operate the terminal. The Singapore Court
ordered the Filipino Government to return NAIA3 to the consortium for failure to
pay for the earlier takeover as agreed.
Piatco went to arbitration following a decision by the Supreme Court that voided
the contract over alleged irregularities and awarded Php3.3 billion to PIATCO as
compensation. That amount has not so far been paid. Why? Has someone not been
paid off?
A senior government spokesperson has said that the Philippines would only follow
the decisions of local courts and not those of foreign courts. So much for
arbitration .- foreign investors will of course take note (not even the
communist countries took this line about international arbitration).
We could go on and talk about government spokespersons coming out and railing
against US energy giant, Mirant for selling its Filipino energy interests
without paying local taxes on the sale (which because it is selling on foreign
exchange it has the right to do). But we won't talk about that nor other matters
that deflect us from the main point in these investor related problems that
appear to have surfaced in recent weeks. Is the government angling for a cut in
order to give the green light for Mirant to divest?
Why suddenly is there a spate of activity surrounding foreign contractors with
legally binding deals and who have committed to invest significant sums of money
in the Philippines? Some have already done so and others are about to do so.
Could it have anything to do with the fact that elections are due next year and
politicians are anxious to fill their war chests so that they can run the
campaigns needed to keep them in power?
Of course, we can only speculate but one explanation for the present uncertain
environment is that in each of the cases cited it may be that progress is being
blocked because somebody somewhere needs to be cut into the deal. Yes, there are
contracts and then there are the deals that are behind the contracts and sadly
in the Philippines a legally binding contract is only as good as the government
that is in power. If power changes hands (or if those in power are running short
of cash), expect the deal to change. That is democracy, Philippines style.
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