Monday, February 19, 2007

Is PPA a fixer for port monopolists?

IS the Philippine Ports Authority (PPA) an agent of some monopolists or what? Whose interest does it represent? These questions have been raised because it seems that it’s acting like a fixer for those who are out to monopolize North Harbor should the government pursue its privatization.

The government has lately been mulling over the privatization of the strategic port. It’s the right thing to do at this time. Governments in this country have always tried to bite more than they could chew, and intervened in economic spheres where they should not. That’s mainly why we ended up with a corrupt, bloated, and sluggish bureaucracy that can’t do anything other than hurt the country’s prospects for growth and development.

But if we have to privatize North Harbor, why should we turn it over to private monopoly? That would be no different from turning over the control of a strategic economic infrastructure from the hands of a publicly paid rent-seeking posse to a group of private capitalist raiders out to fleece the national interest.

We know for a fact that the PPA is owned by the government and therefore we expect it to represent the common good. The government has been saying it’s for deregulation, privatization, and greater competition to promote greater efficiency in the economy. One therefore logically expects the PPA to toe this policy line. But what the PPA has been saying vis-à-vis this issue of North Harbor privatization clearly goes against government policy.
PPA is saying that it prefers a single operator for the North Harbor to “make it attractive to the private sector,” as well as “to prevent cut-throat competition.”

Certainly, any private sector salivates at the prospect of solely controlling North Harbor. Without any competition, any private sector operator could raise prices on a whim without modernizing the port’s facilities. Without a benchmark by which the operator’s performance could be measured against, how do we know if public interest is being screwed or not? But why is the PPA so afraid of “cut-throat competition?” Is it trying to protect certain vested interests in the port business?

Certainly, business people hate and fear competition. They want market dominance all the time. But we all know that competition benefits society as a whole and therefore it is good to ensure competition among the players all the time.

It’s the “cut-throat” competition among telecommunication companies that brought millions of landlines to the provinces and cellular phones to just about anybody else. It’s this cut-throat competition that gave us Internet connectivity. And it’s cut-throat competition among retailers that is driving down inflation rates, thus enabling us to stretch our purchasing power.

A few years ago, we were happy to have dial-up Internet even though it took an eternity to get connected to the Web. Now, a growing number of people are having broadband and, thanks to “cut-throat competition,” high-speed Internet will soon be ubiquitous like TV, thus extending the benefit of the Information Revolution to the broader segment of the population. And most of all, it’s cut-throat competition that brought us all the economic and telecommunications infrastructure that, in turn, also attracted the $3-billion cyberservices industry and giving jobs and hopes to more than 250,000 young people.

If we can do that in telecommunications as well as in other sectors of the Philippine economy, why can’t we do it in port operations and shipping?

Yes, cut-throat competition brings wealth and progress. We are therefore better off having a competitive port operations business in the country. We have more than 7,000 islands in the country and many of them are still suffering in the limbo of disconnectedness, poverty and unrest because for too long the government has tolerated a one-port-one-operator policy. For so long, most of our ports have been operated by monopolies, the reason why farmers and fishers in the far reaches of the archipelago couldn’t sell their produce at competitive prices. Compared with our neighbors, our cost of production in the farms and agribusiness plantations is comparable with our neighbors. Yet we couldn’t compete with them because of higher shipping and transport costs. And shipping and transport costs are high primarily because producers don’t have much choice.

Take the case of Mindanao. It is rich in natural resources, its lands are fertile and productive, and its seas are awash with the bounties of the sea. And yet, a significant part of its population is wretchedly poor and some of its nooks and crannies are havens for criminals and terrorists. Why? It’s because development and progress couldn’t get to these isolated places. Places like Bukidnon, the Cotabato provinces and Wa-o in Lanao del Sur produce the best corn in the land needed by the fast-growing livestock and poultry sector. And yet farmers in these places couldn’t sell their corn at profitable prices because the shipping cost is high. The joke until this day is that it’s cheaper to import corn from Argentina than get it from Mindanao.

These days we always wonder why “development” has always been confined to Metro Manila, Calabarzon, and to the major cities of Cebu and Davao. We always thought that we need more strategic infrastructure facilities to link these economic centers to the hinterlands.

This is true but it’s only half the story. The other side of the coin is the one-port, one-operator rule being encouraged by the PPA. If we want to ensure that growth spreads to the countryside we better scrap this policy. If we have to privatize the North Harbor, we better make sure that what we are going to put in place is a competitive environment for operators, as well as for those who are using them.It’s nice to know that the Philippine Chamber of Commerce and Industry (PCCI) is fighting PPA on this issue. But they need the support of the larger society in this struggle. What’s at stake here is no less than the global competitiveness of the entire Philippine economy.


Amadeo said...

Re Mindanao, you have some good points expressed, specifically the richness of its soil and natural resources.

Time was when we used to have a rice/corn business based in Wa-o and I had acted at one time as "juefe de viaje" for our truck that hauled rice/corn for delivery and sale to the government's RCA office based in Cagayan de Oro.

Business was very brisk and very profitable then because and in spite of the poor infrastructures then prevailing, like sorry conditions of roads and bridges. And non-existence of farm-to-highway basic infrastructures.

And this was way before the current Muslim conflicts.

I have been gone from the old country for a long time but based on reports I am getting, things are much, much worse now.

And re the PPA, you raised very valid points. I know from stories related by a close family friend who operates tugboat services how a local PPA head himself under a separate company went into business, in direct competition with our friend's business. And clearly a conflict of interest issue with regard to his employment.

Clearly, corruption, especially in government, in various forms stymies any forward move toward some meaningful economic development.

Dave Llorito said...

thanks for this comment. you clearly validated my observations about the whole issue.

MrG said...

I am glad to see that PPA's criminal quest for promoting a monopoly in port operations has not escaped the attention of people that know how to write well.

Since 1998, I have been monitoring PPA's consistent quest for promoting these port monopolies. During the time of Erap, PPA was almost successful in turning over the entire PPA port system to a consortium of influential ship and cargo handling operators after conniving with PPA to convince Erap to sign EO 59.

Thanks to Chavit Singson, the Order was withdrawn when Erap felt the heat at the tail end of his term. But even while Erap was already weakened, a Consortium member was busy closing a deal with PPA using his name and at the same time organizing rallies against the beleaguered President at his Cebu corporate base.

The monoplists have mastered the art of switching political support that almost no one noticed the smooth transistion. While there was a change in administration, the strangle hold over PPA and the MARINA continues. Secretary Neri has described the situation as "regulatory capture". One where the regulatory agency is at the complete control of the sector it is supposed to regulate.

The brazen attempt of PPA to start the railroad train to award the privatization of the North Harbor started last Wednesday, June 20 - by calling for a pre-qualification meeting. When fundamental issues on equity, fairness and transparency were raised, the clowns conducting the meeting required the complainants to put down the issues in writing, so that, as they claimed, they can also reply to it in writing.

Of course, this would entail a delay in the bidding proceedings and if not handled properly could again lead to a derailment of the project, for the nth time.

There is nothing wrong with our laws and procedures in bidding out projects. In fact, there are just too many laws that the situation allows the expert engineers to choose which law is applicable in order to favor their favorite candidates.

Joining the current bidding process at the North Harbor is like being invited to participate in a game where the referee has been bought by one of the participants. The referee calls for the start of the game even before the participants are told what kind of game is being played, what are the rules to be followed, and how the score or points are to be made.

Yes, PPA is more than just a fixer at the ports. It is the architect of the grossly inefficient Philippine port system that has prevented our economy to be globally competetive. The inefficiency is not in the physical structures which have been built, even if grossly over-priced or over-built. The inefficiency lies in the operating process developed by an agency which is an owner, operator and regulator of ports rolled into one - an agency created during martial law with a built-in congenital defect called "conlict of interest."

Dave Llorito said...

hi tet, thanks for this comment. i saw your site and its really a great source of information re maritime issues. let's have coffee soon.