Archive for the ‘bureaucrat capitalism’ Category

Why Gloria’s P330-B “Stimulus Package” Will Fail: A Critique of the Economic Resiliency Plan (ERP)

April 21, 2009

Part 1 of a two-part series

Publicized as a “stimulus package”, the Economic Resiliency Plan (ERP) is criticized even by neoliberal economists as severely lacking in funds to stimulate economic activity amid the global downturn. Aggravating these funding problems is the perennial shortfall in government revenues to support its expenditures thus, government will further increase its borrowing and impose new taxes. Even the social security programs under the ERP are extremely limited both in funding and scope.

BY ARNOLD PADILLA
Contributor
Bulatlat

The Economic Resiliency Plan (ERP) is a package of programs put together by the Arroyo administration in response to the global financial and economic crisis. Its stated objectives include the mitigation of the crisis’ impact and the invigoration of the domestic economy through a mix of accelerated government spending, tax cuts and public-private sector investments in infrastructure projects.

For the Filipino workers, the ERP aims to save and create as many jobs as possible and to protect the returning overseas Filipino workers (OFWs) and workers in export industries. The whole package costs P330 billion, of which almost half would be funded by the increase in the 2009 national budget. (See Table)

Funding issues

Publicized as a “stimulus package”, the ERP is criticized even by neoliberal economists as severely lacking in funds to stimulate economic activity amid the global downturn. According to them, a real stimulus package needs significant additional resources on top of what the government has already planned to spend. But it is estimated that of the P330 billion (US $6.92 billion based on current exchange rate of USD 1 = PhP47.672) allocated for the ERP, only P50 billion ($1.85 billion) can be considered as new funds. The said amount represents the sum realigned from the P252 billion allotted for servicing debt interest payments in the P1.41-trillion ($ 29.58 billion) national budget for 2009.

The P50 billion ($1.85 billion) forms part of the P160 billion ($3.35 billion) allocated for the ERP from a total P188-billion ($3.94 billion) increase in the 2009 budget. Thus, P110 billion ($2.3 billion) of the said amount could not be considered a stimulus fund because it was already a planned increase without accounting the global crunch. If we compute the P50 billion as a portion of the gross domestic product (GDP), it is equivalent to only 0.67 percent, said economist Winnie Monsod. Compare it with, say China’s stimulus package, which is about 18 percent of its GDP. In a briefing paper, think tank IBON Foundation pointed out that the 2009 national budget is equal to only 16 percent of the GDP – the lowest since 1986! It confirmed that the current budget was not designed to respond to the global crisis.

Meanwhile, the P100 billion ($2.09 billion) of which a portion would be bankrolled by government financial institutions and social security institutions is facing serious uncertainty. A counterpart fund is supposed to come from private investors to raise the amount needed to fund large infrastructure projects. But as of this writing, administration officials have yet to clinch a definite commitment from private business. They have been negotiating with the Philippine Chamber of Commerce and Industries (PCCI) but the said group threatened to back out in February if they will not get guarantees from government and if the projects will not start in the first half of the year. A portion of the P100 billion ($2.09 billion) will be also sourced from the Social Security System (SSS), which proposed to shell out P12.5 billion ($26 million) for the ERP. However, it is facing uncertainty as well due to strong resistance from SSS members and some lawmakers.

The P40 billion ($839 million) in tax cuts under the ERP are of course not fresh funds provided by government. They represent the estimated additional savings for low- and middle-income earners and corporations accruing from the Reformed Value Added Tax (RVAT) Law enacted in 2005. Finally, the P30 billion ($629 million) in additional benefits to members of social security institutions like the SSS and Government Service Insurance System (GSIS) are also unsure. They will depend on the viability of the said institutions’ investments. Arroyo’s own economic adviser, Albay Governor Joey Salceda, doubted such viability and pointed to the “paper losses” of the SSS and GSIS in their stock market investments, a consequence of the global economic turmoil.

More debts, more onerous taxes

Aggravating these funding problems is the perennial shortfall in government revenues to support its expenditures. The budget deficit this year is expected to jump to P177.2 billion ($3.71 billion) up to as much as P257 billion ($5.39 billion), which some analysts predicted as not even the worst case scenario. Such high budget deficit is not entirely due to government’s pump priming efforts, which as already discussed, could not even be considered real pump priming. Revenues will surely fall this year as corporate incomes drop and the number of wage earners decline because of the global crisis, adding to the already significant number of businesses that have been folding up and displacing workers even before the recession of the world economy. Already, the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) have both lowered their collection targets for this year by P44.4 billion ($923 million) and P39.8 billion ($834 million), respectively.

The Arroyo administration then will have to further increase its borrowing. This year, it plans to increase its foreign debt by $500 million and its domestic debt by P55.45 billion ($1.16 billion). But borrowing from domestic banks will further worsen the situation for local businesses scrambling for much needed capital as they will need to compete with government for loans and raise interest rates in the process. Government thus would have to turn more to foreign creditors. But the question is will the foreign loans be available? According to the Institute of International Finance (IIF), net bank lending to emerging economies this year will see a negative swing of $227 billion (i.e. more outflows than inflows) as investors become more risk averse amid the deepening global crisis. With a tight supply of credit from foreign sources, government would be forced to accept even more onerous terms, including more burdensome conditionalities such as liberalization, deregulation and privatization, tied to these foreign loans.

To fund these debts, government is pushing for more onerous taxes on consumers already heavily burdened by the regressive VAT. Proposals to impose a tax on text messaging have been revived in Congress aside from plans to enforce new taxes on so-called sin products, soft drinks, and other consumer items. These additional taxes on ordinary consumers amid massive displacements become more outrageous considering that at the same time, proposals to provide new tax perks for big business are also being pushed in Congress while fresh liberalization commitments – reducing or eliminating tariffs on imports – through free trade deals are in the offing.

They include House Bill (HB) 6073 of Speaker Prospero Nograles which intends to attract more agribusiness firms in the country by giving them a host of tax incentives, implementation of new liberalization commitments under the ASEAN Free Trade Area (AFTA) and the Japan-Philippines Economic Partnership Agreement (JPEPA), as well as negotiations for new deals such as the Partnership Cooperation Agreement (PCA) with the European Union (EU). All these will deprive the country of billions of pesos in potential revenues, which the Arroyo administration plans to compensate as usual by burdening consumers and ordinary income earners with more taxes.

Social (in) security

Aside from paying for the additional debt that government will surely incur to fund the ERP, ordinary income earners and taxpayers will also directly shoulder a significant amount of the Arroyo administration’s stimulus package. The supposed added benefits to members of social security institutions apparently would come from their extra contributions, and not from government funds. NEDA, for instance, is proposing to extend P10, 000 ($209) in so-called “unemployment benefits” to SSS members affected by the global economic turmoil. The said agency did not specify where it intends to source the money for this, but SSS raised the option of increasing the contributions from its members to bankroll the unemployment benefits.

As part of expanding the benefits of members of social security institutions, the SSS has already approved a P500-million ($10.48 million) fund to allow its members hit by the global crunch to avail of a maximum P15, 000 ($314) in emergency loans. But because the scheme involves loans instead of grants, it only threatens to bury in deeper debts the jobless SSS members who face a worsening uncertainty of finding a job soon, if at all. The said social security institution has also set strict and highly restrictive guidelines for those who can avail of the emergency loan. To illustrate, only SSS members who were retrenched from work starting January 1 are eligible, must have updated contributions and updated loan amortization. In other words, the SSS is further milking the workers dry instead of making available to them funds, which come from the workers themselves through their contributions, to help them cope with the raging crisis.

The ERP also intends to supposedly expand government’s social protection programs including the so-called Conditional Cash Transfers (CCTs). But this program is also criticized for being extremely limited both in funding and scope. For instance, out of some 4.5 million poor households nationwide, CCTs target only 321,000, mostly in Metro Manila. (See Table)

The CCTs is an old program of the Arroyo administration that is being funded mainly through the so-called “Katas ng VAT”. But since a huge portion of government’s VAT collections comes from the poor and ordinary income earners through their VAT payments for petroleum products, electricity, water and other essential goods and services, the ordinary people themselves are the ones funding the CCTs. Furthermore, CCTs are also meaningless amid skyrocketing cost of living, deteriorating jobs crisis and worsening poverty in the country that remain unaddressed and are even aggravated by wrong economic policies of government.

Meanwhile, the education and health components of the ERP will not have an impact on the social protection needs of the people as long as the overall policy direction of government is to privatize and commercialize the country’s public hospitals and schools such as HB 3287 of Rep. Roque Ablan Jr., which intends to corporatize 68 public hospitals nationwide. ERP’s health and education programs are also lip service in the context of meager and declining national budget for social services. In fact, compared to the Aquino, Ramos and Estrada administrations, the Arroyo administration posts the lowest annual budget allocation for health (1.7 percent of the national budget), education (15.2 percent, second lowest behind Aquino’s 12.3 percent) and housing (0.4 percent). (To be continued)(Bulatlat.com)

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Anakpawis probes CMP

March 5, 2009

BAGUIO CITY — Anakpawis and Organisasyon dagiti Nakurapay nga Umili ti Syudad (Ornus) will conduct a fact-finding mission (FFM) on the implementation of Community Mortgage Program (CMP) in Cypress, Irisan.

Ornus, a Baguio-wide alliance of urban poor communities, its allied organizations and advocates in the national and local level will conduct the said fact-finding mission in an attempt to bring their issues to the attention of the public, and to local and national legislation.

The FFM aims to involve affected residents in various caucuses in Cypress Point Village (CPV) and will reach out to the implementers of the CMP through the Homeowners Associations and dialogs with government offices, agencies and the Baguio City government. The FFM will be on March 5-6.

Complicated history

CMP is a mode of land acquisition defined by Republic Act 7279 commonly known as the Urban Development and Housing Act (UDHA). It is intended to help under priviliged and homeless citizens to own and develop home-lots. In the said program, communities are encouraged to organize associations to acquire the land.

According to the initial data of Ornus, the CMP in Irisan missed its objectives at delivering decent housing to the poor. Ornus alleged that CMP’s implementation is marred with serious allegations of corruption of its mandate to provide low-cost housing, among other needed social services.

According to the primer by Ornus, Cypress is an 18-hectare area in Barangay Irisan with more than 500 households and 2,700 individuals. Its title, OCT No. 56, in the name of CPV was subdivided into 248 lots. The title was among the 211 titles which were declared null and void by the Supreme Court in 1973 but was given consideration by Presidential Decree 1271.

In the 1970’s, the property was occupied by migrants from different places and was densely populated by the 1990s. Earlier occupants were not disturbed by the so-called original claimants or title holders. So that they even processed their claims through the Townsite Sales Application (TSA).

In 1993, a certain Arsenio Menor from the Presidential Commission for the Urban Poor came to Irisan and told the residents that the property was bought by a Mr. Peter Santos of the Asia Pine Hills Development Corporation (APHDC).

He then introduced the CMP to the actual occupants for them to own the lots. But the residents rejected it and instead negotiated to pay P350.00 per square meter. Menor however never went back to Irisan to finalize the negotiation.

During the term of then Councilor Betty Lourdes Tabanda as Chairperson of Committee on Land and Housing, a proposal to continue the plan of Menor pushed through. In 2000, the City Council passed a resolution authorizing then City Mayor Mauricio Domogan to negotiate with Peter Santos. In 2003, a subdivision plan for Cypress was approved by the council.

Three Homeowners Associations collected from the equity of members a total of P17, 335, 011.40 for the total of 77, 876 square meter or 7.8 hectares.

On August of 2003, more than houses were demolished by Baguio City demolition team in Purok 14-B in Cypress. Some residents were forced to stay with their relatives in other places of Baguio and the rest went back to the area and rebuilt their houses.

After barely a year, the person claiming to be Peter S.L. Santos wrote a letter to the different homeowners associations demanding to remit the equity. More or less P17 million was then paid by the residents as their equity to Santos.

As of now, the true identity of Santos who was claiming to be the president of APHDC has yet to be established especially that his signature in the Articles of Incorporation is different from other alleged signatures.

Demands on the CMP

Ornus has asked for an in-depth investigation of the CMP in Irisan as irregularities in its implementation has surfaced implying corruption.

They also further call for an investigation and the suspension on the said equity and amortization without any penalty should push through and the suspension of demolition orders within the CMP affected areas, according to ORNUS.

Moreover, Ornus demands that victims of demolition will be allowed to re-occupy their lots. Ornus also demands the investigation on the real identity of Peter Santos.

The results of the FFM will be released in a public program to be graced by Anakpawis representative Rafael Mariano. Ornus hopes through the FFM, Baguio officials will learn to look seriously into the case and initiate its own investigation and discuss appropriate legislation and action.

Besides Mariano, representatives of the national alliance of urban poor Kalipunan ng Damayang Mahihirap (Kadamay), National Union of People’s Lawyers (NUPL), Tongtongan ti Umili (TTU), Interfaith Gathering for Truth and Accountability. # Aldwin Quitasol

Manila waits for US move on Cpl Smith DFA: Americans not ready to discuss issue

February 14, 2009

By Tarra Quismundo, Kristine L. Alave
Philippine Daily Inquirer
First Posted 03:11:00 02/14/2009

Filed Under: Crime and Law and Justice, Subic rape case, Diplomacy

MANILA, Philippines — A Philippine official on Friday said any new negotiations on custody of Lance Cpl. Daniel Smith would have to wait until the Americans were ready to talk, and indicated Manila was powerless to compel Washington to sit down immediately.

“Right now, the department is very serious in coordinating with the US embassy. But they had to approach first their experts to get their legal opinion,” Department of Foreign Affairs spokesperson Bayani Mangibin said in a phone interview.

Mangibin said: “We don’t have a policy to wait for them … What can we do if they are not ready?”

Earlier, US diplomats made it clear they were firm in their position to keep custody of the American Marine convicted of raping the Filipino woman “Nicole” until the courts had ruled with finality on Smith’s appeal.

Smith has been confined in the US Embassy compound, according to US and Philippine officials, since December 2006 after he was sentenced by a Makati court up to 40 years in jail for raping Nicole during a one-night encounter at Subic Bay Freeport. He has elevated his case to the Court of Appeals.

A new furor erupted over the custody issue after the Supreme Court last week ruled that the US-Philippine executive agreement that allowed the embassy to keep Smith ran counter to the two countries’ Visiting Forces Agreement. The court ordered the DFA to immediately negotiate with the US the transfer of Smith to a Philippine-controlled facility.

Main concern

Mangibin said the DFA had started the “process of coordination” with the embassy on the issue of custody, based on the Supreme Court ruling. He said the DFA was also consulting the Departments of Justice and Interior and Local Government, and the Solicitor General.

“Our main concern is to look for appropriate arrangements for Daniel Smith,” he said.

The embassy has said it is studying the court decision and referred it to government legal experts in Washington.

Mangibin said formal negotiations could begin after the embassy had received the legal opinion from Washington and that in the meantime, Smith would stay at the embassy compound.

3 scenarios

Interior Undersecretary Marius Corpus said yesterday that after his last check on Smith on Feb. 5—or several days before the high court’s ruling came out—he met with an embassy political officer and discussed three possibilities in anticipation of a court decision.

In that meeting, Corpus saw the embassy’s steadfast position to continue holding on to Smith until the appeals process had been completed. After his December 2006 conviction, Smith was briefly held at a Makati jail before the embassy took custody of him—in the middle of the night—based on the controversial executive agreement.

“We talked about the possible consequences of the Supreme Court decision,” Corpus said. The discussion was not prompted by any advance information on the court’s eventual ruling, Corpus said when asked if there was any leak.

“One, that the Supreme Court would declare the VFA unconstitutional. Two, I said it’s highly probable that the court would affirm the VFA’s constitutionality, including the agreement [to hold Smith at the embassy], and that it would order some provisions of the VFA revised,” Corpus said by phone.

“Third, that everything will be upheld, both the VFA and the transfer (of Smith to the embassy).”

Lobby for Smith

Corpus said when the issue of custodial arrangement was brought up, the US side said: “We’ve already agreed on that. We’d like to continue what was agreed upon.”

Corpus said he heard that a congressman from Smith’s home state of Missouri was “lobbying in the State Department for it to take care of Smith.”

“That’s the reason why they defend Smith so much,” Corpus said, adding however that he had no categorical information about the supposed lobby.

Also discussed at the meeting was Smith’s condition while in detention, particularly his having gained a lot of weight, according to Corpus, who said he had been visiting Smith almost monthly.

“They (the embassy officials) said, ‘We should give him work, with your permission,’ so that he will not deteriorate physically,” Corpus said.

Corpus said he agreed, noting that similar activities were allowed local prisoners. He said he just asked that any chores given to Smith should not compromise the terms of his confinement.

‘He is bored’

“You can see the emotional stress in him,” Corpus said. “Every time I talk to him, I can see that he is emotionally suffering. He is very bored. The condition is even better in detention facilities outside, where [detainees] have some company.”

Corpus assured the Nicole camp that Smith remained inside the embassy compound, contrary to claims by some of the rape victim’s supporters that he had been spirited out of the embassy.

“Even if I visit him every day, they will not believe me,” Corpus said.

Send him to Munti

Bayan Muna Rep. Satur Ocampo has joined growing calls for Smith’s immediate transfer to a local prison.

“We demand that the Philippine government immediately effect the transfer of Smith to the New Bilibid Prison,” Ocampo said in a press statement. “We cannot understand why a clear-cut exercise of sovereignty, in this case custody over a convicted foreign felon, should be subject to negotiations.”

Ocampo added: “What the Philippine government should do is simply impose its own laws over a foreigner who violated those laws. It should not negotiate but order the US Embassy to turn over Smith to the proper local authority.”

Indefinite delay

The leftist lawmaker said the high court’s order for the DFA to arrange a detention place acceptable to Washington was just a ruse to “indefinitely delay” Smith’s transfer. With a report from Gil C. Cabacungan Jr.

Govt’s stimulus package mere gimmick–IBON

February 14, 2009

By Rommel C. Lontayao, Reporter

The Palace said the allocation for the economic stimulus package is not an old measure contrary to the statements of the independent think tank Ibon Foundation.

Ibon on Friday said in a statement that the government’s P330-billion stimulus package is a “mere spin” of “existing allocations . . . to create the impression that something is being done to address the crisis.”

“These ‘stimulus’ funds are already there even before the recent descent into crisis . . . There is very little to indicate that . . . government is pouring any substantially new efforts to deal with the economic downturn,” said IBON research head Sonny Africa.

Deputy Presidential Spokesperson Anthony Golez belied the statement, saying the current stimulus package is a genuine allocation intended to finance infrastructure projects and create jobs.

Golez said that besides providing assistance to the marginalized sector, the package is also expected to create three million jobs this year on top of the regular job-generation programs of various government agencies.

The reported stimulus plan, which opposition Bayan Muna Rep. Teddy Casiño calls a “simulation package,” includes the P160-billion increase in the 2009 national budget, the P100-billion off-budget infrastructure fund, the P40-billion corporate and individual tax breaks, and alternative livelihood programs, among others.

Africa said that contrary to what government officials claim, the P1.4-trillion budget for 2009 is not a pump-priming budget, and actually is the smallest share of government spending to the GDP (gross domestic product) since 1986.

“The tepidness of the supposed pump-priming is also apparent if the effects of inflation are taken into consideration. In real terms, total non-debt spending in 2009 is only an 8.6-percent increase from the year before,” he explained.

He further said that the tax relief, which refers to foregone revenues from reducing the corporate income tax to 30 percent from 35 percent, is actually already part of the reformed value-added tax law of 2005 and exemptions from withholding tax for those earning P200,000 or less annually.

The research group head also pointed out that the P100-billion infrastructure stimulus package required the Government Service and Insurance System, Development Bank of the Philippines and LandBank to commit P50 billion with the private sector shouldering the other P50 billion.

“All these imply that the administration is not really taking additional measures in the face of the crisis, and leaves the majority of poor Filipinos on their own,” Africa said.

“If it wants the public to believe that it is taking serious steps to address the crisis, it should at the very least preserve current jobs in the public and private sectors, restore real per capita social services spending to at least 1997 levels, free public resources by stopping debt payments, and remove the value-added tax on petroleum products, among others,” he opined.

The economic resiliency plan was announced by the National Economic and Development Authority (NEDA) early this year.

It is intended to upgrade infrastructure and capital stock and expand social protection. NEDA said the plan aims to save and create jobs, protect the poorest of the poor, returning overseas Filipino workers and workers in export industries, ensure low and stable prices to support consumer spending, and enhance competitiveness in preparation for the rebound of the global market.

Golez said the allocation of P330 billion for the economic stimulus package is intended to blunt the impact of the global economic meltdown on the poor and out-of-school youth.
–With Angelo S. Samonte(ManilaTimes)

What the Witnesses Said(Excerpts)

February 14, 2009

Note from the PCIJ: What follows are excerpts from the “Record of Interviews “ with some of the witnesses who met with the investigators of the World Bank’s anti-corruption unit, Department of Institutional Integrity (INT). on the alleged fraud and collusion in the National Road Improvement and Management Program-1 (NRIMP-1) projects. The interviews were separately conducted between April 2003 and November 2006 in the Philippines, Japan and South Korea.

Date of Interview            – 28 April, 2003

Interviewee/s                 –  William Paterson, lead highway engineer – World Bank East Asia and Pacific region; task team leader for the Philippine National Road Improvement Project Phase 1(NRIMP1)

–  Denis Robitaille , regional procurement adviser

Interviewers                  –  Mike Richards and Athene Vila-Boteler

Paterson told INT about two incidents in the NRIMP1 that caused him to believe there was collusive bidding in the project:  He had heard from ‘informal sources’ that government officials usually took 3% of the contract value in kickbacks, but learned in the discussions on five contracts for bidding, the demands had increased to 10%.

He said the DPWH secretary who assumed power in January 2001 had a ‘much better reputation for honesty’ than his predecessor but the replacement in January 2003 was “for the worse.”

The large variation in unit prices alerted him to the possibility of collusion in the bidding. He noted overpricing of materials like asphalt, which was around 50% higher than it should be. The cost of concrete that should be around P700 to P800 per cubic meter was charged P1,100 to P1,400 per cubic meter and the cost of clearing and grubbing was charged P290,000 per hectare when it should only be at P40,000 per hectare.

Paterson raises the possibility that the government, through the DPWH, is actively involved in the collusive arrangements, noting that the bill of quantity (BOQ) is not being reviewed. The excessive pricing of materials, he noted, still conform with the Owners Estimate that is held by the Bureau of Construction.

Paterson found it odd that two local senators have gone to the press to announce the result of the bid evaluation even before the results were published. One of the bidders was rejected because it submitted bogus documents.

According to Paterson, he has “sources” who told him that DPWH takes 10% while senators intend to get 10 – 15% cut of the contract price.

The projects under suspicion of collusion are all in Mindanao. Paterson noted that the DPWH secretary, his deputy, and the project manager that time were all from Mindanao.

Paterson described his sources to INT, including their proximity to the events at issue, but did not identify them by name.

Date of Interview           – 17 March, 2005

Interviewee/s                – William O. Paterson, task team leader

Interviewer/s                 – Merly Khouw, Athene Vila-Boteler, Christian Kammer, Annie Yau and                                                                Thilda Outhuok

It was suggested that there be an independent analysis by an engineer to benchmark the prices and check against excessive price distortions. Paterson was asked if the Philippine President’s personal interest in the project was related to the alleged involvement of her husband as alluded to in the complaint. He said his impression was that it was not as the timing of the government’s complaint was circumstantial to the CG meeting in Mindanao, the location for one of the road packages in question.

EC de Luna, considered as a fairly young contractor with good connections at DPWH, did not qualify on its own merit so it had to tie up with China Road for the 2nd bidding for the 1.6 package.

Date of Interview           – 3 August, 2005

Interviewee                   – Shingo Nakamura, vice president, Yoshida Construction Co.

Interviewers                  – Tim Carrodus / David Hawkes / Michael Kramer

Nakamura filed a complaint against Eduardo C.  de Luna and Augusto Miranda, alleging that the two defrauded Yoshida by falsely representing E.C. De Luna as having been already awarded the contract when in fact it had not. Nakamura said he paid de Luna and Miranda P2 million (about $40,000) in exchange for a P592-million subcontract on a World Bank-financed project (NRIMP-1, CW-RU 1.6) in 2003.

The business environment in the Philippines, he said, is “very dirty,” “as Japan had been 20 to 30 years ago.” All contract awards require “undertables” or corrupt payments. A “syndicate” organized by  de Luna with Miranda, local politicians, and other bidders selects the winning bidder or the “champion.” The champion then pays the losing bidders one to three percent of the contract price.

Contract prices are inflated 25 to 35 percent to cover the cost of bribes that must be paid to various parties, including First Gentleman Mike Arroyo, certain politicians, DPWH officials and others. As a result, contractors must cut back on quality and safety in the construction of roads.

Nakamura first met Eduardo De Luna and Tito Miranda in 2002 through Yoshida’s agent, “Trix”Lim. Yoshida signed a P592-million subcontract with De Luna in Feb. 2003, and paid the $40,000 in cash in local currency in April 2003 to Miranda. Miranda was always asking for contributions to the DPWH Secretary and Mike Arroyo.

Yoshida paid a total of about P10 million to a variety of people: P100,000 for Sen. Barbers, P200,000 during Christmas, etc.

E.C. de Luna was Mike Arroyo’s man. He travelled with Mr. Arroyo, the President, and Tito Miranda to Japan. E.C.de Luna organized a syndicate to control the award of contracts. Miranda is involved as an intermediary for Sen. Barbers.

All the companies that participated in the preliminary qualification process had to be a part of the syndicate, especially the Chinese and Korean. Members of the syndicate – bidders, politicians, DPWH officials, Lim. De Luna, and Miranda – would congregate at the Diamond Hotel every three days to discuss the contract awards.

Contract prices were inflated 25- to 35- percent over the actual costs to generate funds for necessary payments which included the following:

–         1 percent to the Malacanang Presidential Palace (Nakamura said this meant the “Cabinet”)

–         5 percent to Senators (including Sen. Barbers and Sen Rebeira (Revilla?) and his son) 5 percent to Mike Arroyo

–         1 percent to DPWH personnel

–         1 percent to DPWH director

–         3 percent to other local officials, mayors, etc.

·        Contractors also had to make payments of P100 to P300 to government pay clerks. Inspectors were also paid relatively small amounts. Some of the bribe funds came from the 15-percent mobilization payment to contractors at the outset of the contract.

Nakamura introduced Mr. Suzuka of Suzuka Construction Co. to the Philippines after Suzuka heard that it was easy to get contracts because of the syndicate arrangement. Mr. Washo of EIWA Construction was also introduced.

Date of Interview            – 5 August, 2005

Interviewee                   – Tomatu Suzuka -president, Suzuka Construction Co. Ltd.

–         Masaki Suzuka – manager

Interviewers                  – Tim Carrodus, David Hawkes and Michael Kramer

Suzuka’s Philippine office ceased to have business involvement in the Philippines after it had “various issues” three years before the interview. Tomatu Suzuka cited the foreign exchange issues and damage to reputation among the issues his firm withdrew from the Philippines in November 2002.

He said he met with Senator Barbers and Mike Arroyo and “first discussed bribes” but had a “rough approach.” He said he “learned that money was important to do business in the Philippines, which was a “fundamental difference in the way of thinking.”

A certain Mr. Lim, Suzuka’s agent, said Suzuka would have to pay to get a contract, and that dollars would settle problems with the World Bank. He mentioned 2 – 3% to obtain credit or financial support.

Suzuka said he met Lim four years ago (2001) at Diamond hotel. There were policemen and government officials present when they discussed payments. A certain Tito Miranda was also with Lim’s group. Suzuka said he met Sen. Barbers separately. He said he thought Tito was a secretary of Barbers. Tito asked Suzuka to pay for Barbers’ trip to Japan, but that he refused. He said local contacts introduced him to Barbers.

He identified one Trix Lim as the person he was dealing with in the Philippines.

Suzuka even recalled a meeting with Barbers on an island in the Philippines while President Arroyo was delivering a speech and welcomed the Japanese companies. He said he had no contact with President Arroyo.

Suzuka said it was made clear to him that there would be no business in the Philippines without paying money. Money would have to be paid as high up as the president,  senior government officials and politicians in order to do any further business in the country. To win a contract, it would also be necessary to pay the head of the bureau (PMO?) and politicians several million yen.

Suzuka said he knew that the President’s husband handles her business, as what he had heard from local companies and the consultant who prepared the documents for the bidding. However, he said he had no specific information or any direct evidence of any money being paid to somebody specifically.

When shown the bid documents for the contract, Suzuka said his signatures were forged.

Date of Interview            – 8 August, 2008

Interviewee                   – Kyung Hwan Ko – trade service department, Shinhan Bank

Interviewers                  – Athene Vila-Boteles and David Hawkes (in Seoul, Korea)

Ko told the INT that the bid guarantees submitted by Dongsung Construction Co. Ltd. were forged. The document was signed by one Byung Jin Kim, a regular officer of the bank, not a general manager. In addition, Ko said a signature by Shinhan staff on a document would not be in Korean characters, but in English. The letter head of the document was also not correct and that the bank guarantees it issues do not have the guaranteed sum printed on the side. He said the bank does not have a business relationship with Dongsung, which had been bankrupt.

Date of Interview            – 8 August, 2005

Interviewee                   – Young Min Noh – general manager, marketing division -Shingsung Engineering and Construction Co.

Interviewers                  – Tim Carrodus and Michael Kramer

Noh said he was not familiar with details of the company’s operations in the Philippines, having worked in the last six years in the Middle East. His company received two World Bank contracts in the Philippines.

Date of Interview            – 9 August, 2005

Interviewee                   – Choong-Jo Oh, general manager- overseas civil project team, Daewoo E&C

Interviewers                  – Tim Carrodus and Michael Kramer (at Daewoo head office in Seoul)

Oh said he has heard about problems in the Philippines such as bid rigging but has no personal knowledge about it. He said infrastructure projects are simple and the Chinese companies are very aggressive. Korean companies cannot compete in open tender because of their wage rates and longer depreciation schedule – Korean companies have 10 years compared to Chinese firms’ four years.

Date of Interview            – 9 August, 2005

Interviewee                   – M. G. Kwon – overseas business department/ senior vice president,                                                              Hanjin Heavy Industries & Construction Co. Ltd.

– Hyun Woo Ko, overseas business team manager

–  B.D. Park, senior vice president -international finance

Interviewers                  –  Tim Carrodus and Michael Kramer (in Seoul, Korea)

Kwon and Ko both said they have never heard of Suzuka Construction. The Philippine road construction market is difficult for Korean companies. The Chinese companies are ‘quite aggressive’ while the local companies have political connections.

Date of Interview            – 15 August, 2005

Interviewee                   – Min Young Lee – general manager, Dongsung Construction Co. Ltd, Manila

– Angelico “Bong” Teraga – office engineer/project coordinator

Interviewers                  – David Hawkes and Athene Vila-Boteler

Dongsung Construction was one of the losing bidders in the second round of bidding for contracts 1.4B and 1.6 of NRIMP-1

INT found Dongsung’s bid security was forged. Teraga and Lee acknowledged having prepared the bid documents for both contracts, but said the Shinhan Bank bid securities came from the head office in Korea.

Date of Interview            – 17 August, 2005

Interviewee                   –  Oscar Mercado, vice president – marketing and engineering, EEI Corp.

– Ferdy M. del Prado, group manager – marketing and proposal

Interviewers                  – W. Michael Kramer and David Hawkes

EEI does not usually take part in DPWH controlled projects because of the bad reputation of DPWH and because of the perceived system of collusion governing awards. EEI took over from Philrock, Inc.’s contracts with DPWH. It participated in the 1.4B and 1.6 contracts in joint venture with Hanjin.

Date of Interview            – 18 August, 2005

Interviewee                   –  Manuel M. Bonoan, undersecretary – DPWH

–  (Raul) Asis, assistant secretary

Interviewers                  –  Tim Carrodus and Athene Vila-Boteler (at 17th floor, Shangri-la Hotel, Manila)

Undersecretary Bonoan acknowledged the existence of a major problem in the bidding for WB-funded road projects. He said, “We know they are doing it. We know that they are talking to each other, we can see the pattern, but we don’t know how to document it.”

He said collusion has been talked about a lot, but DPWH have problems documenting it. The interference of politicians, he said, is “where the problem  begins.” He told the INT, “We know all these things; everybody demands money from the contracts so the contractors have to recoup by increasing prices.”

Date of Interview            – 18 August, 2005

Interviewee                   – Engr. Lambert Lee, president, Cavite Ideal

Interviewers                  – W. Michael Kramer and David Hawkes

Gist                              – Lee denied the existence of a syndicate and the rigging of bids. Later in the afternoon, he called Athena Vila-Boteler of the INT to request for a second meeting and said the idea of the existence of a syndicate insulted him deeply.

Date of Interview            – 19 August 2005

Interviewee                   – Fu Yu Cheng, president- China State (Phils) Construction and Engineering Co.

Interviewers                  – Tim Carrodus and Michael Kramer

Fu, who had spent eight years in the Philippines, told INT that it was difficult to do business in the country, particularly in public projects. He noted that China State had withdrawn from Packages 1.4B and 1.6, but refused to explain why. He said no one gave him a price to bid as a losing bidder; neither was China State paid to lose a bid.

Date of Interview            – 1 November, 2006

Interviewee                   – S.J. Kim, general manager-civil department

Heunghwa Industry Co. Ltd.

Interviewers                  –  Tim Carrodus and Edil Dushenaliyev (in Seoul, Korea)

Heunghwa submitted bids for the 1.4B and 1.6 contract packages, but was found ineligible to bid. The INT found that unusual, given the size of the company and its capacity to bid for large-value contracts.  The DPWH cited the company’s lack of experience in construction projects.

Date of Interview            – 1 November, 2006

Interviewee                   – Kuk Jung-Soo -deputy general manager, Keangham Enterprises Ltd.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (in Seoul)

After INT explained its findings of collusion in biddings, Kuk said that the business environment in the Philippines is difficult and that Keangham intend to withdraw from the country. The company is unprofitable, he said.

One of the biggest problems, according to Kuk, is that the length of the roads put up for         bidding is too short to be commercially feasible for the company. The scope of the road construction       could be initially 100 kilometers and the value of the contract could be up to $60 million, but when    the company buys bidding documents, the length of the proposed road becomes just 20 kilometers.

The company most likely withdrew from the bidding not because of collusion, but because of lack of profitability. Kuk, however, did not rule out that the firm could have withdrawn       because of corruption.

Date of Interview            – 2 November, 2006

Interviewee                   – Young-Myung Noh – general manager, marketing division – Shinsung Engineering & Construction Co., Ltd.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (in Seoul, Korea)

Noh mentioned that the company’s former branch manager in the Philippines had left the Philippines under difficult circumstances but he refused to provide the manager’s contact information. He said he was not aware of the details of his company’s bids in the Philippines, but had been told of collusion where companies were told to put in a bid even if they were going to lose. He said his company reluctantly participates in such tenders because it did not want to be blacklisted informally from future bidding by the DPWH.

INT wanted to find out why Shinsung withdrew from the second round of bidding for package 1.4B and discuss the contract it won for the rehabilitation of the Buug-Kabasalan section of the Zamboanga-Pagadian road. The company had been implicated in collusion on both projects.

Date of Interview            – 2 November, 2006

Interviewee                   – O.Y. Kwon – general manager, overseas civil team-Daelim Industrial Co. Ltd.

– Hun-Tak Kim- general manager , overseas civil engineering department

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (at the company’s office in Seoul)

Kwon and Lim told the INT that Daelim never took part in a collusive scheme and that the company was involved only in plant building and operations projects in the Philippines. They said there are many powerful people around the President of the Philippines who determine the outcome of bidding on road contracts. Because of that, Daelim does not participate in road tenders. Daelim withdrew from the first round of bidding for the 1.4B project because they could not accept a proposal from a powerful man. However, he did not know the name of that person whose supposed agent contacted the company’s representative at his hotel in Manila and offered his services to win a package, in exchange for an unsolicited bribe of an unreasonable amount. Kim said he did not know the powerful people behind the road projects, but assumed they could be retired generals.

Date of Interview            – 2 November, 2006

Interviewee                   – Pan-Seop Lim -team manager, Daewoo E&C

–  Eun-Yong Chang – assistant manager, overseas sales and marketing team

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (at Daewoo’s head office in Seoul)

Lim said he had little knowledge of the details of the allegations of collusion in the bidding of the Philippine road projects. He expressed surprise about bidding pre-arrangement and high level political interference in the WB-financed project.  INT said Daewoo could be implicated and that the meeting was an opportunity for them to cooperate by responding to its findings of collusion. Lim said he was not involved in the bidding preparation and that he was not the right person to be asked why the company did not participate on a contract.  Lim said the company’s involvement in the alleged collusion was insulting and that he was not prepared to hear that.

Date of Interview            – 3 November, 2006

Interviewee                   – Hyun-Woo Ko – manager, Hanjin Heavy Industries

– Nack-Young – deputy manager, overseas business marketing team

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (in Seoul, Korea)

Hanjin placed bids for two packages, one in joint venture with EEI. Both packages were re-bid three times, and the analysis of the bids had shown collusion in the process, with senior level government officials allegedly involved in pre-arranged procurement.

Ko said the competition was very strong in the Philippines and that he was not aware of any cartel operating in the country.

Date of Interview – 3 November, 2006

Interviewee         – Jeong-Sam Kim – team manager, overseas operation team
– Sammi Construction Co., Ltd

– Jae-Yong Heo – department manager, civil engineering team

Interviewers         – Tim Carrodus and Edil Dushenaliyev (in Busan, Korea)

INT indicated that Sammi could be implicated in collusion in the third round of bidding for contract packages under NRIMP 1 project in the Philippines.  Sammi bid for 1.6A and 1.6B contract packages, but was unsuccessful.

Kim told the INT that he heard from the Manila branch office that corruption was a very serious issue in the country, but he said the company never paid a bribe. The company did not win a single contract although it pre-qualified for four packages under the NRMP 1. He said Chinese companies were acting aggressively in the Philippines, driving the costs extremely low and squeezing out their competitors. For this reason, only a few Korean companies compete with the Chinese on the same tender.

While saying that the company prepared its bid independently of other bidders, Kim admitted to INT that his company had to participate in a collusive scheme out of a concern of being blacklisted and denied future work from DPWH.

Date of Interview            – 7 November, 2006

Interviewee                   – Yu-Tae Kim – director/authorized representative, Manila branch office-Sammi Construction Co., Ltd

Interviewers                  – Terry Matthews, Tim Carrodus and Edil Dushenaliyev

Kim told the INT that he heard from third parties about “unordinary” bidding on the NRIMP packages. He denied that his company was told to put in a losing bid. When told of possible consequences Sammi may face in case of non-cooperation, Kim started to show signs of anxiety and stayed nervous through the rest of the interview, according to INT. Sammi had the highest bid for both the 1.6A and 1.6B packages.  INT said the proposed winner was known one week before the opining of bids. Kim explained its bids were very high because it incurred huge expenses to establish its Manila office but it had to participate in the bidding so as to stay visible in the DPWH radar and not be excluded from future biddings.

Date of Interview            – 7 November, 2006

Interviewees                 – Xie Wen Peng, general manager, China Wu Yi Co. Ltd.

– Wu Yi Bao -deputy general manager

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Xie said nobody called or exerted pressure on the company and that it was usual among Chinese companies to call and ask each other whether they are going to but. However, they never shared their bid price with others. He denied paying money to secure the contract. But he sometimes gave Christmas presents and invite project officials over lunch or dinner. He said he could not complain about the business environment in the Philippines and noted it is no different than in other countries.

Date of Interview            – 8 November, 2006

Interviewee                   – Suh Seung Wong – general manager, Sinsung Engineering & Construction Co. Ltd.

Interviewers                  – Terry Mathews, Tim Carrodus and Edil Dushenaliyev

Wong said he had been in the Philippines for 15 years and found it very difficult to do business in the country. He said some corruption exists, but that he had no evidence to corroborate it. He said he encountered corruption only with the traffic police. He said Shinsung withdrew from the second round of bidding for the 1.4B package because the head office in Korea failed to provide a bid security on time and that the project would overlap with other projects of the company.

Date of Interview            – 8 November, 2006

Interviewee                   –  Kim Won-Ho – general manager-Manila branch office, Daewoo E&C

Interviewers                  – Terry Matthews, Tim Carrodus and Edil Dushenaliyev (in Manila)

Kim recalled that a local politician made him attend a hearing in Congress involving Daewoo’s subcontractor on the Halsema project in Benguet. He said the politician probably wanted to get a portion of the contract to be assigned to a local subcontractor in the area. He said it is a practice in the country for local contractors and government officials to ask to be included in the contract with international companies. Kim said Daewoo could have been disqualified in the 2005 pre-qualification bid for the 1.4A and 1.4C contract because of the INT’s suspicion that it did not want to be part of the collusive scheme on the two packages.

He said local politicians have a vested interest in having large value contracts sliced into smaller package for re-election purposes, and that some, but not all, of the politicians may extract money from smaller contractors to fund their re-election campaigns.

Asked what he knew about EC de Luna Construction, Kim said a person he refused to name told him that EC de Luna could be involved in bidding pre-arrangements and that the Bank’s investigation was triggered by a congressman who wrote a letter to the DPWH.

Date of Interview            – 8 November, 2006

Interviewee                   – Li Peng, general manager-China Geo-Engineering (Phil) Corp.

Interviewers                  -Terry Matthews and Tim Carrodus

Li talked about payment of revolutionary tax to NPA rebels. “The NPA demand a revolutionary tax in order that you can work and protect your machinery and workers. If you have a contract in their areas you have to negotiate. A fee is fixed. If you disagree, then you are summoned by a NPA liaison officer t a meeting, blindfolded and taken to a mountain area and there you meet the NPA people who tell you what the fees or revolutionary taxes are. If you don’t accept you get a bullet in a letter, then a bullet.”

Li also said there were instances when he had to talk to the mayor, governor and congressman to do work in their areas, to be allowed to use the roads. “If you do not cooperate with these politicians, they arrange for your contract to be terminated and rebid and so on.” He said he had to pay “protection fees or commissions” to do work in the project sites.

“Japanese, Korean and Chinese all bid low, then transfer the risk by selling the contract on for a management fee, they do not do the work they win the contract by diving low and then sell to local contractor or a stranger. There are some Chinese companies, no qualifications bid very low and sell to Korean and Chinese. The one who does the work gives fee –maybe 8% of contract price. The project suffers and the contractor who buys has a loss.”

Li said he “paid some money,” 10 percent of contract price, to Sen. Barbers and Tito Miranda who promised to help him. He said he had also talked to Congressman Pichay and asked him if he could assist in getting the contract.

The protection fees or commissions are booked as consultant’s fee, legal expenses or even donations.

Date of Interview            – 8 November, 2006 and 15 November, 2006

Interviewee                   – Noelito D. Policarpio, R.D. Policarpio & Co., Inc. [Philippines]

Interviewers                  – Terry Matthews, Tim Carrodus, and Tom McCarthy (11/08/06)

– Tim Carrodus, Tom McCarthy, and Edil Dushenaliyev (11/15/06)

·        R.D. Policarpio & Co., Inc. (Policarpio Co.) participated in the NRIMP project in the following packages: 1.4A, 1.4C and 1.4B (third round).

·        The involvement of politicians in the awarding of contracts had increased, said Policarpio. In many instances, politicians organize biddings and contractors work together to set how bidding process will turn out.

·        Contractors obtained the price of the contract by paying bribes to individuals of the implementing agencies. All the bidders would then coordinate which contractor would win the bid. This is referred to as the “standard operating procedure” or “S.O.P.”

·        Now, however, politicians heavily influence the S.O.P. by supporting particular contractors. A politician’s support is obtained through a sort of an auction where the contractor willing to pay the highest price gets the necessary political support. This system favors the rich, foreign contractors who can outbid local firms.

·        Policarpio stated that the contractors have had to take part in the corrupt scheme in bidding on all projects in the Philippines that are funded by the World Bank, JBIC, and ADB, as well as locally funded projects.

·        National Road Improvement and Management Project:

–         Packages 1.4A and 1.4C

–         Policarpio explained that the government rejected the application because it could not supply the proper quantity/quality of cement. This, Policarpio said, was merely a pretext, used to make sure that his company did not “play the game.” INT understood this as his company’s exclusion from the bid collusion that would be formalized by the bidders.

–         Pre.-qualification, according to Policarpio, is based on “who you know” – not experience. The company had to be close to certain government officials and politicians. If the company does not cooperate, they can “kick you out.”

–         Package 1.6 (First Round)

–         INT asked Policarpio why his company withdrew from the bidding even if it was pre-qualified. He said he “just didn’t have the time.”

–         INT also asked Policarpio if the reason for his withdrawal was because he knew that he was not going to win so he just gave up early. Policarpio did not agree with this. But he admitted, “they tell me how to bid.”

–   The ABC’s of the Collusive Bidding Scheme

–         The bid collusion involves an entire plutocracy, according to Policarpio. “We will talk to each other, and decide who will get the contract. Sometimes will (agree to) have a small contractor get pre-qualified for strategic reasons.”

–         Policarpio knows that Tito Miranda and Boy Belleza both actively work to manipulate bidding. He said that Eduardo de Luna is “behind” Tito Miranda and “Mr. A” is “behind” de Luna. Mr. A is Mr. Mike Arroyo, Policarpio said.

–         Policarpio said that  de Luna takes an active role in arranging collusive bid schemes in behalf of contractors and politicians. The late Senator Barbers used to be active in using his influence to participate in collusive bid schemes. These activities are now continued by the Barbers sons. Senator Barbers initially used Tito Miranda to arrange his schemes, but later on used  de Luna.

–         Miranda realized that  de Luna is very close to Mr. Arroyo, and has now formed a partnership with de Luna in making arrangements on collusive schemes in behalf of the Barbers sons.

–         Mr. Arroyo is very powerful and places officials in positions, and these officials do what he wants. Policarpio also said he does not believe that Mr. Arroyo’s wife is aware of his corrupt actions.

–         In large government projects, Policarpio said that the process is completely fixed. Prices and winners and losers are determined before the bidding even takes place. Foreign contractors approach politicians and outbid the Philippine companies.

–         Policarpio explained that before, contractors would meet among themselves but now, the decision regarding who will win the contract is made not by contractors but by politicians through the results of the “influence action” system.

–         Losing bidders are paid off by the winning bidder. Politicians would then receive their S.O.P. monies from the contractor’s advance payment, in accordance with the percentage that they have previously negotiated on. Two politicians are usually involved: the politician whose area is hosting or affected by the contract and the politician who controls the implementing agency.

–         For the collusive schemes to work, Policarpio said that the implementing agency must work with the scheme. The DPWH Secretary exercises a very large influence on the schemes and plays a significant role in their success.

–         All payments are paid in cash.

–         Meetings take place at the Diamond Hotel and at a hotel near the U.S. Embassy in Manila. The last meeting Policarpio attended was two weeks ago (check date of interview) at the Diamond Hotel to fix the bidding for a JBIC-funded project.

–         INT asked Policarpio how he accounted for the S.O.P. payments in his company books. He said he does not worry about accounting for the payments because the company books are all “faked” anyway to avoid taxes.

–         INT also asked Policarpio what would happen if he refused to participate in the collusive bid schemes. Policarpio said if he does participate, “they” would try to do something to eliminate his company from bidding in future contracts.

–         Policarpio Co. prepares two bids when tending for a contract: one that conforms with the collusive scheme and one that is a legitimate, “commercial” bid to be submitted in case the collusive scheme falls apart prior to bid submission. Policarpio said he would make the decision as to which bid to actually submit the day before the bid submission deadline.

–         The joint bid submitted by Policarpio/Pancho/Sebastian joint venture in Package 1.4B on August 8, 2006, was part of a collusive bidding scheme, said Policarpio. Prior to the preparation of the bid, he had a telephone conversation with Clemente Pancho, vice-president for Business Development of the Pancho Co. Pancho informed him that he had received the fixing price from the “arrangers” and that he would prepare the bid to reach the predetermined price.

–         Consequently, Policarpio understood that the bid was not going to win and that it was not prepared to win.

–         In a follow-up interview on Nov. 15, 2006, INT asked Policarpio if he was aware if there was a collusive bidding arrangement in the first round of bidding of Package 1.6, where the JV prequalified but withdrew from bidding process. “All bids are fixed,” said Policarpio, noting that the JV in which he was bidding was a designated loser in the scheme.

–         INT asked him why the JV withdrew from bidding. Policarpio said that many times participants in the schemes would decide that they do not have – or unwilling to devote – the resources and time necessary to prepare the bid package since they know that they are going to lose anyway. The JV withdrew because the companies did not have the time to put together a bid at that time which they knew would be unsuccessful.

–         Policarpio also informed INT that he did not understand why the DPWH did not use the ABC formulated by the consultants and used instead used the ABC formulated by its staff. He believes that the ABC’s used in these projects are routinely unrealistic.

Date of Interview            – 9 November, 2006

Interviewee                   –  S.Y. Yoon – commercial and marketing manager, Hanjin

Interviewers                  – Tim Carrodus and Terry Matthews (in Manila)

Yoon said Hanjin’s bid was higher than that of the winning bidder because Hanjin employs Koreans for its projects while local companies use local labor, which is considerably cheaper. In recent times, he said Hanjin decided not to participate in bidding for IBRD projects because of too much competition. He said his company has interest in water-related projects.

Date of Interview       – 9 November, 2006

Interviewees             – Xu Gian -CEO/GM, China International Water and Electric Co.

– Jiang Xiao Hua – chief engineer

Interviewers              -Tim Carrodus, Terry Matthews and Duncan Smith

Xu described the Philippines as “not so easy.” He said that when he took over from the previous general manager in the country, he found the company’s finances “very tight,” the material prices were higher, and prices were manipulated by local people, making it difficult to negotiate prices.

He agreed with INT that one of the big problems in the Philippines was the politicians.  XQ admitted going “sometimes” to meetings of contractors at the Diamond hotel but said he preferred to keep “clean hands.”

Xu said he knew Senator Barbers and met him in 1994 but only as a courtesy and never talked about projects. According to him, it was necessary to “know people” and keep them “happy.”  The local contractors had to pay money to politicians.

Date of Interview            – 9 November, 2006

Interviewee                   – Man-Tae Kim -Keangham Enterprises, Ltd. (Korea)

Interviewers                  – Tom McCarthy and Edil Dushenaliyev (in Manila)

Kim explained that the company couldn’t compete in the Philippines primarily because the       market had many Chinese firms bidding on projects so low that Keangnam cannot get contracts. He       also said it is difficult to operate in the Philippines because the government is not “clean.”

The company has had continuing problems in taxes, which are unclear and too high. According       to Kim, employees in the Philippines have “a difficult attitude” and are “always striking.”

Date of Interview            – 9 November, 2006

Interviewee                   – Junshi Liu, general manager, China Harbour Engineering Co. (ML                                                                 China)

Interviewers                  – Tom McCarthy and Edil Dushenaliyev

The company merged with China Road and Bridge Corp in August 2005, and had changed its name to China Communications Construction Company, Ltd.

It failed to pre-qualify in six packages, pre-qualified but withdrew from bidding in August 2006 on Package 1.6A and pre-qualified and lost in the bidding for Package 1.6B.

Liu described the Philippine government as being “very bureaucratic” on payments and, at time, payments were withheld pending requests for gifts. He found it odd that the government does not favor local contractors. Liu emphasizes the importance of having a good relationship with the DPWH in bidding for projects.  But he denied involvement in any discussions with other contractors to arrange bidding, or pricing. He said he had no knowledge of other contractors working together to fix bidding or prices. However, he said there were informal discussions between contractors prior to submission of bids “to exchange views and lessons learned, informally and privately.”

Date of Interview            – 10 November, 2006

Interviewee                   – Pil Koo Kang – general manager-Manila, Heunghwa Industry Co. Ltd (Korea)

Interviewers                  – Tom McCarthy and Edil Dushenaliyev

Heunghwa submitted to be pre-qualified in a joint venture with EC de Luna but was not pre-qualified for packages 1.4C, 1.4B(1st) and 1.6 (1st); and for 1.4B (2nd) and 1.6 (2nd).

Kang said his company has not bid on IBRD-financed projects because it has no chance of winning the contracts. He said he had heard rumors about IBRD-financed projects in the Philippines, that the contractor has to be connected to many people to win contracts. “We are weak, in that sense and do not know the people you need to know to get the contracts.”

He said the contractors must have connections to government officials, and to agents, or messengers of the government officials. He said there are arrangements made between top government officials and contractors to win contracts. He suggested that INT investigate the winning bidders and talk to the losers “because they always have something to say.”

Kang said he had heard of Tito Miranda and Boy Belleza as agents or messengers for top government officials in arranging bidding on contracts. He confirmed that contractors meet with agents and messengers of government officials before the bidding in order to fix the contract tendering process. Kang said he was told that to get contracts, he has to form a relationship with Eduardo de Luna who was supposedly very close to a top government official. He described de Luna as president of a construction company who is very active in making arrangements between government officials and contractors on contracts. He said de Luna wins contracts with Chinese contractors.

Kang identified the government official that de Luna was connected to as Mike Arroyo, through de Luna’s father-in-law. He admitted that he never participated in any of these dealings and that his knowledge were based on what Kim, his predecessor, had told him and on rumors.

Date of Interview         – 10 November, 2006

Interviewees               – Wen Yuegang, general manager/senior engineer, China Road and Bridge Corp.

– Xiong Shiling, deputy general manager

Interviewers                -Terry Matthews, Tim Carrodus, Duncan Smith and Edil Dushenaliyev

Yuegang said the Philippines was “not an easy place” to work, with NPA and local armed gangs confiscating or restricting access to equipment, and forcing them to pay money. (CRBC’s equipment was burned twice and work forced to be stopped by local armed people.

He denied being instructed by others to put in a specific bid price and stressed that the company’s policy is to set its price at a level so that it will not make a loss. He said his company had never been asked to join a collusive group.

Date of interview           – 13 November, 2006

Interviewee                  – Gerardo V. Pancho, president, C.M. Pancho Construction, Inc. (Phils.)

-Clemente V. Pancho, vice president-business development; head, estimating department

Interviewers                 –  Tim Carrodus, Edil Dushenaliyev and Tom McCarthy

Gerardo Pancho told the INT that the company experiences problems when it competes against foreign contractors, which are able to outbid his company. The Chinese companies are competing unfairly against other companies by using the influence of local politicians…using the names of politicians. His company does not need any political support even if has a relative who is a congressman (Pedro Pancho of Bulacan).  He says his company does not believe in giving money to politicians, and then getting the money back from the project.

Date of Interview            – 15 November, 2006

Interviewee                   –  Panya Visetnut – operations and country manager, Italian-Thai Development Public Co. Ltd (Thailand)

Interviewers                  – Tim Carrodus and Tom McCarthy

The company failed to pre-qualify in six packages and pre-qualified in three others but lost in the bidding.

Panya said it was difficult to do business in the Philippines as a foreigner, and that foreigners themselves present tough competition. He said that while his company could outbid the Japanese firms, he could not submit bids lower than the Chinese companies who can offer lower prices because they are subsidized by the Chinese government.

On the alleged collusion in WB-funded projects, Panya said his company was “ignored” and was  never offered a chance to participate in the collusive bid schemes. He complained that the ABC used by the government is unrealistically low, and does not take into consideration special costs such as the revolutionary tax paid to rebels groups.

Panya said Boy Belleza once offered to do ‘follow up’ services for him for a fee. He denied participating in any collusive bidding schemes or engaging in any arrangement with any other bidder or participating in meetings to designate the winning bidder.

Date of Interview            – 17 November, 2006

Interviewee                   – William (Bill) Paterson, former task team leader East Region, now based in Hanoi, Vietnam

Interviewers                   – Tim Carrodus,  Edil Dushenaliyev, Duncan Smith, Thomas McCarthy and                                                 Richard Leonard

Paterson explained the circumstances leading up to the award of the contracts for NRIMP1 projects.

Date of Interview            – 21 November, 2006

Interviewee                   – Edward C. de Luna, EC de Luna Construction Corp.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

EC de Luna, in a joint venture with China State, was a proposed winner on one of the contract packages but the World Bank did not concur with the DPWH recommendation. De Luna said he did not participate in the third round bidding for the contract because he did not want to lose money again. He said he ‘hates’ politicians. He has to pay them and cannot do anything about it. Some politicians, but not all, want to get a share of contracts in certain areas of the country. Asked of his personal experience with politicians, he said he had to hire local subcontractors connected to politicians in some areas. He likened politicians to the NPA rebels extorting money from contractors. But he denied paying politicians. According to him, politicians meddle in locally funded projects, but not on foreign-funded projects because foreign companies fight back if politicians tried to get a cut out of them.

De Luna denied any involvement in bid collusion. He said one of the losing bidders told him about the alleged collusion. But he did not mind it, thinking that losing bidders in the Philippines always complain about winners and get involved in an intrigue. He admitted knowing Tito Miranda, who coordinates the Philippine-Japan Highway Loan Project of the DPWH, and that he has one contract under the PJHL. But he said he did not know Boy Belleza, an assistant director of Region 4A of the DPWH.

Date of Interview            – 21 November, 2006

Interviewee                   – Federico S. de Vera – sales supervisor- marketing department, EEI Corp.

–  Christopher ‘Peng’ F. Esguerra, sales supervisor

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

De Vera said EEI felt it would not able to meet the pre-qualification criteria, so it entered into a joint venture with Hanjin. In bidding, he said the price is kept confidential before its submission, with very few people in the company knowing about it. Neither de Vera nor Esguerra knew about the alleged bid rigging or the contractors’ meeting at Hyatt or Diamond hotels before the bid opening to designate the winners. Both also said they know either Tito Miranda or Boy Belleza.

The EEI officials said there was a delay in the payment of the P43-million locally-funded Pila-Kalayaan project because of a politician who wanted to get subcontracting work for a local company in his area. They said they did not know if money was given to the politician. Esguerra said he was not aware of any politician asking for a kickback from EEI. Inc as when a local politician expresses interest, EEI can subcontract some work, provided the subcontractor can meet EEI standards.

Date of Interview            – 21 November, 2006

Interviewee                   – Rodolfo J. Corpus, former account of Daelim branch office in Manila

–         R.S. Corpus & Associates

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Corpus said he was not familiar with the details of Daelim’s bidding for the World Bank projects. But having worked for many years at the Construction Development Corporation fo the Philippines (CDCP), he told the INT that he had witnessed the corruption that attended infrastructure projects. He said a third of the project money is lost to corruption of government officials and politicians. He said congressmen would immediately ask for 10 percent of the contract amount, especially on locally-funded projects. World Bank projects are no exemption to this. He said collusion is widely known in the construction community and that it involves all parties, including politicians, government officials, bidders, auditors and officials of the Commission on Audit who get one to two percent of the contract amount. He described DPWH officials as hatchet men or pawns who pull the strings. Contractors who do not participate in the collusive scheme do not get any contract at all. He likened the system to an organized crime where winners are known before the actual bidding could take place.

Corpus said corruption starts from the top, and is a by-product of the political system. He mentioned that Mrs. Arroyo appoints retired generals to top and juicy government positions to buy their loyalty, citing the secretaries of transportation and public works among retired generals who were appointed to plum civilian posts.

Date of Interview            – 21 November, 2006

Interviewee                   – Petronilo Sebastian -P.L. Sebastian

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (at EDSA Shangri-la Hotel)

·          Sebastian denied submitting a pre-arranged bid for the 1.4B package in a JV with Policarpio and C.M. Pancho and that each contractor submitted its own bid. He did not recall making any side payments to politicians or government officials. But the situation with the NPA, he said, is different. He called them extortionists. He has to pay otherwise the NPA will burn the equipment.

·          He had experienced some level of corruption but refused to speak further. He said it involved certain government officials and added that INT should understand his position. Contractors who do not obey the system will be disqualified or face other sanctions. “You know what I mean,” he said.

Date of Interview            – 22 November, 2006

Interviewees                 – Xie Wen Peng – general manager, China Wu Yi Co. Ltd.

–  Wu Yi Bao -deputy general manager

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Xie and Wu denied being asked by politicians or government (officials) to make illicit payments. Wu said that if they had done so, they would have been immediately fired by their head office management. Peng said he believed that some disgruntled losing bidders were not happy with the results of the third round (of bidding) and probably complained to INT. He said local contractors always do “such kind of talk.”

Date of Interview            – 22 November, 2006

Interviewee                   – Clemente V. Pancho, VP – CM Pancho Construction, Inc.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Clemente Pancho said his firm, as the lead partner in the joint venture with Policarpio and PL Sebastian on the 1.4B package, was responsible for the bid preparation, including site visit and cost calculation. The joint venture was formed to meet pre-qualification requirements that were discriminatory against local contractors and favored foreign contractors. Pancho said neither he nor any of his staff attended the Nov. 7, 2006 meeting of the contractors at Hyatt Hotel supposedly to designate CM Pancho as winner in the bid for 1.4.A.1 contract.  Pancho said it was unfair to implicate his company in collusion based on INT’s source and suggested that the source file a complaint to the DPWH or the Ombudsman.

Pancho complained to INT that nobody checks the accuracy of the papers submitted by the Chinese contractors and certified by the Chinese embassy in Manila. He said he was not aware if the Chinese companies made illicit payments to politicians or government officials. The Chinese companies can afford to bid at a loss because they are subsidized by their government.

Date of Interview            – 23 November, 2006

Interviewee                   – Kim Won-Ho, general manager-Manila branch office, Daewoo E&C

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Kim said Daewoo was not at any point in time under pressure from DPWH to submit a bid out of fear of being sanctioned. He said the company withdrew from the second round bidding for the 1.4B package because of tougher competition from the Chinese and manpower problems. And having heard of the INT investigation of alleged collusion, the company did not participate anymore in the third round bidding.

Date of Interview            – 23 November, 2006

Interviewee                   – Manolito Madrasto – chief operating officer, permanent secretariat

— International Federation of Asian and Western Pacific Contractors’ Association

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

IFWAPCA is made up of builders’ associations in 15-member countries.

Madrasto told the INT, “Those who don’t cheat are penalized by the ones who do.”  He said any sanctions against contractors should be made with due process and that contractors accused of any wrongdoing should be afforded the opportunity to defend their actions.

He said corruption in the Philippines starts with locally-funded projects and has expanded to internationally-funded projects. He noted that at the local level,  the local politician decides who wins. If an international contractor wins, there will be local subcontractors suggested by the local politician. He said he is fully aware of the collusive and corrupt system in the Philippines. According to him, some contractors were threatened physically during the third round of bidding for the packages CW-RU-1.4B , 1.6A and 1.6B where everybody knew who was going to win.

Madrasto estimates that 40 percent is added to the cost of a contract to facilitate payments to the politicians.

He said EC de Luna and J.D. Legaspi are connected to the ‘first gentleman’ and they brag about this relationship; RII Builders and 310 Construction are connected to former president Fidel Ramos while J.M. Luciano Construction is connected to a congressman.

Date of Interview            – 23 November, 2006

Interviewee                   –  Yoon Choi -estimation manager, Hanjin

–  Jong II Eum, operations manager

Interviewers                  – Tim Carrodus and Edil Dushenaliyev (in Manila)

Mr. Choi explained the process the company undertakes in bidding for contracts.

Date of Interview           – 24 November,  2006

Interviewee                  -Junshi Liu, China Harbor Engineering Company

Interviewers                 -Tom McCarthy and Edil Dushenaliyev

Liu  said the level of political interference, especially in the project area, was the most difficult factor in doing business in the Philippines. He said politicians and government officials at all levels want to benefit from contractors. In a project in Zamboanga City, he said Chian Harbor had to hire security to protect its staff. He said he heard from the local personnel that they had to pay the politicians also. He said it was an accepted rule to pay the politicians and that contractors have to play this game in the Philippines. According to him, contractors bid very high to cover all potential side payments in the future. There’s also a lot of competition between the politicians in picking the winners for the contracts.

Date of Interview            – 28 November, 2006

Interviewee                   – Jonathan M. Amon -manager, J. M. Luciano Construction, Inc.

Interviewers                  – Tim Carrodus and Edil Dushenaliyev

Amon said that Luciano has an ongoing WB-funded project in joint venture (JV) with RII       Builders and 310 Construction. This contract (1.4C package) is progressing very slowly because       of the low bid price, peace and order, and the politicians. The last two factors were the most serious,       he said.

Amon said that the engineers of all three companies (Luciano, RII Builders and 310       Construction) worked collectively on the cost estimation, each providing an input to its own part of       the work. The cost estimates were consolidated by RII. The JV presented a “normal” bid on both       contract packages (1.4A and 1.4C) and did not factor in any “external” factors such as the side       payment to politicians.

Amon repeated that the JV presented a normal bid for the 1.4A package and the termination of       the contract then was “revenge” from politicians whom the JV refused to pay. It was the politician       in the project area (Surigao), Amon said, but he refused to identify the person. He said that the       DPWH officials were also part of the retaliation action against the JV. Asked about filing a case           with the DPWH Ombudsman, Amon said that he (the Ombudsman) is part of the system since he is       appointed by the President and politicians.

·          Aside from track record and experience, Amon said that one needs to cooperate with everybody to pass pre-qualification. “You know what I mean,” he said, referring to such “cooperation” as paying money to the politicians and government officials. If one does not pay, one does not get the contract.

·          Amon also described Boy Belleza (Asst. General Director of Region 4A) and Tito Miranda (President, DPWH Employees Union Association) as decent persons who would not fix the bidding. He also does not know anything negative about E.C. de Luna.

·          Amon refused to identify the facilitators of the collusive scheme, adding that they are different from project to project and much higher than the persons mentioned above. When asked if these could be the Secretary or Undersecretary of the DPWH, Amon refused to answer, saying that he has five children and needs to think of them.

·          If the bid prices are 20 to 30 percent above the cost estimate (ABC) then politicians are involved in the project, according to Amon. To do away with the interference of politicians, the ABC should be published and no bids above the ABC should be accepted.

·          Amon also said that Chinese companies are winning all the internationally funded tenders because they pay the local politicians and government officials since they have the money to make illicit payments. He knows this because he said he is in the “system” and that everybody in the contracting community is aware of the situation.

·          The surplus amount above the ABC goes to the politicians through the foreign banks of international contractors.

·          Amon noted that foreign contractors rarely partner with local firms but if they do so, they do it for “political insurance.” Foreign contractors need no JVs because they have their own resources and sufficient capacity.

·          Amon denied attending any pre-arrangement meetings at the Diamond or Hyatt Hotels, but said such meetings could take place after the pre-qualification to finalize the list of winners.

·          The current Secretary of the DPWH is a retired general and has been in the position for two years. He said that contractors try not to “mess” with him in order to avoid any harm.

·          Amon stated that Luciano currently has two active projects (hospitals) financed by Land Bank. The company recently finished a P800-million JBIC-financed project in the peaceful part of Mindanao.

·          Amon said they had to pay the NPA both in kind (computers, cellphone, medicine, rice and other goods) and in cash on the 1.4A and 1.4C contract packages, among others. If the company would not pay, its equipment could be burned or destroyed. He admitted that RII Builders paid P1 million to the NPA. He also noted that the local politicians and rebel groups have a mutual respect for each other and do not step into each other’s turfs.

·          Amon told INT that the winner of the 1.4A.1 contract package, C.M. Pancho, was predetermined. He advised INT to look at the result of the bidding in order too see a pattern. He also said that the bidders knew about the outcome and therefore intentionally put in losing bids.
–Compiled by Tita Valderama and Karol Ilagan, PCIJ 2009 (ManilaTimes)

The Confidential Witnesses: Full Testimonies(From PCIJ/ManilaTimes)

February 14, 2009

Note from the PCIJ:  Apart from the 54 witnesses identified in the “Record of Interviews” of the World Bank’s Department of Institutional Integrity (INT),  seven other persons testified on the alleged fraud and collusion in the National Road Improvement and Management Program-1 (NRIMP-1), The INT’s report refers to them as the CWs or Confidential Witnesses. Their full testimonies follow:

Confidential Witness No.1 (CW01):

“A former government official with personal knowledge of the DPWH bid process. CW01 requested that his identity remain confidential. CWO1 expressed concern over collusion in the bidding for said projects, and stated that the primary ‘arrangers’ or ‘facilitators’ of the collusion included: a. contractor Eduardo de Luna (who)… was ‘masterminding’ bids, is close to Mike Arroyo (husband of President Gloria Macapagal Arroyo) and is a go-between for Mr Arroyo on foreign-assisted projects; and b. DPWH staffmember ‘Boy’ Belleza whom CW01 described as a long-time ‘arranger’ dating back to the Marcos regime. CW01 said Mr Belleza had been barred for a time from the DPWH offices.”

“CW01 named multiple Congressmen and Senators who had taken bribes, including former Senator Barbers. According to CW01, members of the DPWH who have taken bribes include: former Secretary Florante Soriquez (who is close to Mr Arroyo and Mr de Luna), and Project Director Lope Adriano.”

“CW01 knew details of the operations of the cartel and echoed others in stating that this process was known as the ‘Standard Operating Procedure.’ First, a Congressman would anoint a winner prior to the bidding by identifying the winner to the District Engineer. The Congressman will tell the District Engineer, ‘This is my Man.’”

“CW01 said contractors pay 15-20% of the contract to the Congressman who sponsors them, either up-front or progressively through the various stages of a project.”

“CW01 said the winning bidder gives the losing bidders 1.5% of the contract value; government officials share in another 2-3%; BAC (bid and awards committee) members also sometimes take money in exchange for not forwarding bids to the central office.”

“CW01 stated that the ABC can also be ‘padded’ by engineers who are paid to increase required quantities and thus manipulate the contract specifications to increase the price.”

“CW01 also said contractors take shortcuts in the execution of the contracts to cover these various costs; according to CW01, the DPWH loses between 15-27% on each contract, not including up to 20% in unnecessary costs added to projects.”

“In essence, CW01 said the bidding process is ‘a sham.’ The only contractors who get contracts are the ones who comply with the system.”

Confidential Witness No. 2 (CW02):

“…another government official with knowledge of the process asked that his identity remain confidential. He noted that witnesses had received threats related to the investigation.”

“Stated that DPWH staff, in particular Mr. Soriquez, would not move on the approval of a contract until a contractor pays them 5% for the approval. CW02 was aware of the ‘SOP.’”

“He said contractors have told him that politicians, district engineers, BAC members, losing bidders, and the media are paid under the SOP. He said politicians in the provinces sometimes interfere with the bid award process if they have friends who want to bid; the politicians insist that their friends win.”

“CW02 said Boy Belleza is in charge of arranging the bids and prices for the losing bidder, and Tito Miranda is the arranger for locally-funded projects.”

“CW02 also identified multiple areas where the bid process was subject to manipulation, noting that (a) the ABC is sometimes padded and calls for more work and supplies than are needed; (b) contractors can shift their bids up as much as 30%, citing the danger of currency fluctuations; and c) contractors can obtain contract variations in order to increase their profits and recoup early losses; these variations can double the price of the contract.”

Confidential Witness No. 3 (CW03):

“CW03, a manger in the Philippines office of a foreign firm, participated in the bidding at issue here. CW03 insisted several times during his interview that his identity remain confidential.”

“CW03 told investigators that bids on public construction contracts are prearranged, the bid rigging is an “open secret,” everyone knows about it, and all contractors must participate to get work. He said every layer of the system is corrupt, and all details for the bid documents are prearranged.”

“CW03 said the bid-rigging system is present on contracts with the National Irrigation Administration, the Department of Transportation and Communications, and the Department of Environment and Natural Resources, as well as with the DPWH.”

“Based on his own personal interactions and involvement in the syndicate, CW03 named a number of other companies involved in the collusion. They include Hanjin, China State, Daelim, and Cavite Ideal. CW03 said Cavite Ideal is ‘famous’ for working with the syndicate, and that China State is a ‘very strong, big payer’.”

“CW03 said some companies meet to discuss bids and other issues on a regular basis. Government officials, according to CW03, act as ‘mediators,’ arranging the collusive pricing. ‘Mediators’ assign prices to the losing bidders for submission on the fraudulent bid documents. CW03 named Mr. Belleza and Mr. Miranda of DPWH as mediators; he specifically noted Mr. Belleza’s involvement in the 1.4B and 1.6 packages.”

“CW03 said mediators hold meetings at the Diamond Hotel near DPWH, before each contract goes out to bid. He told investigators that normally, all prequalified bidders attend these meetings. (He said the prequalification process itself is sometimes prearranged.) The mediator discloses the approximate budget amount to the contractors, and asks who is interested in the contracts.”

“Through private follow-up meetings with the interested contractors, the mediators decide on the winner – i.e., the company promises the largest kickbacks. The mediators assign prices to the losing bidders, and check colluders’ bids just before submission to be sure they are ‘correct.’ The winner gets the contract, and support from local politicians, in exchange for the promised payments.”

“Contractors make payments on the bidding date, on the award date, and when they receive payments under the contract. CW03 told investigators he knew about these matters first hand.”

“CW03 noted that the ABC is widely known by bidders. He told investigators that contractors typically add between 20% and 28% to the ABC.”

“CW03 told investigators that each percentage point added to the ABC and dedicated to a corrupt payment is known as a ‘share.’ The apportionment of shares typically is as follows:

1.      the BAC members each receive one share;

2.      the BAC Chairman receives one extra share;

3.      the DPWH Legal Department receives one share;

4.      relevant NGOs or local media receive one share (as payoff to avoid publicity);

5.      the mediator receives one share;

6.      four to five shares go to the Project Management Office (PMO); and

7.      three to five shares are divided among the losing bidders.

“Thus typically between 17 and 20 shares must be allocated to the cartel’s various facilitators.”

“CW03 said contractors know they can add 25% to the ABC and the World Bank will approve the contract. So the winning bidder typically bids 24% higher than the ABC, and the losers bid higher than that.”

“CW03 said work suffers because of the bribes; contractors cut back on implementation, and simply pay off inspectors with food, lodging, and pocket money. CW03 also stated that corruption is “a way of life” in the Philippines. He predicted that even if solid evidence were to be provided, the government would do nothing to remedy the problem.”

Confidential Witness No. 4 (CW04):

“CW04, another foreign firm, has also participated in DPWH bidding. CW04 agreed to provide information only on grounds that it be treated confidentially. Investigators interviewed CW04A and CW04B, both officials in CW04’s manila office.”

“General Description of Syndicate Operations. CW04 told investigators, ‘(If) you have a project with DPWH, you have to give.’ CW04 said that the syndicate operates on a ‘gentlemen’s agreement,’ and it is understood in the syndicate that those who violate it will be excluded from future pre qualifications and will not win further contracts.”

“According to CW04, ‘coordinators’ – among them the winning contractors – arrange the prices at which losing bidders will bid. CW04 identified Mr. Belleza, (the DPWH Region 1V-A Assistant Director), and another DPWH official as coordinating the collusion for DPWH. They have networks of collaborating officials in all PMOs (i.e., PMOs for JBIC, ADB, and World Bank projects).”

“CW04 showed investigators a chart which outlined payments made and due to each of the colluding contractors, as well as the amounts of their bids. Both individuals said the BAC is involved in the bid-rigging, but they do not know what share it receives, because payments to the BAC are handled by the contractors. Both said the payments would be distributed once the contract was awarded.”

“Bid-Rigging on the 1.4B and 1.6 Contract Packages, CW04 said companies sometimes pay a small amount to be prequalified. He said bribes and kickbacks paid by CW04 are hidden in financial reports under vague expense lines. He provided INT with a copy of an example record of payments to a DPWH official.”

“CW04 said contractors were engaged in negotiations with one another. CW04 said that in at least one of the bidding rounds, the company that was designated by the cartel to be the winner thereafter arranged the bids. CW04 confirmed that CW04 had placed bids that were ‘not meant to win’ because another company already had been designated to be the winner of the contract package. They nonetheless tried to demonstrate participation, in hopes of gaining future contracts.”

“CW04 explained that CW04 had been provided a ‘lump sum’ price to bid by a coordinator. He said he then had to ‘jack up’ the other items in the bid to meet the lump sum.”

“CW04 said the Bill of Quantities in CW04’s bids is obviously inflated by at least 20 to 25%. The choice of how to inflate the prices to meet the requested sum was not imposed by the syndicate but was left to each contractor.”

“Other Contracts. CW04 showed investigators other corporate records concerning cartel payments in other contracts. According to cartel procedure, the designated winning bidder was responsible for paying out a portion of the ABC to the losing bidders.”

“CW04 said the winner paid off politicians for election campaign funds, and paid direct bribes to senior DPWH officials. He provided documentary evidence of some of these payments.”

“CW04 explained that, to avoid bookkeeping problems, CW04 obtained fake receipts to balance out any payment discrepancies. The books were prepared by a certified public accountant, and were sent to CW04’s head office without any supporting details. Moreover, he said, CW04’s submissions to the Philippine Bureau of Internal Revenue (BIR) did not necessarily reflect the company’s true financial condition, as CW04 was also bribing officials of the BIR.”

“In a follow-up interview with investigators, CW04 identified an additional World Bank financial project manipulated by the cartel.”

Confidential Witness No. 5 (CW05):

“CW05 participated in bidding on these contracts. CW05 began his interview by noting that he is afraid for his safety if he speaks about Mr. de Luna; he asked the Bank to protect him.”

“CW05 said it has become difficult to do business in the Philippines. In the last three or four years, he said, politicians have gotten involved in the construction business; they ask for money, and his company does not want to pay it.”

“CW05, just as CW03 and Mr Liu of China Harbour had, described corruption in Philippine road projects as ‘an open secret.’ ‘Everyone knows the situation in the Philippines but no one wants to talk about it because they have to survive.’”

“CW05 commended the Bank for its rejection of the bid in the 1.4B and 1.6 contract packages. He said this rejection showed the Bank understood how corruption had infected the bids.”

“CW05 said Tito Miranda, DPWH Region IV-A Assistant Director, is close with both Mr de Luna and important politicians. CW05 said that Mr de Luna appears to have connections with the police, within the agencies, and with the first family.”

“CW05 said under the syndicate system, contractors are to inform Mr Miranda of their intent in a contract. CW05 said contractors cannot say no to Mr Miranda, and he noted that a contractor in Northern Luzon was shot in the mid-1990s because he would not go along with the syndicate.”

“CW05 told investigators a bid may be inflated up to 50% if the bidder has the support of government officials and is willing to pay what he characterized as ‘expenses.’”

“CW05 said companies sometimes withdraw from bidding because they hear the bids are rigged, and they feel a bid under these circumstances is hopeless.”

Confidential Witness No. 6 (CW06):

“CW06 participated in bidding on these contract packages. CW06 noted that he feared repercussions if his cooperation were to become known.”

“CW06 told investigators that Eduardo de Luna was managing the 1.4B and 1.6 contract packages, as well as the NRIMP 1.4A, 1.4C and 1.5 contract packages. He stated that Mr de Luna claimed to be able to arrange for companies to win any of the contracts for a fee.”

“CW06 said politicians were involved in the bid-rigging on Bank projects, and he identified particular individuals.”

Confidential Witness No. 7 (CW07):

“CW07 is a former employee of a DPWH contractor. CW07 agreed to speak only on conditions of anonymity.”

“CW07 told investigators that one of his employer’s contracts had been prearranged by a DPWH employee.”

“CW07 said that for a given contract, the ‘matchmaker,’ who was in charge of arranging the bidders, would ask contractors if they were interested in a particular project. During a subsequent follow-up meeting, the arranged winner would negotiate the markup necessary, and arrange the payments of the bribes and kickbacks to government officials.”

“According to CW07, under the bid-rigging system, ‘silent guidelines’ are followed which direct the amounts of payoffs to which losing bidders in the cartel are entitled. Under these guidelines, the winner would set aside 3% of the ABC for the participating pre-qualifying and losing bidders to share.”

“CW07 told investigators that losing bidders are told the price they are to bid one day before the bid documents are to be submitted. The arrangers check the losing bidders’ prices immediately before submission to make sure they are ‘correct.’ CW07 said ‘divers’ can avoid the prearranged bidding by bidding lower than the others but they will be punished for it by the syndicate.”

“CW07 said that his company has placed bids for contract packages that it had no intention of winning. CW07 said his company received the bid price from the ‘arranger.’ His company then marked up the price computations to meet the arranged total bid price.”

“CW07 also acknowledged other kickbacks his company paid to the DPWH. He told investigators that he was approached by one senior DPWH official who demanded a kickback in connection with an ongoing contract. CW07 said he ‘couldn’t say no’ and admitted that he paid off the official.”

“CW07 said the headquarters offices of some foreign companies know generally about the bid-rigging system in the Philippines, but prefer not to hear the details.” –PCIJ, 2009 (ManilaTimes)

$45M lost to bribes for ‘cartel’ backed by govt officials

February 14, 2009

By Malou Mangahas, Philippine Center for Investigative Journalism

Corrupted to the core—and entirely—by a “cartel” of kickback-takers with support from the highest levels of the Philippine government.

In gist, this is the damning conclusion of the World Bank’s anti-corruption unit, the powerful and dreaded Department of Institutional Integrity (INT) regarding the bank-funded National Road Improvement and Management Project-1 (NRIMP-1).

According to the department, “the entire NRIMP-1 Project has been corrupted,” and had put “at least $30 [million to] $45 million of the entire $150-million loan at risk,” or lost to “a cartel” of contractors, bureaucrats, politicians. Two witnesses said bribes were also “shared” with “relevant local media and non-government organizations . . . to avoid bad publicity.”

The cartel has been “institutionalized and has operated with impunity for at least a decade, possibly longer,” on account of the “systemic corruption and bid rigging” in the Philippine public works sector.

Even worse, “evidence suggests [that] the cartel may enjoy support at the highest levels of the Government of the Philippines, including several officials of the DPWH [Department of Public Works and Highways] and even reaching the husband of the President [Gloria Arroyo] herself.”

“Ultimately,” said the Department of Institutional Integrity, “the cartel harmed development itself—NRIMP funds were not disbursed because of the fraud and corruption, and the roads were not rehabilitated with the development funds allocated to this purpose.”

60 witnesses, piles of docs

The Department of Institutional Integrity said its investigation—which eventually implicated 16 individuals and had the unit’s acting director Johannes Zutt recommending sanctions against 17 companies—involved 60 separate witness interviews and the evaluation of hundreds of documents.

“Despite fears that they risked their physical and economic well-being,” the department said, “over a dozen witnesses confirmed the existence of the cartel and provided details on its practices.”

By the department’s reckoning, “a syndicate made up of contractors and corrupt officials in the DPWH had organized and had been operating a cartel to control road projects at least as early as 1998.”

But “Filipino politicians later took a managing role in the organization,” while public works officials “arranged for contracts to be awarded to particular contractors in exchange for bribes and kickbacks,” said the Department of Institutional Integrity.

With the cartel’s operation, it continued, “the entire system operated [and may continue to operate, with respect to other contracts . . .] under ‘a gentlemen’s agreement,’ with implicit understanding that those who violate the agreement will be denied the prospect of winning future contracts.”

The cartel provided “the illusion of competition—the appearance of a free market [that] was entirely simulated,” the Department of Institutional Integrity said.

According to the department report signed by Zutt, “The evidence is sufficient for a determination that it is more likely than not that the respondents, with the active cooperation of numerous officials of the Government of the Philippines, participated in an institutionalized cartel replete with collusive tendering, bid rigging, price fixing, and the routine payment of bribes and kickbacks.”

In the 260-page report on the findings dated March 20, 2008, Zutt also recommended sanctions against a Filipino contractor and 17 construction companies that joined the three rounds of project biddings.

(A separate 230-page Part II of the Department of Institutional Integrity report enrols the “Record of Interviews” that the investigators conducted with 54 named witnesses from April 2003 to November 2006, in the Philippines, Japan and South Korea.)

‘Affirmative deception’

Thirteen of the 17 firms were put under the category of respondents who “either refused to cooperate with the Bank’s investigation or affirmatively misled the INT.”

Such “affirmative deception” of the Bank and “obstruction of its investigative mission should be an a priori disqualifying circumstance from doing future business with the Bank.”

These 13 companies are:

Cavite Ideal International Construction and Development Corp., based in Pasay City;

China Road & Bridge Corp, a state-owned firm based in Hong Kong;

China State Construction Engineering Corp., a state-owned firm based in Beijing;

China Wu Yi Co. Ltd., a state-owned firm based in Fuzhou City;

CM Pancho Construction Inc. in Quezon City;

Daewoo Engineering & Construction Co. Ltd., based in Seoul, South Korea;

Dongsung Construction Co. Ltd., based in Gyeongham, South Korea;

EC de Luna Construction Corp. and Eduardo de Luna, San Juan City;

EEI Corp., Quezon City;

Hanjin Heavy Industries & Construction Corp., based in Seoul, South Korea;

Italian-Thai Development Public Co. Inc., based in Bangkok, Thailand;

Sammi Construction Co. Ltd., based in Busan, South Korea; and

Shinsung Corporation General Contractors and Engineers, based in Kangnam-Gu, South Korea

Five of the 17 respondents were judged to be “affiliated with the organizers of the cartel also [and] should receive enhanced sanctions as they are the perpetrators of fraudulent and corrupt practices.” These five respondents, the department asserted, “had the greatest extent of corrupt relationships with government officials, directed the submission of fraudulent bids, and controlled the fraudulent distribution of contract awards.” The five are:

China Geo-Engineering Corp. based in Beijing;

China Road & Bridge Corp.;

China State Construction Engineering Corp.;

China Wu Yi Co. Ltd.;

EC de Luna Construction Corp. and Eduardo de Luna.

Open secret

The witnesses who spoke with the Department of Institutional Integrity, including “multiple cartel participants and government officials,” described the “collusive and corrupt practices surrounding these contracts as an ‘open secret’ and said the bribery the cartel managed was known in the Philippines as ‘standard operating procedure.’”

The report exposed the modus operandi of the cartel:

“The cartel was aided by officials within the Project Implementation Unit, the Philippine DPWH, which disqualified uncooperative bidders without basis before formal bids could be placed.”

“Cartel managers would anoint contract winners in advance of bid submission and would designate losing bidders, who were compensated to cover their costs in bidding.”

“Cartel managers told bribers what to bid, days before the bid submission date, down ‘to the last peso.’”

“Cartel backers thereafter redrafted their unit bid prices to comport with cartel-mandated total bid amounts, frequently 20 [percent to] 30 percent in excess of estimates.”

“The prearranged bidding was made all the more evident when, to the final round of bidding in 2006, an anonymous informant provided investigators with advance notice of the correct outcome of the third round of bidding before the bid opening had occurred.”

Besides interviewing 60 witnesses, the Department of Institutional Integrity said it conducted “in-depth analysis of the three rounds of bidding” and established that “bids in all rounds showed abnormally high and unexplained unit and total costs.”

This bids analysis yielded, the department said, the following findings:

“Bids bore lockstep relations to engineer’s estimates [i.e., one round’s bids were 31 percent, 32 percent, 33 percent and 34 percent above the estimate].”

“Bids contained numerous, large calculation errors suggesting last-minute revisions pursuant to cartel instructions—one bid contained an error in excess of US$3.6 million.”

“Two bids on a US$26 million total contract, with widely disparate subtotals, totalled to values only US$31 apart.”

The lowest bids investigated, the report continued, “were routinely 20 [percent to] 30 percent above cost estimates, threatening the Bank’s borrower with tens of millions of wasted dollars had the cartel not been exposed.”

Sanctions vs. 7 firms

The World Bank’s Evaluation and Suspension Officer, who evaluated the evidence gathered by the Department of Institutional Integrity, later issued in May 2008 a Notice of Sanctions Proceedings to the respondent bidders.

But on January 12, 2009, the World Bank sanctions board decided to impose penalties on only seven companies:

EC de Luna and Eduardo de Luna, debarred indefinitely from participating in World Bank-funded projects.

China Road, debarred for five years. China State and China Wu Yi, debarred for four years. Cavite Ideal and CM Pancho, debarred for four years.

In August 2008, the Korean firm Dongsung was separately debarred for four years, “for fraudulent and corrupt practices in relation to the NRIMP-1 case.”

According to the Bank’s sanctions board, the Department of Institutional Integrity had not presented sufficient evidence that the respondents may have engaged in “fraudulent practices separate from collusion.”

In its report, however, the department said it had “direct evidence of fraudulent or corrupt practices such as the submission of fraudulent documents or the payment of bribes derived from admissions of participants or the direct testimony of witnesses,” and “circumstantial proof of collusion detected through an analysis of the fraudulent bids the cartel submitted.”

“At a minimum, the totality of the evidence reflects that each of the bidders on the contract packages at issue had knowledge of the cartel’s practices and willingly participated in the systemic fraud and corruption,” the department said.

The “evidence accumulated in this case,” it said, “is sufficient for a determination that the respondents violated Bank procurement guidelines.”

Still, it admitted that the evidence collected “does not reveal any exculpatory factors” or “any further mitigating factors” to be considered in the case, in favor of any of the respondents.

The department said, it determined that “among the aggravating factors to be considered are: the egregiousness of the misconduct, including multiple instances of misconduct; the degree of involvement of the respondents in the misconduct; damage caused by the respondents to the credibility of the procurement process; and harm caused to the borrowers.”

Thus, it said, “without exception, it is the INT’s contention that all of the respondents . . . acted in a manner that permits the charge of engaging in corrupt practice to be levelled against them as a principle or, in the alternative, as a secondary party.”(ManilaTimes)

Macroasia lodges complaints in Ombudsman vs Brooke’s Pt. barangay officials

November 20, 2008

By Celeste Anna R. Formoso

MACROASIA CORPORATION (MC) has recently filed administrative charges in the Office of the Ombudsman for the preventive suspension of Brooke’s Point barangay Ipilan chairman Jonathan Lagrada and three others for allegedly causing “undue injury to the government and grave abuse of authority.”

A statement obtained by the Palawan Times said MacroAsia filed administrative cases against Lagrada, Jane Araullo, Wilfredo Rodriguez and Cresencio Ura – all officials of barangay Ipilan on grounds that they are “stopping a mining firm from pursuing its legal exploration activities, as covered by a Minerals Production Sharing Agreement (MPSA) granted by the national government, and which was duly concurred by the municipal government.”

The cases were filed at the office of the Deputy Ombudsman for Luzon in Manila by MacroAsia Corporation representative and complainant Marivic T. Moya, the statement said.

The MC beseeched the Ombudsman to preventively suspend the respondents for vehemently violating Republic Act 3019, or the Anti-Graft and Corrupt Practices Act; and appealed that it be allowed to pursue its legitimate mining activities pursuant to the MPSA.

Moya’s complaint cited that in September 2008, upon orders by Lagrada, the barangay chairman of Ipilan, blocked scheduled survey activities of the company that were supposedly carried out by its contractor JCP Geo-Ex Services, Inc.

“The firm was accredited by the Mines Geosciences Bureau (MGB) to provide exploration services for mining companies,” the statement said.

MacroAsia believes that the move of Lagrada and the others was a “wanton disregard of barangay resolutions no. 05 and no. 27, dated April 2 and November 19, 2007 respectively, which authorized and endorsed the company to pursue its mining activities.”

Both resolutions, which were approved before his term, are being questioned by Lagrada, a staunch supporter of the “no to mining” fight of non-government organizations (NGOs) and some religious sects.

“The continuous refusal of the respondent Jonathan Lagrada to allow the conduct of survey by MacroAsia, without valid and justifiable reason or court order, and obviously attended with evident bad faith, and with grave abuse of authority, causes undue injury to the operation of MacroAsia which is now suffering financial and capital losses due to the unjust actions of the respondents preventing the enforcement of a legitimate contract signed by the MacroAsia and the Republic of the Philippines, as well as of the barangay resolutions created by duly constituted authorities,” Moya said.

“We have long kept silent and tried to endure all these unfair acts against us, hoping our detractors will eventually become reasonable enough to appreciate our company’s legitimate goals. But it has already reached a point where the sense and logic of our purpose is fast becoming unworthy to pursue, if we do not assert our legal and legitimate rights now,” she added.

Lagrada, in a phone interview with the Palawan Times, shrugged off the administrative cases filed against them as “pure harassment’ by MacroAsia.

“It’s pure harassment because MacroAsia will really do everything to make us stop our fight against mining,” he said, adding that he has not received any copy of the filed cases, neither has he received any other document as of press time.

“I am ready to face them,” Lagrada said firmly.

Brooke’s Point has become a favorite hub of anti and pro-responsible mining rallies and other campaign efforts due to the impending operation of three large-scale mining companies in the town, namely Ipilan Nickel Corporation (INC), Leebach and MacroAsia Corporation.

MacroAsia, a publicly-listed corporation, is part of the Lucio Tran group of companies which is the lead organization for the group’s mining activities, apart from its core aviation industry services business.

MacroAsia was granted with a MPSA by the government on December 2005 to pursue its mining activities in Brooke’s Point after the Palawan Council for Sustainable Development (PCSD) issued the firm, on June 2005, with a clearance that its target of operations conform to the Strategic Environmental Plan (SEP) of the province.(ThePalawanTimes)

2010 election fund raiser? Privatization of gov’t stake in Petron means more oil price hikes – Bayan Muna

June 19, 2008

BAYAN MUNA Rep. Teddy Casiño is firmly opposing the government’s plan to sell its 40 percent stake in Petron Corporation, saying it would “definitely lead to a permanent regime of oil price hikes as the government losses its only remaining foothold in a deregulated industry dominated by foreign oil firms and their local agents.”

The government is looking to sell its 40% stake in oil giant Petron Corp. by November once approvals are secured from Pres. Macapagal-Arroyo and the Philippine National Oil Co. (PNOC) board next month, Finance Sec. Margarito Teves said yesterday.

“Government, instead of selling Petron, should get back a majority stake to gain market leverage and effectively control the manner, rate, frequency and so-called justifications being made by oil companies in hiking prices. Petron’s sale shows that this government actually favors the weekly oil price hikes done by oil companies. So far, prices have been hiked 15 times this year.  We also view this privatization initiative as an administration fund raiser for its slate in the 2010 elections,” Casiño said.

Petron refines, markets and distributes fuel throughout the Philippines . It has consistently retained its market position, cornering 40 percent share of the country’s fuel market. “It is easy to see that oil price hikes can be effectively be put in check if the state itself has market leverage. The problem with the Arroyo administration is its focus on raising funds – including selling Petron – for purposes other than the people’s immediate relief,” Casiño said.

“Since government rejected British investment firm Ashmore Group’s offer of P6.531 per share, we think that it must instead get majority control of Petron if it is intent to alleviate the people’s sufferings worsened by each oil price hike.  If government wants to take a clear and definite step towards addressing rampant oil price hikes, it should buy back Petron,” Casiño said.

Casiño, principal author of House Bill 3031 that mandates the government to re-acquire control of Petron Corp. said that “government only needs to acquire an additional 11% of Petron shares on top of the PNOC’s 40% stake for the state to gain the majority in the oil firm.” HB 3031 has been pending with the House Committee on Government Enterprises and Privatization since November 13, 2007.

The lawmaker said one source of funding for the buyback is the windfall revenues from the VAT on oil and petroleum products estimated to be between P16.7-P18 billion. ###

Crisis Management, Arroyo Style

June 16, 2008

ISSUE ANALYSIS No. 9
JUNE 13, 2008
Series of 2008

Crisis Management, Arroyo Style

By the Policy Study, Publication and Advocacy (PSPA)
Center for People Empowerment in Governance (CenPEG)

Long queues of people wait for their turn to buy NFA rice; gas prices shoot up every week as the country faces unprecedented high inflation; parents are uncertain whether they will be able to send their children to school; the rate of unemployment is highest in decades; and the number of victims of disease epidemics and calamities is mounting by the year.

Is the government in control of the deteriorating situation? Is there any prospect for the country to weather the economic and political morass that it is in?

With the vast executive powers it wields and the financial resources at its disposal, the Arroyo administration should be able to grapple with the country’s woes by the horns, so to speak, and navigate past danger zones. Yet its style of crisis management reveals a propensity to use, on the one hand, short-term, quick-fix solutions to problems that cry for comprehensive and responsible response and, on the other, costly PR strategies to project a president in control of a ship that is fast sinking.

Mrs. Gloria M. Arroyo’s knee-jerk response to the food and oil crises, for instance, is too late. Her damage control tack is to first make the people believe that it is the result of an unavoidable global crisis way beyond government’s control when in fact the fuel and food security problems can be traced to poor priorities and simple lack of foresight. Thousands of youths won’t be able to enter school this year due to insurmountable high education costs while the shortage of teachers and classrooms is at critical proportions. To all these, the president now styles herself as Merlin the magician with a wand of subsidies worth P4 billion taken, so she claims, from E-vat collections. The subsidies are for distribution to schoolchildren, power consumers, poorest households, farmers, and the land transportation sector. Is she doing all these as an accomplishment in her coming state-of-the- nation address (SONA)?

Rehash

Some of the subsidies are a rehash of previous promises though. Faced with prolonged budget deficits and unsolved corruption scandals, Arroyo’s package of “subsidies” comes across as nothing but stopgap remedies with no promise of long-term effect. The handout is held with suspect, coming as it is from a president widely believed to have used government resources for her own political ends, who authored multi-billion transactions for the greed of her business cronies and close allies, and definitely a person without any genuine compassion for the poor except as a cheap publicity gimmick.

The president’s resort to “band-aid” solutions and other incredible prescriptions is exemplified by her full endorsement of globalization policies as a means of addressing poverty, unemployment, and other social and economic ills. The costs of this economic paradigm have been staggering: 28 million individuals rated as poor or an increase by four million in just three years; four million jobless; a wide income gap with the net worth of the country’s 10 richest individuals ($12.4 billion) equivalent to the total annual income of the poorest 9.8 million families. Arroyo’s personal assets, in the meantime, went up by at least P11 million in the past year alone.

As in past regimes, the management of economic programs has been run by the president’s economic advisers and academic elite intoxicated by the bitter pills of international finance institutions such as the World Bank, IMF, and the Asian Development Bank. The stimulus for this package has been to increase the taxpayers’ burden, pay the huge foreign debt and further liberalize the country’s trade and investment to transnational corporations in tandem with the local finance oligarchs and Arroyo’s business cronies. In the course of implementing development projects and budget allocations, billions of pesos have been lost to corruption.

Economic governance

Meanwhile, the constitutionally- enshrined infrastructures of people’s participation in economic governance have been largely written off while those who oppose the regime’s indefensible policies are tagged as de-stabilizers. The president’s subservience to foreign interests and local finance oligarchs accounts for the threats to food security, energy requirements, and other socio-economic costs and exposes Arroyo’s “pro-poor” and “meal for every table” posturing as an empty rhetoric.

Another case is Arroyo’s counter-insurgency program. Tagging the armed Left as a “national security threat,” the president unleashed Oplan Bantay Laya targeting the “enemy of the state’s” alleged legal political network. Flaunted as part of the state’s counter-terrorism measures, the counter-insurgency program enhanced U.S. military assistance and political support for Arroyo. It was also used by Arroyo to maintain military loyalty and to promote hawkish senior AFP officers based on the number of suspected “communist terrorists” killed or abducted. The costs of Arroyo’s national security doctrine have been monumental: 903 activists summarily executed and 193 others victims of enforced disappearance. The peace process that seeks to address the institutional roots of the armed struggle has long been abandoned in favor of the short-term militarist approach.

Like past administrations, the Arroyo regime has been in a crisis mode since the very beginning of its reign. Instead of instituting reforms toward addressing the long-running problems of land dispossession, low labor wages, and a host of other concerns of the very same people who catapulted her to power in January 2001, she chose to align herself with the narrow, elitist interests of her allies and business cronies. She shielded from investigation her fellow conspirators in politics, the military, business, and the Commission on Elections who ensured her presidential power in one of the most fraudulent elections – the 2004 presidential derby.

Misfortunes

She blames others like the Left and the electoral opposition for the misfortunes that are caused by her own mismanagement and a poor diagnosis fed by her neo-liberal perspective and anti-progressive biases. Aside from this “wag-the-dog” approach, there is no transparency of information about the magnitude and roots of problems thus putting her prescribed solutions under public suspicion if not rejection. Arrogance is saliently at the core of her management style: “I’m not bothered by what public surveys say about my performance because God knows that what I do is for the good of the people.”

While according the long-lasting and most-favored- treatment to financial credit institutions, TNCs and the economic elite through her globalization policies, she has nothing or, if any, only piecemeal measures for the vast majority of Filipinos. Her offensives against political dissent and human rights have strengthened the coercive powers of the state thereby further weakening the justice system. The same iron-fist policy is likewise under criticism among the business sector in her pursuit of, for instance, appropriating power distribution into the hands of her business cronies under the guise of state takeover.

Perhaps the worst component of her crisis management is to take each problem from the perspective of surviving the presidency. In these critical times – induced no less by her dangerous policies – every major economic problem or criticism to her presidential rule is treated as a threat to her presidential survival. This insecurity is what drives her to react with quick-fix solutions that are designed to cushion public reactions, complete with PR cosmetics and threats to harness her authoritarian powers.

Actually, the problems faced by multitudes of Filipinos are basically the same that the people saw in the past and have deep institutional roots. The only difference is that while in the past such predicaments were aggravating by the year, today people are hurting by the day.

Reference:


Bobby Tuazon
Director, Policy Study, Publication and Advocacy (PSPA)
Center for People Empowerment in Governance (CenPEG)
TelFax +63-2 9299526; mobile phone: 0915-6418055
E-mail: cenpeg.info@gmail.com; info@cenpeg. org
http://www.cenpeg. org

Ombudsman findings unfair – lawmakers

June 15, 2008

By Delon Porcalla
Sunday, June 15, 2008

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Congressmen linked to the P728-million fertilizer scam in 2004 yesterday decried as “unfair” the initial findings of the Ombudsman implicating them in the misuse of public funds.

Quezon City Rep. Nanette Daza, one of the lawmakers named by the Ombudsman in the scam, explained that as a matter of procedure, it is the Department of Agriculture – not the congressmen – that identifies what projects should be undertaken in a particular district.

“No such thing as fertilizer, no such thing as overprice,” Daza told The STAR.

“In fairness to the other congressmen, we have never identified projects. These are identified by them (DA), not by us.”

Daza, now on her third and last term, could not recall though if the DA even provided her with towable shredders as reported.

“That I can’t recall. But if indeed there is I would have endorsed this to Payatas where this is needed. I still have to check the records,” she said.

Daza also cited her highly urbanized district as another reason why she cannot possibly avail herself of a fertilizer subsidy.

“My district and the NCR (National Capital Region) doesn’t need fertilizers,” she said.

Former congressmen Oscar Gozos of Batangas and Federico Sandoval II of Malabon-Navotas also made the same defense.

Both denied having received fertilizers for farm use, but admitted receiving shredders.

“These are not our funds. These are DA funds. We’re not even involved in the bidding. All of these came from the executive department even if Congress has the power of the purse,” said Gozos, now the mayor of Lipa City in Batangas.

“It is the DA that disbursed these funds, not us,” he added. “I’m not a recipient (in the fertilizer list), although I suspect that my name was included. But I didn’t get any fertilizer, in whatever form.”

Sandoval, for his part, claimed he never received any fertilizer for his former district.

“I don’t know (about the fertilizers and overprice). It is the DA that conducts the bidding. What I got was a shredder. Alangan namang tanggihan ko? E para naman sa district namin iyun (How can I refuse that? Anyway, my district was identified as a recipient of that shredder).”

As leader of the 241-strong House of Representatives, Speaker Prospero Nograles expressed displeasure over the report, which was leaked to the media despite the confidential nature of cases handled by investigators.

But Nograles could not say whether former Agriculture Undersecretary Jocelyn “Jocjoc” Bolante used the involved congressmen in the scam.

Bolante, who is now hiding and undergoing deportation proceedings in the US, allegedly masterminded the scheme to help bankroll President Arroyo’s campaign in the May 2004 presidential elections.

“Let us not telegraph in haste our opinions until there is clear and final findings of a prima facie case,” Nograles said.

“As a matter of fact, this premature disclosure is against the confidentiality nature of Ombudsman cases where only final resolutions are made public. The reason being that reputations of officials may be unduly harmed by premature disclosures,” he said in a text message to The STAR.

Muntinlupa Rep. Ruffy Biazon, who was also listed among the recipients, said congressmen “are not part of the process for the funds to be released. They may be correct that their districts were just recipients.”

An irate Makati City Rep. Teodoro “Teddyboy” Locsin, who in 2004 hurled invectives at Bolante, lashed back at Newsbreak for getting credit for the fertilizer expose.

“Newsbreak writes like they exposed it. I did and Newsbreak wouldn’t carry (the) story. Siguro nabili sila nuong una (Maybe then they were paid to kill the story),” Locsin said.

“Pu…ina, cleared daw ako ng mga p…iyan sa Ombudsman when ako ang nag-expose while ang lecheng opposition walang imik kasi sali sila. (… how can they say I was cleared by the Ombudsman when I was the one who exposed it, while those… opposition kept silent because they were part of it).”

“I demand a refund from everyone who got delivery. I need the money for the contract I put out on that asshole (Bolante). A clearance from the Pinoy Ombudsman is like a conviction from a US court, worse than useless. It is an insult,” Locsin said.

“I don’t allow monkeys to judge me. It is for me to decide that to do with the money in my name, not some monkey. Quote in full please. That’s what comes from giving chimps the right to hold public office,” Locsin said in a text message.

Former Tarlac representative and now Senator Benigno “Noynoy” Aquino III, who was also on the list, said he and former Batanes representative Florencio “Butch” Abad were also used in the scam, even though they never applied for the program.

“This is rather a difficult situation since we are being used as a shield. Either way, the farmers will get angry. They read in the newspapers and ask us where (the money) is, and we say we’re not part of it, but they want to know why we didn’t get anything,” he said.

Aquino said they were told then the “guidelines” were still being processed, but he had received reports that several congressmen had already gotten their share. “Obviously, we were excluded,” he added.

Aquino nevertheless managed to secure a “certification” from Agriculture Secretary Arthur Yap stating that his district in Tarlac was not a recipient of the fertilizer project.

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My Take:

This classic ‘doctor’s way’ (pandodoktor, hehehe) is another quality handiwork by the shadows (huge ones) lurking at the darker sections of Malacañan.  Sa tingin nyo, with jocjc’s situation e makakaya pa nyang makapagmaniobra ng ganyan?  Hehehehe never.

Someone in here did that, putting that opposition solons in the list to confuse the people and muddle the investigation.

Nice work to the Daddy of all suckers!

CA decision favoring Australian firm a temporary setback

June 13, 2008

House militant bloc supports Nueva Vizcaya LGUs in fight against foreign mining intrusion

BAYAN MUNA Rep. Teddy Casiño today renewed full support to the people of Nueva Vizcaya as he labeled a Court of Appeals decision preventing the its provincial government from implementing an order that halts mining operations in the area as “a temporary setback for environmental protection, local governance and the defense of national patrimony.”

The Court of Appeals issued a 60-day injunction with temporary restraining order on the Nueva Vizcaya provincial government that issued a Cease and Desist Order [CDO] on OceanaGold, a Melbourne-based mining firm.

“The militant partylist bloc in Congress supports the people of Nueva Vizcaya and its Governor, Luisa Cuaresma in this fight. Gov. Cuaresma only put out a CDO to stop OceanaGold from operating the mine after it failed to pay P30 million for a quarrying permit, aside from the growing tension among indigenous tribes – including the murder of the village chief – that the entry of the mining firm has caused. The CA decision has obviously favored the Australian firm over the local people of the province,” Casiño said.

The militant solon was visibly dismayed by the decision penned by Associate Justice Remedios Salazar-Fernando that completely favored Oceana Gold Mining Inc. The company runs the Didipio Gold-Copper Mining Project in Bgy. Didipio, Kasibu, Nueva Vizcaya.

“I cannot help but surmise that the decision is part of the Arroyo administration’s effort to allow OceanaGold to go on with its mining operations that will permanently damage the area. The OceanaGold incursion into Nueva Vizcaya at this point is the cause of brewing tension and violence among Ifugao and Bugkalot tribal communities in Dipidio. The company has in fact supplanted the government in the area as it has arrogated the functions of providing social services and peace and order in the area. It has demolished houses and bulldozed rice lands. With all due respect to the Court, we went to the area last June 7, were waylaid by a police checkpoint and in fact saw the deep division among the once peaceful local community due to the entry of OceanaGold. This, to my mind, is what the Court should do to better come up with a decision,” Casiño said.

Casiño, along with Ifugao Rep. Solomon Chungalao, Nueva Vizcaya Rep. Carlos Padilla, and Gabriela Rep. Luz Ilagan went to the area to have an onsite inquiry into OceanaGold’s violations committed in its operations.

From June 7 to 8, 2008, the said Congressional Committee on National Cultural Communities held two on-site hearings in Bgy. Kakidugen and Bgy. Didipio in Kasibu town, mining sites of foreign owned mining companies RoyalCo and Oceanagold, respectively.

The investigation also focused on the OceanaGold’s alleged violations of human rights, the Free and Prior Informed Consent (FPIC) process, certain provisions of the current Mining Law and the Local Government Code in relation to its mining operations.

“It should also be noted that even before the CA decision, DENR Secretary Lito Atienza already branded the the Nueva Vizcaya provincial government’s cease and desist order illegal. This emboldened OceanaGold to go to the CA and defy the local authorities. The municipal and provincial governments do not support the project yet Atienza is siding with the mining firm. We will not back down from this temporary setback. The militant bloc in Congress sides with the people and supports the stand of the local governments versus destructive mining operations in Nueva Vizcaya,” Casiño said.

The House militant bloc is composed of Bayan Muna Reps. Casiño and Satur Ocampo, Gabriela Reps. Ilagan and Liza Maza, and Anakpawis Rep. Rafael Mariano. #

BSP says pessimism to run deep among consumers

June 13, 2008

By Maricel E. Burgonio, Reporter

AMID higher inflation and eroding incomes, pessimism will run deep among consumers for the rest of the year, according to the latest survey of the Bangko Sentral ng Pilipinas (BSP).

In its Consumer Expectation Survey, the BSP said the overall consumer confidence index dropped to -43.8 percent in the second quarter, easing to -26.9 percent in the third quarter and to -20.3 percent in the next 12 months.

Iluminada Sicat, BSP Department of Economic Statistics director, said Filipinos from the middle- and low-income groups will be more affected by unfavorable economic conditions. About 10 percent of the families are supported by overseas Filipino workers (OFWs).

“Current and near term outlook for consumers nationwide dipped in 2008. The negative perception in the economic condition pulled down the overall confidence,” Sicat said.

She said lower consumer demand in the second quarter indicates slower economic expansion for the period.

In the first quarter of the year, the country’s gross domestic product (GDP) grew 5.2 percent, or below market expectations due to higher oil, rice and other commodity prices.

The inflation rate in May hit a 9-year high of 9.6 percent and is expected to accelerate to 11 percent in June before easing in the second half of the year.

In the next 12 months, consumers expect the unemployment rate to increase, interest rates as well as prices of basic goods and services to climb. They however see a steady peso vis-à-vis the dollar.

Filipino consumers spend more on food, fuel, electricity, education, water, and personal and medical care, the survey showed. Consumers also indicated lower demand for consumer durables, motor vehicles and house and lot.

However, Filipinos indicated higher savings in the second quarter with the index at 31.3 percent from the first quarter’s 14 percent.

About 4,839 participated in the survey from the National Capital Region and areas outside NCR.

The bulk of the respondents at 58 percent came from the lower income group with less than P10,000 monthly earnings. Another 34 percent belonged to the middle income group with P10,000 to P20,000 in monthly earnings.(ManilaTimes)

Catanduanes governor opposes mini-hydro

June 11, 2008

VIRAC, Catanduanes — The provincial governor here who is supposed to lead in undertaking an environment-friendly project to minimize, if not combat, global warming turns out to be its strongest oppositor.

Gov. Joseph Cua of Catanduanes reportedly has expressed his opposition to the proposed construction of a mini-hydro power plant here despite favorable endorsement by Bishop Manolo A. De los Santos of the Diocese of Virac, the League of the Municipalities of the Philippines-Catanduanes chapter, Bicolano Senators Joker Arroyo and Gregorio Honasan, and of the National Power Corporation.

Sources claimed the project runs counter to the business interest of the governor.

The min-hydro power plant is an electric power generating plant that utilizes the kinetic energy of falling or running water (run-off river hydro plants) and turn the turbine generator to produce electricity. The project hopes to generate no less than 101 KW or more than 10,000 KW of renewable and clean energy.

Elizaldy ‘Zaldy’ Co, president of the Sunwest Water and Power Co. Inc., (SUWECO) accused the governor of being the real ‘inconvenient truth’ because the governor is involved in diesel fuel business.

Co expressed disgust upon learning that Gov. Cua is blocking the mini-hydro power project which could have otherwise generated employment, provide clean energy and resolve power outages.

Co said that Cua monopolized the diesel-fed fuel business in the island Catanduanes, and worst, sell it at 30 percent higher compared to prices in mainland Bicol.

“There was a businessman who put up the Petron gasoline station and spent almost P2 million but he (Gov. Cua) opposed it too because it would affect his diesel business. The issue here is not only moral but ‘vested interest’ considering that he was elected as public servant. If he allows our project, the government will save P200 million a year, aside from providing clean energy,added employment and income,” Co told Bicol Mail.

Aside from gasoline business, Cua is also engaged in rice trading, owner of RSL buses plying from Catanduanes-Manila vice versa, and sea crafts operating the Catanduanes-Tabaco sea lane.

Co is constructing the Solong mini-hydro projects with capacity of 2.1 MW in San Miguel town, Hitoma 01 with 1.5 MW and Hitoma 02 with 1.35 MC capacity all in Obi, Caramoran town, Gigmoto mini-hydro power plant with 0.55 capacity in Gigmoto town and Kapipian mini-hydro project with 2.8 MW capacity in Solong,Catanduanes with the total of 8.3 MW capacity.

Apart from Catanduanes mini-hydro projects, Co is currently constructing several mini-hydro projects in the country such as the Villasiga Mini-hydro project in Igsoro, Bugasong Antique, Guiamon San Ramon Mini-hydro project in Laua-an, Antique, Dalanas Mini-Hydro-project in Barbasa, Antique, Tiniano Mini-Hydro project in Tibiao, Antique with 14.1MW total capacity. All these projects were supported by Bishop Lagdameo of the Diocese of Jaro to address the acute power shortage in Panay island, especifically in Iloilo.

In Albay province the on-going mini-hydro power plants are the Misibis Multi-Purpose Reservoir in Cagraray Island, Bacacay town, Cumagingking and Vera Falls mini-hydro projects in Malinao town.

The mini-hydro projects in this island province is programmed to be operational by 2010 with a total of 5,375 KW capacity and additional 2,600 kW capacity by 2013 to stabilize and energize numerous barangays here.

Unfortunately, the renewable energy project of SUWECO was blocked by Govv.r Cua before the Energy Regulatory Commission last month.

Cua cited the following grounds in his opposition paper submitted May 26,2008 : the applicant failed to submit the documents prescribed by law; there is no competitive selection process or bidding undertaken by FICELCO in the selection of SUWECO as new power producer; the selling price of electricity offered by the firm is grossly overpriced and is against the basis established by law; SUWECO has no technical and financial capacity to undertake the project; the cooperation period stated in the Electricity Supply Agreement (ESA) is violative of the law; and SUWECO did not conduct a feasibility study to justify the assumptions made in the ESA.

As if on cue, Arvin T. Amata, provincial legal officer of Catanduanes, also asked the ERC to invalidate and scrap immediately the instant application for approval of the ESA submitted by SUWECO and FICELCO for lack of merit.

SUWECO entered into ESA with the First Catanduanes Electric Cooperative Inc. (FICELCO) whereby the latter would pay for all the electricity produced by the proposed mini-hydro electric plants at a discounted rate of 4 percent less than the subsidized and approved generation rate (SAGR) for Catanduanes for a period of 30 years from commercial operation, Co said.

On May 7, 2008, the Sangguniang Panlalawigan of Catanduanes led by Vice Governor Alfredo M. Aquino granted Gov. Cua an authority to represent the provincial government in any legal action relative to the electricity supply agreement entered into by FICELCO and SUWECO.

The provincial board council stated in their authorization given to Cua to oppose the said agreement due to following grounds; FICELCO has an existing ESA with several power providers which to date still remains to be in effect not having been declared invalid or rescinded by any competent authority in an appropriate proceedings, several provisions of ESA between FICELCO and SUWECO are found to be detrimental to FICELCO and its consumers.

The council added that the provincial government, pursuant to its mandate under section 16 of the RA 7160 to promote the general welfare of the people of Catanduanes, is duty bound to do and enforce any legal action including opposing the application for approval of the ESA between Ficelco and SUWECO which is pending before the ERC.

Former Senator Francisco Tatad, a native of Catanduanes, opined that Cua and his allies’ move was disadvantageous to the people while it was deemed to protect the governor’s business interest.

Tatad had Rodolfo Albano, Jr., Chairman of the Energy Regulatory Board to help facilitate the speedy completion and immediate operation of the mini-hydro projects being undertaken by SUWECO in several municipalities of the island province in order to liberate their poor constituents from the scourge of unstable power supply and inordinately high prices provided by highly polluting bunker-fed sources.

“I am made to understand, however that certain provincial politicians who are involved in the sale and distribution of bunker fuel, are moving to block the projects for their own reasons,” Tatad said in his letter to Albano.

He said that as former chairman of the Senate Committee on Energy and principal sponsor of the Electric Power Crisis Act in the Senate, it was his dream then to see the province of Catanduanes and other small islands in the country which are cut off from the national power grid, become self-sufficient in energy, through their exploitation of indigenous renewable energy sources like water, sun and wind.(BicolMail)

Analysis: Tokenism

June 11, 2008

The problem with those practicing tokenism is that they always make sure that their efforts are seen and publicized; it’s as is if they are doing a lot, when well in fact, they have done close to nothing, in terms of impact. In responding to the worsening crisis confronting the Filipino people, the Arroyo government chose measures that are not effective but are highly visible, thus the preference for handouts. These are not meant to mitigate the effects of the social and economic crisis on the Filipino people but to ease the effects of the political crisis on the Arroyo government.

BY BENJIE OLIVEROS
ANALYSIS
Bulatlat
Vol. VIII, No. 18, June 8-14, 2008

The problem with those practicing tokenism is that they always make sure that their efforts are seen and publicized; it’s as is if they are doing a lot, when well in fact, they have done close to nothing, in terms of impact.

The Filipino people are saddled with so many problems, with the continuous surge in oil and food prices, and yet the Arroyo government lends a deaf ear to measures that would provide immediate relief to the people as well as those that would address the main causes of these problems.

Inflation is soaring, with a 9.6 percent increase in May – the highest in nine years – and threatening to hit 10 percent anytime soon. Instead of controlling prices, the Arroyo government chose to increase benchmark interest rates by a quarter of a percentage point. Raising interest rates is the knee-jerk or rather, the main solution of mainstream economists to address the problem of inflation. The rationale behind this is that inflation, according to mainstream economics, is caused by an increase in demand for commodities, which is, in turn, caused by an increase in the purchasing power of consumers brought about by increased income and employment.

But the problem is, the current pressure of inflation is not caused by an increase in the demand for commodities brought about by a corresponding increase in the purchasing power of consumers. In fact, the country is experiencing double-digit unemployment and underemployment rates, 11.3 percent and 18.5 percent respectively, according to estimates by IBON Foundation; and in as much as Filipino consumers are in dire need of basic commodities, they could hardly afford it. Rice traders are complaining that sales of commercial rice have gone down. Also, drivers of public utility and private vehicles are trying everything to cut-down on fuel consumption. What we are experiencing right now is stagflation: inflation coupled with a stagnation in the economy. And if no substantial, effective measure is instituted by the Arroyo government, the economy would shrink more, especially with the recession in the US economy – the main trading partner of the Philippines and its biggest investor- while prices would keep on soaring.

If the Arroyo government wants to really control inflation, it should control the prices of basic commodities.

In stead of removing the 12 percent VAT on oil, rescinding the Oil Deregulation Law, and regulating oil prices, the Arroyo government chose to lower the 3 percent ad valorem tax on crude importation and grant fuel subsidies to public utility vehicles. But lowering the 3 percent tariff on crude importation would hardly make a dent in pump prices as it is too little to make a difference, and refining and marketing charges and the 12 percent VAT on sales of gasoline and diesel easily erase any gain in the reduction of tariffs. Neither would the P3 billion ($67,988,668 at an exchange rate of $1=P44.125) quarterly subsidy meant to provide fuel discounts for drivers of jeepneys and buses make a lot of difference. Pump prices have already increased 12 times during the year and is expected to increase some more. Just last weekend, pump prices increased P1.50 ($0.03) for the second consecutive week. Some analysts are predicting that gasoline prices would reach P65 ($1.47) per liter soon. How much then would be the discount? How many would benefit from it? For how long could the government sustain it?

Even more stupid is the directive of the Department of Energy to oil companies not to announce price increases supposedly to prevent speculation.

Removing the VAT on oil would lower pump prices by an average of P5 ($0.11) per liter. (How can the government stomach the fact that it is making a windfall in tax collections on petroleum products amounting to P49.2 billion or $1,115,014,164 in 2006 and P18.6 billion or $421,529,745 from January to July 2007 with soaring of oil prices while the Filipino people are suffering more?)

More importantly, regulating oil prices would protect consumers from speculative attacks of oil traders and monopoly pricing of giant oil companies. Because with regulation, oil companies would have to justify any petition to increase pump prices.

With soaring prices, incidences of poverty and hunger are expected to worsen. But the solution the government is implementing is to allocate P2 billion ($45,325,779) for “cash transfers” to selected poor families. Considering that the population is estimated at 80 million and that by government’s conservative estimates, the average poverty incidence is at 26.6 percent, this P2 billion ($45,325,779) cash transfer would amount to only P93.98 ($2.22) per person for the 21,280,000 who are living below the poverty line. The tokenism of this allotment is even more glaring if we consider that, based on data culled by IBON Foundation, 70 million Filipinos live on P110 ($2.49) per day.

If the Arroyo government is serious in solving poverty, it should implement a genuine agrarian reform program and gear the country’s industry, as well as the whole economy, towards producing the needs of Philippine society. And with a well-balanced industrialization, more jobs would be generated.

To solve high power rates, the Arroyo government is engaging the Lopez family in a legal battle for control of Meralco and has announced a P2 billion ($45,325,779) grant subsidy for those consuming less than 100 kilowatts of electricity a month. It is true that the Lopez family practices monopoly pricing in setting power rates being the main distributor of electricity to households. It also true that Meralco’s practice of charging pilferages to consumers – reflected in charges for system losses – is grossly disadvantageous to consumers. It is also true that power plants owned by the Lopezes, as well as those owned by other companies, are wrongly charging all the power they generate regardless if it has been consumed or not under the “take or pay” provision in government contracts. It may also be true that the Meralco is purchasing electricity from Lopez-owned power producers at a much higher rate through the Wholesale Electricity Spot Market (WESM). But engaging Meralco and the Lopez family in a corporate legal battle is tedious and expectedly would be a long, drawn out conflict. In the first place, Meralco and the Lopez family is able to do these because of the Arroyo government’s deregulation and privatization policies.

If the Arroyo government is sincere in bringing down power rates, it should renegotiate its contracts with Independent Power Producers (IPP), repeal the Electric Power Industry Reform Act of 2001 (EPIRA) and regulate power rates. With the EPIRA, the Lopez family is able to own and control not only Meralco but power plants as well; it is able to manipulate the computation of rates; it is able to distort contract prices at the WESM. But the setting of grossly disadvantageous contracts and manipulation of rates is not the “monopoly” of the Lopez family. It is also being done by other power producers such as the Aboitiz along with their foreign partners. That is why the Foreign Chambers of Commerce are warning the Arroyo government not to renegotiate its contracts with IPPs and not to amend the EPIRA.

To solve the highly probable increase in drop-out rates of students – due to the pressure of high prices of basic commodities and services on families – the Arroyo government ordered a freeze in tuition increases of State Colleges and Universities (SCU) and appealed to private colleges and universities to do the same. It also allocated P1 billion ($22,662,889) for student loans and scholarships. The P500 million ($11,331,444) student loan fund is supposed to provide 62,500 third and fourth year college students with P8,000 ($181.30) loan without interest under the Student Assistance Fund for Education for a Strong Republic. The other P500 million ($11,331,444) is meant for for four-year scholarships to around 1,666 students to be allocated as follows: P300 million ($6,798,866) for eligible students in SCUs who would receive P15,000 ($339.94) per year, and P200 million ($4,532,577) for deserving students in private schools who would receive P30,000 ($679.88) per year.

But SCUs and private schools have already increased their tuition before the freeze order was announced. The University of the Philippines (UP), for example, has already implemented a 300 percent hike in tuition since last school year.

Moreover, the planned student loans and scholarships would benefit a very small percentage of students enrolled in tertiary education. Data from the Commission on Higher Education revealed that there were 819,251 enrollees in SCUs and other government-owned education institutions and 1,583,064 students in private colleges and universities during academic year 2004-2005. The 64,166 students who would benefit from the loan and scholarship constitute a mere 2.6 percent of the total number of students in 2004. Besides, the amount allocated for loans and scholarships are not sufficient. Tuition at UP amounts to between P17,000 to P20,000 ($385.26 to $453.25) per semester. The University of Sto. Tomas (UST), with a relatively low tuition compared to other private universities, charges around P1,000 ($22.66) per semester. With miscellaneous and other fees, the tuition amounts to around P40,000 ($906.51) per semester.

To help ease the burden of parents in public elementary and high schools, the Arroyo government announced that uniforms are no longer required. But expenses for uniforms constitute a small percentage of the expenses of parents. Parents are also burdened with transportation and food expenses, and costs of school projects. And with the almost nil budget of public schools for Maintenance, Operating and Other Expenses (MOOE), parents are made to bear expenses for school repairs, furniture and fixtures, and even the salaries of janitors.

If the Arroyo government is really serious in easing the burden of education expenses of parents, it should increase the education budget significantly, including the allocation for SCUs. According to CEGP National President Vijae Alquisola, SCUs even experienced a reduction in government subsidies. SCUs got a meager share of 1.84 percent from the national budget, a decrease from the 2.74 allocation it received last year. Alquisola said that the Polytechnic University of the Philippines, which charges the lowest tuition among SCUs suffered a budget cut of approximately P6 million ($135,977) this year.

With the responses of the Arroyo government, it appears that it is not so much interested in solving the crisis at its roots. Rather it came up with policy responses that merely scratch the surface of the crisis. It chose measures that are not effective but are highly visible, thus the preference for handouts. These are not meant to mitigate the effects of the social and economic crisis on the Filipino people but rather to ease the effects of the political crisis on the Arroyo government. The question is, how long can the Filipino people continue carrying the burden of the crisis and how much time can the Arroyo government buy? Bulatlat

Farmers Ask CBCP: Support GARB, Not CARP Extension

June 11, 2008

Calling the Comprehensive Agrarian Reform Program (CARP) of the Aquino regime “bogus,” farmers from Southern Tagalog, Central Luzon and Mindanao regions ask the Catholic Bishops Conference of the Philippines to support House Bill No. 3059 or the Genuine Agrarian Reform Bill (GARB) which the late Anakpawis (Toiling Masses) Rep. Crispin “Ka Bel” Beltran filed in the 14th Congress.

BY NOEL SALES BARCELONA
Contributed to Bulatlat
Vol. VIII, No. 18, June 8-14, 2008

Calling the Comprehensive Agrarian Reform Program (CARP) of the Aquino regime “bogus,” farmers from Southern Tagalog, Central Luzon and Mindanao regions ask the Catholic Bishops Conference of the Philippines to support House Bill No. 3059 or the Genuine Agrarian Reform Bill (GARB) which the late Anakpawis (Toiling Masses) Rep. Crispin “Ka Bel” Beltran filed in the 14th Congress.

This developed as some 1,000 farmers from Southern Tagalog were staging a “Lakbayan para sa Lupa, Pagkain at Hustisyang Panlipunan” (March for Land, Food and Social Justice).

In the weekly Kapihan sa CyPress media forum at the Treehouse Restaurant, Matalino St., in Quezon City last June 7, Orly Marcellana, secretary-general of the Katipunan ng Samahang Magsasaka sa Timog Katagalugan (Kasama-TK or Association of Peasant Organizations in Southern Tagalog), a local chapter of the Kilusang Magbubukid ng Pilipinas (KMP or Peasant Movement of the Philippines ), and currently the Bagong Alyansang Makabayan (New Patriotic Alliance or Bayan) regional chair, said that history has already proven the futility of the existing agrarian reform program, which is now 20 years old.

“In the two decades of CARP’s implementation, the farmers in the region remained landless, hungry and poor. We have enough of this bogus land reform,” said Marcellana.

Marcellana insisted that only GARB can introduce an almost-perfect solution to the landlessness problem of farmers in the country.

Rev. Ray Galloaga of the United Church of Christ in the Philippines (UCCP), who works closely with the peasant folk in the region, cited the Scriptures and said that as part of the social justice program of Yahweh, Israelites-through their judges and kings-have implemented their own version of agrarian reform program

“Thus, it is rightful to support what the peasant-folks are fighting for right now and that is the passage of a progressive legislation on agrarian reform,” Galloaga said.

Earlier, Second National Rural Congress (NRC2) Chair and Cagayan de Oro Archbishop Antonio J. Ledesma, expressed support to the extension of CARP.

CBCP even asked the President to certify the bill extending the CARP as urgent. She certified it as urgent early last week.

The Central Luzon experience

United Luisita Workers’ Union (ULWU) president and now Unyon ng mga Manggagawa sa Agrikultura (UMA or Union of Agricultural Workers) Rene Galang shared his own experience with CARP inside the Cojuangco-owned Hacienda Luisita in Tarlac.

“Instead of giving the lands to the farmers and farm-workers for them to till, they (the Cojuangcos) have given us the Stock Distribution Option (SDO), a scheme that paved way for more abuse. Now that the Supreme Court has finally decided in favor of the farmers, the Cojuangco clan still refuses to give the farmers’ part of the hacienda which our colleagues have already shed their blood for,” Galang said, referring to the November 16, 2004 massacre.

Alyansa ng Magbubukid sa Gitnang Luzon (AMGL or Alliance of Peasants in Central Luzon) chairman  Joseph Canlas said more and more lands are being grabbed by unscrupulous landlords and developers thus leaving more and more farmers landless and hungry.

Among the schemes used are crop conversion and land use conversion, in which lands are being developed into industrial and residential uses, and instead of being used for production of rice and other food lands are planted with cutflowers and other high-yielding crops, threatening the country’s food supply, Galang elaborated.

“That’s why, we are strongly supporting the bill that our beloved Ka Bel, filed in Congress,” said Galang.

CARP: the Mindanao experience

Mindanao has the same experience, said Antonio “Ka Tonying” Flores, KMP officer in Mindanao.

“Many lands have been classified as corporate farms, which can only be distributed if the corporation owning the farm voluntarily submits to CARP, as provided for by the Comprehensive Agrarian Reform Law of 1988,” said Flores.

GARB

Incoming Anakpawis Rep. Rafael “Ka Paeng” Mariano, said that he would be fighting hard for the passage of the GARB and will ensure that the farmers would win this battle.

Mariano joins thousands of farmers that are expected to flock the foot of Mendiola bridge, this June 10, CARP’s 20th anniversary. Contributed to Bulatlat

Amid Oil Crisis: No Need for Emergency Powers Yet, DoE Says

June 11, 2008

But public warned to ‘expect the worst’

While oil prices in the international market are soaring and projected to hit US$200 per barrel before December, the Department of Energy (DoE) claimed that the situation is under control and there is no need—as of now—to give emergency powers to President Gloria Macapagal-Arroyo. However, Energy Secretary Angelo T. Reyes Jr., said that the country must expect the worst now that pump prices of gasoline and diesel have breached the level of P50 (US$1.124) per liter and transport groups are not totally abandoning their demand for a fare hike, despite the “withdrawal” of their petition to the Land Transportation Franchise and Regulatory Board (LTFRB).

BY NOEL SALES BARCELONA
Contributed To Bulatlat
Vol. VIII, No. 18, June 8-14, 2008

While oil prices in the international market are soaring and projected to hit US$200 per barrel before December, the Department of Energy (DoE) claimed that the situation is under control and there is no need—as of now—to give emergency powers to President Gloria Macapagal-Arroyo.

However, Energy Secretary Angelo T. Reyes Jr., said that the country must expect the worst now that pump prices of gasoline and diesel prices have breached the level of P50 (US$1.124) per liter and transport groups are not totally abandoning their demand for a fare hike despite the “withdrawal” of their petition to the Land Transportation Franchise and Regulatory Board (LTFRB).

In the weekly Kapihan sa Sulô in Quezon City, the energy chief said that they are still talking about short- and long-term solutions to the surge in oil prices.

Measures such as the promotion of the use of compact natural gas (CNG) and liquefied petroleum gas for public utility vehicles, tariff cuts on crude imports (which was done earlier) and the promotion of the use of biofuels in industries and transport, are more likely to be considered, he said.

“But for now, all we need to do is to conserve and cut down on our fuel consumption,” Reyes said, adding that it is not government’s sole responsibility to find solution to the crisis.

“Expect food prices to soar due to higher transport cost,” Reyes added.

On the issue of suspending the 12-percent value-added tax (VAT) on oil, Reyes explained that it is hard for the administration to do so for it is mandated by law. The law he was referring to is Republic Act No. 9337, more commonly known as the Restructured Value-Added Tax Law, which was passed in 2005.

“Unless we repeal or amend the law, then the suspension or the removal of VAT on oil can’t be imposed,” said Reyes.

Asked about the possible re-opening of the US$2.3-billion Bataan Nuclear Power Plant (BNPP), which was mothballed in 1987, Reyes replied that it is easier said than done.

Some groups are lobbying for the reopening of the controversial power plant but Reyes clarified that government needs at least US$800 million (P35.585 trillion) to rehabilitate the plant and the public must wait another five years before the BNPP can be fully operational.

On the other hand, independent think-tank IBON Foundation, Inc., said that it is the proper time for the government to take a stand and regulate the domestic prices of oil.

In the statement published in their official website (http://www.ibon.org/), the think tank stated that the recent pronouncements of the Big Three (Petron, Caltex and Shell) that they need to increase their prices by as much as P10 to P11 ($0.22 to $0.24) per liter highlight the urgency of reinstating regulation of the oil industry.

The government has lost its power to control prices of petrol in the local market after the Downstream Oil Industry Deregulation Law was implemented in 1998. Contributed to Bulatlat

Cartel, GATT-WTO, Gov’t Polices to Blame for Rice Crisis

June 11, 2008

The Kilusang Magbubukid ng Pilipinas (KMP or Peasant Movement of the Philippines) said that the current rice crisis is a result of hoarding by the rice cartel, loopholes in the Comprehensive Agrarian Reform Law of 1988, and the government’s policy of liberalization, deregulation, and privatization, which is in line with its commitment to the General Agreement on Tariffs and Trade-World Trade Organization (GATT-WTO).

BY ALEXANDER MARTIN REMOLLINO
Bulatlat
Vol. VIII, No. 18, June 8-14, 2008

The Kilusang Magbubukid ng Pilipinas (KMP or Peasant Movement of the Philippines) said that the current rice crisis is a result of hoarding by the rice cartel, loopholes in the Comprehensive Agrarian Reform Law of 1988, and the government’s policy of liberalization, deregulation, and privatization, which is in line with its commitment to the General Agreement on Tariffs and Trade-World Trade Organization (GATT-WTO).

This crisis, KMP said, cannot be solved neither by the government’s aggressive importation of rice nor by the extension of the CARP.

President Gloria Macapagal-Arroyo, early last week, certified as urgent House Bill No. 4077, which provides for a five-year extension for CARP. HB 4077 provides for an allocation of P100 million ($2.27 million at the June 6 exchange rate of $1:P44.14).

The Comprehensive Agrarian Reform Law was signed in 1988 and was intended to be in force until 1998. CARP expired in 1998 but was extended for another 10 years. It expires again on June 10 this year.

Based on DAR data, only 3.96 million hectares out of the target 5.16 million hectares, or 77 percent, under CARP have been redistributed.

Usec. Gerundio Madueño of the Department of Agrarian Reform supported the extension of CARP saying that extending CARP will help improve the country’s rice production.

“By completing CARP, it will help in the increase in the production of rice ‘cause the farmers will be given the basic rural infrastructure, technology, the training and support for their cooperatives and training for themselves,” Gerundio said.

But Madueño’s claim was belied by KMP secretary-general Danilo Ramos. He pointed out that the country had experienced rice crises under CARP. This, he said, does not give a promising picture of CARP’s supposed ability to solve the rice crisis.

“When did we first experience a rice crisis?” Ramos said. “That was during FVR’s (Fidel V. Ramos) time (as President). 1994-1995. CARP ended only in 1998, before it was extended for another 10 years. That means that experience shows that CARP is not a solution to rice crises.”

The rice cartel

“In fact, during FVR’s time, rice supply increased by 350 percent, but prices nevertheless soared,” he added. “Why? Because of the cartel.”

The rice crisis of 1994-1995 was largely a result of the partial privatization of the National Food Authority (NFA), which then procured only 0.5 percent of total palay (unhusked rice) production. Private traders took advantage of the situation, creating an artificial rice shortage by hoarding supplies. This caused rice prices to jump by 90-100 percent.

The present rice crisis is also largely traceable to the activities of a rice cartel, known as the Big Seven, whose members, aside from being able to channel production to itself through a network of traders, are also allowed to import heavily.

The members of the Big Seven have been identified in Senate investigations as Joaquin Go Soliman (JOMERCO Trading), Pio Sy Lato (PNS Grains Center), Ramon Ang Syson (Family Native Supply), Gil Go (Jocardo Merchandising), Leoncio Tan/Janet Tiu (Leoneco Merchandising), Santos See (Manila Goodyear), and Teofredo Co (Teofredo Trading).

CARP and GATT-WTO

The depredations wrought by the rice cartel are aggravated by CARP’s loopholes and the government’s implementation of liberalization, deregulation, and privatization policies in accordance with the GATT-WTO (General Agreement on Tariffs and Trade-World Trade Organization) framework.

The Philippines is now the world’s top importer of rice, according to the socio-economic think tank IBON Foundation – a far cry from its status as a self-sufficient, rice-exporting country in the 1980s. IBON Foundation’s research also shows that the Philippines devotes only 4 million hectares to rice production – contrasting sharply with Vietnam, with more than 7 million hectares planted to rice, and Thailand which devotes more than 10 million hectares.

Lands planted to cash crops are exempted from CARP. The owners of lands planted to rice and corn, which are subject to CARP, have found a way out of the government’s agrarian reform program through crop conversion. This contributed to the decrease in rice production.

Under the WTO’s Agreement on Agriculture (AoA), which the Senate ratified in 1995, the Philippines has been forced to meet a minimum rice importation requirement, whether or not the country has sufficient rice yields. The Agriculture and Fisheries Modernization Act (AFMA), which Ramos signed into law in 1997, aims for further privatization of the NFA and increased private-sector participation in rice importation.

The NFA is mandated by law to procure at least 12 percent of palay production. From an average of 7.95 percent of palay production in 1977-1983, the NFA’s procurement dropped to 3.63 percent in 1984-2000 and from 2001-2006 was only 0.05 percent of total production.

Rice imports have increased from 257,260 metric tons (MT) in 1995 to 1.7 million MT in 2006. This year, the government has secured the importation of some 2.2 million MT of rice from Vietnam, Thailand, and the U.S. – the country’s largest volume of rice importation since 1998.

“The government’s ratification to the GATT meant full liberalization of Philippine agriculture, particularly the emphasis on export crops and, on the other hand, rice importation,” Ramos said. “That is why in 1994, when the GATT was being deliberated upon in the Senate, we put forward a position urging them to reject it.”

The government’s Medium-Term Agriculture Development Plan (MTDAP) aims to reduce rice and corn production from 5 million MT to 3.1 million MT. Meanwhile, the Medium-Term Philippine Development Plan (MTPDP) for 2004-2010 aims for “the development of 2 million hectares of new agribusiness lands through multi-cropping, the cultivation of idle and marginal lands, the expansion of fishery production in unutilized offshore and inland waters, and expansion of the product mix through high value crops and value-adding through innovative packaging and agro-processing.”

The reduction of rice production and the country’s increased dependence on rice importation have placed the people more and more at the mercy of private traders, who control rice prices.

HB 3059

The KMP is calling for the passage of House Bill No. 3059, or the Genuine Agrarian Reform Bill. Principally authored by the late Anakpawis (Toiling Masses) Rep. Crispin Beltran, the bill provides for free distribution of land to farmers, the expansion of agrarian reform coverage to include all agricultural lands, and government support services for beneficiaries. Bulatlat

EPIRA Cause of High Power Rates, Says Scientist, Consumer Group

June 11, 2008

“Government measures such as the subsidy and failed takeover of Meralco management will not result to lower power rates,” said Dr. Giovanni Tapang of AGHAM.

BY RONALYN V. OLEA
BULATLAT
Vol. VIII, No. 18, June 8-14, 2008

The Arroyo government is locked in a corporate battle to wrest control of Meralco from the Lopez family purportedly to lower power rates.

Also, Mrs. Gloria Macapagal-Arroyo announced last week, the allocation of a P2-billion ($45,325,779 at an exchange rate of $1=P44.125) subsidy for small power users. An estimated four million lifeline users or those with a 100kwh or lower monthly electricity consumption will receive P500 ($11.33) for their electric bills.

In an interview with Bulatlat, Dr. Giovanni Tapang, chairperson of scientist group Agham and convenor of the People Opposed to Warrantless Electrity Rates (Power) said, “Government measures such as the subsidy and failed takeover of Meralco management will not result to lower power rates. Apparently, such populist posturing is meant to fend off reactions to increasing prices of basic commodities. Mrs. Arroyo seems to be preparing for her next state of the nation address (SONA) in July.”

Tapang described the subsidy announced by the Arroyo government as a “one-shot deal” that can never be sustained.

In a separate statement, Engineer Ramon Ramirez, spokesperson of POWER, said, “There’s some deception here since the electricity subsidy will be coming from the value-added tax (VAT) which is also paid for by consumers. It’s the consumer subsidizing the consumer. Government is desperately trying to justify the existence of the VAT by making it appear that it is helpful for the poor.” The group has called for the removal of VAT on power.

Tapang said that aside from the removal of VAT, their group is calling for the repeal of the Electric Power Industry Reform Act (EPIRA), which, according to him, has put the Filipino consumers at the losing end.

EPIRA

Signed into law by Mrs. Arroyo in June 2001, the EPIRA seeks to restructure the electricity industry and privatize the National Power Corporation (Napocor).

One of the purported objectives of the EPIRA is to ensure the reliability and affordability of supply of electric power. After almost seven years, however, what happened is the opposite; the cost of electricity has increased due to numerous charges considered legal under the law.

Sec. 36 of the EPIRA mandates the unbundling of rates. This is consistent with the privatization thrust of the EPIRA wherein the power sector is segregated into generation, transmission and distribution sectors.

Hence, the controversial Purchased Power Adjustment (PPA) has been deleted from the consumer’s monthly electricity bill. However, Tapang said that the unbundling of rates has not removed the PPA; it has merely hidden it.

The PPA stemmed from the onerous contracts between Napocor and independent power producers (IPPs). Even without producing a single watt of electricity, the ‘take or pay provisions’ stated in the contracts guarantee payment for installed capacity of generation plants.

In its paper titled ‘Ever increasing rates from the EPIRA: A closer look at the electric power industry in the Philippines,’ Agham said that the PPA remains to be a large part of electric power rates of end-users albeit under different names. It is distributed in the various line items in the new electric bill such as the generation charge, the transmission charge, system loss charges, subsidies and franchise taxes.

System loss charges include technical losses, pilferages, and company use or electricity used by distribution utilities such as the Meralco.

Moreover, Sec. 32 of the EPIRA paves the way for the national government to directly assume a portion of Napocor’s debt amounting to P200 billion ($4,532,577,903). The so-called stranded cost recovery is reflected as a separate item in the consumer’s billing statement.

Other stranded debts of Napocor in excess of the P200 billion ($4,532,577,903) as well as qualified debts of distribution utilities form part of the universal charge stated under Sec. 34 of the EPIRA.

Other components of the universal charge include missionary electrification, environmental charge, among others.

The missionary charge is a compulsory contribution to a fund to be used for electrifying remote barangays (villages). Agham asked, “But why are we charged for a job the government should be doing? This is also true of environmental charges. Why are we charged for the havoc that the generation plants of Napocor or these IPPs do to the environment?”

Sec. 25 of the EPIRA states as a policy the full recovery of “prudent and reasonable” economic costs of a distribution utility.

The same Agham paper said that this particular provision gives authority to distribution utilities to recover and pass on to consumers currency fluctuations, fuel cost fluctuations and contract obligations. The Generation Rate Adjustment Mechanism (GRAM) and the Incremental Currency Exchange Rate Adjustment (ICERA) are concrete examples of these charges.

Tapang blamed the EPIRA and the privatization of the power industry for soaring prices of electricity rates. He said, “We have lost control over the power industry because it is already controlled by local big business and foreign investors whose main interest is to accumulate huge profits.”

Foreign interests

According to the Agham paper, most IPPs are owned by transnational corporations (TNCs) in partnership with local business tycoons. At least 22 out of 41 IPPs are largely foreign-owned.

Last week, Inquirer reported that the Joint Foreign Chambers (JFC) of the Philippines wrote a letter to Mrs. Arroyo asking the latter not to alter EPIRA and not to ‘tinker with IPP contracts.’ Asked for a reaction, Tapang said that the JFC’s statement only shows that foreign investors and financial institutions benefit from the EPIRA at the expense of the Filipino people.

Sec. 68 of the EPIRA mandates the creation of an inter-agency committee tasked to review IPP contracts. According to Agham, the said committee found that only six out of 35 contracts were without any legal or financial issues. The rest were supposed to be renegotiated by the government.

The privatization of Napocor, along other power sector reforms, is a long-standing recommendation of the International Monetary Fund (IMF). This is part of the structural reform program (SAP) the country has to implement as a pre-condition to the granting of more loans.

Tapang challenged the Arroyo government to stand up against the interests of foreign investors by deleting the ‘take or pay’ provisions in the IPP contracts and to stop the privatization of Napocor. However, Tapang quickly added, “Based on Mrs. Arroyo’s track record, she can not risk foreign investments even as the Filipino people grow angry.”

As a long-term solution, scientist Tapang said, “Power is a strategic utility that should be run by government. We should nationalize the power industry and improve our capacity to produce electricity from indigenous sources of energy.”

He deplored the current thrust of the Arroyo government to sell out the country’s energy resources to foreign investors. “Our natural gas and other indigenous sources should be utilized to serve the Filipino people, not foreign interests.” Bulatlat

RP faces ‘perfect economic storm’ — analysts

June 9, 2008

MANILA, Philippines—The Philippine economy faces a “perfect economic storm” of inflation at 9-year highs as food and oil prices soar, rising interest rates and slowing growth, according to analysts.

They said inflation was unlikely to ebb soon after hitting an annual rate of 9.6 percent in May, leading the Bangko Sentral ng Pilipinas to hike borrowing costs last Thursday for the first time since 2005.

“Throw in rising unemployment and you have the recipe for a perfect economic storm,” former Budget Secretary Benjamin Diokno said.

Official data showed food prices rose 14 percent in May as rice, the national staple, rocketed 31.7 percent and corn 27.1 percent. Gasoline, kerosene and diesel prices have also surged. Inflation in 2007 was just 2.8 percent.

“If inflation pressures persist into next year and it feeds into further price increases, or leads to an economic slowdown and job losses, then we may start to see unrest,” warned political risk consultant Roberto Herrera-Lim.

Gov’t subsidies

“It is when you combine the two—job losses and inflation—then things become troublesome,” Lim, the Southeast Asian analyst for New York-based firm Eurasia Group, said in an interview published on the ABS-CBN television website.

The government has already announced measures to ease the pain on the country’s poor, such as a one-off P500 subsidy to help pay electricity bills. It has also announced a quarterly fuel subsidy for the public transport sector and loans to help convert buses and taxis to alternative fuels.

Farmers are to be given fertilizer subsidies and poor students scholarships, with the government going to the international debt market to raise $750 million to help pay for it all the subsidy programs.

But at the same time economic growth is slowing, falling to an annual rate of 5.2 percent for the first quarter compared with 7.2 percent for all of 2007.

“Giving away cash grants for food and electricity consumption, subsidies for farmers and the transport sector and borrowing from abroad to pay for them show desperation,” Diokno said. “It doesn’t help the situation in the long run.”

Rommel Macapagal, chair of Westlink Global Equities, said the government’s handouts were short-term solutions. “The problem is that it can do very little about rising fuel and food costs on its own because it is a worldwide problem.”

Double-digit inflation

Other experts warned inflation could rise into double digits, potentially heralding still higher interest rates.

Cayetano Paderanga, an economist at the University of the Philippines, said it was too late to stop inflation hitting double-digits.

“The inflation rate will still go up before it goes down and there is a very good chance that it will breach 10 percent,” he told the Inquirer, adding it would then be increasingly difficult to control.

“Ten percent is an important threshold. Beyond this level, the psychology of the people changes and it becomes more difficult to control their expectations of price increases,” Paderanga said.

It could create a situation like “stagflation,” he said, where economic growth slows but inflation stays high, posing a severe test for policymakers.

Agence France-Presse(PDI)

Editrial Cartoon: Conserving Power

June 8, 2008

Pinilipit na ang tao, pilipit pa ang dahilan.

Gov’t appeals: Conserve fuel, power

June 8, 2008

Local prices up anew; record $ 139 in global market; 14th increase announced, with no end in sight

By DAVID CAGAHASTIAN & MYRNA M. VELASCO

Malacañang appealed to the people yesterday to conserve gasoline and electricity amid another round of oil price increases during the weekend and prospects of more price increases in the coming weeks.

Deputy Presidential Spokeswoman Lorelei Fajardo said the government can do nothing to stop the oil price increases, as the Philippines merely imports oil and is vulnerable to the market forces that drive oil prices up.

“The best thing that we can do is to conserve not only electricity but also gasoline,” Fajardo said in an interview with government network Radyo ng Bayan.

“Kung kinakailangan — at sabi nga, mas healthy — maglakad, mag-bike, mag-carpool tayo. Maraming means na maaari ding gawin ng publiko, hindi lamang ng pamahalaan,” she said.

She said the government can only give out subsidies on fuel for public utility vehicles and for households who consume very little electricity, to mitigate the effects of high oil and food prices on the poor.

Fajardo said the government is taking the lead in conserving energy. President Arroyo had earlier ordered all government offices to turn off their air conditioning units by 4 p.m. every day and to replace their incandescent bulbs with more energy-efficient flourescent lights to conserve electricity.

Fajardo said the government is also drafting a P2 subsidy for public utility vehicles from the P18-billion revenues from the Expanded Value-Added Tax collections of the national government.

Local oil companies

raise prices for 14th

time this year

The local oil companies implemented twin increase in their prices over the weekend, raising gasoline and diesel pump prices by P1.50 per liter and liquefied petroleum dgas (LPG) by P1 per kilogram.

The adjusted prices took effect at 12:01 a.m. and 6 a.m. on Saturday. The price hikes were initiated by small oil player Flying V and immediately followed by all the other companies — Pilipinas Shell Petroleum Corporation, Chevron Philippines which carries the Caltex brand, Unioil, and Petron Corporation.

Further increases in pump prices are expected in the coming weeks as the companies continued to collect on previously computed increases. In the world market, global prices hit a new all-time high record of $ 139 per barrel in last Friday’s trading at the New York Mercantile Exchange – which will be reflected in future local price increases.

The price increases in the Philippine oil market are already the 14th price adjustment this year and there is no end in sight yet.

Unoil said its new round of adjustment was “due to the continued increase in the prices of petroleum products in the world market and to partially recover its losses.”

Rafael Ledesma of Petron’s public affairs office advised media that for its fuels, “we are still reflecting the increase in Dubai crude by more than $ 16 per barrel in May,” which hit an average of $ 119.50 per barrel.

The contract price for LPG climbed substantially this month by $ 55 per metric ton from last month’s $ 852.50 to $ 907.50 per metric ton.

The oil companies are now getting cautious about giving forecasts or estimates on how pump prices would behave in the coming weeks or months, after Energy Secretary Angelo T. Reyes directed to stop doing so.

After shaving off $ 8 per barrel from the price last week, world oil prices rallied anew this week by about $ 16 per barrel because of what market observes as a “buying rush” hinged on the intensifying tension between Israel and Iran that have been fueling speculations of potential supply worries.

Some market analysts are forecasting that oil prices may go to as high as $ 150 per barrel by July 4 because of a projected increase in the demand of the United States for its coming travel holidays.

Market speculations are seen exerting pressure on global oil prices; and these are compounded by worries over the weakening value of the American dollar and the declining oil stockpile of the US.

Rising demand on oil is reportedly triggered by China and other developing economies; and coupled by the influx of oil buyers which are hedging against inflation when the US dollar falls.

Analysts have noted that “supplies have been affected by low capacity expansion and declining yields (in oil-producing countries), while demand has surged largely due to growth in emerging markets.” (Myrna M. Velasco)

Global oil price

hits record $ 139

a barrel on Friday

By MATTHEW ROBINSON

NEW YORK (Reuters) — Oil jumped nearly 9 percent to a record $ 139 a barrel on Friday, extending a two-day rally to more than $ 16 as the slumping US dollar and mounting tensions between Israel and Iran attracted a stampede of buyers.

Oil prices could top $ 150 by July 4, one of the busiest US travel holidays, as strong demand in Asia triggers a slowdown in shipments of crude to the United States, investment bank Morgan Stanley said.

“We are calling for a short-term spike in oil prices,” the bank said in a research note.

US crude settled up $ 10.75 at $ 138.54 a barrel before touching an all-time high of $ 139.12 in its biggest gain in dollar terms on record, adding to a rise of $ 5.49 on Thursday.

London Brent crude settled $ 10.15 higher at $ 137.69, off the record 8.12 hit earlier.

“It’s eye-popping. It’s absolutely stunning,” said Chris Feltin, analyst at Tristone CapitaL Inc in Calgary.

Oil has risen 44 percent this year, threatening economic growth in major consumer countries including the United States, whose economy already is hobbled by a housing crisis.

Analysts have said the dramatic rally in oil prices is due to rising demand in China and other developing economies as well as an influx of cash from investors seeking a hedge against the weaker dollar and inflation.

The greenback extended weakness against other currencies Friday on data showing the US economy lost jobs for the fifth straight month and the unemployment rate shot up to its highest in more than three years.

The drop in the dollar added to losses from Thursday when European Central Bank President Jean-Claude Trichet said a number of policymakers wanted higher interest rates, possibly as soon as next month. USD/]

“Obviously there’s a lot of concern on the economic impacts of a weakening US dollar. That seems to be driving some of the momentum here today,” said Feltin.

Further support came from remarks by Israel’s transport minister that an attack on Iran’s nuclear sites looked “unavoidable.” It was the most explicit threat yet against Tehran from Prime Minister Ehud Olmert’s government.

Worries of a potential disruption of the OPEC member’s crude supply have helped support prices over the past year.

“We’ve had a huge historic rally on little fundamental input, other than the weakness of the dollar and the news this morning out of Israel that seems to have pushed some geopolitical risk premium back in the market,” said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

Morgan Stanley forecast the diversion of Middle East oil shipments away from the United States to Asian markets could push US crude to $ 150 a barrel by the US July 4th holiday.

“Middle East oil exports are stable, but Asia is taking an unprecedented share,” Morgan Stanley said in a report, adding US inventories have dropped by 35 million barrels since March.

“Robust Asian non-OECD demand growth, coupled with a stagnant global oil supply backdrop, appears to be pricing out Atlantic basin consumers while at the same time driving Atlantic inventories to critically low levels.”

The report added to a string of upward price forecast revisions by analysts, with Goldman Sachs in May predicting prices could tip $ 200 a barrel within the next two years.

A six-year rally in oil has sent prices up six-fold as demand from emerging economies such as China and India strain supplies.

High prices have started to eat away at global growth however, with some consumers such as the United States and the United Kingdom showing signs of lowering consumption.

Some Asian governments — including India — have decided to cut fuel subsidies, stirring concern rising prices could cut further into demand.

The International Energy Agency (IEA), an adviser to 27 industrialized countries, said it may cut its 2008 demand growth projection further after having already more than halved it to 1.03 million barrels per day (bpd).(MB)

============================

My Take:

Funny.  The gvernment who displays unequaled love for corrupt generals and public officials is now calling for us to tighten the belt.

Instead of scrapping the oil dereulation la, instead of looking for cheaper source of oil (such as venezuela), instead of prosecuting the big-time oil smuggler and the cartels, they want us to tighten our belts!

Ni hindi nga nila magawang ibigay ang P125 minimum wage hike across the board eh.  bwisit!

GSIS hits back at MBC

June 7, 2008

By  Michael Punongbayan
Saturday, June 7, 2008

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The Government Service Insurance System (GSIS) called on the Makati Business Club (MBC) yesterday to stop “parroting” the Lopez line that the government is out to take control of the Manila Electric Co. (Meralco).

Estrella Elamparo, GSIS chief legal counsel and spokeswoman, said the MBC should be objective and impartial in looking at allegations of mismanagement in the Lopez-controlled power firm.

“In fact, the MBC should be speaking against the excesses being committed by the Lopezes in Meralco,” she said.

“These excesses, like charging consumers Meralco’s own electric consumption and P30 billion of its income tax from 1994 to 2002, are what’s driving up the cost of power.”

Elamparo said while Meralco shareholders are not getting returns from their investment, other Lopez companies dealing with Meralco had been posting record-setting incomes.

“A case in point is the Lopez-owned IPP Sta. Rita, which Meralco paid P13 billion in a 12-month period from 2000 to 2001 for delivering just over P3-billion worth of electricity,” she said.

“The MBC should not be seen by the public as coddling the Lopezes, under which Meralco did not declare dividends for its shareholders from 1990 to 1997.”

Elamparo said the GSIS and other government financial institutions, which hold shareholdings of about 33 percent in Meralco, are campaigning to bring back good corporate governance and transparency to bring down power rates.

One reason why foreign investors think twice before putting money in the Philippines is that it has the second most expensive electricity rate in Asia, next only to Japan.

“The MBC knows fully well that their members’ cost of production increases due to the high cost of electricity, reducing the competitiveness of their products in the world market,” she said.

Elamparo said while consumers pay for power that Sta. Rita did not provide, the Lopez IPP was able to more than double its P8-billion capitalization in less than two years.

“Likewise, the global downward trend in stocks is also contributing to the downswing in the value of Meralco shares,” she said.

Elamparo said the GSIS is not out to take over Meralco, but only wants to have a professional team to run the company.

“Meralco will become attractive anew to investors when it is freed from the stranglehold of the Lopezes,” she said.

“This is because Meralco will be better managed and will be fully accountable based on international good corporate practices.”

Salonga defends Lopezes

Former Senate president Jovito Salonga defended yesterday the Lopezes from allegations that they were responsible for Meralco’s high electricity rates.

In a statement, Salonga said as legal adviser of President Diosdado Macapagal, he helped draft the congratulatory letter to Eugenio Lopez Sr. after his group acquired Meralco from its American owners, General Public Utilities in 1962.

“They are a family of nationalistic entrepreneurs, best known for their investments in public service companies such as power, telecommunications and tollways,” he said.

“But because these businesses are heavily regulated, the Lopezes are vulnerable to public scrutiny, and even severe criticism, from time to time. They have also been victims of repression.

“As a consumer of electricity myself, I would like to see lower electricity rates despite the global phenomenon of skyrocketing oil prices. This will be good for the economy. How to reduce it remains to be the bone of contention.”

Salonga said Meralco, being a publicly listed company, is regularly subjected to internal and external audits.

“I also understand the Lopez family is philanthropic and is very much into corporate social responsibility,” he said.

“It gives back to society part of what it earns from its public businesses, for example, in education, arts and culture, the environment, poor communities, disaster victims and even abused children.

“In light of these, I find it difficult to fathom the accusations leveled against Meralco and the Lopez family given the low credibility of some of its critics.”

Salonga said it was unfair for Meralco to receive the brunt of the blame for high electricity rates when the state-owned National Power Corp. had also been inefficient.

“I await government’s response to questions regarding Napocor’s buying practices and production inefficiency that, in sum, result in higher generation charges than Meralco’s independent power producers,” he said.

“Also, I want to hear from the government about the steps it has taken to address the issue concerning royalties and taxes it imposes on indigenous sources of energy like natural gas that renders such unnecessarily expensive.

“I believe Meralco is in no position to misrepresent its actuations because its books and operations are open to scrutiny.

“I understand that it is not only regulated by the ERC (Energy Regulatory Commission) but also by the BIR (Bureau of Internal Revenue), COA (Commission on Audit), SEC (Securities and Exchange Commission) and the PSE (Philippine Stock Exchange).” –With Iris Gonzales, Aurea Calica(PStar)

Angelo Reyes gags oil firms on price hikes

June 5, 2008

By Euan Paulo C. Añonuevo, Reporter

Energy Secretary Angelo Reyes ordered oil companies to desist from disclosing to media future fuel and cooking-gas price hikes.

During a stakeholders’ meeting Wednesday organized by the Department of Energy, Reyes said the oil firms should stop making early announcements on price increases so as not to cause undue panic and anxiety on consumers.

“It will not serve anybody any good if they will make announcements based on their own projections,” he added.

Reyes’ order came about after media clarified whether his earlier remarks lambasting Arnel Ty, head of Liquefied Petroleum Gas Marketers Association, during the meeting meant a stop to early price-increase announcements.

The Energy chief had castigated Ty for being too open to media about the group’s future price adjustments—a practice not common among larger oil firms—such as the P3.50 per kilogram increase that the marketers association tagged on its liquefied petroleum gas products a week ago.

The cooking-gas retailers’ adjustment was announced much early on while big oil companies made their own public announcements only a few hours before implementing their own price hikes.

In front of media, transport groups and officials of the government and oil firms, Reyes told Ty that he “should not speak for everybody” and that his group should instead be “competing with each other [in the group].”

He said the marketers’ association is “increasing prices ahead of everybody” and is also in the forefront when cooking-gas prices go down just to look good in public.

But Ty said his group’s cooking-gas price for its 11-kilogram cylinders, which costs about P610 each, is not enough to influence prices as it is still the lowest in the industry.

Under the Downstream Oil Industry Deregulation Act of 1998, oil firms are allowed to automatically increase their pump prices but are not compelled to announce such move to the public.

But the Energy department requires oil companies to inform the department within one day, but not less than six hours, of any move to increase prices and any public announcements related to this.

Despite the public berating, Ty later told media that his group will comply with the Energy secretary’s order but stood by the legality of the group’s price adjustments, which he said can be attested to by their supplier, Liquigaz Philippines Corp.

“The [Energy department] knows best. We will just follow it first,” he said.

Ty added that the marketers association will also be attending future meetings organized by the department to come up with a system for making announcements on price adjustments.

Other oil company officials present during the industry meeting deferred to Reyes’ order, saying that making early disclosures on price adjustments may lead to hoarding of petroleum products.

Rate adjustments ‘reasonable’

Ironically, while Reyes questioned the Ty group’s price adjustments, a report released during the meeting by Peter Lee U, University of Asia and the Pacific School of Economics dean, found that price adjustments implemented by the oil firms are “reasonable.”

The study, which was commissioned by the Energy department for a pittance, however, focused only on Petron Corp. and Pilipinas Shell Petroleum Corp.’s price adjustments from December 2006 to November 2007. The two firms represent 70 percent of the total petroleum market in the country.

“Oil price increases have been reasonable. They were not out of line and are consistent with what they are saying that they have under-recoveries,” Lee U said.

He added that while many analysts are saying that oil prices may continue to stay at high levels abroad, the best protection government can offer to consumers is to have the petroleum industry be more open to new players to spur competition.

“The country needs a credible competition policy with an enforcement agency,” Lee U said.(ManilaTimes)

Fix GSIS before buying into MERALCO shares

June 4, 2008

TUGUEGARAO CITY – The employees association of the Department of Agrarian Reform, Region 2, recently called the attention of president and general manager of the Government Service Insurance System to look into the situation that has been plaguing the GSIS before going into his plans to buy the Lopez shares in Meralco.

In a letter signed by Luthgarda S. Sibbaluca, DAR Employees Association president and all the officers and members of the association, they alleged that they are experiencing difficulties with the GSIS Tuguegarao City Branch.

“Although we can avail of the GSIS services, the net proceeds of our loans and benefits are inadequate due to the ‘systems failure’ in the computerization program the company,” the employees stated.

The employees also expressed dismay over the delayed posting of monthly premiums and loan amortization of their loans.

“We are prompt and accurate in our payments since these are automatically deducted from our salaries but we are wondering why your system can not upload these payments in time,” the employees said.

“What’s wrong with your system, or is there something fishy going on? they asked.

The DAREA members insisted that they should not be denied of the services of the GSIS since they are not remiss in paying their dues. # PIA Cagayan(NorthernDispatch)