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Tuesday, March 28, 2006
Espinoza: Developments in privatization efforts
By Fred C. Espinoza
Interest. One of the least expected developments in the government’s plan to privatize state assets would be the modernization of the nation’s obsolete postal service as investor interest in the Philippines improves.
A Japan-based company is set to infuse P3.3 billion into the state-owned Philippine Postal Corp. (Philpost) to help modernize the postal services in the country. Reports said the Cabinet-level Investment Coordinating Committee (ICC) has approved the proposal of ROA Systems Co. Ltd., an information technology (IT) company in Japan, to invest P3.3 billion in Philipost.
At this point, it would be worthwhile to take note that the banking sector has also benefited in the disposal of its non-performing assets and soured loans. The Ayala’s Bank of the Philippine Islands (BPI) plans to “unload as much as P10 billion worth of bad loans this year,” according to BPI president Aurelio Montinola III.
“Before we were talking to only one or two potential buyers at any given time. Now, we’re talking to three or five groups. I think they’re talking to other banks too, and that’s good for the country,” Montinola said.
In the case of Philpost, the investment by ROA would be made under a build-lease-transfer agreement with the government, says Jonathan Uy, director for public investment of the National Economic and Development Authority (Neda).
He said that under this arrangement, the government will lease Philpost to the Japanese IT firm for seven years. During the contract period, ROA will enhance the operational efficiency of the postal firm by installing the necessary hardware and software. It also will link up all offices nationwide.
In addition, the Neda official said ROA will introduce modern communication services that will add value and improve the income-generation of Philpost.
Additional services would include voice-over internet protocol (VoIP) and bills payment. Under Philpost’s modernization plan, ROA will automate the post office counter service by developing a point-of-sale system.
The Japanese firm will benefit from the proceeds of the enhanced postal service but will have to turn over Philpost to the government upon the expiration of the lease contract.
The Japanese firm will shell out P1 billion from its own pocket for the initial fund infusion into Philpost. Reports said ROA was able to secure a loan from the Japan Bank for International Cooperation to complete the amount of investment committed. The loan is payable in seven years and will carry an interest rate of 2.35 percent a year.
The more interesting feature of the agreement is that under the contract period, the government will get a share of Philpost’s revenue in the form of a lease fee. Uy, however, did not disclose the amount involved.
“Privatization need not always come in the form of outright sale. It could also be in the form of a lease agreement,” Uy said.
On the other hand, Chief Justice Artemio Panganiban has vowed to improve the integrity of the judiciary in dealing with business affairs but warned investors “to play by the rules.”
While Panganiban was quick to admit before a forum of civil society that he disagreed with several controversial rulings by the Supreme Court (SC) that gave the judiciary a bad image of intervening unduly in business and the economy, he also emphasized that the business community had to do its part.
“Play by the rules,” the chief justice said. “Don’t take short cuts and don’t bribe our officials.”
The integrity of the judiciary came into question in 1993 when the SC ruled that a petrochemical plant should be built near refineries of an oil company partly owned by the government, rather than in the site preferred by the investors. This resulted in the withdrawal of Taiwnese investors.
In 1995, the SC cancelled a government contract with a Malaysian group that won the bidding in the sale of the Manila Hotel, giving the historic building to a local company.
But he defended a decision in 2002 to nullify a contract with a consortium, led by Germany’s Freeport AG, for the construction and operation of the new airport terminal in Manila, which the government seized last year and hopes to operate next week. He said the rules were changed while in midstream or towards the end,” he said.
“The contract was changed five times,” he added.
For Bisaya stories from Cebu. Click here. (March 28, 2006 issue)
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