PRESIDENT Aquino’s SONA last Monday gave us much food for thought.
After a week’s reflection, we can now give our response to a speech that reveals some of the president’s concerns.
I quote some of P-Noy’s more resonant statements together with my reactions.
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`Let’s discuss what happened in Napocor. From 2001 to 2004, the government forced Napocor to sell electricity at a loss to prevent increases in electricity rates. The real motivation was that they were preparing for the election. As a result, in 2004, Napocor slumped deeply in debt. The government was obligated to shoulder the P200 billion it owed.’
Napocor’s indebtedness did not stop at 2004’s P200 billion. Now it is P735 billion. Energy Secretary Jose Rene D Almendras is warning us to prepare for higher electricity prices. And therein lies a dilemma. We want economic growth. This can only come if there is increased electricity consumption. But higher electricity prices tend to reduce consumption and hence tend to depress the economic growth that we need if we are to generate employment and fight poverty.
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`Let us now move on to the funds of the National Food Authority (NFA). In 2007, 589,000 metric tons was the shortage in the supply of the Philippines. What they bought were 1.827 million metric tons. Even if you multiply for more than three times the amount of shortage, they again bought more than what was needed. What hurts is, because they keep purchasing more than what they needed year after year, the excess rice that had to be stored in warehouses ended up rotting, just like what happened in 2008.’ The result is NFA’s current debt of P177 billion!
To be fair to GMA, I recall that the discovery of rotting rice in 2008 did cause her to throw tantrums (and cellphones). It is prudent and, I believe, NFA policy, to keep approximately 60 days of rice supply. This means that the NFA is seeking to store approximately 1.8 million metric tons at any given time. [Our daily consumption is around 30,000 tonnes].
The quantities quoted by P-Noy are, therefore, not excessive. But there are two main problem areas associated with rice importation that needs vigilance. The first is the effect of substantial rice importation on local prices obtained by our palay farmers. Local prices can drop substantially when a large rice shipment comes to Bacolod, thereby causing hardship to the local farmers. The second problem is the mechanism whereby rice is acquired from abroad. There are significant corruption opportunities and the prices we pay are alleged to be higher than they should be. It is in this arena that accounts for the enormous NFA indebtedness of P177 billion.
For example, on 15 December 2009 the government purchased 733,000 metric tonnes at $664.90 per metric ton. This equates to P30.50 per kg – bad enough when we are buying retail. But in an order of over $485 million [P22 billion] we would have expected our `leaders’ to negotiate a more advantageous price.
We need to change the mechanism by which we import rice. Both P-Noy in his inauguration speech and Agriculture Sec Alcala have spoken out against `middlemen’.
We need a system of much greater transparency where corruption opportunities and profiteering are minimized.
The same applies to sugar. Due to smuggling it is difficult to assess whether or not there is a shortage, and if there is, there is great difficulty in quantification. Negros Governor Afredo Marañon Jr., not normally given to exaggeration, asserts that there is also hoarding of sugar. Be that as it may, the government has decided to import 100, 000 metric tons of the sweetener. [This has been reduced from the proposed 150,000 metric tons so presumably there has been extensive discussion as to what the supply/demand position really is.]
The same problem applies as with rice. It is imperative that our sugar planters do not suffer from this importation. We are also concerned that it is the NFSP and not the Bureau of Customs which has been vigilant in identifying the problem of smuggling raw sugar from Thailand to Cebu. We trust the Bureau of Customs is getting its act together and is now apprehending the flow of illicit sugar.
The other problem of the importation of sugar is price. We are concerned that over the past few weeks, Archie Amarra, an SRA member and CEO of the Philippine Sugar Millers’ Association has been talking up the degree of difficulty and hence the price which we can expect to pay for imported sugar. He has reportedly been saying that Thailand has no more sugar to sell (at the same time as the NFSP has caught Thai sugar being smuggled to Cebu!). He says that we have to obtain sugar from Brazil and that the landed cost for raw sugar will be P1700-1800 per LKG. Refined sugar will have a landed cost of P2300-2400 per LKG. Retail consumers can expect to pay up to P70 per kg, according to Amarra.
Well, the Canadians are buying raw sugar from Brazil at $375 per tonne and incur freight costs of $46 per tonne. This means that the Canadians buy raw sugar at a landed cost of P975 per LKG. I hope we shall buy the 100,000 tonnes at a reasonable price and that DTI retains its vigilance in ensuring that the retail consumer is not victimized.
The World Market price for sugar has reduced considerably since its peak in early 2010 and is now (Friday 30 July 2010) US$0.195 per pound at the New York commodities exchange.[P20 per kg] Price reductions mean easier acquisition so importing 100,000 tonnes should not produce the extraordinarily high prices suggested by Amarra.
We are also disappointed by the reported comment of Bernardo C. Trebol, SRA honcho. Last Thursday at a pre-bidding conference for the aforementioned importation of 100,000 tons of sugar, Mr. Trebol blithely asserted that the retail price of sugar should be raised to P54/kg on the basis of recent increases in world market price. But when world market price decreases as it has done for much of this year, we do not hear SRA saying that our retail price should decrease correspondingly. This appears to be somewhat cavalier. For too long SRA has not adopted a neutral position. Admittedly Trebol recognized that the decision on retail sugar price also rests with Agriculture Sec Alcala and DTI Sec Gregory Domingo. But recent SRA outpourings are not, seemingly, compatible with President Cory Aquino’s EO18 promulgated in 1986 which established SRA’s existence. The philosophy of EO18 was explicitly to ensure fair play to all – the planters, the consumers and, above all, the sugar workers. Hacienda Luisita management would do well to remember this.
Also at last Thursday’s pre-bidding conference, the Philippine Sugar Millers Association legal counsel Jesus L. Barrera said, in the context of the appropriate retail price, `Traders are asking how they could sell sugar at P52 per kilo if they are buying it at P54 per kilo.’ Hyperbole has its place, in show-business stupidities perhaps, but not when it comes to the price that cash-strapped Filipinos are expected to pay for sugar. Let us see more sensible discussions when it comes to negotiations.
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`This week, I will sign the first ever Executive Order on the formation of the Truth Commission.’
`I appeal to our legislators to pass the Whistleblower’s Bill to eradicate the prevalent culture of fear and silence that has hounded our system.’
`We will strengthen the Witness Protection Program.’
All of the above depend on careful drafting. We wish the drafters well in producing results that have the desired effect. But we are doubtful that there will be substantial practical changes.
True to PNoy’s SONA promise, EO1 creating the Truth Commission was released on Friday. There are those who describe the Truth Commission as a ‘toothless tiger’. I am not sure. Even in the worst case wherein the truth does not emerge, the Commission will have a deterrent effect on potential future wrongdoers.
There is a challenge to our relationship with China. The Truth Commission, if it is to complete its work, will need to interview ZTE officials, including Ms Fan Yan, its CFO who gave our officials a hard time (Why? The Philippine government was ostensibly the customer) at a meeting held in Shenzhen, China on 26 December 2006. I do not suppose the Chinese will wish to cooperate. President Aquino then has a decision as to how far to push the issue in any communications with President Hu Jintao.
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`In the soonest possible time, we will convene the Legislative Executive Development Advisory Council (LEDAC) to discuss the important bills that need to be addressed. Rest assured that I will keep an open mind and treat you honorably.’
We empathize with this. Constitutionally, the Legislative and the Executive are co-equal branches of government but in the past the Executive has successfully sidelined the Legislative. For example, Congressional hearings became a joke as a result of the high-handed EO464. If President Aquino, in the finest Liberal tradition, engenders a vigorous Executive/Legislative dialogue, then we shall have the vibrant democracy that we are seeking.
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I fear that President Aquino underestimates the difficulties associated with eradicating corruption. It is not enough to have a cabinet of good people. They have got to have the strength of purpose to address corrupt practices. It is not as easy as it sounds. Corruption is hard to detect and when it is detected is hard to prove. The corrupt are adept at obfuscation and evasion. Investigations have to be rigorous and even then are unlikely to prevail.
The Philippines is currently 139th in the corruption league table (out of 172 countries). We would do well to improve to 100th (still very corrupt) by December 2011.
Corruption is not confined to the public sector, it is endemic in the private sector as well. President Aquino can do much to curb private sector hocus pocus, particularly in arenas where there is, nominally at least, significant regulatory controls. Banking, finance and insurance are not free of corruption. Much, but not all, of this corruption is addressed by the audit controls of the financial institutions. When the audit controls are not effective we have strong sanctions that we can and should exert.
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`It is every Filipino’s duty to closely watch the leaders that you have elected. I encourage everyone to take a step towards participation rather than fault - finding. The former takes part in finding a solution: from the latter, never-ending complaints.’
Well said. But `duty’ is a two-way street. We have a duty to be participants – not merely fault-finders - so long as those in a position of authority who receive information from participants, act upon the information intelligently, honestly and, above all timeously. At present, we have no guarantees and, indeed, the performance of our officials in the Executive Branch has been lamentable. In Bacolod, we see many allegations relating to the probity of former Congressman Monico Puentevella. But for year after year we see no progress.
So, P-Noy, here is the deal. We become participants. You arrange for our participation to yield fruitful results.
But please understand that one Leila doth not a smooth and efficient justice system make.
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There are many who were disappointed with SONA. I am not one of them. I see a government which understands the importance of dialogue and is prepared to listen. In this way, over the next few weeks and months we shall see whether the government is well-meaning and capable or merely well-meaning. But a well-meaning government will have the support of the vast majority of the populace. And that in itself will help to create the society we seek.