He wouldn’t have done it

In Memoriam: Fidel Valdez Ramos

FVR was a revolutionary. FVR was a hero. He put adherence to the nation’s Constitution and support of the people over loyalty to his boss. He staked his life in a daring coup that risked failure but instead succeeded when the people massed in support. Cory Aquino had won the snap election, and FVR defended it.

Later, perhaps in gratitude, Cory anointed FVR to replace her. The populace agreed, he became the second post-Marcos leader.

He immediately sat down to work. Complete staff work (CSW) in red pen and frequent meetings with Congress (83 in all), coupled with a work ethic that wore everyone else out resulted in a complete overhaul of the country’s political, social, and economic condition.

He opened up the economy and instituted reforms to provide a fairer, more attractive condition in which business could flourish. He traveled extensively to convince foreign businessmen this was the place to invest. They did. What stood out was how, through emergency powers, he brought 24-hour power back to a country suffering daily brownouts. A stagnant economy rose to 6-percent growth.

Peace agreements were reached with the Muslims and the communists. And he gave a nation confidence in itself.

The changes he wrought created the foundation upon which future presidents could build. He was a visionary in how he saw the Philippines should be—a vision that is reality today in ever so many ways.

FVR was a statesman, a leader who transformed the Philippines into a strong, open, fair society. I had the good fortune to work with the president as an advisor. He became a dear friend I will miss.

He will be sorely missed by us all. We salute him in his passing.

AN ILL-CONSIDERED ACT

All of us in the business community agree: How could a revision of the implementing rules and regulations (IRR) of the build-operate-transfer (BOT) law that is so anti-business, and was brought into force in the last two minutes of the last administration, have emerged and come into force?

I mean, think of just this one thing. The BOT IRR exempts from material adverse government action (Maga) acts of the executive branch, acts of the agency/local government unit and approving body, acts of the legislative and judicial branches. FVR would never have agreed to an IRR like this and raises a rather important question: What does Maga cover? It would seem that no government act would qualify as Maga. This will result in a situation where if any of these entities decides to change the rules in a way that will adversely affect the proponent, the proponent must absorb the cost. Not the government entity that unilaterally made the change.

It’s called Maga, which is “any act of the executive branch, which the project proponent had no knowledge of, or could not reasonably be expected to have had knowledge of, prior to the effectivity of the contract; and that occurs after the effectivity of the contract, that: specifically discriminates against the project proponent; and has a material adverse effect on the ability of the project proponent to comply with any of its obligations under the contract.” No investor would accept this risk.

The IRR would also absolve the government of all blame and responsibility for any changes in public-private partnership projects. The risk devolves to the private sector, resulting in additional costs they can’t pass on through, no fault of their own.

Another completely unacceptable condition is that the government won’t accept international arbitration, the venue must be in the Philippines. Worse, it says acts and decisions of regulators shall not be subject to arbitration. A foreign investor is going to demand a third party who is independent and impartial to arbitrate when there is disagreement. It’s standard practice in other countries trying to attract foreign investment. Not only that, the government must agree to be bound by the arbitrator’s decision. The last administration not doing so with the two water concessions sent a very negative signal to the world of investors looking for a new home.

Another thing the IRR does is it adds the National Economic and Development Authority (Neda) into the equation. It requires Neda to sign off on the parameters, terms, and conditions of a proposed contract. It’s as though they don’t trust the implementing agency that has the technical capability to know what it is doing. It adds another layer of bureaucracy that flies in the face of President Marcos Jr.’s desire to “rightsize.” This would “wrongsize.”

Neda is now also added to the evaluation and acceptance of unsolicited proposals, adding another bureaucratic layer to the process for no discernable gain. Wrongsizing again. It continues with its wrongsizing by bringing the Department of Finance into the picture by requiring it to review and agree with a proponent’s loan agreement terms. Surely that’s a bank’s decision to make; it’s the one that has money at risk.

It also brings the Commission on Audit (COA) into the picture by giving it the authority to audit the project. However, COA is strictly limited by the Constitution to the audit of government entities. A BOT project involves a private company over which COA has no authority. Private companies are audited by private auditors, the results of which the government can inspect.

Prequalification requirements have become too restrictive and onerous in this IRR. For example, an O and M operator in an unsolicited proposal is prevented from hiring an operator who is not a member of the consortium, even if the consortium member has failed at the job. There’s a litany of other restrictions that are unnecessary, just adding more bureaucracy into the process.

The simplest thing to do is for Mr. Marcos to repeal it in its entirety, something he can do with an executive order. Then, if he still feels changes are needed, do what the previous administration didn’t do: sit down with businessmen, particularly foreign investors, as to what they could live with. Better, what would encourage them to bring their business here, and write an IRR that does attract them.

A hallmark of this administration should be: talk. When you want to introduce something new, whatever it is, talk to those who’ll be affected. You can ignore, disagree with, modify, but at least you’ll do it based on knowledge of the likely impact your decision will have. If Putin had talked to the Ukrainians, he wouldn’t have gone into a war he’s not winning and is costing him immeasurably. He went in ignorant. This IRR certainly isn’t at that scale, but it was developed ignorant of what it would do to the stakeholders because the authors didn’t talk to them.

Email: wallace_likeitis@wbf.ph

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