/ 04:38 AM December 28, 2013

Does the Philippines need more privatization, or less? That’s the subject of a recent think piece by foreign affairs and economic analyst Richard Javad Heydarian in The Huffington Post, which argues that, contrary to prevailing wisdom about the Philippines’ continuing need to open up its markets and nurture its private sector, what it needs “is not more privatization and economic liberalization per se… but instead a stronger state that (a) can bust oligarchic collusion, and (b) protect the interest of the consumers and productive sectors of the economy.”

Heydarian makes a powerful point simply by pointing at the example of the outrage that has erupted over the Manila Electric Co.’s power-rate hike of P4.15 per kilowatt hour—a jolting increase it has blamed in turn on the supply shortage emanating from power producers. The producers have been accused of collusion in allegedly creating artificial shortages through simultaneous plant shutdowns to jack up the price of electricity—the very scenario that Republic Act No. 9136, also known as Epira or the Electric Power Industry Reform Act, was meant to prevent when the landmark legislation was passed in 2001 to liberalize the power-generation industry and thereby bring down electricity costs through a more efficient, cost-competitive system.


What happened? “The key problem with the privatization process in the developing world is its inherent vulnerability to regulatory capture—the process by which major businesses and special interests coopt a weak, post-transition state in order to control profitable, strategic enterprises, which were previously held by the government,” writes Heydarian. In the power-generation business, specifically, “the increasingly privatized electricity sector would be dominated by the country’s leading business families, which turned electricity production into one of the most profitable businesses in the country—at the expense of the overall economy and public welfare.”

That warped development not only covers power generation, but is also increasingly the picture in other areas such as water, land use, healthcare, public transport, and other key services in which the government has effectively ceded even token regulatory control. In the face of widespread public protest over the unprecedented power increases, President Aquino could plead only impotence, saying that his administration has no power to stop the rate hike because the Energy Regulatory Commission, the body tasked to approve power rate hikes, is an agency independent of either the Department of Energy or the Office of the President.


The latest state service to be toying with some sort of privatization is law enforcement. The National Capital Region Police Office has reportedly signed an agreement to tap the armed civilian sector for help in combating crime. The Philippine Association of Detective and Protective Agency Operators, which claims to have some 600,000 members nationwide and is made up of private detectives and licensed security guards can serve as “force multipliers” that can be “deputized to help with whatever happens in the vicinity where they are deployed,” the NCRPO chief, Director Carmelo Valmoria, has been quoted as saying.

Who cooked up this idea, and why hasn’t it been explained, at the very least, by a higher entity such as the Department of Interior and Local Government, which has control and supervision over the Philippine National Police? Turning over to private security agencies the task of fighting crime is a dangerous proposition, given not only the disparity in training between cops and security guards, but also the rationale for their operations. Private businesses are there primarily to make a profit; how does that fit into the business of investigating crimes, apprehending and detaining suspects, developing and lodging cases against them, etc? Massive training of what will, in effect, be parapolice forces is required before they can be roped into effective crime prevention. But the NCRPO chief has announced that the memorandum of agreement has been signed, although the “nitty-gritty” has yet to be discussed!

The better way to fight crime is to recruit more cops, train them thoroughly, professionalize their ranks, and raise their pay; in the short term, round up loose firearms; and, on a larger scale, ensure the successful prosecution of criminals to deter others. Turning over the function of law enforcement to the private sector is the ultimate cop-out.

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TAGS: economic analyst, economic liberalization, Foreign affairs, Heydarian, Manila Electric Co., Meralco, privatization, Richard Javad Heydarian, The Huffington Post
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