Rendering the public
vulnerable to high electricity cost
POWER- sector reform
programs rendered the public vulnerable to high electricity cost, profits
motive of private power firm and loss of control over environment regulation.
The end-result pointed toward significant impairment of consumer protection and
transfer of corporate debts into public hands.
The Freedom from Debt
Coalition (FDC) said requiring the implementation of a power-sector reform
program as a condition for loan disbursements illustrated the way the Asian
Development Bank (ADB) and other international financial institutions believed
in a one-size-fits-all model, applicable to countries everywhere.
Power-sector
reform programs were being advanced by those institutions, believing these
changes to be panacea for improving technical, financial and managerial
performance of power utilities.
These reforms in the
power sector were enforced regardless of differences in the economic level of
countries, the level of development of their power sectors, the number of
people connected to the grid and the roots of the crisis faced by various
public or state-owned utilities.
Indonesia and the
Philippines have different stages of power-sector development, different models
of electricity market structure and different conditions in terms of energy
sources. Yet, said the FDC, the models and phases for power reform imposed by
the ADB and the World Bank on the two countries were almost the same.
Many times in the
past the ADB had also intervened in the internal process of reforms that
countries are supposed to enjoy as sovereign states. It had gone beyond its
role as loan provider, intervening to shape the substance of laws, government
policies and programs.
According to FDC, the
ADB practically drafted the electricity reform bills of Bangladesh and the
Philippines and, in 1998, worked with the World Bank to draw up the Power
Sector Restructuring Policy of Indonesia. Both institutions were also involved
in drafting the Indonesia Electricity Bill. The ADB itself facilitated the very
process of passing the bill into law, which explicitly declared that the second
disbursement of the power-sector restructuring loan of $200 million, plus the
additional cofinancing from Japan Bank for International Cooperation of
$200 million, would not be released without the law in place.
From the time the
Electric Power Industry Reform Act (Epira) was drafted for the Philippine
government, the ADB exercised undue influence to the country. FDC said some
lawmakers exposed the scandalous payoff incidence in the privatization of NPC.
The ADB’s overarching
goal to reduce poverty came under serious question due to the flawed process in
reforms and the lack of genuine participation in the public sector. The ADB
argued that the reforms in the power sector would help government cut subsidies
for electricity which, in turn, would channel funds saved to other priority expenditure,
such as health and education.
The idea for
encouraging private- sector participation in IPP programs through
build-operate-transfer (BOT)/BOOT, along with the implementation of the reform,
had put private profit before public interest, FDC claimed. Private investors
would always want to limit their losses and to cover most of their business
risks, and they would always insist on government guarantees for their
revenues. The case of BOT private infrastructure clearly demonstrated the
nature of the ADB’s strategies and the lack of accountability in terms of
longer-term development goals, such as debt and risk management. The World Bank
itself admitted that guarantees could potentially create major budgetary
shortfalls and dire consequences for future generations (Wyatt, 2002).
In the case of the
Philippines, NPC admitted paying about P60 million a month to the Department of
Finance to guarantee IPP projects starting in the 1990s. The Epira law
asserted that with privatization, competition and lower costs of energy would
materialize. The Epira should have achieved two objectives—(1) reduce power
costs and (2) assure power supply. It was supposed to create market-oriented
competition and, thus, deregulation to lower power rates.
This premise hinged
on the belief of the International Monetary Fund, World Bank and the ADB that
imposing structural reforms to developing countries would free up government
resources that could be utilized to pay past loans to these agencies.
Compliance to the
policy of lending agencies was a condition for the release of new loans, as can
be proven in the Congress passage of Republic Act 9136, the stimulus for the
ADB and the Japan Export-Import Bank, an export credit agency, to release a
total of $950 million in loans and guarantees. This huge release of loans
triggered a series of borrowings by the Arroyo administration, hence, making it
the biggest debtor in her time.
The World Bank is
currently estimating the quantitative dimension of contingent liabilities. Some
estimates of the government’s contingent liabilities run to about P3.1 trillion
as of end-March 2002, representing maximum exposures under obligations, such as
(a) liabilities of public pension institutions; (b) direct guarantees on loans
to government-owned and -controlled corporations (GOCCs) and GFIs; (c)
guarantees on risks under BOT contracts; and (d) deposit insurance.
Outstanding
public-sector debt (national government and debts of GOCCs) as of 2010 was more
than P5 trillion. The Philippines’s external debt to GDP ratio was second only
to Indonesia at 69.1 and 75.8, respectively, in 2002. But as of the second
quarter of 2003, the Philippines’s external debt to GDP ratio increased to 71
and Indonesia decreased to 69.6. The Philippines is now the highest in the region.
By comparison, Marcos
debt in 1986 was $28.206 billion or P575.12 billion ($=P20.39, 1986 forex).
Marcos’s accumulated budget in 20 years was P486.2 billion; the peso devaluated
24 times between 1981 ($=P7.90, forex) and 2004 ($=P55.55).
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