The Wall Street Journal Berates Gloria

Written on Wednesday, July 2nd, 2008 at 1:29 pm | by Ding G. Gagelonia

The Wall Street Journal has delivered a scathing review of what it calls the “powering down of the Philippine economy” courtesy of President Gloria Macapagal Arroyo.

The piece, “1 STEP FORWARD BUT 2 STEPS BACKWARD–on Philippine Economy” was written by Greg Rushford who is editor of the Rushford Report, an online journal that tracks the politics of trade and finance.

Rushford cites what he terms the “inhospitable investment climate” in the Philippines” with particular reference to how European Chamber of Commerce officials were, by all accounts, given a tongue-lashing by Senators juan Ponce Enrile and Miriam Defensor Santiago, both allies of Mrs. Arroyo, when the foreign business executives were explaining their call for amendments in the 1991 Electric Power Industry Reform Act (EPIRA).

The WSJ report says that while during Arroyo’s “whirlwind tour” of the US the Philippine leader “boasted that her country’s economy is on the move, having enjoyed an impressive 7% growth rate last year,” such statements “ring hollow.”

“Ms. Arroyo and her political allies back in Manila don’t seem to care that they are sending signals that would cause any potential investor to cringe,” the Wall Street Journal says.

The report goes on to say, “take the most recent bungle: the liberalization of the notoriously inefficient Philippine energy sector. In 2001, a newly sworn-in President Arroyo signed legislation calling for at least 70% of the government-owned National Power Corporation, known as Napocor — long one of the country’s worst symbols of inefficiency and corruption — to be privatized. Even though Ms. Arroyo’s administration has dragged its feet in following through with the reforms, the Electric Power Industry Reform Act of 2001 is working, albeit slowly.”

“Today, slightly more than 40% of Napocor is privately owned. In April, America’s AES Corporation completed a $930 million purchase from the government of a 660-megawatt coal-fired thermal power plant in Zambales Province in Luzon. Currently, seven interested foreign bidders — including AES, France’s Alstom, Marubeni Corp., and a subsidiary of Korea Electric and Power Co., according to news reports — have been invited to compete for Napocor’s 620 megawatt power plant in Limay. Those bids should be in by the end of July. By year’s end, the reform act’s goal of privatizing at least 70% of Napocor could be realized.”

“But will Manila allow that to happen? Last December, the Arroyo administration announced that it wanted to amend the reform act by Christmas, to ensure that the government would retain control of at least 50% of Napocor. Hardly for the first time, the government in Manila was reminding foreign investors that the economic goal posts could be moved in the late innings. In the House of Representatives, the anti-reform legislation’s chief sponsor is the chairman of the energy committee, Rep. Juan Miguel “Mikey” Arroyo, the president’s son.”

“When the heads of the Joint Foreign Chambers of Commerce protested the roll-back of Napocor’s privatization in a May 27 letter to Ms. Arroyo, the president’s allies in the senate exploded in nationalistic outrage. Summoned to a June 6 hearing, Hubert D’Aboville, the French president of the European Chamber of Commerce, tried to speak on behalf of the foreign chambers, whose members hail from the U.S., Korea, Japan, Australia, Canada and New Zealand. Mr. D’Aboville prepared testimony that pointed to the “negative consequences” of amending the privatization law and thus dampening confidence among the foreign investment community (a view enthusiastically shared by the more enlightened members of the Philippine business community in the influential Makati Business Club). But Mr. D’Aboville was not allowed to present his testimony.”

“My goodness, get out of this country if you can’t live with us,” Sen. Juan Ponce-Enrile told Mr. D’Aboville, who has lived in the Philippines for 31 years and is married to a Filipina. Added another presidential ally, Sen. Miriam Defensor-Santiago, “You may not continue. You do not determine what you can say or not say. I determine.”

The Wall Street Journal notes further, “unembarrassed by such a display of legislative intemperance, Ms. Arroyo has brought Sen. Santiago with her to New York, where the president is lobbying the United Nations to give her a seat on the International Court of Justice. Asked by reporters right after the hearing if the senators’ June 6 bullying of the foreign businessman had been inappropriate, presidential spokesman Ignacio Bunye said he didn’t think so. A few days later, Ms. Arroyo — possibly having been informed that several European ambassadors were prepared to file a formal diplomatic protest — came out with a statement thanking foreign investors for being part of her country’s “success.”

“Ms. Arroyo has argued that government control of power plants is a more efficient way of keeping electricity prices down than private competitors who will compete in the marketplace — surely a strange argument from a woman who has a doctorate in economics. Making matters worse, her administration is engaged in a separate but equally embarrassing power struggle for control of the board of directors of the Philippines’ largest private electricity distributor, the Manila Electric Co. The company is controlled by the powerful Lopez family, one of the Philippines’ most enduring oligarchies. In addition, the Philippine government holds a 30% stake and is represented on the board.”

“To be sure, there is a case that could be made that Meralco, which controls some 70% of electricity on the big island of Luzon, is a monopoly that should be subjected to the pressures of real market competition. But the political intensity of the Arroyo administration’s personal attacks on the Lopez family suggests — especially to watching foreigners — that an agenda is at work that goes beyond economics. Specifically, the fight between Ms. Arroyo’s family and the Lopez business empire seems to personify the latest example of feuding family clans that have long been a major source of the Philippines’s economic and political fragility. In the early 1960s, when Ms. Arroyo’s father, Diosdado Macapagal, was president, he also tried to wrest control of Meralco from the Lopez family.”

“Ms. Arroyo needs to understand that when Manila promises to open up major sectors of the economy to reforms that would foster real competition, those promises should not be broken. This would seem to be especially relevant, considering that economic projections warn that the Philippine electricity sector could, in the next several years, face more of the blackouts that crippled economic growth in the late 1980s.”

The WSJ report concludes by citing how Vietnam, by comparison, has been able to land a major foreign investment in a giant hydroelectric power project.

If Rushford had scratched the surface a bit more he might have found other worms regarding Napocor, but I guess he wasn’t ready to write about corruption just yet, only investment concerns.

Just reading the story is already depressing enough without touching on the economy’s already downward spiral with inflation now expected to enter the double digit range and the unmitigated fuel price hikes are already making other economic dominoes fall.

Early in the Rushford article one detail that also stood out:twas hat while in DC, the Philippine leader was supposed to make her presentation during a $5,000-per-plate dinner with prospective investors. We wonder who took care of the bill?

You can almost hear someone shout,”prepare to abandon ship! Women and children first!”

But using the Princess of the Stars tragedy would be a cruel parallel here as in that incident many of those who died had their life jackets but had drowned before help came.

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About The Author: Ding G. Gagelonia is a journalist of some 30 years, having worked in both radio and TV news and public affairs since his teens. Ding Gagelonia now writes independently and does corporate communications consulting. He has two kids, Felice and Luis. His journalist blog is at midfield.wordpress.com

Filed Under Business and Economy, National News, Politics, Society

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Comments

4 Responses to “The Wall Street Journal Berates Gloria”

  1. paolo on July 2nd, 2008 3:39 pm

    I was reading it from top to bottom and I felt a sense of deja vu. Then I realized that you’ve duplicated the article…

  2. Ding G. Gagelonia on July 2nd, 2008 3:45 pm

    Pardon the error. corrected it.

  3. Pochero on July 2nd, 2008 3:56 pm

    And recently I hear that Korea’s Hanjin Corp. has abandoned its plan to build a shipbuilding facility in Misamis Oriental due to shakedowns from the local mayors. Estimated 40,000 potential jobs lost.

  4. cocoy on July 3rd, 2008 6:36 am

    Article’s right on, you know?

    it’s a leadership problem. And often, this country screws its business partners. who’s going to do business with the philippines when that happens? who’s going to trust us? that’s also not just a government problem— but a lot of Filipinos think that way too. “Bite the hand that feeds you, why don’t you?” is not a sound tactic or engaging strategy.

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