The Market Monitor Minding the Nation's Business
By Luis Leoncio
The minority in the House of Representatives plans to question before the Supreme Court the “railroading” of President Aquino’s pet bill, the Public Private Partnership (PPP) Act, on the final session of Congress before it went on recess for the election period.
The PPP Act seeks to institutionalize and strengthen the Aquino administration’s infrastructure-development strategy, and mandates his successor to pursue it.
The opposition in the House said that despite its guarantees, the proposed law “takes away checks and balance,” while a local think tank said it “promotes private business in public utilities and services at the people’s expense.”
The bill was on its final reading but it was recalled on the motion of Senior Deputy Minority Leader and Bayan Muna Rep. Neri Colmenares.
House members then agreed to cancel the plenary approval of House Bill 6631 or the PPP Act.
Congress resumes session on May 21 but will mainly act as the national board of canvassers for the presidential and vice presidential race.
The bill was approved on final reading through viva voce or oral voting.
Colmenares moved to recall the third-reading vote on HB 6631, pointing out that it violated Section 28, Article VI of the 1987 Constitution that states: “No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress.”
Faced by Colmenares’s objection, Majority Leader and Mandaluyong City Rep. Neptali Gonzales II swiftly referred the motion for plenary through a viva-voce vote.
House records showed that only 136 congressmen present in Monday’s session voted to pass the measure.
With the House rolls showing a total membership of 291, HB 6631 may be passed on third and final reading by 146 congressmen.
“Even if my motion loses, I believe my objection will be upheld by the Supreme Court, as the Constitution clearly requires a vote of the majority of all members, not just those present during the session,” Colmenares said.
The opposition stalwart was among the handful of lawmakers that rejected the third-reading approval of HB 6631, which supports the Aquino administration’s centerpiece program on infrastructure development and other services.
“I voted ‘no’ to the PPP bill because it would institutionalize sovereign guaranty through the viability-gap fund and take away checks and balance by castrating the role of local government units (LGUs) and centralizing authority on Malacanang,” Colmenares said
He noted that the PPP bill empowers the President to automatically grant permits and licenses – and even franchises – to private-sector participants.
“It even grants tax exemptions and deprives both the national government and LGUs of taxes, fees and charges. This would deprive the people of accessible public service and take away billions in public funds from our people’s needs,” said Colmenares.
Speaker Feliciano Belmonte Jr., principal author of the bill, said the approval “will sustain the gains of the Aquino administration‘s PPP program.”
“The approval of the bill is a welcome development in light of our efforts in Congress to come up with a new law that would build from the experiences of the government in areas involving build-operate-transfer (BOT) projects. Our proposed reforms intend to sustain the gains of the Aquino administration’s PPP Program as it continues to move forward with its infrastructure projects,” Belmonte said.
The research group IBON said the “midnight passage” of the PPP Act “will deepen elite profiteering from the economy through huge regulatory risk guarantees.”
The group also said the approval of the bill promotes private business in public utilities and services at the people’s expense.
The PPP Act declares as policy the recognition of the primary and indispensable role of the private sector in national development by encouraging private investments in normally government undertakings in infrastructure and services from financing, design, construction, operation and maintenance.
IBON said the PPP Act “reinforces the Alternative Dispute Resolution which provides for alternative avenues outside of court to settle disputes or conflicts between government and project proponents.”
IBON also said these other observations on the proposed law:
* It will restrict the mandate of courts and regulatory bodies, the remaining institutions assigned to defend the people from onerous arrangements, by disallowing courts from issuing temporary restraining orders, preliminary injunctions and preliminary mandatory injunctions against PPP-related acts.
* It will guarantee that public funds are available to protect the commercial interests of investors. It will also form a Contingent Liabilities Fund (CLF) to be funded by foreign debt and local resources to ensure a steady source of public funds to meet the government’s financial obligations arising from PPP contracts.
“PPP concession agreements under the Aquino administration have been characteristic of lopsided terms, such as charging on public funds the difference between notional and approved fees, right of way, and government liabilities that have not been incurred,” IBON said, noting likewise that government has also allocated around P123 billion of the national government budget to a handful of PPPs with the country’s wealthiest businessmen in 2015 and 2016.
The think tank reiterated that despite the Act’s stipulations on the protection of public interest, transparency, fair competition and ample public information, its institutionalization, consolidation and expansion of the PPP reforms begun by Aquino would undermine public interest even more.
Senate President Pro-Tempore Ralph Recto, co-sponsor of the PPP bill in the Senate, said the version of the bill in the chamber would not contain the Palace-proposed Contingent Liabilities Fund (CLF), which is a lump sum where the government can draw guarantees for key contracts.
Recto said the Palace proposal was to make the CLF a permanent part of the yearly budget.
“The original proposal we received was for the creation of Contingent Liabilities Fund, which will be financed through dedicated budgetary appropriations, contributions from the budgets of implementing agencies, premium payments, and official development assistance (ODA). However, the creation of such fund is an untried scheme that may not be legally permissible,” Recto said in sponsoring the bill.
Recto said the Palace proposed that the CLF be “permanently appropriated” and, if not spent, the power to disburse it will be given to the finance secretary, and will not revert to the General Fund.
“I cannot agree to this proposal – unprecedented as it is in public expenditure management,” Recto said.
The senator said that in the age of line-item budgeting, when lump sums are broken down, “one cannot just appropriate what is basically a stand-by reimbursement fund whose recipients are not known, for amounts not yet determined, for causes yet to be established.”
He said the CLF was described by “a friend” as a security blanket to comfort contractors. “I call it for what it is – a blank check,” Recto added.
The republic’s obligations will be honored, but not in a manner that will preposition public funds, he said.
He also said the CLF might lead to half-baked feasibility studies, not well thought-out projects, those whose financial projections are off by a mile, and bloated user targets.
“As I speak, the amount of contingent liabilities arising from PPP projects is a whopping P81.1 billion,” he said. “Of this, some P13.7 billion is already due and demandable. In one scenario, the probability of occurrence for P34 billion worth guarantees is ‘in the realm of the possible’.”
“Thus, this cannot be discounted: that the P33.66 billion that the government collected in premium and concession payments will be cancelled when contingent liabilities become assumed obligations,” Recto added.
He said that while such kind of slippage was not allowed in the private financial sector where one can get fired for projections way off the mark, it should not be condoned in the government.
“This does not, however, in any way diminish the need for a PPP,” he said.
“On the contrary, these are the provisions that will strengthen the PPP as a tool for national development and progress, one that will uphold public interest always, Recto added. SEE RELATED FROM PAGE B2