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(1) Let's have a fire sale!
By Peter Wallace
January 26, 2005
The President, in her State of the Nation address, said
National Power Corp. and Transco must be sold, but not at fire sale prices. I
had earlier suggested that, if necessary, they should be sold at fire sale prices…
Get these massive debts off the government's books and
operating efficiently. This is far more important than maximizing cash returns
now, even if the government is desperate for funds…
Simple calculation would show that a 30 percent discount
from market value so as to sell NPC quickly could be recovered within two years
just from stopping the hemorrhage of NPC (assuming a conservative asset value
of P200 billion for the Generating Companies (Gencos) and an annual average
loss of P30 billion). But, more importantly, the urgently needed capital for
expansion, upgrading, modernization would become available in these companies.
What the President should do is sell everything. Every
government-owned or -controlled corporation (GOCC) except maybe, a very select
few, such as GSIS, DBP and Land Bank), every share in every corporation, every
piece of land not being actually used by government where government has no
business being. Every asset of every sort — at bargain basement prices. Do it
like they do in the retail business announce: FIRE SALE, EVERYTHING MUST GO.
Even businessmen can't resist a bargain.
Government has no business being in San Miguel, or
competing with the private sector to import rice (it can ensure there is
honest, open competitive dealing instead). I do not buy the argument, for
example, that the National Food Administration (NFA) is necessary
to stabilize prices and ensure supply in case of shortages. A truly open market
with minimal duties on imports would draw enough players to ensure supply — at competitive prices. I would argue that it was
the controls and interference of NFA that have led to the oligopolistic nature
of this sector.
It's the same with so many of government's other
agencies. What really are they doing, and is it really necessary? I'd argue
that they have no role, no role the private sector can't do better.
Government's role should be to regulate them, where regulation is really
necessary. And this should be minimal, too. The countries that succeed best are
the ones where the government intervenes the least in business.
No one seems to know the real numbers, but, just off the
top of my head, there are something like 60 GOCCs competing with or can be run more
effectively by the private sector. There are also, government shares in a number of major private companies (e.g. Philippine
National Bank, Petron, Philippine Airlines, etc.) and about 50 pieces of
valuable real estate.
P1 trillion worth to sell
A very rough calculation indicates that there could be at
least P1 trillion that could be sold, assuming a conservative average of P10-12
billion per non-Napocor asset. P1 trillion would not only wipe out the P190 billion budget deficit in one fell swoop, it would
also allow some massive infrastructure development…
February 2005
(2) Me:
I Agree with these proposals. I would also argue
that ALL govt. corporations and banks, devt. bank (DBP) and land bank (LBP) should be
privatized. And both state-managed private pension funds SSS and GSIS, be deregulated
if not privatized.
The philosophies are simple:
a) The state should concentrate on its core function --
protection of lives and properties. Catch most of those killers, rapists, akyat-bahay
gang, kidnappers, carnappers, drug pushers, gun smugglers, bombers and
terrorists, out there. Prosecute them if caught, shoot if they fight back.
b) If the state cannot do the above functions, why is it
running banks, tv stations, real estate companies, agri trading and shipping companies,
petrol firms and private pension funds?
c) Get the money quick, and retire a big portion of the
public debt, and do not burden the citizens with additional taxes and fees. If
the state can raise just P1 trillion from such fire-sale, at 8% interest rate,
that's P80 billion savings from interest payment ANNUALLY. It's like finding a
Yamashita gold and spending the interest earnings to public infra and
strengthening the justice system to protect lives and properties.
(3) From Marcial: Why does the government INSISTS on
holding on to these corporations? The advantages of divestment should be
obvious to them now. The man-on-the-street answer usually revolves around words
like 'greed', 'corruption', and 'inefficiency'. but we don't believe that. why
then?
(4) From Joseph: Any sale of government assets should be
held under the most transparent conditions.
We certainly do not want a repeat of how the sale of PNB and of PAL to Lucio
Tan went through. Sales like these are
equivalent to behest loans.
We do have some statists who insist on some government
involvement so as to "balance" the so-called "greed" of
corporations. As to what will make GOCCs
profitable without profit incentive, I just don't see it.
As to the so-called "nationalists" who insist
on controlling our patrimony, all to the good if on one hand law enforcement
really works, and on the other, if "national" priorities are
straight. Otherwise,
it's just one big hypocrisy.
(5) From Cynthia: All the reasons government gives, the
noble reasons such as government's role in catalyzing development, the provision
of essential services, are just cover-ups. GOCC's and government shares in corporations
are just the means of expanding the delicious pie that the parties in power can
divide among themselves. Anybody who has
witnessed the posturings of the clowns appointed as directors and senior
officers in GOCCs (why do GOCCs, which have only one shareholder- the
government, have a Board of Directors anyway? All the better to accommodate all
political debts, the more available appointive seats, the happier the
appointing authority!), and the panic that ensues when elections are near and everybody
is scrambling to keep their seats. The
advantages of divestment are not obvious to these people because nobody will
willingly give up their turf and gravy train.
For example, I'm involved in the valuation of one of
those companies mentioned for privatization, but the senior officers insist on
moving very, very SSLLOOWWLLYY, ostensibly in the interest of transparency,
following correct procedure, etc. But
the real reason, I think, is if they're
successful, their jobs are also gone. That simple.
---------------See also:
Privatization 10: More on Selling PAGCOR, June 12, 2013
Privatization 11: Presentation in Hawaii in 2007, June 08, 2013
Privatization 12: PH government corporations sold, retained as of 2007, February 07, 2016
