Cyril del Callar, current President of Napocor, has a real PR problem at hand right now.
Davao Today, under no byline, published today what is reportedly the content of the current weekly report of Pacific Strategies & Assessments for its clients. There’s no indication of how they got their hands on it. I have seen no secondary verification that this is indeed the content of the report.
But if it is what it’s represented to be, then I’m somewhat taken aback by the loosey-goosey language used. Although there is much mention of very recent events, indicating that this indeed is a recent report, other contentions look like they might be old hat.
Take this quote:
“Senior officials apparently receive millions of pesos in kickbacks and commissions from fuel importers and others. “
That is very believable about Napocor from a few years ago and before. But does this statement reflect insights applicable to del Callar’s regime? Are things different under del Callar?
There’s really nothing new here. Most, or all, of this we’ve read in the newspapers over the past few months. What seems newsworthy to me is that PSA released it as an advisory to their clients. But then, I really don’t know anything about PSA.
In any event, it will be interesting to see how this plays out over the coming weeks.
Here’s the section published by Davao Today that is applicable to Napocor:
Napocor: A State of DecayThe government a few years ago announced a hopeful plan to privatize the National Power Corporation (Napocor), a gargantuan government-owned firm notorious for huge debts incurred through mismanagement and corruption. Particularly, the firm’s debts stem from numerous controversial contracts that lopsidedly favor power producers that charge expensively for their output and several power projects that remain idle because of muddled planning.
It should be noted that these now controversial contracts were driven by necessity during the major power crisis of the early 1990’s when there was a desperate need for attractive contract provisions to entice foreign investors into an investment market where contracts often lack the sanctity of law over time and are often overturned on political whim. Without payment and power usage guarantees no one would have come to the Philippines rescue at a time of dire need.
Equally frustrating, the government has disingenuously drafted a vaunted but totally unrealistic blueprint of selling Napocor assets to pay off its debts and reduce the fiscal deficit. The business community has now heavily criticized Napocor officials when they announced last week that they had sold about 10% of Napocor assets, a far cry from the targeted 70% that was promised back at the end of 2004. Congress later discovered that the officials had hidden the real figures – only 3% of Napocor’s assets have been sold.
What the Philippine government is never honest about when it pontificates about the sale of Napocor and its potential cash windfall for debt servicing is the reality that utility fees are heavily subsidized through price controls to appease the majority of Filipinos who are poor by every statistical definition. Due to price controls it is impossible for Napocor to make a legitimate profit and it would be the same for anyone stupid enough to purchase significant parts of Napocor.
The inability to sell Napocor spells even more trouble for the Philippine economy and its taxpayers. Napocor will continue to borrow huge amounts of money guaranteed by the government, meaning that taxpayers ultimately shoulder the burden. Last year, Napocor borrowed US$800 million; this year it plans to take on another US$700 million in debt. Napocor’s total debt is now equal to a third of the Philippines’ national debt, having reached US$9.6 billion in mid-2005 from only US$6.2 million five years ago. Napocor needs this money to service existing debt, keep its bloated bureaucracy afloat, and keep pace with payments for pricey energy purchases from independent power producers.
Many cynics believe that Napocor officials have been dragging their feet in the privatization drive because they want to retain their lucrative jobs. Senior officials apparently receive millions of pesos in kickbacks and commissions from fuel importers and others. They also have heavy retirement packages, with each allegedly receiving a little over US$2 million in one-time payments. Soon after retiring, many are rehired as consultants to stay on the payroll. Moreover, officials use their influence to have Napocor sign contracts with private companies that they own or operate. These realities certainly play poorly in the minds of would be Napocor buyers.
Corruption at Napocor has a serious effect on an already debt-heavy government that will likely have to borrow even more overseas to service existing debt. As it does, there will continue to be less money left over for education, health care, and road repairs. President Gloria Macapagal Arroyo has the authority to make changes, but her continued focus on political survival makes meaningful power sector improvements difficult to imagine.
I wish there were some Napocor bloggers so we could go, right now, and see their take on this. In the blogoshpere, this could play itself out in a matter of hours in stead of days, at best. But I guess we’re stuck with main stream media – unless PSA and Napocor do something on their websites (don’t count on it – that would make too much sense).