PEA-Amari as Electoral Controversy
Robert Rivera, SJ, ICSI

Even as we have been collectively desensitized to controversy during the campaign period, the Public Estates Authority-Amari imbroglio seems to represent a scandal of truly epic proportions. If mudslinging has been the order of the day in the electoral derby, then PEA-Amari would certainly be one of the largest and slimiest mudballs of all. The political adversaries of the Ramos administration maintain that no less than the president himself is culpable. The crime: selling out the government's interests by favoring Amari Coastal Bay Resources and Filinvest Development--topping off a growing list of other corporate beneficiaries--over higher bidders in various lucrative real estate development schemes.

Ramos anointee Jose de Venecia is widely rumored to have been influential in deciding the outcome of the PEA-Amari transactions as well, with various presidential contenders claiming to "have the goods" on the former speaker. President Ramos, in his spirited counterattack, has dismissed these accusations and trained his guns on former PEA board member Arturo Trinidad, who has whipped up quite a tempest with his disclosures about the president's preferential treatment of various business interests.

With the results of the elections hanging in the balance, the PEA-Amari scandal has temporarily receded from public view. A suit attempting to void the PEA-Amari deal has been recently dismissed by the Supreme Court. Various presidential aspirants, however, have already promised investigations into the role of the Ramos administration in the scandal. Moreover, the controversy will certainly have repercussions on the economic agenda of the next administration.

Whether the charges levelled against the Ramos administration are indeed true or simply part of the electoral muckraking that is to be expected during the campaign period, the PEA-Amari et al affair allows us to appreciate the complexities involved in the privatization of government assets. The divestment of state controlled property, enterprises, and services has long been the subject of intense economic analysis and debate in many European and North American countries. In an insightful volume entitled Bureaucrats in Business, the World Bank (WB) analyzes the political considerations in the transfer of state operated enterprises (SOE's) to the private sector. Many of the WB policy paper's recommendations certainly resonate with the travails currently being encountered in the Philippine privatization process.

For instance, in the section entitled "The Politics of Reforming SOE's," the WB suggests three important norms to help overcome the obstacles to SOE reform and privatization. First, the reform undertaken must be politically desirable to the leadership and its constituencies, with the political benefits outweighing the political costs. Second, it must be politically feasible; leaders must have the means to enact reforms and overcome the opposition by winning them over, or by compelling them to comply. Finally, the whole conduct of the reform process must be credible. The investors should be convinced that the government will not take over privatized property once more, and any persons to be displaced by the reform or privatization (e.g. government employees) should be properly compensated.

Unfortunately, the PEA affair has revealed how Philippine government and the public in general has been amiss as far as these three norms are concerned. With regard to the political desirability of the PEA privatization projects, opposition and cause oriented groups can be faulted for not sufficiently looking and anticipating the complex issues involved. Thus, misdeeds associated with the transfer from government to private ownership fall into public scrutiny only when the projects are already well into their implementation. Many pundits have already aired, with good reason, their doubts about the suspicious timing of the Trinidad revelations.

The blame for the political unfeasibility of the PEA privatization initiatives, on the other hand, falls squarely on the government. Because of a fundamental lack of transparency in the way the bidding process and the selection of winners has been conducted, the government now seems hard pressed to explain why the companies in question received the contracts. The president, for one, has feebly explained that the deals involved were "flagship projects," not categorically denying Trinidad's allegations, and resorting instead to attacking the credibility of the government's detractors.

Ensuring the political credibility of any privatization initiatives will thus be dependent on both government and civil society representatives. The government should ensure that the guidelines for proper divestment are followed, and that any aggrieved parties are properly compensated. Various advocates should keep a watchful eye on the conduct of the privatization process, so that they may not simply be "too late the hero," but instead genuinely concerned with the proper implementation of the privatization projects. Both government and civil society representatives should be vigilant in ensuring that the property or enterprise to be privatized will truly be utilized for the common good.

The WB report points out that the political acceptability of SOE reform is usually high when governments are in transition; the transfer of Marcos controlled assets to the private sector during the Aquino administration is an example (although the Presidential Commission on Good Government was not itself totally free from scandal). The Ramos government did not have this advantage,and neither will its successor. The next administration should thus work hard, together with the private sector, to ensure that the political desirability, feasibility, and credibility of privatization are achieved. If not, the privatization initiaves of the next government could very well be stuck in the mud of controversy.