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Concessions to crony capitalism

“What compelled the inclusion of definitively onerous provisions is the desperation of the government on one end… and on the other, the concessionaire’s incompetence at managing our resources.

Concept News Central

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The perspectives through which the public views the worsening rift between the government of Rodrigo Duterte and some of the leading business conglomerates in the economy seem to be as varied as there are people on both sides of a partisan aisle. That for the most part these businesses operate under a government franchise or a bilateral concession agreement, and where the underlying resources to earn corporate profits are owned by the Republic is a critical factor in forming those points of view.

Politics cannot be avoided. Media has essentially painted this controversy as one between corporations on one hand and Duterte on the other. Unfortunately, we may be barking up the wrong tree of politicians.

Some see a leader who genuinely cares for a long-victimized public savagely abused by select and privileged corporations whose stranglehold on power were woven by past politicians. Dirtier minds think that the latent pressures indicate a new group of businessmen are salivating in the sidelines. Some see harassment rather than necessary and critical fiscal action.

That the relationship is not good is an understatement and is a common observation against those who might be thinking that media’s narrative is simply a zarzuela of sorts, and that there is nothing but ruffled feathers behind the ugly optics usually erupting when the President encounters entities he doesn’t like and the rhetoric becomes media’s singular focus.

The focus on rhetoric sells newsprint and TV time so media obliges and simply uses the contractual debate as fillers, the incendiary rhetoric being the banner points.

While the public is familiar with the contractual issues surrounding the water concessionaires’ controversy and the imminent expiration of a major network’s congressional telecommunications franchise, this is the Philippines. Partisanship colors everything, rightly or wrongly. More so when a business takes sides or favors one over another. It’s a country where dirt not only provides for fertile ground for expansion but likewise fertilizes everything.

While indeed the focus on the political aspect is unavoidable, we surmise that we’ve been focusing, not only on the wrong politicians, but more important, on the wrong administration.

Of the foregoing perspectives on these issues, allow us to explore the first as it relates to oligarchies and crony capitalism that Duterte has alluded to — an aberration constantly dominant at the forefront of our economy from the fledgling dictatorship years to the illusory and non-inclusive growth of the last administration.

More than just being oligarchies these conglomerates were cronies of the administrations with whom they negotiated their franchises and concessionaires. Note Wikipedia’s definition of crony capitalism.

“Crony capitalism is an economic system in which businesses thrive not as a result of risk, but rather as a return on money amassed through a nexus between a business class and the political class. This is often achieved by using state power rather than competition.”

The absence of risk is integral to crony capitalism. It is in the DNA. It is merely a question of cronies getting the most lucrative and juiciest contracts. But more than that, it is where the risks are borne by the public rather than the capitalist. That is corruption with a multiple whammy.

Against such skinny, array the three most onerous provisions in the concessionaire contracts where, one, the state is prevented from intervening in pricing, two, there is a state guarantee of profitability, and three, taxes, foreign exchange losses as well as interest on loans are passed on to the public.

These provisions fulfill the requisites of crony capitalism where risk is extinguished and a “return on money (is) amassed.”

Two previous presidencies immediately enter the equation. These contracts were signed under the administration of Fidel Ramos and then were prematurely extended under Gloria Macapagal-Arroyo.

In their defense, the question of necessity will certainly arise. But note. What compelled the inclusion of definitively onerous provisions is the desperation of the government on one end, perhaps conjured or created by artificial circumstances, and on the other, the concessionaire’s incompetence at managing our resources.

As Duterte continues to clean up the mess of previous administrations, it behooves us to seek accountability both from these past officials and the crony capitalists they fattened.

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