SPECIAL REPORT : RP to lose $40 M Japanese loan due to graft

The country stands to lose by default some $40 million in infrastructure development loans from Japan due to technicality, negligence and apparent graft, dealing a serious blow to the government’s rural electrification program.

The impending forfeiture of the loan from the Japan Bank for International Cooperation (JBIC) will indefinitely stall implementation of the government’s ambitious program to bring electricity to the country’s more remote areas.

This means that over five million households nationwide would be forced to continue living without electricity in the new millennium.

The loan facility, being granted under Japan’s Overseas Economic Cooperation Fund, will expire in October this year, unless the National Electrification Administration (NEA) which was tasked to carry out the rural electrification program can meet the requirements of the creditor.

The $40 million is actually just an unused portion of the total financial package for the project that seeks to deliver the benefits of electricity to the countryside.

Pete Ilagan, president of the National Association of Electricity Consumers for Reforms Inc. (NASECOR), said the financial assistance will be withdrawn if the government fails to avail itself of the remaining loan proceeds by October.

The amount was earmarked for the acquisition and installation of wooden poles and crossbars in the intended service areas.

With October only nine months away, the government would be racing against time because the poles and crossbars have to undergo a tedious process of cutting and treatment, not to mention the fact that the logs would have to be imported.

Delivery of the poles to the recipient barangays, as well as the bureaucratic process of evaluation and review to be undertaken by both the JBIC and the NEA and the final approval by Malacañang, will also definitely take a lot of time.

Meanwhile, transformers and other components of the energization project which have been purchased earlier under the same JBIC loan portfolio were left rotting in ill-maintained storehouses. With no clear and immediate possibility that these equipment will be installed, they will continue to deteriorate and eventually become useless.

Citing reports from NASECOR members nationwide, Ilagan confirmed that the materials were left exposed to the elements and were already decaying in some warehouses.

The transformers and other materials cannot be installed because the woodpoles have yet to be erected.

"We understand that to date, mini-hydro components from China continue to rot at NEA warehouses because the government could not put its act together," Ilagan added.

For a cash-strapped Third World country like the Philippines, that spells both golden opportunity lost and big money down the drain.

"In any ambitious endeavor like the government’s rural electrification program, it is always the financial aspect that is the most difficult to raise. Unfortunately, it is our own shortcomings that will cause the failure of this project," Ilagan lamented.

He recalled that two years ago, the World Bank also withdrew a $3.8-million package for electric posts in the Caraga region for the same reason.

Ilagan challenged the Estrada administration to fulfill its campaign promises of redeeming the people from mass poverty by at least ensuring that a rural electrification program is fully implemented under his tenure.

"It is an economic and social obligation of the government to provide electricity to the countryside," Ilagan stressed, adding that Filipinos residing in the hinterlands have as much right to a better quality of life as those living in the cities.

What went wrong?

The rural electrification project appeared to be hopelessly mired in some bureaucratic red tape, squabbling among NEA officials and unceasing complaints by losing bidders.

Bidding for the supply of the woodpoles was initially conducted two years ago, but the winner was disqualified for submitting spurious bank documents.

Another bidding was held in mid-1999, with 13 participants but only four of whom were pre-qualified on the basis of their technical proposals, was won by a Filipino-Malaysian partnership.

The bidding, covering the financial aspect of the project, was held Feb. 26 last year.

Two bidders, Nerwin Industries Corp. and the Australian firm Koppers Timber Preservation Ltd., arrived five minutes late.

Nevertheless, the pre-qualification, bids and awards committee (PBAC), exercising judgment call, allowed them to participate despite the objections of the other bidders. Nerwin and its Malaysian partner, Aktimas Sdn. Bhd. emerged as the winner after submitting the lowest bid of $11.7 million, which is reportedly $1.47 million lower than the second quotation.

However, the final award of the contract to the winner was indefinitely suspended as a sore loser raised objections over the five-minute delay in the submission of the winning bid.

The late Government Corporate Counsel Jun Valerio upheld the PBAC’s decision, saying the five-minute difference was immaterial compared to the benefits the government would derive from the $1.47-million savings.

"The insistence of Tri-State (Pole and Piling) on the five-minute technicality further becomes irrelevant and immaterial if one has only to consider its overall impact to the electrification program of the government," Valerio stated in his comment.

Subsequently, NEA and JBIC representatives went to Malaysia to look into the capability of Aktimas to deliver the woodpoles, and came up with a favorable report.

The PBAC’s recommendation of the award of the contract to Nerwin and Aktimas was even endorsed by then NEA Administrator Conrad Estrella. That move was taken in October last year, leaving only one full year to implement the project under pain of forfeiture of the loan for non-compliance with the creditor’s requirements.

But the contract has yet to be awarded to the winning bidder.

The controversy is further muddled by reports that the NEA was mulling the use of concrete poles instead of woodpoles as stipulated in the project’s blueprint drawn up by pertinent government agencies, including the National Economic and Development Authority.

Under the new scheme being proposed, the woodpoles component would be reduced to only 50 percent, with the other 50 percent comprising concrete poles "in an apparent attempt to please certain quarters."

The new proposal would effectively necessitate a new bidding, further setting back the project.

Under the bidding rules, the NEA can legally increase or decrease the volume of woodpoles by only 15 percent "with changes in the unit prices and terms and conditions of the contract."

"That is grossly unfair to the winning bidder. You just can’t change the rules in the middle of the game," an industry observer said.

Meanwhile, Nerwin claimed it continues to suffer huge financial losses arising from undue delay in the award of the contract, mostly as an offshoot of the interest on a loan used to put up its cash bond of P26.8 million for the bidding.

Nerwin officials told The STAR that they may be forced to take legal action. "If they declare there was failure of the bidding, notwithstanding the fact that we have won it fare and square, we will be compelled to take appropriate actions as my be necessary to protect our rights, based on the principle of governance that public office is a public trust, and the right of the people to be informed shall not be abridged."