Faulty biddings, erratic rules turn off investors

In my piece last Labor Day I listed down what economists analyze to be the roots of jobless growth. There were three: stifled investments due to economic restrictions in the Constitution, continuing neglect of agriculture and fisheries, and smuggling of food, fuel, and construction products. Foreign money flows into no-labor stocks and bonds. Rural youths find no work in shrinking farms. Automotives and construction are booming, but not their collateral and supplies businesses.

Insightful readers pointed up two more causes: conflicting national and local policies, and costly yet erratic electricity. These even combined recently in a ruling by the Court of Appeals that turns off investors. The case concerns a new power plant to be built inside the Subic Freeport in Zambales-Bataan. The investors dutifully secured clearances from the environment office and the Subic Bay Metropolitan Authority. Still the CA invalidated these because the Redondo Peninsula Energy Inc. allegedly ignored the affected towns. So there goes another job and power generating project down the drain

Ironically, the consent of the local governments of Olongapo, Morong, and Hermosa was not even needed. The towns already had ceded authority to the SBMA upon its creation two decades ago. Besides, reps of the three towns sit in the SBMA board; in fact they had approved in 2010 the power firm’s entry.

The CA earlier had rejected an environment lawsuit against the power plant. There was no claim to ancestral domain over the land where it was to rise. Why the local governments insisted on prior approval is a mystery that will push away other investors from the Subic Freeport. The CA ruling sets a risky precedent to question the presence of earlier investors in Subic. The very residents of the three towns will lose jobs and businesses should the investors depart. Same with other towns that host free-trade zones across the land. For, the CA ruling effectively disempowers the governing authorities from inking investment deals.

Mindanao’s power shortage has turned away potential investors. The same could happen in Luzon if the energy supply stays low and the cost high. The energy department foresees 4.8 percent yearly rise in Luzon power demand till 2030, meaning an additional capacity buildup of 10,500 MW. It is already short 600 MW -- the very power that the new plant was set to supply.

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Here’s yet another potential investor turnoff if not wisely resolved by the government.

The apparent lowest bidder for the production of vehicle license plates is questioning its disqualification on flimsy technicalities. Favored instead were two rivals whose bids were two billion pesos higher.

The complainer, a joint venture of Filipino RNA Holdings Inc. and Polish Utal Sp. (or RNA), had submitted a bid of P1.32 billion to produce license plates for the Land Transportation Office. Yet it was declared ineligible during last week’s bidding by the Dept. of Transportation and Communications.

Deemed compliant were two other joint ventures: Filipino Power Plates Development Concepts Inc. with Dutch J. Knieriem B.V. Goes (JKG), and local Data Trail Corp. with Spain’s Samart Industries.

JKG’s bid of P3.18 billion was more than double RNA’s. More so Samart’s, at P3.31 billion.

The DOTC disqualified RNA on three alleged counts: absence of financial statements and credit line, and non-conformity with delivery schedules.

RNA, controlled by partners Robert Aventajado and Buddy Zamora, contested this in a motion for reconsideration. It said it had submitted the financial statements of its Polish partner, but in the form of audit papers that were the norm in Poland and not in the local format. It added that the bank had given Zamora the required P390-million credit backing, which he in turn committed for use in the RNA-Utal project for license plates. As for the delivery schedules, RNA said it gave a separate page as required by the bidding rules, instead of merely signing on one of the checklists.

Five other Filipino firms also were deemed ineligible for other reasons. Three were joint ventures with Chinese, and two with German plate makers. In informal talks among them, one of the Chinese ventures turned out to have bid lower than JKG and Samart, but much higher than RNA’s. The rest had bids higher than JKG and Samart, but just the same expressed concern about the arbitrariness of their disqualification.

The bidding was for 5.24 million pairs of motor vehicle plates, and 9.97 million pieces of motorcycle plates. The DOTC set ceilings of P2.36 billion and P1.5 billion, respectively, for a total of P3.86 billion.

In its complaint, RNA said its bid was beneficial to Filipinos who would avail of vehicle plates, for it would produce those for motor vehicles for only P163.85 per pair, and for motorcycles P46.16 apiece.

By contrast, JKG bid P380 per pair and P120 per piece, while Samart’s was P388 and P188.

RNA stated that in the product-quality compliance testing, it was probably the only bidder that met the latest US standard that the DOTC required. This was because it took the newest test, instead of the DOTC spec that turned out to have been phased out six years ago.

When RNA alone pointed this out in a pre-bid conference, the DOTC apologized for the supposed typo error. Unclear, however, was if the other bidders had submitted the latest test as they swore they did, not the outdated one.

Given the issues of price and quality test, the DOTC transparently should open all the bids.

Why was RNA’s bid P2 billion lower than the DOTC’s ceiling price? Two reasons, it said. One, it wanted to undercut the Chinese newcomers. Two, it knew the prices of the Europeans with whom they often compete, so it decided to set up the manufacturing plant in the Philippines to lower its costs. It figured that it could recoup its input by bagging other plate-making deals, such as for business permits and tourism certifications from local governments.

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