Trashed

It was such a bad idea. The real spectacle here is that our policymakers even went through the motions of entertaining it before finally trashing it.

Acting Secretary Eliseo Rio finally put the proposal into a coffin where it belonged – and drove the last nail on it. Before a Senate hearing, after Senators Grace Poe and Chiz Escudero hammered the proposal, the DICT head confirmed in no uncertain terms that the proposal to limit construction of telecommunications towers to only two players has been abandoned.

Rio likewise confirmed that incoming DICT secretary Gregorio Honasan of allowing all players to come in and compete to build the towers. The business community heaved a huge sigh of relief.

Right now, in the face of the exponential growth in the demand for data transmission, the country needs about 70,000 communications towers to adequately serve the whole archipelago. We have only 16,000 functioning towers.

Providing all the towers we need is a task hampered by cost barriers and right-of-way issues. If we limit construction of these towers to only two players, we may never meet our needs.

Vietnam, our closest competitor in the region, already has 70,000 communications towers. They will undoubtedly build more as the market grows rapidly.

Limiting tower construction to only two players will create another duopoly just as we have brought in a third telecoms player precisely to break the old duopoly in the mobile communications business. The new player, along with the two existing ones, will want the flexibility to build the towers they need and share their facilities with their competitors if doing so will help recover investments.

As a general principle, the less constrained the market is, the better it works. Limiting the number of players in the communications tower business is totally ridiculous.

The proposal to limit the number of players in the communications tower business originates from RJ Jacinto. He seems to have overreached his role as a presidential adviser for economic development by insisting the DICT go along with his market-constricting idea.

In fact, we have never heard Jacinto actually justify the soundness of his proposal. All he has done was to pour vile on critics of his proposal. This is certainly not the way policymaking is done.

Making ad hominem claims about those who question one’s policy position certainly convinces no one. Any proposed policy must stand close scrutiny. Good governance depends on that.

World class

Things are looking quite promising for the Clark Airport emerging as a world-class facility.

After many years of neglect during the previous administration, quick progress is being made toward fully realizing the potentials of the Clark Airport. The facility will be built up entirely by the private sector.

The North Luzon Airport Consortium (NLAC) won a 25-year concession from the BCDA to undertake the operations and maintenance of the Clark International Airport. The consortium combines the financial muscle and technical know-how of the Filinvest Development Corp., JG Summit Holdings and Philippine Airport Ground Support Solutions Inc.

Changi Airport Philippines Pte. Ltd. now joins the consortium. The company is a wholly owned subsidiary of Changi Airports International, renowned for the excellent Singapore airport that consistently ranks at the top of any list of the world’s best.

The deal concluded between BCDA and NLAC is the outcome of a very transparent bidding process. The International Finance Corp. of the WB served as transaction adviser to this award. It is not likely this deal will be challenged by any of the losing bidders as often happened in previous award of contracts.

A new benchmark was set in awarding this contract. The Philippine government managed to transfer risks to the private sector and removed all explicit and implicit guarantees. There will surely be no possibility, as there was in the past, for government to assume contingent liabilities when a project fails.

Without government guarantees, it is often difficult to bankroll large projects such as this one. Banks extending project financing usually balk at contracts where government offers no guarantees. In fact, some of the potential bidders withdrew from the process because of this.

This is the truly remarkable thing here. A contract to build a world-class air transport facility has been sealed without this government exposing its successors to financing risks. Having done this for the Clark Airport operations and maintenance project, future PPP deals will have to match this achievement.

Fortunately, the enterprises involved in the consortium have their immense financial and reputational resources to bank on. These enable them to commit to a contract without forcing government to assume financial risks.

Economist Raul Fabella, one of our national scientists, foresaw a deal like this one in a recent lecture. He noted that the scale and financial strength of some of our conglomerates are such that they are now able to undertake large projects in place of government.

Government, constantly burdened by bureaucratic inertia, political interests and fiscal constraints is often stymied in making the investments necessary to push our economic development. The model of a contract where private sector entities do not expose government to future risks is indeed remarkable.

The deal between the BCDA and the NLAC will be observed closely not only here but in other countries as well.