Privatization vs corruption: What readers say

Some weeks back, I wrote about privatization as a possible solution to our corruption woes. It elicited mixed reactions from readers, with some suggesting measures as extreme as abolishing some agencies altogether.

One businessman from one of the country’s biggest conglomerates, for instance, favors privatization but said some government functions are no longer needed.

His idea, for instance, is to remove the tariffs on all goods entering the country and, in doing so, there would no longer be a need for the Bureau of Customs.

This is taking a page from Hong Kong, which is famed for its free-port status.

A free port, according to an article published by SCMP, is a designated geographical area, usually encompassing a port and its surrounding land, where goods can be landed, handled, manufactured and re-exported without being subject to tariffs and with minimal customs intervention.

The idea of minimal customs intervention here in the Philippines may sound appealing, especially to our local businesses which have had to deal with the Bureau of Customs for their import requirements, and have their own horror stories about it.

But there are consequences in removing tariffs, especially on our local industries.

What is possible instead is to privatize some of the functions of the BOC.

Although, as it is now, BOC Commissioner Ariel Nepomuceno, as we’ve been seeing so far, is doing what he can to make BOC processes better. I hope he succeeds.

Hong Kong, for its part, follows a free-trade policy and hence maintains basically no barriers on trade. There is no customs tariff on goods imported into – or exported from – the city. Import and export licensing is kept to a minimum.

This has strengthened Hong Kong’s status as a global logistics and re-export center but hey, this is Hong Kong where there is regulatory consistency.

In the Philippines, however, the rules change every administration, even midway into every new presidential term.

‘From the frying pan to the fire’

On the other hand, another reader, Fe Obana, who identified herself as a concerned senior citizen, warned against privatization, saying that businessmen are profit-driven and would always opt out when the going gets tough, i.e. when they don’t get the desired rate increases.

Water utilities, she said, passed from owner to owner like a hot potato in the past, especially when the government stepped in to freeze rate hikes.

And when rules change midstream, investors pull back, or sell to another.

But the bigger question she raised cuts through the noise.

Has privatization, in all its previous waves, actually lifted ordinary Filipinos out of poverty?

Did per capita GDP rise enough for wages to finally reach living-wage levels?

“No. Minimum wages remain well below what families need to survive,” she said.

How about the lowering of corporate income taxes? She argued that this did not deliver any meaningful improvement in employee pay.

“Again, no,” she said.

Privatization, she argued, may have made some sectors more efficient, but it has not made Filipino workers any less poor.

Privatization must therefore be implemented with good governance and must be under close scrutiny by regulators.

If this is done well, then for sure, we might have a better BOC, BIR, DPWH and other government agencies if these functions are transferred to the private sector.

It’s worth a try for sure, given the way things are at present.

The Ukraine experience

I also received a letter from Oleksii Opanasenko, international cooperation officer from Ukraine’s Prozorro.Sale, a national online auction platform, about Ukraine’s experience in public assets management and privatization process.

The letter basically introduced Prozorro.Sale, a Ukrainian digital “one-stop-shop” for the sale and lease of government and municipal assets.

“It belongs to the Ministry of Economy of Ukraine, and since 2016 it has helped the country generate over $3.5 billion in a transparent and efficient way.

“We would be glad to share our expertise and help the Philippines build its own public-private digital ecosystem for efficient and transparent sale and lease of government and municipal assets. This would generate additional funds for the country’s development, while fighting corruption and increasing trust among society and international partners (making the investment process more transparent and safe),” he said.

Oleksii Opanasenko said Prozorro.Sale could advocate the development of a similar ecosystem in the Philippines, which would benefit both the government and the private sector.

There were many more ideas on whether or not privatization in the Philippines will work.

For sure, it is worth a try because corruption in government has worsened through the years. as we’re seeing now with the DPWH, Congress and the executive branch all in cahoots to divert funds into flood control projects – from ghost to substandard – enabling the corruption of taxpayers’ money.

But privatization must be done with strict governance and proper regulation because here in the Philippines, it is also a fact that some businessmen try to influence the laws in their favor – a whole new level of corruption in itself.

On the other hand, if it is done well, we get better service and at the rate things are in our country, that’s a rarity in government offices.

Privatization alone won’t save us; corruption simply adapts so we must build a system where no one can game the process. Then perhaps we can finally break the cycle.

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Email: [email protected]. Follow her on X @eyesgonzales. Column archives at EyesWideOpen on FB.