Slapstick

We are governed by clowns craving popularity.

This week, all 21 senators present endorsed a wage order raising minimum wages in Metro Manila. The same order was suspended by court order for very good reasons.

First, the order broke the revered tripartite process that, for decades, processed wage adjustments. Representatives for the employers rejected the order. It was issued nonetheless.

We now know the proposed wage adjustment was determined without the benefit of any serious economic study of its repercussions on employment. None of the country’s economic managers were consulted. Some of them oppose the adjustment vehemently.

Going through the tripartite wage board was the due process. That was thoroughly undermined. Investors have lost all confidence that policymaking in this country will be evidence-based rather than politicized.

The Foundation for Economic Freedom issued a strong statement calling for the suspension of the order and warning against its consequences. It was issued while unemployment was rising and small businesses are under great pressure. The order will cause a freeze in hiring, a reduction in paid working hours and possibly business closures.

The same conclusions were reached in separate statements issued by the Congressional Planning and Budget Research Office, the Philippine Institute for Development Studies and the Bangko Sentral ng Pilipinas. These are not partisan institutions.

The politically driven wage increase is a foreboding of more policy actions that are not grounded on sound evidence. This is not comforting for investors. The policymaking process has been abused for narrow political ends.

Another instance of such unscientific and ultimately destructive policymaking is the President’s statements regarding systems losses. There is no evidence the matter was thoroughly studied – nor understood by the President himself. Yet it found its way into the SONA.

No energy agency was consulted beforehand. The item was smuggled into the SONA merely as a bait for applause. This is grossly irresponsible.

Immediately after the unenlightened remarks were made, the market capital of a major distribution utility dropped by billions. Electric cooperatives teetering on bankruptcy could not get financing. Horrified investors looking into our energy sector left in fear.

Our energy future just got bleaker because of irresponsible presidential utterance that utterly defied science. We direly need energy investments. We are getting none.

There is a Turkish proverb: When a clown enters a palace, he does not become king. The palace becomes a circus.

Exclusionary

We have become a ghostly country: ghost employees, ghost projects and now ghost electricity.

The ombudsman announced it is looking into the mega franchise awarded Leandro Leviste through the efforts of his influential mother. The son became a billionaire. The investments never materialized. The projected renewable energy was never generated. The damage to the country’s energy future could run into the hundreds of billions.

This mega franchise was questionable from the start. A franchise is normally granted to allocate a scarce resource: bandwidth or road space. Solar energy is free and abundant. A franchise simply gives a business exclusivity over something that is freely available. This, at first glance, defies reason and militates against science.

The franchise that Leviste won at the ripe old age of 21 is an asset many could kill for. It gave him rights and privileges for free. It excludes others from competing on even terms – thereby denying them the opportunity to invest sustainably in supplying the country the energy we need.

A franchise is an asset – especially when it is bundled with accumulated rights, regulatory approvals and undeveloped obligations. It could be used to raise capital from the market to support a business venture. Those excluded from the franchise are denied this asset.

Even as he managed to generate a negligible amount of electricity, Leviste was able to sell a portion of his Solar para sa Bayan franchise for an astonishing P30 billion. This is probably fair market. But the dynamics that led to that deserves the closest scrutiny.

Within the framework of the mega-franchise, Leviste’s companies accumulated numerous solar energy service contracts to such an extent a virtual monopoly over solar energy opportunities was created. He worked quickly to consolidate whatever unreasonable rights the franchise gave.

These contracts gave Leviste’s companies exclusive rights to develop, produce and sell solar energy in designated areas. These contracts shut out other Filipino investors who might have actually built facilities and are trying to supply real electricity to the market.

While he cornered the supply contracts, Leviste failed to deliver the actual power. The Filipino public was left with what Ombudsman Boying Remulla called “ghost electricity.” The ombudsman estimates that financial obligations from the terminated contracts add up to about P10.44 billion.

The franchise handed Leandro Leviste is not a gift. It should not be. It is a solemn obligation to use the privileges granted to produce cheaper and safer electricity for the Filipino people. Apparently, he thought of it as an opportunity to cash in on the privileges.

Today, Filipinos pay the highest cost for power in Southeast Asia. Our energy costs are higher than Singapore’s. This does not only punish the Filipino consumer. It punishes our economy’s ability to attract businesses and build prosperity. The costs are long even as the profits drawn from this questionable franchise is quick.

Kickbacks are for those with crude imagination. The franchise Leviste won has the veneer of legality even as it makes our people’s future a bit darker.