Mining: illusory economic gains

Resistance against large-scale mining is gaining ground (Photo from ucanews.com)

On Mar. 3 (Saturday), anti-mining advocates will mark the anniversary of the Philippine Mining Act (enacted on Mar. 3, 1995) with a protest march from the University of Sto. Tomas (UST) to Mendiola Bridge in Manila. Participants will include delegates from various regions nationwide who are attending the two-day National People’s Mining Conference which starts today (Mar. 1). The protest march is the culmination of a weeklong series of activities against mining plunder organized by environmental and anti-mining groups.

New mining EO

The intensifying resistance from local mining communities to national organizations and support groups has forced the Aquino administration to promise a supposedly new mining policy. But Malacañang has yet to release the executive order (EO) for the new policy which was expected by end-February. Apparently, strong lobbying from the mining industry led by the Chamber of Mines, Philippine Mining Exploration Association as well as the Joint Foreign Chambers of Commerce is delaying the issuance of the EO whose initial draft reportedly contained unfavorable provisions for mining investors. What is clear is that the new policy is still framed within the neoliberal Mining Act, as assured by Executive Secretary Paquito Ochoa, and thus dims hope that the plunder, destruction, and maldevelopment that mining perpetuates will be substantially addressed.

P37-trillion mineral wealth

Meanwhile, as if to add to the pressure not to reverse current mining policies, the US State Department in its background note on the Philippines released last Jan. 17, 2012, noted that the country has about $840 billion (about P36.64 trillion at P43.62 per US dollar) worth of mineral wealth. However, such resources that include some of the world’s largest gold, copper, and chromate deposits remain untapped with the State Department noting that the Philippine mining industry is just a fraction of what it was in the 1970s and 1980s. It also said that while the Supreme Court (SC) upheld the constitutionality of the Mining Act in a Dec. 1, 2004 decision, some local government units have banned mining in their areas.

Increased mineral exports

Proponents of the Mining Act argue that since the SC allowed the operation of 100% foreign-owned mining companies, the industry has seen a jump in foreign investments and export earnings. Indeed, mineral exports grew by 27.9% every year from 2005 to 2010 while the annual growth rate in its share to total export earnings also grew by almost 21.1% during the same period. These numbers are a dramatic improvement from negative growth rates recorded in the 1980s and 1990s. (See Charts 1 & 2)

Growing foreign investments

Foreign equity has also climbed both in value and as a percentage of total paid-up investment in the sector. Although lower than its average in the 1990s (202.77%), the annual growth rate of foreign equity in mining remained robust in the 2000s (130.9%), especially in 2005-2008 (146.04%). Meanwhile, the annual growth rate of foreign equity’s share to total paid-up investment in mining increased from 76.69% in the 1990s to 317.74% in the 2000s (and in 2005-2008, to 237.12%). Also, the percentage share of foreign equity to total paid-up investment in mining improved to 14.25% in 2005-2008 from 9.7% in 2001 to 2004. FDI data from the Bangko Sentral ng Pilipinas (BSP) show that from an annual average of $20.99 million in 1999-2004, FDI in mining and quarrying jumped to $104.32 million in 2005-2010.

Insignificant share to economy

However, despite these supposed “developments”, mining continued to fail to contribute to industrialization. The contribution, for instance, of mining’s gross value added (GVA) to the country’s gross domestic product (GDP) even declined this decade compared to its long-term average from the 1960s to 1990s and did not show significant improvement even after the SC declared the Mining Act constitutional in 2004. (See Chart 3)

Chronic trade deficit

Though exports of mostly raw minerals grew substantially, the Philippines continued to rely on the importation of processed mining-based products for our own industrial needs, resulting in a perennial mining trade deficit. Data from the BSP show that from 1990 to 2010, the balance between Philippine mineral exports and imports of mining-based products (i.e., metalliferous ores, non-metallic mineral manufactures, iron and steel, non-ferrous metals, and metal products) averaged a negative $1.17 billion a year. (See Chart 4)

Negligible job creation

Other much-hyped economic benefits like employment and government revenues, meanwhile, were also negligible especially when measured against the social and environmental costs of large-scale mining operations. Data from the MGB and the Department of Labor and Employment (DOLE) indicate that the employment in the mining and quarrying sector is growing by a small 1.17% annually in 1990-2008 as compared to the yearly growth in total employment in all industries of 2.53% during the same period. Employment growth in mining and quarrying, however, did accelerate in 2000s at 5.41%, and especially in 2005-08 with 7.65 percent.

But as a percentage of total employment, mining and quarrying declined from 0.49% in the 1990s to 0.40% in 2000s, although in 2005-10, its share to total employment is higher (0.47%) as compared to its 1990-2004 average (0.44%). In the past two decades, mining and quarrying employment has only contributed an average of 0.44% to total annual employment. (See Chart 5)

Meager government revenues

Data from the MGB and the Department of Finance (DOF) show that the share of revenues from fees, charges, and royalties collected by Department of Environment and Natural Resources (DENR)-MGB; excise tax collected by Bureau of Internal Revenue (BIR); taxes collected by national government agencies; and taxes and fees collected by local government units (LGUs) to total state revenues remained insignificant at just 0.5 percent.

The minimal tax revenues and royalties that the mining industry yields are blamed on the Mining Act itself. It has been pointed out that the State, which supposedly owns all mineral resources in the country as stated in the 1987 Constitution, does not get any share in the profits of mining companies. The only government share is the 2% excise tax on metallic and non-metallic minerals (mandated under the Mining Act). In his dissenting opinion in the 2004 SC decision upholding the constitutionality of the Mining Act, Justice Antonio Carpio argued that “The excise tax is not payment for the exploitation of the State’s natural resources, but payment for the ‘privilege of engaging in business’… the State must receive its fair share as owner of the mineral resources, separate from taxes, fees and duties paid by taxpayers.  The legislature may waive taxes, fees and duties, but it cannot waive the State’s share in mining operations.” (As cited by economist Winnie Monsod in her Philippine Daily Inquirer column.)

Now, juxtapose these illusory economic gains from neoliberal, export-oriented mining to the well-documented and very real cases of environmental destruction and physical, cultural, and economic displacement of indigenous and peasant communities, not to mention the extrajudicial killings that are associated with large mining operations. Clearly, what we need is more than a new mining EO but a deep and far-reaching reorientation of the mining industry. #

Mining and climate change: Aquino’s policy incoherence

The Aquino administration assures the public that it is proactively dealing with climate change but continues to promote programs like large-scale mining that aggravate the adverse impact of extreme weather events (Photo from facebook.com)

First published by The Philippine Online Chronicles

What caused the massive flooding in the provinces of Central and Northern Luzon, several of which remain submerged more than a week after  typhoons Pedring and Quiel left the country? Elderly village folks in affected areas swear that they have not seen such flooding before, that what happened was abnormal. For this, the catch-all explanation of the Department of Science and Technology (DOST) is climate change. “What we consider as abnormal we should now consider as normal,” its undersecretary was quoted as saying.

But the Aquino administration assures the public that it is proactively dealing with the issue of climate change. In fact, President Benigno S. Aquino III has made Climate Change Mitigation and Adaptation as one of the five Cabinet clusters that will implement his programs until 2016. In Aquino’s proposed 2012 budget, P36.2 billion is allocated for climate change adaptation and mitigation activities.

Priority area

Ironically, however, the Aquino administration also continues to promote programs that aggravate the vulnerability of the country to the adverse impact of climate change. One example is large-scale mining, which is among the priority areas of government’s Philippine Development Plan (PDP) 2011-2016. While the PDP talks about linking the mining industry to the domestic production of manufactured goods and industrial products, its ultimate goal is to double the sector’s exports by 2016.

The importance that Malacañang gives to the mining industry as among the sectors with the “highest growth potentials and generate the most jobs” explains its strong reaction to the simultaneous attacks on three mining firms in Surigao de Norte last Oct. 3 by the New People’s Army (NPA). The rebels cited the serious harm to the environment being inflicted by the large-scale mining operations in the province as one of the main reasons for staging the attacks.

Massive deforestation

Mining contributes to both the cause and effect of climate change. The Philippines is considered one of the most mineralized countries in the world (third in gold, fourth in copper, fifth in nickel) due to its location along a belt of volcanoes in the Pacific. According to the Mines and Geosciences Bureau (MGB), an estimated “nine million hectares of the Philippine total land area of 30 million hectares are geologically prospective for metallic minerals”. But much of these areas lie underneath the country’s forests, which have to be cleared to extract the minerals, resulting to massive deforestation. It has been reported that the Philippines ranks number three in the world (behind Honduras and Nigeria) with the fastest deforestation rate. The Center for Environmental Concerns (CEC) Philippines, citing government data, said that the country’s forest cover is just about 18% of the total land area.

Together with corporate logging, large-scale mining is behind the significant deforestation in the country. The forest cover in the town of Claver in Surigao del Norte, where the target of the recent NPA offensive –Taganito Mining Corp. (TMC), Taganito HPAL Nickel Corp., and Platinum Group Metals Corp. (PGMC) are operating – is just one in a long list of forests denuded by large-scale mining. Generated through Google Maps, a satellite image of Claver where TMC operates shows a vast portion of the mountains in reddish hue, indicating massive deforestation.

A recent documentary by the GMA’s “Reporter’s Notebook” also presented the extent of environmental damage, including deforestation, caused by the mining operations in Claver as well as in Surigao del Sur. The GMA report said that the massive mining in Claver has almost leveled the mountains with the extracted minerals being exported to Australia, China, and Japan for processing.

Aggravating climate change

The clearing of forests is one of the factors behind global climate change as forests store huge amounts of carbon. According to the Greenpeace, “when forests are logged or burnt, that carbon is released into the atmosphere, increasing the amount of carbon dioxide and other greenhouse gases and accelerating the rate of climate change. So much carbon is released that they contribute up to one-fifth of global man-made emissions, more than the world’s entire transport sector.”

In the Reporter’s Notebook documentary on mining in Claver, reporter Jiggy Manicad noted the thick blanket of dust from the mining areas. Environmental advocacy group World Rainforest Movement (WRM) pointed out that this dust does not only pollute the air and causes serious health problems but also triggers a release of gases and toxic vapor, including “sulphur dioxide – responsible for acid rain – is produced because of metal treatment, and carbon dioxide and methane – two of the main greenhouse effect gases causing climate change – are also released, due to the burning of fossil fuels and the creation of artificial lakes for the hydroelectric dams, built to provide energy for the casting ovens and refineries.”

Of course, the amount of GHG emissions of the Philippines, including from deforestation, is dwarfed by the emissions of the world’s largest industrial countries. The US alone accounts for 25% of historical GHG emissions, according to the Friends of the Earth (FOE). Furthermore, much of the GHG emissions of poor countries actually come from the operation of First World companies plundering the natural resources of poor countries such as in the case of the Claver mines where Japanese giant mining company Sumitomo Metal Mining Co. has stakes in the TMC and Taganito HPAL Nickel Corp. Nonetheless, it does not downplay the incoherence in the Aquino administration’s proclaimed environment-conscious medium-term plan and its avowed promotion of supposed “development” programs that worsen climate change such as large-scale mining.

Worsening impact

But for Third World countries like the Philippines, the bigger concern is how deforestation and other environmental problems caused by large-scale mining increase the vulnerability of communities to extreme weather events such as unusual volume of rainfall (like typhoon Ondoy in 2009, which according to local weather officials poured a month’s volume of rain in barely six hours) due to climate change. Deforestation, for instance, aggravates flooding in rural and urban areas, which in the Philippines has become increasingly worse and more frequent. Forests play a crucial environmental role in preventing  floods. A report said, quoting the findings of a research conducted by the Charles Darwin University and the National University of Singapore, that “as little as 10% loss of forest cover leads to an increase of as much as 28% in flood risk.”

Another way that large-scale mining aggravates flooding is the siltation of rivers. One source of sediments are the tailings disposed by mining companies in rivers such as in the case of the Abra River that according to the Cordillera People’s Alliance (CPA) has become heavily silted because of the tailings disposal of Lepanto Consolidated Mining Company. As a consequence, an estimated 465 hectares of riceland have been washed out, the CPA claimed. Experts have also attributed the heavy flooding in Centra Luzon, aside from the ill-timed release of water from privatized dams, to the siltation of rivers due to denuded mountains in the region, which also hosts a number of mining operations.

Not a recent concern

Contrary to the common notion, climate change is not a recent concern of the government. In fact, the Philippines was among the first to recognize, at least on paper, climate change as a phenomenon and the urgent need to address its causes and mitigate its impact. As early as 1991, Noynoy’s mother, the late President Cory Aquino has already created the Inter-Agency Committee on Climate Change (IACC) through Administrative Order (AO) No. 220.  The Philippines was also among the first to ratify the United Nations Framework Convention on Climate Change(UNFCC), which it did in 1994.

These initiatives suffer from basic defects such as the promotion of market-based mechanisms to mitigate climate change (e.g. allowing rich countries to buy cheap emission credits from poor countries which allow industrial countries to evade their responsibility to cut down their own emissions) as well as low emission reduction targets. Worse, as a result of lobbying and pressure from First World corporations and financial institutions and their local agents, Third World countries like the Philippines continue to implement programs that allow the wanton corporate plunder of natural resources and enormous destruction of the environment. A year after ratifying the UN agreement on climate change, for instance, the Philippine Congress passed the Philippine Mining Act of 1995 or Republic Act (RA) 7942, which liberalized and consequently intensified large-scale mining in the country.

Two decades since the country officially acknowledged the challenge of climate change, there is no indication that government is willing or capable to promote development programs that are truly sustainable and responsive to the country’s environmental and social concerns and economic needs. #

Razon and Catanduanes coal mining: Arroyo’s cronyism rears its ugly head again

Mrs. Arroyo with crony Enrique Razon (photo from inquirer.net)
Mrs. Arroyo with crony Enrique Razon (photo from inquirer.net)

Businessman Enrique Razon, widely perceived as among the richest and most influential cronies of Mrs. Gloria Arroyo, is again in the news after his company – Monte Oro Resources and Energy Inc. – reportedly clinched a huge P6.2-billion contract to mine coal in 7,000 hectares of land in Catanduanes. It is bad enough that the coal project itself will have serious, irreversible damage to the environment and cause the physical and economic displacements of Catandunganons. It is worse that that the project smacks of patronage politics and cronyism.

This is not the first time that Razon figured in a controversial business deal that has been sealed because of his ties with Arroyo. Below is an article I wrote in December 2007 about Razon and his business empire that has expanded rapidly since Arroyo became president in 2001.

CRONYISM UNDER THE ARROYO REGIME

(Two-Part Series)

From human rights abuses and authoritarianism to corruption and cronyism, the uncanny similarity of Arroyo’s brand of political rule to that of the late strongman Ferdinand Marcos keeps growing by the day. Independent human rights groups have already declared Arroyo’s human rights record as worse than Marcos’s while a recent Pulse Asia survey found out that Filipinos believe that Arroyo is more corrupt than Marcos.

Now, Arroyo seems vying to outdo Marcos’s cronyism, with certain tycoons rapidly accumulating wealth under the current regime and cornering anomalous mega-million dollar contracts from the government.

Part 1 of this series details how Arroyo’s cronies have been using the Electric Power Industry Reform Act (Epira) of 2001 to expand their business empire. Part 2 deals with Enrique K. Razon, who is widely acknowledged as the closest crony to Malacañang.

POWER BROKERS IN POWER SECTOR REFORM

(Part 1 of a Two-Part Series)

The Electric Power Industry Reform Act (Epira) has been peddled by the Arroyo regime as the program to bring down the cost of electricity in the country, with the ordinary consumers reaping the benefits of cheaper electricity bills. But Epira, which has been beleaguered by graft and corruption issues in the past, suffered another setback with the controversy spawned by the recent $3.95-billion sale of the National Transmission Corp. (TransCo).

At the center of the latest Epira debacle is Enrique K. Razon, a known crony of President Gloria Macapagal-Arroyo, and who has also figured in the anomalous National Broadband Network (NBN) project. A deeper probe of the issue shows that a Transco franchise would only consolidate the control that Razon and his close business colleagues have already established in the Arroyo regime’s power sector reform.

Tip of the Iceberg

That Razon is one of the seven directors of the winning TransCo bidder, Monte Oro, is just the tip of the iceberg. It appears that a certain group of businessmen – which has bankrolled the administration’s previous electoral bids marred by allegations of massive cheating – have been cashing in on the Epira, with great help from their patron, Arroyo.

The appointment by Arroyo of Jose C. Ibazeta last February 21, 2007 as president of the Power Sector Assets and Liabilities Management Corp. (PSALM), the body created under Epira to handle the privatization of the National Power Corporation’s (Napocor) assets, is most illustrative. PSALM needs a “business-minded” president, Arroyo declared, and Ibazeta perfectly fits the position. Ibazeta is a member of the Board of Directors of the International Container Terminal Services Inc. (ICTSI), where Razon is Chairman and President.

Like Razon, Ibazeta is also a Director in several companies of the Soriano family, among them the Phelps Dodge Philippine Energy Products Corp. (PDE). Phelps Dodge Philippines (PDP) was formed by Andres Soriano, father of Andres Soriano III, also a Director of ICTSI and other Razon firms, in 1955 through a merger with Phelps Dodge International Corporation (PDIC), a US-based company and the world’s second largest copper mining company and the world’s biggest producer of continuous cast copper rods. In 1997, PDP established the PDE to consolidate all the manufacturing operations of various entities under the PDP.

PDE supplies aluminum wires and cables to the Napocor and independent power producers (IPPs) for their transmission lines and the National Electrification Administration (NEA) and electric cooperatives for their rural electrification program. PDE also manufactures high voltage power cables up to 35 KV, which are used extensively by the Manila Electric Co. (Meralco) and the NAPOCOR to deliver electric power to residential and commercial areas throughout the country.

The Epira created the Joint Congressional Power Commission (JCPC) to oversee Epira’s implementation. Among its tasks is to “ensure transparency, require the submission of reports from government agencies on the conduct of public bidding procedures regarding (the) privatization of Napocor’s generation and transmission assets”. The JCPC is currently co-chaired by Senator Miriam Defensor-Santiago, a fierce Arroyo ally, and presidential son Rep. Juan Miguel “Mikey” Macapagal-Arroyo (Pampanga, 2nd district).

When Mikey, with the help of Malacañang-backed majority coalition in the House of Representatives, took the post as House energy committee chair last July 2007, many questioned his expertise on energy reforms. Now their questions have been answered. Santiago and Mikey have acquitted Ibazeta on charges of “conflict of interest” in the TransCo sale because “there is no conflict between terminal services and power sector”, ignoring Ibazeta’s deep interests in the power business that make his position as PSALM chief highly dubious.

Monopoly Control

Meanwhile, Razon’s connection to the energy business is not limited to his “less than 2 percent share” in Monte Oro as well as his business association with Ibazeta. According to Senator Maria Ana Consuelo “Jamby” Madrigal, Razon also has close relations with the Aboitiz Group, which has been aggressively expanding its energy empire under the Epira. Razon is a brother-in-law of Stephen Aboitiz Paradis. Paradis serves as the senior vice president, chief financial officer, and corporate information officer of the Aboitiz Equity Ventures (AEV) and senior vice president for finance of Aboitiz & Co., Inc. He also sits on the board of ICTSI.

The Aboitiz Group controls power distributors Davao Light and Power Company, Inc., the third largest power distribution utility in the Philippines; Cotabato Light and Power Co., Inc.; Visayan Electric Company, the second largest power distribution utility in the country; San Fernando Electric Light and Power Company; and the Subic Enerzone Corporation. In addition, the Aboitiz has also been on a buying spree of Napocor generation assets such as the Philippine Hydropower Corp., Hedcor Inc., Luzon Hydro Corporation, Southern Philippine Power Corporation, and the Western Mindanao Power Corporation. The Philippine Hydropower Corporation is the holding company of the Aboitiz Group for its various hydroelectric power investments such as the Hydroelectric Development Corporation, Benguet Hydropower Corporation, Luzon Hydro Corporation, Northern Mini Hydro Corporation, and Bukidnon Hydro Corporation.

A TransCo franchise completes the Aboitiz Group’s stranglehold of the national power industry – from generation to transmission and to distribution.

Furthermore, Razon is also a Director of the CLSA Exchange Capital, which serves as the financial advisor, underwriter, and global coordinator of the Philippine National Oil Company (PNOC) – Energy Development Corp. (EDC) and the PNOC – Exploration Corp. (EC). PNOC-EDC was recently privatized for P58.5 billion and sold to Red Vulcan. Incidentally, CLSA Exchange Capital is also the financial advisor in the privatization of television networks RPN 9 and IBC 13.

A CRONY’S PROFILE

(Part Two of a Two-Part Series)

Establishing a foothold in the country’s power industry is just part of the aggressive expansion in Razon’s business empire, which has been growing dramatically under the term of Arroyo. Razon, who served as treasurer and major financier of Arroyo’s Team Unity ticket in the 2007 senatorial elections, is the eight richest Filipino with a net worth of around $820 million as of 2007, according to the Forbes.com. His net worth has increased by at least $100 million from 2006, highlighting his rapid accumulation of wealth in recent years.

Dramatic Expansion

Two of his companies are among the top 500 corporations in the Philippines in 2006. ICTSI ranked 129th in terms of profits with P955 million and 157th in gross revenues with P6.72 billion. On the other hand, ICTSI Warehousing, Inc. ranked 181st in terms of profits and 424th in gross revenues with P2.44 billion. ICTSI Warehousing, Inc., in fact, posted remarkable increases in gross revenues (3,411 percent) and profits (796 percent) between 2005 and 2006.

ICTSI is the crown jewel of Razon’s business empire. Established in December 1987, it holds a virtual monopoly control of the country’s ports. It has 25 subsidiaries (11 port management companies; eight holding companies; three software developers; one company each involved in warehousing, manpower recruitment, and port equipment rental) in the Philippines, Cayman Islands, Bermuda, Brazil, Poland, Madagascar, Japan, Indonesia, China, the Netherlands, British Virgin Islands, Australia, and Singapore. In the Philippines, ICTSI controls some of the biggest and most important ports such as those in Manila, Batangas, Subic, Davao, and Cebu.

Interestingly, 12 of ICTSI’s 25 subsidiaries were either acquired or established only between 2005 and 2007. The Naha International Container Inc., a port management firm in Japan, was acquired only in January 2005; the Madagascar International Container Terminal Services, Ltd., a port management firm in Madagascar, was established only in June 2005; the Australian International Container Terminal Limited, a port management firm in Australia, was established only in September 2005; the ICTSI Far East Pte. Ltd., a holding company in Singapore, was established only in March 2006; the PT Makassar Terminal Services, Inc., a port management firm in Indonesia, was acquired only in May 2006; the ICTSI Capital BV, a holding company in the Netherlands, was established only in August 2006; the Pentland International Holdings, Ltd., a holding company in the British Virgin Island, and the Abbotsford Holdings, Ltd., a Philippine-based holding company, were both established only in December 2006; the Davao Integrated Port and Stevedoring Services Corp., a port management firm, was acquired only in December 2006; the Yantai Rising Dragon International Container Terminals, a port management firm in China, was clinched in January 2007; while the Cebu International Container Terminal Inc., a port management firm, and the Prime Staffing and Selection Bureau, Inc., a manpower recruitment firm in the Philippines, have both not yet started commercial operations. In March 2007, ICTSI announced that it bagged another contract on port management in Ecuador.

Special Place

Is it merely a coincidence that such rapid expansion in Razon’s business empire is happening under the Arroyo regime? It does not seem so. Apparently, Razon enjoys a special place in Arroyo’s scheme of things. In fact, it is widely believed that Razon was behind the sudden transfer of Romulo Neri from the National Economic and Development Authority (NEDA) to the Commission on Higher Education (CHED) last July 2007 after Neri earned “Razon’s ire” over the issue of ports liberalization that threatens ICTSI’s monopoly.

Razon’s name was also mentioned by businessman Joey de Venecia in one of his testimonies in the Senate’s inquiry on the NBN. According to de Venecia, Razon, along with Soriano and Ibazeta, bought his shares at Multimedia Telephony in 2003, the company which subsequently signed a vendor and financing deal with Chinese firm ZTE Corp. Razon, according to de Venecia, filled in the shoes of First Gentleman Mike Arroyo, who got sick early this year, in brokering the NBN deal and ensuring that ZTE seal the contract with the Department of Transportation and Communication (DOTC).

In 2003, Razon was one of the only four private sector representatives appointed by Arroyo in the Public-Private Sector Task Force to coordinate Philippine Participation in the post-war reconstruction and development of Iraq.

Membership in this task force meant huge business opportunities. As stated in Arroyo’s Executive Order (EO) No. 194 issued in April 14, 2003, the task force was in charge of, among others, “assisting the participation of Philippine companies in the rehabilitation and development of the Iraqi infrastructure – public works, highways, transportation, information and communications, energy, agriculture – and public services such as education, sanitation, civil administration and other service industries; developing procedures to expedite deployment of Philippine manpower and other services in the fulfillment of contracts; and such other actions relevant to Philippine private sector participation in the reconstruction and development of Iraq”.

Razon also enjoys advantage over his competitors as he has “easy” access to infrastructure projects funded by Arroyo’s foreign loans. A case in point is the $215-million Subic Port Modernization Project, which is being bankrolled by the Japan Bank for International Cooperation (JBIC) and a flagship infrastructure project of the national government. The Subic Bay International Terminal Corp., an ICTSI subsidiary, was chosen by the Subic Bay Metropolitan Authority (SBMA) Board of Directors to operate the modernization project’s New Container Terminal 1, which was completed in July 2007.

Undermining Development and Democracy

Cronyism, or the act of giving concessions to favored businessmen, friends, relatives, and allies by political leaders, is inherent in any government that governs over a society divided between those who have money and power, and those who have not. In this kind of society, government is just an extension of those who have money and power and they use the control of government to further advance certain economic interests. Thus, cronyism undermines development because its definition is further narrowed to mean development only for a favored few. The Epira, for instance, is already a bad program for the poor but it is even worse that Razon, Aboitiz, and company are cashing in on the program to enrich themselves at the poor’s expense.

Cronyism undermines democratic governance as well because it further stunts the country’s political maturity and reinforces patronage politics. It robs the people the sovereign will to determine government policies and ensure that these policies truly benefit the general public and not only several cronies. For the Arroyo regime, its cronyism only further exposed its lack of accountability to the people and that it owes its survival and legitimacy not to the public but to a handful of rich and powerful.