Cronyism & patronage

Presidential pork, election budget and Aquino cronies

Image from the DBM website

Image from the DBM website

Massive presidential lump sums and discretionary funds in the 2015 National Expenditure Program (NEP), along with a redefined savings, expose the proposed P2.6-trillion budget to abuse by the Aquino administration. It is vulnerable, in particular, to patronage and electioneering by the ruling Liberal Party (LP). The LP is desperate to bolster the low popularity of its president-on-leave and perceived 2016 presidential bet – Department of Interior and Local Government (DILG) Secretary Mar Roxas. Local government units (LGUs), including the barangays, play a key role in ensuring the electoral victory of a presidential candidate. With enormous pork barrel-like funds at Aquino’s disposal, the LP and Roxas have the resources to buy the political loyalty of governors, mayors and barangay captains for the 2016 presidential race. Vice President Jojo Binay may be the most popular choice right now as the next Chief Executive according to various polls, but Roxas boasts of a bottomless election war chest.

Thus, we see in the 2015 NEP mammoth increases in the administration’s planned spending for LGUs, many of which will be directly handled by Roxas as DILG head. A glaring example is the huge 80% increase in lump sum allocations for LGUs – from the current P17.3 billion to P31.1 billion next year. The amount includes P27.9 billion in LGUs’ Special Shares in Proceeds of National Taxes and P3 billion in Local Government Support Fund (LGSF), including P2.8 billion under the controversial Grassroots Participatory Budgeting (GPB) scheme and P200 million for “financial assistance to support various priority programs and projects”. The balance is comprised of a “death benefit fund” for barangay officials worth P50 million and shares in proceeds of fire code fees pegged at P200 million. The P31.1-billion LGU allocation is part of the P48.1 billion that Department of Budget and Management (DBM) Sec. Butch Abad has admitted as lump sum in the 2015 NEP. The remaining P17 billion is composed of P14 billion in disaster fund, P1 billion in rehabilitation fund, and P2 billion as presidential “contingent” fund. These amounts pertain to DBM-admitted lump sums; to be sure, much larger discretionary lump sums are tucked in various items of the NEP.

But another feature of the NEP seldom discussed is how the proposed spending plan, including presidential lump sums, will be used to support rich families and business groups with close ties to the Aquino administration. Through budgetary support for the Public-Private Partnership (PPP) program, these elite families and groups, and their foreign partners and patrons, will continue to receive presidential favors under the pretext of infrastructure development. Indeed, the proposed 2015 budget will be used not only to promote the political interests of LP’s presidential wannabe; it will also be used to promote the economic interests of presidential cronies.

Some P57.2 billion in public funds have been allocated in the 2015 NEP to guarantee the profits of investors participating in Aquino’s PPP program, pay for an onerous PPP contract, and facilitate the implementation of more PPP projects. The amount includes: (a) P30 billion for the Risk Management Program (RMP); (b) P10.9 billion for the Department of Public Works and Highways’ (DPWH) PPP for Infrastructure Projects; (c) P7.4 billion to support the LRT 1 and LRT 2 extension projects of the Light Rail Transit Authority (LRTA); (d) P4.7 billion to pay for government obligations under its Build-Lease-Transfer (BLT) deal with the Metro Rail Transit Corp. (MRTC); (e) P2.7 billion for the Department of Transportation and Communications’ (DOTC) PPP for Transport Projects; and (f) P1.6 billion for the Department of Education’s (DepEd) PPP for School Building Projects.

The P30-billion RMP, according to the NEP, is meant to “manage the National Government’s fiscal risks and enhance the country’s credibility among potential PPP proponents”. Executive agencies and departments as well as government-owned and -controlled corporations (GOCCs) can avail of the RMP fund to “cover commitments made by, and obligations of, the National Government, in the concession agreements relative to PPP projects”. The amount shall also be tapped to pay for all the obligations of a GOCC in concession agreement covered by a performance undertaking or any similar instrument issued by the National Government. A performance undertaking usually involves government assuming debt or other financial obligations related to a PPP project. One of the projects covered by the Aquino administration’s performance undertaking is the P62.7-billion MRT 7 of presidential uncle Danding Cojuangco and his right hand man Ramon S. Ang.

Aside from performance undertaking, RMP will also cover “contingent liabilities arising from regulatory risks assumed by the National Government”. One project that enjoys Aquino’s regulatory risk guarantee is the P64.9-billion LRT 1 extension and privatization of the Ayala family, a longtime ally of the Aquinos, and the group of presidential supporter Manny V. Pangilinan (MVP) and his Indonesian patron, the Salim family. Under the concession agreement that will be signed with the Ayala-MVP group, if the notional LRT 1 fares stipulated in the contract are lower than actual or approved fares, government will pay the difference through a so-called Deficit Payment Scheme. Notional fares refer to the adjusted fares as scheduled in the concession agreement. Such situation may arise, when, for example, a regulatory body or local court intervened and prevented the collection of the notional fare. To fulfill its deficit payment obligation with the Ayala-MVP group, which is essentially a profit guarantee, government will disburse from the RMP fund paid for by the people’s taxes. The RMP is actually just one of the many favors that Aquino is giving the Ayala-MVP group in relation to the LRT 1 project. As part of the contract, the common station that will link the LRT 1, MRT 3 and the soon-to-be-built MRT 7 was taken away from Henry Sy’s SM North and moved to the Ayala’s Trinoma Mall. (The SM group questioned this before the Supreme Court and got a temporary restraining order or TRO. In response, the DOTC said they might just build two common stations to accommodate Henry Sy and the Ayalas.) The Ayala-MVP group is also exempted from paying real property taxes, which government agreed to shoulder and could reach P64 billion throughout the 32-year concession agreement. These are on top of the P5-billion startup subsidy and P34.9 billion in loans that government will borrow for the project.

Meanwhile, the P10.9 billion allocated for DPWH’s PPP for Infrastructure Projects will be used to cover the costs of right of way (ROW) acquisition and relocation of affected communities. The projects identified in the NEP where this fund will be used include those controlled by the same groups with close presidential ties such as San Miguel’s P15.52-billion NAIA Expressway Project and P18.1-billion Tarlac-Pangasinan-La Union Toll Expressway Project, and the Ayalas’ P2.01-billion Daang Hari SLEX Link Road Project. Similarly, the DOTC’s P2.7-billion PPP Transportation Infrastructure Project fund will be used for ROW costs particularly for the P2.5-billion Integrated Transport System, which San Miguel, Ayala, MVP and Henry Sy, among others, are also eyeing. Meanwhile, DepEd’s P1.6-billion PPP for School Building Projects 2015 fund will be used for the amortization or lease payment of the total project costs of school buildings constructed by Henry Sy-affiliated Megawide Corp. and other firms.

P4.7 billion under the proposed 2015 PPP budget will go to the servicing of onerous contractual obligations with the MRTC, which is 48% controlled by the MVP group. The BLT contract, a PPP deal signed during the Ramos administration, tied the national government to paying Equity Rental Payments (ERP) to MRTC for its guaranteed 15% return on investment (ROI). Instead of rescinding, or at least renegotiating, the patently unfavorable contract with MRTC to build and operate the MRT 3, the Aquino administration continued to honor it because doing otherwise would undermine its PPP program. To supposedly correct the situation, Aquino has set aside P53.9 billion in the 2015 NEP’s unprogrammed appropriations to buy out the MRTC and scrap the BLT. But this approach means government will shell out more people’s money while legitimizing the illegitimate financial obligations with the MVP group.

Lastly, the P7.4 billion allocated for LRT 1 and LRT 2 extension projects will be used to support the privatization of both lines. The Ayala-MVP group will take over LRT 1, as already mentioned, soon. On the other hand, the LRT 2 operation and maintenance project, estimated to cost P14.3 billion, is scheduled for bidding within the year or in early 2015.

These planned expenditures show how public funds, raised mainly through taxes of ordinary wage earners and consumers, are being wasted and drained not only through corruption and political patronage but also through questionable economic policies that only benefit a favored few such as big business groups involved in PPP projects.

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SONA 2014

Sona 2014: A shaken regime

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All the previous issues that faced the Aquino presidency are like relentless jabs pounding its body, and the pork barrel and DAP are like powerful blows straight to the head of the regime. (Photo from here)

Since his first State of the Nation Address (Sona) in 2010, President Aquino has seen the steady erosion of his legitimacy as the empty presidential slogans of “daang matuwid” and “kung walang corrupt, walang mahirap” fall apart. Today, in his fifth Sona, Aquino is facing the worst political crisis of his regime amid the raging pork barrel and Disbursement Acceleration Program (DAP) controversies.

From the onset, Aquino’s presidency has been questioned for the powerful interests it represents as symbolized by Hacienda Luisita. His trumpeting of public-private partnership (PPP) in his first Sona signaled the perpetuation of pro-business and long discredited neoliberal economic polices. Barely two months in office, his leadership, or lack of it, was widely criticized with the Luneta Hostage crisis. When prices spiraled, “Noynoying” captured the indifference of the regime to the plight of ordinary people. The rapid growth in gross domestic product (GDP) and massively increased cash transfers could not camouflage the deteriorating poverty and job scarcity, made even more pronounced by the scandalous rise in wealth of the oligarchs. (Read: Prices, profits and poverty; Poverty trends) His criminal neglect of Pablo and Yolanda victims brought extra momentum to the public discontent that has been gathering force.

Then, the pork barrel and DAP scam exploded, shaking the Aquino administration in a way it has never felt before. If this were boxing, all the previous issues that faced the Aquino presidency are like relentless jabs pounding its body; and the pork barrel and DAP are like powerful blows straight to the head of the regime. It is obviously shaken. Aquino’s appeal to “tie a yellow ribbon” to show support to his administration illustrates how insecure and uncertain the administration has become. If this appeal were Aquino’s “counterpunch”, it merely exposed him to more blows as the Palace was forced to downplay the yellow ribbon call after an overwhelming public rejection.

Aquino and his Liberal Party (LP) hoped that the pork barrel scam would weaken the opposition for 2016. But the controversy quickly developed in a manner that Malacañang’s political operators did not foresee. It is no longer just about Senators Juan Ponce Enrile, Jinggoy Estrada and Bong Revilla, and Janet Lim Napoles and her bogus non-government organizations (NGOs). It has become more about the rotten system of patronage politics and bureaucrat capitalism with Aquino and his clique currently at the helm. Palace’s efforts to cover up the accountability of the President, his Budget Secretary Butch Abad, and other LP stalwarts and their allies are generating public anger as intense as the indignation against Enrile and company. In the eyes of the public, they are all the same trapos (traditional politicians) who abused the powers entrusted to them for selfish and narrow private gains. They must be all held to account, the President included.

The satisfaction and approval ratings of the Aquino presidency are dipping to their all-time lows and there are no signs of recovery. In the coming months, the neoliberal offensive against the people is sure to intensify with ever-rising costs of basic goods and services and economic displacement. After the Sona, for instance, we are anticipating a huge increase in LRT 1 fares related to its impending takeover by the Manny V. Pangilinan (MVP)-Ayala group (Read: How MVP-Ayala will squeeze LRT 1 consumers dry) followed by a massive retrenchment of Light Rail Transit Authority (LRTA) employees. (Read: How Aquino betrayed public interest in LRT 1 privatization) The long-delayed upward adjustment in LRT 2 and MRT 3 fares may also be implemented along with the LRT 1 fare increase, if not in the weeks or months after. Also after Sona, the results of the ongoing arbitration between the Metropolitan Waterworks and Sewerage System (MWSS) and its private concessionaires Maynilad and Manila Water are expected to come out, with a big-time hike in water rates a possibility. (Read: Water arbitration: Issues and implications) Then there’s the threat of El Niño, which experts say would be felt starting in the second half of the year with devastating impacts on the agricultural sector (and consequently, further increases in food prices) and on the livelihood of millions of farmers in the countryside. (Read: Bracing for El Niño) All these would aggravate the precarious state of the regime.

Meanwhile, on top of these brewing economic issues, Aquino himself is creating favorable conditions for persistent, growing and broadening protests against his regime and the rotten system of governance in the country. His display of excessive self-confidence and arrogance in successive speeches to defend DAP against the Supreme Court decision and pervasive anti-DAP public sentiment has further fuelled the likelihood in the coming months of mass mobilizations similar, if not bigger than, last year’s Million People March.

As the primary contradiction between the Aquino regime and the people further sharpens, so is the contradiction among the various cliques of the political elite for control of state power and resources. The filing of cases in relation to the pork barrel scam against LP’s perceived strong rivals in 2016 is just the start of electoral bickering among the trapos.

Already, the LP has initiated efforts to remove Vice President Jejomar Binay from the Aquino Cabinet, hoping to weaken his public profile as well as access to state resources that can be used to support his expected presidential bid. Plunder cases have been recently filed at the Ombudsman against the Vice President and his son Makati Mayor Junjun Binay, while daughter Makati Rep. Nancy Binay is facing allegations of anomalous pork barrel transactions involving an NGO founded by the Vice President.

The bickering among the trapos will surely intensify and escalate into full-blown maneuverings as 2016 draws near, and even earlier especially now that the impeachment against Aquino has already been endorsed in the House of Representatives. Palace propaganda operators, for instance, are trying to discredit the impeachment by charging it as a pro-Binay campaign, simply because of presidential succession. However, the blatant and arrogant way that Aquino has been covering up his and his clique’s accountability in the pork barrel and DAP scam is too glaring for people to doubt the intentions of the impeachment.

Another political flashpoint is the dynamics between Malacañang and the Supreme Court, which could develop into a full-scale confrontation between supposedly co-equal branches of government. Aquino’s veiled threat of impeaching the Justices would put the raging controversy into a higher level of contradiction between and within government’s institutions. Already, LP leaders at the House led by its Speaker Sonny Belmonte and its justice committee chair Niel Tupaz Jr. have called for a probe on the alleged SC’s own pork barrel – the Judiciary Development Fund (JDF).

Furthermore, the handling by LP and its allies of the impeachment process in Congress against the President will determine how fast and how intense the political crisis will escalate. The Aquino administration firmly controls the lower house and, like the Arroyo regime, will surely use all its influence and resources – including massive presidential discretionary funds – to dictate the outcome of the impeachment. Aquino apologists in Congress like Rep. Walden Bello of Akbayan, one of the biggest beneficiaries of presidential patronage and largesse, are already dismissing the grounds for the presidential impeachment as “flimsy” even before the process of determining its substance could begin. But for the people, all these only highlight how rotten the prevailing political system is and how hopeless reforms are within a decaying system dominated by narrow and self-serving interests.

We must emphasize that the Supreme Court decided against the pork barrel and DAP not because they are made up of upright Justices who are willing to challenge the country’s most powerful man (the decision, in fact, gives Malacañang wiggle room to evade criminal liability), but because amid the snowballing public condemnation against the corrupt and capricious use of state resources, upholding the patently unconstitutional and illegal DAP would only further fuel social unrest. Thus, while LP and its allies may blatantly derail Aquino’s impeachment, they will do so at the risk of triggering more public outrage and aggravating political instability.

The regime is shaken. The situation may or may not eventually lead to a dramatic outcome like Aquino’s ouster or resignation but the way people are rising up, challenging the status quo and asserting their democratic rights certainly gives us optimism that ultimately, the people will triumph.

It is not only about the pork barrel and DAP. Look, for instance, at how Yolanda and Pablo victims are gradually recovering through community actions and initiatives to ensure their livelihood and social services that government could not provide; or how the farmers and farmworkers have persistently pushed for, and in some areas even actually implemented, genuine land reform despite landlord repression and state terrorism; or how many Filipinos continue to join or support the 45-year old civil war in the countryside in the belief that it is the only way to end oppression.

Indeed, there is hope as long as the people are ready to struggle for what is truly democratic and just. ###

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