What is it about Metro Rail Transit 3 (MRT-3) that the government wants to buy out its private stockholders and take full control of the country’s most congested mass transit system?
Last week, the Department of Transportation and Communications (DOTC) rejected once more the offer of Metro Pacific Investment Corp. (MPIC) to invest $300 million in the system to improve its operation.
Not content with its 80 percent ownership of MRT-3’s economic interests, the government is raising P56 billion to acquire the remaining 20-percent economic interest held by banks and other parties which include MPIC. The economic interests consist of bonds and asset-backed securities that MRT-3’s original owner, Metro Rail Transit Corp., earlier sold to meet its financial requirements.
Since these economic interests translate to stockholder rights, whoever owns their majority has corporate control over MRT-3.
The offer of equity infusion was turned down despite repeated breakdowns in MRT-3’s mechanical and communications systems that have resulted in long queues under the sun and rain by its riders. In typical bureaucratic fashion, MRT-3 and DOTC officials have come up with a myriad of reasons, other than themselves, for the inefficiencies of the 15-year-old mass transit system.
Concessionaires
The government’s track record in engaging or getting involved in commercial or business activities has, by and large, been spotty. Government-owned or -controlled corporations that are able to operate efficiently and still remain in the black are the exception rather than the rule.
The success of that few can be attributed more to their easy access to interest-free government funds and their ability to discourage private companies from competing against them rather than to the competence of their management. Without these factors, it is doubtful if these corporations can go toe to toe with their counterpart in the private sector and be able to earn respectable returns on their capital investment.
During the 1990s, the national leadership recognized the folly of using the people’s money to operate and, if things go wrong, prop up corporations engaged in commercial activities that are better left in private hands.
In 1994, Petron Corp., the country’s biggest oil refinery operator, then under government control, was privatized with the sale of majority of its shares to a Saudi Arabia-based company and to private stockholders through a public stock offering.
Three years later, Metropolitan Waterworks and Sewerage System underwent the same process and ceded its mandate to efficiently provide potable water to its service areas to two private concessionaires.
Politics
When a government entity engages in a business or commercial activity, it is inevitable that politics will intrude into or influence its operations. The politicians, or their surrogates, appointed to the board of directors or management staff owe their position and the perks that go with it to the appointing power.
If they want to keep their posts, they should remain in the good graces of the powers-that-be or whoever pulled the right strings in the high echelons of government to get their appointment.
This means, their business decisions should be populist, will not attract adverse publicity and, most importantly, cannot be used as an issue against their patrons come election time.
Thus, in MRT-3’s case, the upward adjustment in fares needed to finance the improvement of its services has been postponed thrice by DOTC because of its expected negative impact on the administration.
Unlike private businessmen who have to be strategic in the management of their businesses to ensure their survival and development, the horizon of political appointees at the helm of government corporations does not go beyond the term of office of the appointing power. Hence, the “weather weather lang” attitude: Make hay while the sun is shining, meaning, while still in power because the opportunity may not come again.
Regulation
Government has no business going into business. It should stick to the principal reason for which it is organized—public governance— and leave the commercial activities to the private sector.
This is not to say that private business should be given a free and unfettered hand in running its affairs or transacting with the public. The government, through its regulatory agencies, should see to it that the laws, rules and regulations on the fair conduct of business are rigorously enforced, and the public protected from predatory business practices.
Going back to the MRT-3 case, what assurance do we have that DOTC or any other government entity it may create would, assuming the buyout is successful, be able to turn it around and make commuting less stressful and hazardous to its riders?
MRT-3 is a capital intensive business. It needs a constant infusion of funds to keep the trains running promptly and efficiently.
It is foolhardy to expect Congress to readily make available the money needed for that purpose. If private business is ready and willing to provide the funding [and expertise] to properly operate the trains, why should the government insist on doing it instead?
The P56 billion that the government intends to spend to gain full control of MRT-3 can find better use in the construction of the infrastructure projects our country sorely needs.
Government’s insistence on taking over MRT-3 just doesn’t make sense. It’s a harebrained idea that renders suspect the motivation [and competence] of its author.
For comments, please send your email to “rpalabrica@inquirer.com.ph.”