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Privatization as Solution

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The non-expert in me proposes a radical solution yet again! After the political summit proposal, here I go again with something I will do if I were president.

I was watching DECS Secretary Abad on the ANC Show On Line, when the idea of privatization dawned on me. An SMS from a viewer noted that the problem of the education system in the Philippines is not really the structure alone but the funding as well. He pins the blame on debt servicing. That made me think....The non-expert in me proposes a radical solution yet again! After the political summit proposal, here I go again with something I will do if I were president.

I was watching DECS Secretary Abad on the ANC Show On Line, when the idea of privatization dawned on me. An SMS from a viewer noted that the problem of the education system in the Philippines is not really the structure alone but the funding as well. He pins the blame on debt servicing. That made me think.

The Philippines pays more than a million pesos every two minutes to IMF to prevent the interest rates alone from getting higher and higher. Every Filipino, even kids yet to be born technically owe IMF around P50,000 pesos each, If I remember the figures right.

The government pays only the yearly interest and not the principal. This makes it a perpetual payment, which strains the yearly budget of the Philippines. Budget pressure by a deficit still has to prioritize debt servicing over any government program. It's a yearly non-negotiable! It makes sense then that other programs of the Government cannot be fully implemented.

People complain about lack of projects and lack of support. Meanwhile, the government can't do a darn thing because budget is limited and we can only do so much with so little. To avoid deficits new taxes are created, and collection is needed to beef up the national coffers.

I propose privatization of particular departments as the solution.

For those who understand basic Finance, the government departments are by nature expenditure items in a simplified cash flow statement. Each department begs for funding every year. I am not aware if there are Governement-Owned and Controlled Corporations operating under the departments. Big chance that they are seperate entities, but if in some legal way they are under the control of particular departments, the net cash flow per department will be toward expense all the time. There may be cost-cutting here and there but is there any department giving back money to the government?

Forgive my lack of know-how in this matter but besides GSIS, SSS, PAGCOR, PCSO and other GOCC's which are not technically departments (I think) but particular service offices handling particular concerns.

What would offering particular departments on auction do? Let's take the Department of Tourism for instance?

  1. Raise money from it's sale and channel the cash for funding other PRIORITY departments. Say open 51% of it for sale and retain seats on the board. Mandate by law its jurisdiction and what it has to do. Let the one with the best proposal win. Make it host events and profit from it. The years thereafter it will not receive funding but generate it's own.
  2. Government gets cash out of it's share. Or it can opt to trade it.
  3. This will free up resources for other projects worth more time and has more political value (Enterprising politicians do you hear me? It's good for you!)
  4. This will entice the best people to serve the organization. Mediocres and non-performers can be fired this time around. No more "pakiusap-maghihirap-po-ako" mentality.
  5. Corruption will no longer be a problem. Efficiency within the organization will be visible in it's financial statement.
  6. Filipinos can no longer complain about a department not doing what it has to do.
  7. Transition will not be a problem, since I think several bureaus in other department have enacted certain policies thru memos that save cash by charging for extra services beyond the normal offerings of their office. Oh you know what I mean! How enterprising is an office that makes you pay for a pen if you need one for filing up an application? Hence the culture to profit is there already. Make them think differently this time. Profit is for their tenure, and survival as an organization and not for something else.
  8. Department appointments are based on career achievements and excellence, not political appointments which are based on utang na loob. Corruption can be curb by basing their salary on earnings of the department functioning as a company.
  9. Tie-ups with private companies will be easier, since red tape will have to be avoided out of necessity. More companies will be more interested to work with the 'government' then because there is the motivation for profit!
  10. Redundant agencies and offices within the government will be removed, resulting in a more efficient bureaucracy. That and many other reasons!

Consider too that this had been done elsewhere, albeit in a micro sense:

"Opportunities for privatization of national parks were created when China's
rapid economic reforms met up with the state's empty coffers. The central
government in Beijing could not afford to pay to protect national parks, so
government officials created companies to do the job."

Source

In the Philippines this is not without precedent. Take the privatization of companies focusing on utilities like Petron and NAWASA. The only difference is that this privatization will be bigger in scale!

First order of the day therefore is to identify which departments will be suitable to this setup. I could already think of the Bureau of Jail Management and Corrections, BFAD (To be organized as a research institute that profits from royalties and outsourced product research), and the Department of Tourism, which will generate income by organizing events focused on "selling" the Philippines.

Wishful thinking? Well at least I'm thinking of something! Will it work? Tell me what you think.

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posted by Jdavies @ 5/26/2005,

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The Author

J.Davies

Jdavies lives in Quezon City, Philippines and has been blogging since 2002. A brand manager in a leading technology company and a freelance new media/web strategy consultant, he has refocused his blogging from personal, political & sociological observations, to marketing-related efforts and Internet trends that are relevant to his career and branding advocacies.


About This Blog

This blog is a depot of thoughts and observations on marketing trends which remain personally relevant to the Author as far as his marketing career is concerned. Having evolved from the personal blog of Jdavies, much of the earlier work contained herein are laced with personal speculation, political views, and similar advocacies. These posts are being kept for posterity's sake and for no other reason. No effort is being made to claim that the author will not contradict himself from his previous positions or that such advocacies are absolute.

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