MBC: Campaign vs Meralco weakens SEC, ERC


Posted at Jun 05 2008 05:00 PM | Updated as of Jun 06 2008 01:00 AM

An influential business forum has castigated the Arroyo administration for its campaign to wrest control of the country's largest power distributor, Manila Electric Co. (Meralco), saying it was damaging public institutions and weakening government credibility.

In a statement issued Thursday, the Makati Business Club (MBC), said the Arroyo administration's campaign to replace the Meralco board has "damaged several public institutions and sent wrong governance signals to the private sector."

Taking a similar stance as Meralco, the MBC said the resort by the Government Service Insurance System (GSIS) to Securities and Exchange Commission (SEC) intervention in resolving the intra-corporate dispute was a wrong move.

GSIS chief Winston Garcia tried to take control of Meralco in the May 27 stockholders' meeting. GSIS, which owns one-third of Meralco, sought and got a cease and desist order (CDO) from the SEC telling Meralco to exclude management-solicited proxies in the election of a new board.

But Meralco argued the order was invalid and went ahead with the election of a new board, foiling Garcia's takeover bid.

"Since R.A. 8799 transferred all intra-corporate disputes from the Securities and Exchange Commission to the Regional Trial Courts designated as Commercial Courts, the resort to SEC intervention by the GSIS was improper. By allowing itself to be used by the GSIS to wrest management control, the SEC has contributed to the diminution of its own credibility in the eyes of the business community," the MBC said.

RA 8799 is the Securities Regulation Code signed into law in July 2000.

Aside from the SEC, the MBC said the campaign against Meralco has also affected the role of the Energy Regulatory Commission (ERC).

"The Administration has used the consumerist cause of lowering the price of electricity as the rationale for revamping Meralco’s management. Yet the responsibility for protecting consumers’ interest in this particular area lies with the Energy Regulatory Commission. By shifting that responsibility to the GSIS, the Administration has weakened the authority of the proper government institution to handle this issue," the MBC said.

The MBC urged the Arroyo administration to fully implement the Electric Power Industry Reform Act (EPIRA) of 2001 to bring down power rates instead of trying to do it through a Meralco takeover.

"In order to bring down the cost of electricity, Congress passed R.A. 9136, otherwise known as the Electric Power Industry Reform Act of 2001. As the law encourages the development of a more competitive environment, electricity rates should come down as and when the EPIRA comes into full effect. But because its own executives have not achieved the benchmarks set by the EPIRA, this Administration appears to have lost faith in that law and has resorted to forcing down electricity rates on its own by bludgeoning Meralco, one of the private distribution companies," the MBC said.

The MBC said there may even be a political motive behind the takeover bid, saying "it is no coincidence that Meralco’s major owners may not share the Administration’ s political views."

The business group also noted that the GSIS campaign to take over Meralco was hurting the interests of government pensioners.

"The funds invested by the GSIS belong to its members—current and retired government employees who have dedicated their careers to public service. The GSIS has a fiduciary responsibility to act in a manner that enables the investments it enters into to grow. Yet ever since the GSIS increased its holdings in Meralco to at least 25% of the company, Meralco’s stock has fallen from P80 per share to P56 per share due to the very public denigration of Meralco’s management and its major owners by the GSIS itself! In so doing, the actuarial soundness of the government employees’ retirement fund may have been adversely affected," the MBC said.

The MBC said the administration's strategy to bring down power rates was an example of "bad governance."

"The Securities and Exchange Commission, the Energy Regulatory Commission, the Electric Power Industry Reform Act of 2001, and the GSIS itself have all been undermined in the course of the Administration’ s professed effort to take over management control of Meralco as the ultimate solution to high power costs. Damaging public institutions in this way is plainly bad governance. It sends the signal to the private sector that this Administration is prepared to sacrifice public institutions and its own reform program for political objectives," the MBC said.

The MBC supported call recently aired by the Joint Foreign Chambers of the Philippines (JFCP) that the government should continue the policy of privatization as a means to bring down power costs.

"The Makati Business Club stands firmly against the use of state power to intimidate the private sector and vigorously opposes the nationalization of the electric power industry. Reverse-privatization is the worst way to bring down the cost of electricity, as state-owned enterprises in this country are vulnerable to political patronage and are inefficient due to lack of competition. With few exceptions, government-owned and -controlled corporations have been a heavy burden on the resources of the state," it said.

The MBC also said that while it supports the Arroyo administration's call for "transparency" in Meralco's management, it said this should be done through properly.

"We support the Administration’ s call on Meralco’s management for transparency, but we also call for transparency on the part of National Power Corporation. A full and sober analysis of the causes of high electricity costs is needed at this time. Let reason and good governance prevail," it said.

The MBC is a "private non-stock, non-profit business association organized as a Forum for Constructive Ideas." Its main thrust is "to foster and promote the role of the private business sector in national development efforts, both in the planning and the implementation of policy."

It was founded in 1981 and is "composed of over 800 chief executive officers and senior executives representing almost 450 of the largest and most dynamic corporations in the Philippines."

Its current chair is former Finance Secretary Ramon del Rosario, president of Philippine Investment Management Inc. (Phinma).

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