MANILA, FEBRUARY 7, 2007 (STAR) By Paolo S. Romero - Malacañang said yesterday it remains unfazed by the failure of the government to privatize the National Transmission Corp. (TransCo) even as President Arroyo expressed confidence that the power company’s 25-year concession would be sold in the next round of bidding.

The failure of the bidding for TransCo on Monday was discussed in yesterday’s Cabinet meeting at the Palace, where some factors delaying the privatization of the country’s sole transmission company was tackled.

"This (failed bidding of Transco) is a temporary snag in the process that does not detract from the overall upbeat outlook on the Philippines which is now riding high on our growing economic strength and political stability," Press Secretary Ignacio Bunye said.

"The President has full confidence in the energy team to carry this privatization effort forward and we leave to the Secretary of Energy to clarify the next steps to be taken on the TransCo sale," he said.

Following the failed auction where only one bidder showed up, Mrs. Arroyo immediately ordered concerned officials to improve the bidding process. The government aims to raise $3 billion from the sale of TransCo, which has been on the auction block since 2003.

During the Cabinet meeting, TransCo officials cited several factors that led to what they called "underutilization" of TransCo, including "bidding-related, financing-related, regulatory, and other issues."

Under bidding-related issues, the officials cited the lack of bidders; complex bidding process resulting in longer bid evaluations; abrupt increases in prices of metal products resulting in the non-extension of bid validity; inability to negotiate for Transco’s own credit line; and required bank approvals of bid reports.

Other issues include right-of-way problems and abandoned projects by contractors.

Among the actions to be taken by TransCo, the officials said, are reviewing the bid evaluation procedures and documentary requirements to shorten the process; negotiate with banks National Power Corp.’s assistance to expedite the opening of letters of credit; close coordination with the Energy Regulatory Commission for approval of projects; review right-of-way system and organization structure; and screening of contractors and suppliers.

Admin to fasttrack less painful fiscal measures By Paolo S. Romero The Philippine Star 02/07/2007

The Arroyo administration will fasttrack the passage of pending and less-painful fiscal measures in Congress, including the rationalization of incentives to investors, to ensure government is able to balance the budget by next year.

President Arroyo, however, said during a pooled interview following a televised round table discussion in Malacañang with key lawmakers and economic managers that the government would not change its deficit target for the year despite the continued improvement in revenue collections that resulted in a much-lower-than-expected budget deficit of P62.2 billion in 2006.

"Our Medium Term Philippine Development Plan says the budget will be balanced in 2010. Our economic managers say that it could be balanced by 2008 so they’re kind of ahead of schedule but I will still keep the balanced budget at 2008 only in deference to them but I would rather have made it 2010 because we should spend money and that is my belief," Mrs. Arroyo said.

The government projected a deficit of P125 billion last year but under-spending due to a lack of an approved budget as well as belt-tightening measures led to a much-reduced deficit.

Financial institutions have been asking whether the government will continue to bank on the 12 percent value-added tax it imposed in 2005 to shore up its fiscal position or implement more reform measures.

The President said the government would spend more this year on social and infrastructure programs owing to the passage of the P1.126 trillion national budget by Congress.

She noted there are three pending fiscal measures in Congress that lawmakers are rushing to pass: the proposed Rationalization of Fiscal Incentives Act, a bill exempting people earning P145,000 a year from income tax, and the proposed Simplified Net Income Taxation Scheme (SNITS).

Albay Rep. Joey Salceda, chairman of the House committee on appropriations, said that unlike the VAT, the new measures would be less-painful and would even entail a transfer of money from high-income earners to those who receive less by as much as P16 billion annually.

"In the House, the tax relief would essentially be funded by SNITS and the Rationalization of Fiscal Incentives bill," said Salceda, who was present during the televised discussion. "It’s not going to be washed out but there will be a new transfer from the higher income classes to the lower income classes. And there would not only be transfer but higher (tax) burden to those who earn more and the other side would receive tax relief."

Chief News Editor: Sol Jose Vanzi

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