Nixing asset sale

August 06, 2020

Of all the cash-generation options available to the government, privatization of state assets is the easiest, fastest, and least painful to execute.

Taxation can only raise so much and generate tremendous public resentment; borrowing or issuing bonds is costly and can edge  private borrowers out of the credit market; advancing dividends of government financial institutions and government-owned and controlled corporations and would dissipate future earnings.

Selling state assets, especially those marginally profitable and running inefficiently, can raise the needed funds for the cash-strapped government. Throw in non-performing assets but still having residual value and thus can still be liquefied or turned into cash.

The downside for this option, however, is that it is a one-time, non-recurring deal. Once sold, a state asset is gone forever unless bought back.                 

Apparently, this sobering thought was not lost on Malacañang which said it does not yet see a need for the government to sell public properties to boost the social amelioration program funding in areas under modified enhanced community quarantine.

Presidential Spokesperson Harry Roque made the remark after President  Duterte, in a public address late Sunday night, again bared that the government is running out of funds to provide cash aid for low-income households under MECQ.

Duterte previously broached the idea of selling public properties if the government falls short of funds that could be tapped to address the coronavirus disease 2019 pandemic.

Roque said the government has billions in loans secured from other countries and foreign organizations.

“Well, the President promised that even if we run out of funds, we can use every peso from our loans. That’s the benefit of our good credit rating – we can easily secure loans with little interest,” he said.

While he does not see the sale of public properties necessary at this point, Roque said they could be sold as a last resort.

“If it’s not enough, he will really sell them. But at this point in time, it is not necessary because we can still manage),” he said.

Roque acknowledged that looking for a source of funding for the supposed third tranche of cash aid is a “big challenge” since Congress has yet to approve the “Bayanihan 2” bill that contains a stimulus package for the country’s recovery from the impact of Covid-19.

The Senate last week passed the Bayanihan 2 bill while the House of Representatives has yet to pass its version of the measure.

“Giving assistance for the third tranche is really a big challenge in Metro Manila and nearby provinces but we will find a way,” he said.

Finance Sec. Carlos Dominguez III has maintained that there is no need to sell state assets because the government entered the pandemic on a strong fiscal position.

Dominguez also cited government borrowings intended to finance the Covid-19 response.

Meanwhile, Roque said the Palace would hold on to the promise of the Department of Social Welfare and Development to finish distributing the second tranche of cash aid by the second week of August.

“Almost half of the second tranche has been distributed. The DSWD is asking for a deadline until mid-August to meet the 100 percent,” he said.

As of Monday, the DSWD has distributed P61.8 billion worth of cash aid to some 9.5 million poor households.