The humiliating arrest of Indanan Mayor Isnaji Alvarez, a ranking member of the Moro National Liberation Front (MNLF) is a slap on the face of the MNLF and the Bangsa Moro.

Alvarez, using his stature in the province, insured the safe release of Ces Drilon and her companions. And for that, he got arrested and charged of kidnapping.

How many successful rescues against the Abu Sayyaf had the military done ? Very few and with huge casualties. Allegedly looking for Fr. Bossi in Basilan, 10 of its Marines were beheaded and some killed. Yet Fr. Bossi was not even in Basilan. He was in a totally different province and region — in Lanao.

The Ces Drilon kidnapping is the most successful negotiation ever in Abu Sayyaf kidnappings. This was only possible because of Isnaji’s political stature in the province and armed followers. The military, police or other Abu Sayyaf groups did not dare sabotage the negotiations as they would be in for a fight.

After the successful outcome, Isnaji and son were flown to Manila upon the pretext of bringing them to the President in Malacanang for congratulatory  ceremonies. Instead, they were arrested and charged.

NO LAWYER

The Isnajis were so taken by surprise. They did not even have a lawyer. Atty Francisco presented himself as the lawyer of the Isnajis. Reportedly, he was sent by Senator Legarda.

According to the lawyer, as broadcast on TV, Ces and her crew were brought to Isnaji’s house after they were released by the kidnappers. It was around 11 pm. The military and police wanted to take immediate custody of them but Ces and her team refused.

Why did they refuse? Ces knew the situtation there and she knew that anything could happen if they went with the military in the dead of night.

I hope our brillant Moro lawyers would take the cudgels for Isnaji. If my brother Jun Abbas were alive, he would be right there in the limelight fighting for Isnaji, who was his friend.   

I have met Isnaji only twice, more than a dozen years apart. The first time was in Mindanao a long time ago and the second time was in Manila with my brother Jun. He may not even remember me. But to me, he appeared to be a no-nonsense guy, straightforward and honest. He certainly is no kidnapper.

MORO UNITY

The humiliation of Isnaji is the humiliation of the MNLF and the Bangsa Moro people. Perhaps this will be a lesson to the Moros. The MNLF cannot expect anything from the government despite the Jakarta and succeeding agreements.

Opposition leader and former President Erap keeps on repeating and boasting that the MILF should be finished off (tapusin) by the government. He reminds the people of his "all-out war" against the MILF. It appears that the only way left for the MNLF and MILF is to return to each other’s arms and re-unite. That would be applauded not only by the Bangsa Moro but by the Organization of Islamic Conference (OIC).

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Former MNLF rebels throw support behind Isnaji

MNLF questions Sulu mayor’s arrest

Interior and Local Government Secretary Puno said that Isnaji and son are prime suspects in the kidnapping of Ces Drilon and her companions. The basis of the government’s accusation? The fact that the kidnappers asked to negotiate with Isnaji. Puno said that this means that the kidnappers know Isnaji.

Oh my! Who in Sulu does not know Isnaji? He is a long-time MNLF commander, he is the mayor of Indanan and he is running for the Governorship of the Autonomous Region of Muslim Mindanao (ARMM). According to some reports, he is the "official" MNLF bet for ARMM Governor.

Besides, doesn’t Puno watch Hollywood films about hostage-taking? Many hostage-takers demand to speak to people whom they find credible. Perhaps in this case, the hostage-takers found Isnaji as more credible than the Vice Governor, who was the one negotiating with them.

Really, the government should find more credible reasons. I hope they will not resort to the usual PNP/military M.O. of getting one of their assets to testify against the suspects.

And what about the local guide - (Biyaw or Bitaw)? According to media reports, the guy is well known for his military connections. Why is he not a suspect? His actions were certainly suspect. He delivered the TV crew to the kidnappers and then left the area alone.

KIDNAPPERS’ EMISSARY

When the Media started calling Isnaji the "kidnappers’ emissary", I already had some misgivings. It looked like the beginning of a media spin. And this is exactly the justification the government used to arrest Isnaji; i.e., that he was the kidnappers’ emissary.

Perhaps Isnaji should go back to being an MNLF commander rather than a politician.

REVENGE OF THE MILITARY

With the entry of Isnaji, the military could not make "pogi points". The successful outcome of the hostage negotiation proved that negotiations are better than the military way of engaging the kidnappers in a firefight. 

I think this is the first kidnapping where the military did not take center stage.

RENEWED WAR VS MNLF

With the government’s decision to charge Isnaji of Kidnapping, it is probable that the MNLF would go back to war. They have already lost the ARMM leadership. And now, their candidate is in government detention. 

With the Food Crisis, the Oil Crisis, the high unemployment and inflation rate, does the country really need another war in Mindanao?

SENATE INVESTIGATION

As I mentioned in an earlier post, the Senate should investigate this event.

Top TV broadcast journalist Ces Drilon, her cameraman Jimmy Encarnacion and her supposed host in Sulu, Octavio Dinampo of the Mindanao State University - Sulu were freed. They were picked up by Jun Isnaji, son of the hostage negotiator Indanan mayor Isnaji Alvarez, accompanied by policemen.

Interestingly, Senator Legarda is claiming that she was instrumental in the release of Drilon and company. She allegedly talked to the kidnappers through Drilon’s cellphone and pleaded for her release. Oh my! What can one say?!!

The military is also claiming that the kidnappers let go of their captives because they became afraid of the military presence. As reported earlier, the army shelled the kidnappers lair. But the military later denied that they fired at the kidnappers. They said they shelled some other place — for target practice, I suppose.

Pretty soon, everybody will claim they were the heroes. Poor Isnaji Alvarez, who put his reputation on the line by accepting to be the negotiator, is shoved into the sidelines. It is not easy to be a negotiator. You have to have credibility and you need certain persuasive power, including fire power. The success or failure of the negotiation will have a great impact on your credibility. You cannot do it sitting in Manila and talking to the kidnappers through the cellphone. Only Loren Legarda believes that that can actually happen.

ERAP AS ANTI-MUSLIM

The impeached and graft-convicted Erap is back with his inane announcements. He said he had already wiped out the bandits from Mindanao with his all-out war. He then blamed the present government for "giving back" the camps to MILF. Obviously, he doesn’t even distinguish Abu Sayyaf from MILF. I suppose in his mind, they are all just Moros. Does he not know the consequences of his "all-out war" with the MILF?

And to think that this guy is the leader of the opposition. And he wants to be president again. So he can wage another "all-out war?"

LESSONS TO BE LEARNED

I hope that non-Moro journalists should realize that they may claim to be such Moro experts, they really don’t know us, the Moros. And non-Moro journalists, even how well-connected militarily and how famous they are, should still take the necessary precautionary measures when going to Mindanao.

Once in the late 1980s, I went to Zamboanga to speak in behalf of my brother. I brought with me a bodyguard. After one day, my bodyguard told me that there was a problem. He just saw the family of his enemy. So we had to go to the governor and asked for a bodyguard for my bodyguard.

Mindanao has so many armed groups — the military, the military lost command, the pro-government militias, MNLF (whatever factions), the MILF, the bandits, the ASG, etc.

Also, it is high time for the media organizations to hire Moro journalists. There are many Moro A.B. Journalism graduates, even from U.P., but many just couldn’t get jobs.

Another thing, not every Moro can act as your host. The host should be able to provide his/her guests the necessary protection.

The Senate should conduct an investigation on this matter.

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See related posts:

ISNAJI ALVAREZ MEDIATES IN CES DRILON KIDNAPPING

CES DRILON KIDNAPPING - P 20 M RANSOM

We are in the middle of an oil crisis and we are letting go of our own oil company, PETRON. Ashmore,a Lond0n-based investment fund group is buying ARAMCO’s 40 % share. With PNOC having the right of first refusal, now is the most opportune time to buy back Petron. Petron is a CASH COW. Ashmore is an investment fund firm. It is interested only in profits. But Petron should be more than a profitable firm. The country needs its OWN oil company to protect it from the vicissitudes of the oil industry and to compete against other oil majors just as what PETRONAS and PTT is doing for Malaysia and Thailand respectively.

Strangely, according to reports, President Arroyo thinks that "Ashomore’s decision to buy Petron shares is a ‘vote of confidence’".

Below is a report I did in the late 1990s/2000 about Oil Deregulation and PNOC. I think I submitted a copy to Pres. Arroyo when she first became President in early 2001. It is titled "Probable Solutions to the Oil Price Crisis." Since we are in the midst of another oil price crisis, I am publishing it here:

                        PROBABLE SOLUTION TO OIL PRICE CRISIS

OIL  DEREGULATION

In March 1996, Congress passed the Downstream Oil Industry Deregulation Act of 1996 or R.A. No. 8180. There was not much public protest since the concept of a deregulated oil industry is not well understood. But a few gentlemen questioned the constitutionality of the law, and brought it up to the Supreme Court. The petitioners zeroed in on the three allegedly prejudicial provisions; namely: tariff differential, the inventory requirement and the predatory pricing clauses. The petitioners averred that the law ran counter to its objective: "to foster a truly competitive market".

On November 5, 1997, in a move that surprised many, the SC declared RA 8180 unconstitutional and ordered the legislature to create another law, but this time adhering to the tenets of the Constitution.

In its decision, the SC declared :

Again, we underline in scarlet that the fundamental principle espoused by section 19, Article XII of the Constitution is competition; for, it alone can release the creative forces of the market. But the competition that can unleash these creative forces is competition that is fighting yet fair. Ideally, this kind of competition requires the preserve of not one, not just a few but several players. A market controlled by one player (monopoly) or dominated by a handful of players (oligopoly) is hardly the market where honest-to-goodness competition will prevail. Monopolistic or oligopolistic markets deserve our careful scrutiny…."

 

It went on to emphasize that:

"…the perpetuation of RA No. 8180 threatens to multiply the number of our people with bent backs and begging bowls.  R.A. No. 8180 …cannot be allowed by this court to stand even while Congress is working to remedy its effects."

And it concluded with rhetorical flourish:

"…the Constitution is a covenant that grants and guarantees both the political and  economic rights of the people." The Constitution mandates this Court to be the guardian not only of the people’s political rights but their economic rights as well. The protection of the economic rights of the poor and the powerless is of greater importance to them for they are concerned more with the exoterics of living and less with the esoterics of liberty. Hence, for as long as the Constitution reigns supreme, so long will this court be vigilant in upholding the economic rights of our people especially from the onslaught of the powerful. Our defense of people’s economic rights may appear heartless because it cannot be half-hearted."

(Amen.)

Congress immediately cobbled another law, R. A. 8479, which is actually just RA 8180 without the provisions that the Court found "odious" and "offensive." Some enterprising gentlemen again petitioned the Supreme Court, this time zeroing in on the transition period.

Three years after RA 8479, the kind of competition the SC envisioned still is nowhere in sight. The arguments cited for declaring RA 8180 unconstitutional appears to be as valid against RA 8479, the present oil downstream deregulation law.

There were, and still are, calls for a repeal of the law. But this would just bring us back to regulation. Regulation is the mechanism for controlling consumer prices; however, there is a price to it. The government is forced to give subsidies, but the government gets its money from the people. It’s a Catch-22 situation. Regulation also stagnates growth, inspires complacency and promotes inefficiency.

If one were to take heed of the zeitgeist, it is very clear that regulation is now out of the question. De-regulation is simply the order of the day, not only in the oil industry, but also in practically all industries.

The main function of deregulation is to give a freer reign to market forces. It opens up the market. Even if there were many and huge barriers to entry, the mere threat of entry would stimulate the industry. Existing firms, be they monopolistic or oligopolistic, would be forced to innovate, streamline and be efficient. Otherwise, the mere threat (of entry) would translate to new entrants. Or, other existing firms, which heeded the call of deregulation (i.e., modernization, streamlining, efficiency, etc.) would eat up the market share.

Theoretically speaking, in the long run, efficiency and growth of the industry would translate into better quality goods and services, higher tax revenues for the government and even lower prices for the consumers.

What’s the catch ?

The Philippines was fortunate to have a national oil company like the ones in Malaysia, Indonesia and Thailand, which have had quite an experience competing with multinationals. Such experience would have proved valuable for the country when deregulation of the industry came. However, for some reasons, PNOC’s refining and distribution arm, Petron, was privatized some years ago. This left the Filipino public purely at the hands of “market forces.” And the oil downstream market is far from perfect.

***(It is interesting to note that Petron was sold to Saudi Aramco for about 14 Billion pesos, most of which were easily recouped by Aramco after the IPO which had the stocks’ price soaring almost three times as much as the buying price of Aramco. And just a year later, PNOC was ordered to infuse 10 billion pesos (of people’s money) to the OPSF so that it can be distributed among the three oil companies. In effect, the Philippine government, and by extension the Filipino people, got only 4 Billion pesos for 40 % of Petron!!!)***

Coupled with the fact that the Filipino people do not have an oil company that could compete with the transnationals is the presence of an oil deregulation law that promotes the perpetuity of the existing oligopoly.

CONTROVERSIAL PROVISIONS

The tariff differential created a big fuss and was one of the reasons for the Supreme Court’s junking of the first Oil Deregulation law. But it is just another barrier to entry. The existing barriers to entry are already too numerous for the tariff differential to be significant. In fact, the three companies are better off without it as they can gain more in terms of goodwill rather than get all the bad publicity because of it.

Another controversial provision of the first deregulation law is the “predatory pricing” clause. Any price “lower than the industry average” is prohibited. With all the formidable forces against a new entrant, lower price would be its only weapon to attract customers and earn profits. But before being able to exercise "predatory pricing", one has to enter the industry first and must have huge resources to be able to challenge the so-called Big Three. Shell, Petron and Caltex cannot possibly be expected to sit back while a new entrant would come in with lower prices.

And as for the existence of a cartel, it must be re-iterated that this should not be the point of contention. One will only encounter the sophistry of company lawyers, paid apologists, jargon-loving bureaucrats and media consultants The fact is that the present market structure is, by definition, a STRICT OLIGOPOLY. And in such a situation, one cannot expect healthy competition.

All the reasons cited by the Supreme Court for declaring the first Oil Deregulation law unconstitutional remain valid. The provisions cited by the Supreme Court (predatory prices, oil inventory and differential tariff) affect only ONE of the FIVE basic competitive forces of an industry. (Porter, Michael E., “The Structural Analysis of Industries”, Competitive Strategy, New York, Free Press 1989, p.3). And even in that one (potential entrants), the existing barriers to entry are numerous enough to protect the interests of the existing oligopoly.

However, in the imperfect real world, it would have been a miracle for the Supreme Court to declare the new oil deregulation law unconstitutional for the following reasons: First, when the SC declared the first oil deregulation law unconstitutional, it was not as popular as it should have been. One popular economist / TV personality even chided the SC’s decision and said that it was the cause of the oil price increase then. If the so-called progressive and well-known economists came out against the SC ruling, who was left to defend the SC justices?

Second, the alternative being espoused for the deregulation law is a return to regulation or Price Control. The leftists’ call for price control would be hard to defend in this age of globalization, deregulation, and free trade zones.

Third, some petitioners were merely questioning the length of the transition period. How would the justices know how much time would be enough? Moreover, with the market forces obtaining in the oil industry, the transition period can be extended to 20 years yet not much will change. A new entrant cannot possibly compete with the Big Three unless it is ready to use huge amount of resources that would force the Big Three to welcome it to the club. It will then be called the Big Four. The market would remain an oligopoly.

Fourth, and most importantly, oil deregulation remains an IMF "conditionality".

Probable Solutions

 A new Supreme Court ruling

De-regulation, as already pointed out, has many advantages, especially in this age of globalization. And it would be to the advantage of the country to have a real deregulation and not, in the words of a Supreme Court justice, "pseudo-deregulation." Real deregulation promotes competition. It does not tend to protect existing oligopolistic market structures.

A new petition to the Supreme Court to declare R.A. 8479 unconstitutional for the simple reason that the present law will not change the present market structure; i.e., an oligopoly, even for a hundred years. The SC should order the legislature to frame a new law that would give a freer reign to the other competitive forces in order to have real competition in a truly deregulated environment.

For example, for the "BUYERS forces" to be competitive, all gasoline stations and other retailers must be free to buy from any supplier, domestic or international. All the thousands of existing franchisees of Shell, Petron and Caltex must be free to buy from any supplier they choose. This would mean that the law must force the Big Three to re-negotiate their contracts with the retailers so as to give the latter freedom to choose their suppliers. This would be a tall order indeed. But if it were done, it would free not only the "Buyers forces" but also the "Sellers forces" as all oil companies in the world would now have a market for their products in the Philippines. The suppliers would then have reason to set up trading posts here so they can sell to both wholesalers and retailers. Only the Supreme Court can order this, and this needs nothing short of a miracle.

There are many others ways that the government can do to encourage competition in the Buyers and Sellers groups. For example, the government can help set up huge cooperatives, such as a national fisherfolk’s (including big-time tuna fishing companies) cooperative that would buy and maintain its own diesel fuel depot. This cooperative can then hunt for bargain diesel fuel in the world market and sell the product to its members. This would give the Big Three competition.

(Note: I forgot to include a big factor in the equation – SMUGGLED OIL)

Oil Exchange

Rep. Enrique Garcia’s proposal for the creation of an Oil Exchange is quite a novel idea. No other country does it, no country ever will (except maybe the Philippines). He patterned it after the power (electricity) industry or the US natural gas industry where such "exchange" entities were created as a result of unbundling the power and natural gas industries. The characteristics of the electricity and natural gas markets are very very different from that of the oil industry.

First, how can the government declare full deregulation on the one hand and have an Oil Exchange on the other?

Second, no sane exiting oil company with a refinery or storage facilities would agree to it.  Would any company simply sit back and allow a government entity to sequester its warehouse, import new stocks and simply allow this company to bid for the new stocks?

Third, even if there were such an Oil Exchange, all the gasoline stations are not allowed by their contracts to buy oil products from companies other than its principals. Contractual obligations are protected by law and even by the Constitution.

If it could be done, it would be immensely easier if Congress would make a law that would free all gasoline stations and other retailers from their contractual obligation of buying only from the principals. This will open the oil retail market to the world’s players (There are hundreds of them, not just 40 as asserted by Rep. Garcia.) There would then be no need for a state-run Oil Exchange. All oil products suppliers can directly sell to the retailers, thus creating good competition that is necessary for lower prices.

Fourth, nobody can force the Big Three to bid. They could very well refuse to bid and simply sell their oil products in the world market. These companies are transnationals, vertically integrated and have huge resources. In fact, they are even richer than the Philippines.

Fifth, the oil exchange would be run by Government bureaucrats, and therefore would again be under bureaucratic red tape not to mention probable graft and corruption.

Sixth, there are very very few Filipino bureaucrats who are knowledgeable in the practices of the world oil industry. Operating an oil exchange would need expertise in arbitrage, hedging and other financial analytical tools in order to insure profitability. Philippine oil company officers never gained experience in oil products financial markets because the government gave them OPSF and foreign exchange cover incentives. Besides, the mother companies usually handle all financial market dealings.

Another option :     Regain control of PETRON

Petron has a contract to buy 90% (recently changed to 70%) of its oil exclusively from Saudi Aramco. In exchange, Petron should demand substantial discounts on its crude prices. Contracts discount is ordinary practice, esp. in government-to-government contracts.  Petron can then afford to sell its products cheaper than the other transnationals.

It would be a great move on the part of the government to regain control of Petron either through a change of its representatives in the Petron Board or buy back from the market (i.e., through the Stock Exchange) five to ten percent (5% - 10%) of the shares in order to gain majority control. It is highly unlikely for Aramco to protest such moves. In fact, in the contract with Saudi Aramco, Petron has the right to buy back from Aramco up to 10% of the shares.

*** (Note: Ashmore is buying the ARAMCO shares. PNOC has the right of first refusal. This is the greatest opportunity to buy back Petron.) ***

Still another option:    a new  PNOC

Incidentally, the Supreme Court noted that on "November 9, 1973, President Ferdinand E. Marcos boldly created the Philippine National Oil Corporation (PNOC) to break the control by foreigners of our oil industry." It is quite interesting to note that by its Charter, PNOC is mandated "to provide and maintain an adequate and stable supply of oil and petroleum products for the domestic requirement" and "to foster oil or petroleum operation conditions conducive to a balanced and sustainable growth of the economy." However, PNOC today does not appear to want to have anything to do with its mandate.

However, if PNOC would want to live by its Charter, it can sell all its shares in Petron (i.e., totally privatize Petron.) It will then be free of its obligation to buy oil from Saudi Aramco.

The best and fastest way for the Filipino consumers to be protected in a deregulated oil industry is to have one of its leading players on its side just as State-owned PETRONAS, and PTT of Malaysia, and Thailand respectively are competing very well in their own deregulated environment.

PNOC can re-establish itself as a state-owned refinery and oil distribution corporation. The proceeds from the sale of the Petron shares can finance the revitalized PNOC. It can start by building several gasoline stations in strategic locations, especially in places where it has real estate property.

*** (Note: But since ARAMCO is selling its shares, this is the biggest opportunity to buy Petron back. Petron is a CASH COW. The investment can easily be recouped) ***

PNOC can scout for discounts from friendly Muslim countries. Or the government can exempt PNOC from some duties/taxes.  In this way, the government will not be forced to reduce oil taxes for all oil companies like what some sectors are now demanding.

PNOC can then afford to sell oil products AT A CHEAPER PRICE (during times of oil price crises).  This would have GREAT IMPACT on the people and would win a lot of GOODWILL for the government

Eventually, PNOC will establish a refinery or two, probably in Mindanao or the Visayas. A Mindanao refinery can also sell its products to neighboring areas in Indonesia and Malaysia (yes, they also buy petroleum (refined) products).

The new PNOC option does not violate the Oil Deregulation Law and therefore would get the nod of the IMF. There would be no need for controversial legislative measures. There would be no need to create new and unique institutions (like an Oil Exchange), whose exact functions and characteristics are only vaguely imagined by its proponent.

An active and thriving national oil company can even drum up patriotic fervor.

CONCLUSION

In sum, the "fundamental principle espoused by section 19, Article XII of the Constitution", i.e. — "competition that is fighting yet fair" is still absent from the industry. An oligopoly of three foreign firms controls the oil downstream industry and RA  8479 insures the perpetuation of this market structure.

A State-controlled oil company manned by knowledgeable foreign-trained technocrats, who can compete, at least in this country, against multinational oil giants while protecting the interests of the Filipino people would be ideal.

But this is just a short-term solution. The nature of the oil industry is such that an oil price crisis can come anytime, esp. since practically all the oil is imported. There must be a serious long-term strategy on oil and gas exploration, renewable energy research demonstration and development (RD&D), and development of an oil downstream industry that would give a free reign to market forces.

The fate of the Philippine downstream oil industry is not in the hands of the big multinationals. It lies in the hands of the Filipino people; or rather, its leadership.

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See related post:  GOVT SHOULD BUY BACK PETRON