In 1998, Asian Development Bank (ADB) approved a US$300-million loan (Power Sector Restructuring Program) to unbundle the electricity sector and privatize the state power agency (NAPOCOR). A key conditionality of the loan was the enactment of an enabling law that will privatize NAPOCOR. The agency’s privatization in 2003 resulted in the termination of 8,500 state workers; roughly 10,000 had earlier been retrenched due to phased restructuring of the sector. PSRP financed some of the ‘adjustment costs’ of the restructuring, including the debt burden, incorporation of ’take-or-pay contracts’ with IPPs (independent power producers), and separation payments to NAPOCOR employees.The Japanese aid agency JBIC (Japan Bank for International Cooperation) provided an additional US$300 million in co-financing. In 2006, ADB approved a second policy-based loan (US$450-million Power Sector Development Program) that aims to support the absorption of NAPOCOR’s financial obligations and create a conducive environment for the successful implementation of the NAPOCOR privatization program. JBIC again co-financed with an additional US$300-million loan. In October 2007, PSI Philippine affiliate (NECU) wrote a letter to the ADB President highlighting violations of trade union rights in the power sector loan – e.g. illegal termination of NAPOCOR employees, violation of collective bargaining, non-recognition of unions, lowering of working conditions, non-consultation with unions, etc. In September 2008, the Philippine high court ruled with finality that the 2003 termination of employees was illegal and ordered NAPOCOR to reinstate the workers and pay them backwages.
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