E·N·Q·U·I·R·Y
DEMAREE J.B. RAVAL
DEMAREE J.B. RAVAL
What is it exactly!
Sunday, 09 08, 2002
The Piatco contract – is it valid? Or, is it onerous and disadvantageous to the government and, therefore, not binding on the latter? Conflicting statements from government functionaries lie at the root of the confusion.
DoTC Secretary Panteleon Alvarez, in defense of himself during the confirmation hearings before the Commission on Appointments, understandably asserted the validity of the contract. Neda Secretary General Dante Canlas was even more categorical during the hearings. The exact words of Canlas as recent as May 29, 2002: “Our (Neda) analysis found out that this is really advantageous to the government.” [Now, he is a member of the review panel]. Both Alvarez and Canlas fought very strongly and ferociously to affirm the validity of the contract.
On the other hand, for two weeks now Strategic Projects Secretary Gloria Climaco has been mouthing her plan for government to buy out the project, and take the contract out of Piatco which won the bid. Climaco’s statement that the Cheng Group has no choice but to sell out and accept at a discounted rate its contribution is made on the premise that the contract is not valid from the perspective of the government.
Last Friday, DoJ Secretary Perez, chairman of the review panel on the Piatco contract, disclosed that the government is keen on renegotiating the deal.
The government’s discordant and incoherent position has spawned the suspicion that it is possibly trying to take over the contract for the benefit of a favored client – an unseen, strong hand, if you will. Or, it could be that the Piatco contract, which involves a flagship project, was conveniently crafted, then mangled through the ARCA and four supplemental contracts to hide serious anomalies perpetrated, and thereafter exposed for such anomalies to be used as a convenient escape clause justifying a government takeover.
Sen. Ed Angara rightly placed in perspective the thread of the ongoing hearings of the Senate on the Piatco contract, when he said the government must be clear, categorical and unambiguous to the public, so that no suspicion will be injected into its action.
The insinuations of a kickback of $100 million, or that of someone fronting for the powerful, may be largely undeserved at this stage but hardly makes the government any more credible. Are statements fanning the position that 28 vital terms of the contract are onerous and disadvantageous to the government one way of conditioning the minds of the public that an otherwise valid contract is not valid? And, that before we know it, the government shall have already justified its takeover? And then, the eventual beneficiary comes in?
Climaco comes on too strong in defending her position. The more she asserts her plan to buy out Piatco’s minority German partner, Fraport, for $400 million instead of $300 million, the more she projects herself as an apologist for the eventual beneficiary of a government takeover. Plainly and simply, Climaco’s claim is being made the basis for the initiative to buy out Piatco and take over the contract to eventually bid it anew.
A direct government takeover of Piatco would entail serious legal and policy considerations.
It is violative of the non-impairment of contracts clause in Sec. 10, Article III of the Constitution. The government, as the enforcer of rights and dispenser of justice, should honor, instead of impair, contracts.
A government takeover could go against the declared policy of privatization, as enunciated in the BOT Law (Republic Act 7718), where the private sector, as the main engine for national growth and development, is provided the most appropriate incentives to mobilize private resources for the purpose of financing the construction, operation and maintenance of infrastructure and development projects normally financed and undertaken by the government. What the government is trying to do now is no different from a corporate takeover, reverse privatization to many. And privatization be damned.
Should it renege on its contractual obligations, the government will be only reinforcing its sagging image in, and send a chilling message to, the international investing community. It is a stupid investor, indeed, who will gamble his precious dollar in the Philippines only to find at the end of the day that he has lost his investment to the government.
In the event of a takeover, the government is not even in a position of fully compensate Piatco of its equity, considering the ballooning fiscal deficit. A government takeover could be suicidal, considering the government’s poor record in managing business by itself. Angara has been quoted as saying “ the times call for less government, and that the State should not meddle into concerns that rightfully belong to private business.”
Assuming that $400 million will be paid Fraport and a yet to be determined amount to the Cheng Group, in the form of a loan, then this would again highlight the propensity of government to borrow more than it can repay. A government that would opt to borrow for something that it need not finance is a government that has no clear fiscal management position. Instead of allocating its scarce resources on other ventures, it seems, for reasons known only to itself, that the government now wants to venture into something that should be better left to the private sector.
In all likelihood, the present controversy could drag the government to a nasty and prolonged lawsuit it cannot possibly win. For who would take lightly a determined effort to invalidate a contract that has been performed up to 98 percent, as ruse for a takeover? This early, Piatco has already warned it would not take the matter to the courts. And no less than the chairman of the review panel on the Piatco contract has projected how the government’s position of an outright takeover will be weak in the event of a lawsuit, when he said a takeover is possible and legal only if Piatco “voluntarily” withdraws completely from the project. But voluntary withdrawal appears to be farthest from the mind of Piatco.
One of the options available to government is renegotiation of the contract for better terms, on the premise that the contract is valid. Piatco appears receptive to a renegotiation. But first, the government must state clearly and categorically its position with regard to the status of the contract. If the contract is void, the government is not even obligated to pay Fraport and the Cheng Group. But if the contract is merely defective, then obviously government ought to be consistent and should reconsider the defective provisions of the contract and work for a renegotiation with Piatco instead.
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