The Market Monitor Minding the Nation's Business
By Riza Lozada and Jerry Maglunog
The European Chamber of Commerce of the Philippines (ECCP) has placed “honoring the sanctity of contracts” on top of its wish list for the incoming administration, as it lamented the Aquino regime’s “unclear policies on government deals.”
ECCP President Guenter Taus said the ECCP has been witness to contracts that have never been honored, thus greatly affecting the international competitiveness of the Philippines.
Taus spoke at a media conference last Wednesday as he presented the programs for 2016 of the European business community in the Philippines.
ECCP offi cials cited several contracts affected by changes of policies midstream, particularly the deal between the Philippine International Air Terminal Co. and German airport contractor Fraport AG and the government for the construction of Naia Terminal 3.
ECCP Vice President Henry Schumacher said Terminal 3 is now widely used, but the contractor has not been paid.
ECCP also cited the case of the water-contracts issue between MWSS and water concessionaires Manila Water Company Inc. and Maynilad Water Services Inc., where a dispute over rates later came about despite specifi c provisions on water charges in the contract with the government.
ECCP offi cials added that contracts not being honored must be based on “concrete proof” of their being onerous and not mere allegations of wrongdoing.
The court battle on the water contracts stemmed from MWSS’s re-interpretation of major provisions of the concession contracts without the consent of the concessionaires
This prompted the two water firms to file arbitration proceedings with international bodies.
The arbitration court declared Manila Water a public utility, a ruling that, it said, differs significantly from the government’s original representation during the 1997 bidding for private-sector participation in the operation of MWSS—that Manila Water would be an agent and contractor of MWSS, which will continue to be the public utility.
The decision conflicted with the concession agreement that disallowed Manila Water to recover its corporate income tax.
In the case of Maynilad, the arbitration court ruled in its favor but allowed the water concessionaire a reduced water-rate hike from its original asking water-rate hike. Manila Water’s petition for water-rate increase was denied.
Following the arbitration ruling, MWSS allowed Maynilad a lower rate hike.
The ECCP also recently expressed disappointment over the dispute on the license-plate standardization project of the Land Transportation Office (LTO).
A contract was awarded by the Department of Transportation and Communications (DOTC) to JKG-Power Plates, a joint venture between a Dutch firm and a Filipino company that won the Motor Vehicle License Plate Standardization Program of the LTO.
After conducting the bidding process, the DOTC signed a five-year contract with JKG-Power Plates in 2014 for the supply of vehicle license plates worth P3.18 billion.
On the basis of this signed contract, JKG-Power Plates delivered 877,166 pairs of MV plates, 2,370,006 MC plates, and 12,685 trailer plates worth P620.35 million. However, they have only been paid P477.90 million.
This is after the Commission on Audit (COA) disallowed additional disbursements for this project in July.
Taus also said the incoming administration will have to nurture “with greater care” the country’s competitiveness, which may be put to a severe test with the implementation of the Association of Southeast Asian Nations (Asean) Economic Community (AEC), starting this month.
As part of its commitment to help the Philippines achieve economic growth, the ECCP said it will promote its “pillars of development centering on energy, infrastructure, agriculture and local governance.”
The ECCP will also put up a Mindanao Business Council by next year to cover Davao, Cagayan de Oro, Zamboanga and Butuan cities.
ECCP Vice President for Membership and Business Services Florian Gottein said ECCP representatives will visit Davao this week to feel the business pulse in the region and seek possible tie-ups among local and European companies.
European companies have expressed “great interest” in setting up business here and have been seeking a lot of information about the agriculture, mining infrastructure and tourism business in the Philippines, Taus said.
This surge in inquiries from European companies stems from the well-know beauty of the Philippines and its vast potential in all aspects, including the manufacturing and the business- process outsourcing (BPO) sectors,” he said.
Mindanao has the potential to receive the branching out of many BPOs, Taus said.
The ECCP also noted that Cagayan de Oro has an interesting agriculture sector, particularly for palm oil, but noted that the local coconut industry, which is a vital export, has remained largely underdeveloped.