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Honor foreign contracts, gov’t told

11 July 2011 No Comment
July 2, 2011, 7:09pm


MANILA, Philippines — Administration and opposition lawmakers backed Malacañang’s bid to review the billion-peso public works contracts entered into by the previous administration with foreign firms but warned the Aquino administration not to turn its back on the deals, saying such a move would be disastrous to its much-vaunted public-private partnership (PPP) program.

In a media forum in Quezon City, opposition Rep. Mitos Magsaysay said any decision calling for unilateral revocation of the contracts would not only trigger an investment boycott against the country but could also draw the Philippine government to expensive litigation before the international court.

“Worst, in the end the money the government is trying to save in rescinding the French and Belgian contracts may not be enough to cover the litigation cost that the administration has to pay,” she told reporters during the Usaping Balita News Forum.

On the other hand, ACT party-list Rep. Antonio Tinio said the government should be cautious in implementing the PPP program and avoid committing state guarantees for projects.

The Aquino administration has questioned the contract that the previous administration signed with the French government-backed Eifel-Matiere SAS for the building of 72 state-of-the-art steel modular roll on, roll off (RoRo) ports.

The government also aired strong suspicions that the Laguna Lake Development Authority (LLDA) project dredging contract awarded by the Arroyo government to a Belgian firm was overpriced.

International repercussion

Magsaysay said the government should brace itself for international business repercussions should it rescind the two contracts, stressing that Malacañang should not allow its decision to lead to a repeat of the experiences of previous governments with German and Taiwanese governments.

She was referring to the German firm Fraport’s multi-million dollar suit over the construction of the Ninoy Aquino International Airport terminal 3 and the illegal takeover of the Subic golf course from Taiwanese businessmen.

“We spent huge sums of money for the international court litigation with Fraport and invited the ire of German businessmen. Taiwanese investors have also shied away because of the harsh manner by which former SBMA (Subic Bay Metropolitan Authority) threw out their compatriots,” she said.

Magsaysay said the government should honor its contractual obligations if it does not want to send the wrong sig nals about the country’s business climate to the international community.

“Once a contract is signed, we must honor it. We can propose amendments to the contract if you see that there are provisions that are grossly disadvantageous to the country,” she said.

Reacting to reports that the French firm had already advanced over P1 billion in incidental and actual expenses for the RoRo project, Magsaysay said the government may no longer be in a position to amend the contract, much less cancel it.

Earlier, Undersecretary Ruben Reinoso Jr. of the Department of Transportation and Communications said the agency is already assessing the costs of terminating the contract to guide the President on his decision whether to push through with the project despite all the issues raised against and for it.

Dr. Patrick Azanza, senior adviser of French government-owned Eiffel and its joint venture partner Matiere SAS, expressed concern that the DoTC seemed oblivious of the mounting interest charges caused by the government’s supposed exhaustive review of the contract and its failure to come out with official findings.

Azanza said the start of actual port construction works has been delayed for almost a year since the project was halted by the Aquino administration to give way to a review of the contract signed during the previous administration by the DoTC and the PPA.

“Unofficial lowest estimate of possible interest charges and damages is P500,000 per day or P15 million per month of delay,” Azanza said, looking at the interest charges set to be charged the Philippine government for any delay in the project coming from its side stipulated under the government-to-government, ODA-funded contract.

With the one-year delay in the implementation, he said the interest charge now stands at around P180 million.

Azanza admitted that the French consortium was already anxious about the fate of their project in view of unofficial pronouncements coming from the DoTC, alleging an overprice in the costs of the 72 modular ports they will build.

Despite working for the foreign firm, he said he saw the terrible implications to the Filipino people of an ill-advised or careless move by the DoTC to cancel the contract because of misguided notions of the project being overpriced.

“This (interest charges) does not include the cost of international arbitration and the possible forfeiture of the P1.5 billion down payment that the Philippines made,” said Azanza, a Harvard-trained former international consultant for the Asian Development Bank.

(Source: http://www.mb.com.ph/articles/325153/honor-foreign-contracts-govt-told)

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