By Arjay L. Balinbin, April 3 2019; Business World
Image Credit to Philippine Star
PRESIDENT Rodrigo R. Duterte has ordered the Office of the Solicitor General (OSG) and the Department of Justice (DoJ) to review all government contracts with firms and other countries to make sure they do not have “onerous provisions that might be detrimental to… Filipinos,” Malacañang announced on Tuesday, prompting business leaders to say their sector would monitor results of this move.
In his statement on the 36th cabinet meeting held in Malacañan Palace on Monday night, Presidential Spokesperson Salvador S. Panelo said: “The Chief Executive… instructed all agencies to check and review all contracts entered into and remove onerous provisions that might be detrimental to the lives of the Filipinos.”
“He reiterated his vow to protect the people of the Republic of the Philippines.”
In a separate statement on Tuesday, Justice Secretary Menardo I. Guevarra said: “The priority contracts for review include concession agreements on public utilities and foreign loan contracts.”
“The target provisions are those perceived to be onerous, one-sided, disadvantageous to the government, and/or contrary to public order or public policy,” Mr. Guevarra explained.
“As these are contracts, the first course of action should be to jointly review and renegotiate; if this is unsuccessful, legal action for rescission may be resorted to,” he added.
“ We have organized teams to conduct this review. But my office as attorney general will need a lot of help from the Office of the Solicitor General to perform and complete this task at the soonest possible time.”
Sanctity of contracts has long been a key concern among investors. The World Bank Group’s Doing Business report shows the Philippines slipping 11 notches to 124th place out of 190 economies in the 2019 edition from 113rd in 2018, with its rank in “enforcing contracts” slipping to 151st from 149th. The other indicators for measuring economies’ competitiveness are: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, resolving insolvency and labor market regulation.
Sought for comment, officials of two major foreign business chambers said the government step bears watching.
“Any party to a contract can review the terms, and contracts have provisions for settling disagreements,” John D. Forbes, senior adviser of the American Chamber of Commerce of the Philippines, Inc., said in a mobile phone message.
“But we remember when PGMA (President Gloria M. Arroyo, now House Speaker) reviewed the PIATCo (Philippine International Air Terminals Co.) contract and found it ‘onerous’ then cancelled it,” he recalled.
“The foreign investors and contractors [concerned] waited over 10 years and the payment went all the way to the Supreme Court where the government lost its case and paid a large amount of interest,” he added.
“We will be very interested in the conclusions of this review and hope they will not discourage private sector investment needed in infrastructure projects, as that could delay ‘Build, Build, Buld.’”
For Nabil Francis, president of the European Chamber of Commerce of the Philippines, “While we understand the intentions that may be behind this directive, we hope the Philippine government can continue to uphold the sanctity of contracts.”
“It may be too early to tell how such a directive will affect investor sentiment, but we will continue to monitor the situation, as we will need to observe how it will be implemented.”
Also sought for comment, George T. Barcelon, president of the Philippine Chamber of Commerce and Industry, said in mobile phone message: “I don’t think this will deter investors because this would let them know contracts should not be tainted with corruption.”
“What’s important, the government agencies tasked be clear on rule of law and [be] fair in their review.”
In an e-mail, Federation of Indian Chambers of Commerce Philippines, Inc. President Rex Daryanani said: “We welcome this directive of the President as it his sworn duty to ensure that our country is never at a disadvantage when it comes to any government contract.”
“Contracting parties who have entered into contracts in good faith will welcome this move as it will only prove their credibility and put everyone’s mind at rest as to the nature of these contracts.”
In an interview, Mr. Panelo said after Tuesday’s press conference that the review should not have any impact on the confidence of investors who want to do business in the country. “Hindi nga eh, it will even to be their advantage kasi they will know how exactly to deal with this government, di ba?”