The chocolate contract and the Masinloc bidding
The chocolate contract and the Masinloc bidding
Updated 11:43pm (Mla time) Sept 26, 2004
By Neal Cruz
Inquirer News Service
Editor's Note: Published on page A14 of the September 27, 2004 issue of the Philippine Daily Inquirer.
IF you have a sweet tooth, and you are not diabetic, not overweight, and does not easily break out with pimples, eating chocolate is one of the most delightful indulgences, 'di ba? So why is chocolate bringing a lot of trouble to some public officials and businessmen? Because of one cardinal sin: greed. Not for chocolate but for money.
Last Sept. 17, this column dwelt on the conflict over a contract to supply Duty Free Philippines with chocolate snacks and candies. DFP had awarded the contract to Eastern Duty Free (EDF). Another supplier, Winning Touch, made a higher offer. EDF matched this higher offer and clinched the contract. Winning Touch and the DFP Employees Union protested and filed charges of graft against then Tourism Secretary Roberto Pagdanganan and DFP General Manager Michael Kho. There was no public bidding, they said.
It turns out that William Tieng, owner of Winning Touch, himself has several contracts with DFP which he got without any public bidding either. Two congressmen filed resolutions calling for investigations not only of the chocolate contract but all the other contracts of DFP, including those awarded to Tieng.
Last week, the camp of Tieng sent a letter commenting on that column. In fairness to him, I am now reporting the contents of that letter.
The issue is neither the contracts of Tieng nor his "alleged monopoly" of the operations at Duty Free, the letter said. And it is EDF that will monopolize the chocolate business at DFP.
Chocolate products represent about 40 percent-worth about $40 million or P2.2 billion-of DFP's annual sales. At least 20 companies now supply chocolate products to DFP. In the new contract under question, only one, EDF, will henceforth be the sole supplier. The 20 other companies will lose their business, which means lost jobs for their employees, the letter said.
"Why fix something that is not broke?" it asked. "The new contract will earn less for the government than what it is earning under the present setup.
"Despite the amended DFP-EDF contract (to match Winning Touch's superior offer) which increased the government take by P180 million a year, DFP would still lose P336 million a year, according to the complaint of the DFP employees."
Besides, the contract was rushed; it was a midnight contract, the Tieng camp said. Pagdanganan's replacement had already been announced, and yet he approved a major contract. Prudence dictates that he should have allowed the new secretary, who was to take over in a few days, to review and sign the contract. Yet the PTA board pushed through with the meeting to ratify the contract on Aug. 25, when half of Metro Manila was under water. The President declared a calamity by lunchtime and sent home employees in both public and private offices. Why the hurry then? Besides, the letter added, EDF, just like Winning Touch, supplies other products to DFP.
* * *
Another government contract will be bid out this October, and it is bound to be a headache, too if it is not handled correctly. This is the sale of the 600-megawatt Masinloc power plant in Zambales, the first part of the privatization of the mega-losing National Power Corp.
The sale of all of Napocor's assets is expected to raise between $4 billion and $5 billion, not even enough to pay for its accumulated debts of $7.2 billion. But Napocor has to sell them in a hurry because it loses an average P100 billion a year!
The government badly needs foreign investors to privatize Napocor-and put a stop to its bleeding-as there is not enough local capital. A number of foreign investors have qualified for the bidding, among them, Marubeni of Japan, Kepco of Korea, YNN of Australia, YTL of Malaysia, and Atlanta-based Mirant Philippines.
The lone local bidder may be the First Generation Holdings of the Lopez group.
So what is the problem?
In a pre-bid conference last Sept. 1, the potential foreign investors denounced the bidding guidelines drafted by the government.
They denounced a "right to match" provision which states that any winning bid by a foreign company may be matched by a Filipino-owned company, which will then be proclaimed the winner.
This rule, said the foreign investors, is inequitable and gives preferential treatment to a Filipino company. It is grossly disadvantageous, unfair and discriminatory to foreign investors, they said.
But wasn't that the same rule given by the Supreme Court in the sale of Manila Hotel? A Malaysian company won the bidding but a Filipino group, led by businessman Emilio Yap, matched the bid and was declared the winner. The Malaysians protested but the Supreme Court backed the Filipino company.
But there is a difference between the Manila Hotel and the Masinloc power plant. The Manila Hotel is clearly part of the national patrimony and should remain in Filipino hands, the tribunal said. The Masinloc plant is not.
Foreign investors must be given a level playing field, otherwise they would not bother to invest here at all. Remember that they spend a lot of money and resources to conduct studies on the property they intend to buy. When the right to match is given to a preferred third party, that party doesn't have to spend or make any studies at all. It just matches the highest bid, knowing that the bidder made painstaking studies to arrive at the price. That effectively results in a virtual handover to the Filipino firm. The foreign investor loses his investment on the due diligence it made, and the Filipino company profits from the foreigner's pains and investments. That is unfair. That sends the wrong message to foreign investors and jeopardizes government efforts to privatize Napocor.
Updated 11:43pm (Mla time) Sept 26, 2004
By Neal Cruz
Inquirer News Service
Editor's Note: Published on page A14 of the September 27, 2004 issue of the Philippine Daily Inquirer.
IF you have a sweet tooth, and you are not diabetic, not overweight, and does not easily break out with pimples, eating chocolate is one of the most delightful indulgences, 'di ba? So why is chocolate bringing a lot of trouble to some public officials and businessmen? Because of one cardinal sin: greed. Not for chocolate but for money.
Last Sept. 17, this column dwelt on the conflict over a contract to supply Duty Free Philippines with chocolate snacks and candies. DFP had awarded the contract to Eastern Duty Free (EDF). Another supplier, Winning Touch, made a higher offer. EDF matched this higher offer and clinched the contract. Winning Touch and the DFP Employees Union protested and filed charges of graft against then Tourism Secretary Roberto Pagdanganan and DFP General Manager Michael Kho. There was no public bidding, they said.
It turns out that William Tieng, owner of Winning Touch, himself has several contracts with DFP which he got without any public bidding either. Two congressmen filed resolutions calling for investigations not only of the chocolate contract but all the other contracts of DFP, including those awarded to Tieng.
Last week, the camp of Tieng sent a letter commenting on that column. In fairness to him, I am now reporting the contents of that letter.
The issue is neither the contracts of Tieng nor his "alleged monopoly" of the operations at Duty Free, the letter said. And it is EDF that will monopolize the chocolate business at DFP.
Chocolate products represent about 40 percent-worth about $40 million or P2.2 billion-of DFP's annual sales. At least 20 companies now supply chocolate products to DFP. In the new contract under question, only one, EDF, will henceforth be the sole supplier. The 20 other companies will lose their business, which means lost jobs for their employees, the letter said.
"Why fix something that is not broke?" it asked. "The new contract will earn less for the government than what it is earning under the present setup.
"Despite the amended DFP-EDF contract (to match Winning Touch's superior offer) which increased the government take by P180 million a year, DFP would still lose P336 million a year, according to the complaint of the DFP employees."
Besides, the contract was rushed; it was a midnight contract, the Tieng camp said. Pagdanganan's replacement had already been announced, and yet he approved a major contract. Prudence dictates that he should have allowed the new secretary, who was to take over in a few days, to review and sign the contract. Yet the PTA board pushed through with the meeting to ratify the contract on Aug. 25, when half of Metro Manila was under water. The President declared a calamity by lunchtime and sent home employees in both public and private offices. Why the hurry then? Besides, the letter added, EDF, just like Winning Touch, supplies other products to DFP.
* * *
Another government contract will be bid out this October, and it is bound to be a headache, too if it is not handled correctly. This is the sale of the 600-megawatt Masinloc power plant in Zambales, the first part of the privatization of the mega-losing National Power Corp.
The sale of all of Napocor's assets is expected to raise between $4 billion and $5 billion, not even enough to pay for its accumulated debts of $7.2 billion. But Napocor has to sell them in a hurry because it loses an average P100 billion a year!
The government badly needs foreign investors to privatize Napocor-and put a stop to its bleeding-as there is not enough local capital. A number of foreign investors have qualified for the bidding, among them, Marubeni of Japan, Kepco of Korea, YNN of Australia, YTL of Malaysia, and Atlanta-based Mirant Philippines.
The lone local bidder may be the First Generation Holdings of the Lopez group.
So what is the problem?
In a pre-bid conference last Sept. 1, the potential foreign investors denounced the bidding guidelines drafted by the government.
They denounced a "right to match" provision which states that any winning bid by a foreign company may be matched by a Filipino-owned company, which will then be proclaimed the winner.
This rule, said the foreign investors, is inequitable and gives preferential treatment to a Filipino company. It is grossly disadvantageous, unfair and discriminatory to foreign investors, they said.
But wasn't that the same rule given by the Supreme Court in the sale of Manila Hotel? A Malaysian company won the bidding but a Filipino group, led by businessman Emilio Yap, matched the bid and was declared the winner. The Malaysians protested but the Supreme Court backed the Filipino company.
But there is a difference between the Manila Hotel and the Masinloc power plant. The Manila Hotel is clearly part of the national patrimony and should remain in Filipino hands, the tribunal said. The Masinloc plant is not.
Foreign investors must be given a level playing field, otherwise they would not bother to invest here at all. Remember that they spend a lot of money and resources to conduct studies on the property they intend to buy. When the right to match is given to a preferred third party, that party doesn't have to spend or make any studies at all. It just matches the highest bid, knowing that the bidder made painstaking studies to arrive at the price. That effectively results in a virtual handover to the Filipino firm. The foreign investor loses his investment on the due diligence it made, and the Filipino company profits from the foreigner's pains and investments. That is unfair. That sends the wrong message to foreign investors and jeopardizes government efforts to privatize Napocor.
posted by Dante at 12:00 AM
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