"It is time we demanded that we get our fair share in the development of natural resources."
"It is time we demanded that we get our fair share in the development of natural resources."
(Part 2)
So, why are we talking about the P146-billion underpayment of the Malampaya Gas-to-Power Project’s foreign contractors and the various schemes and arrangements surrounding the implementation of Service Contract (SC) 38 which allowed the exploitation of the massive oil and gas field off Palawan in violation of the Constitution and other laws? And, on top of which, paved the way for these contractors to avail of incentives and benefits such as what transmogrified into this huge multi-billion peso income tax underpayment?
Simple. For us to learn our lessons and ensure that any future “exploration, development and utilization” of our natural resources will not suffer the same fate. To be sure this was not the first time that we have allowed foreigners to take advantage of the Constitution and our hospitality. This anomaly has become such a common practice, almost an epidemic, particularly in the case of natural resource exploitation and the nationalized sectors, what we call the commanding heights of the economy, such as power, telecoms and water and even the retail trade that it has made the country a magnet for corporate buccaneers. We have allowed unscrupulous foreign interests and their local partners and enablers (foremost the law and accounting firms and so-called consultancy groups) to make a mockery of our regulatory institutions including the judiciary. The Malampaya Project is one such glaring example. I hope it will be the last.
Imagine, the Project is owned 45 percent by Shell Exploration, 45 percent by Chevron and only 10 percent by the government through the Philippine National Oil Co. Thus, 90 percent of the country’s proven natural gas reserve is under foreign control in clear violation of the Constitution which mandates that any exploration, development and utilization of our natural resources should be by entities at least 60 percent owned by Filipinos. Well, that prohibition was somehow suspended in this case to accommodate the high cost of developing the gas field (estimates range from $ 3.7 billion to $4.5 billion) 90 percent of which was contributed by the foreign partners. But that arrangement was supposed to end at the 10th year of the 25-year concession period to enable the investors to recover their investments after which the facilities should have been turned over to the government and turned them into mere O & M contractors. Sadly, that arrangement never happened at all.
Worse, the contractors even managed to have government absorb their income tax payments from the start of operations in late 2001 to the present.
Thus, the foreign contractors were “allowed” to hang on to 90 percent of the project and the profits. And, they were also accorded huge perks and benefits not usually given to foreigners such as duty-free importation of goods and equipment, unrestricted entry of foreign personnel and extended tax holidays, among others. This tax holiday arrangement is what the foreign contractors and their enablers, in and out of government, abused since the start of its operations in 2001 by computing their income tax payment as part of the government’s 60-percent share of the net proceeds from operations. This highly irregular anomalous scheme was finally exposed to the light by COA 15 years after.
In dismissing the contractors’ plea, the COA simply repeated what was in the law governing their operation which stated in part that their “service fee shall not exceed 40 percent of the balance of the gross income…after the required deductions including participation incentives and operating expenses.” By insisting that government absorb their income tax payment, the latter’s share was reduced by the amount equivalent to said tax payment while theirs remained at 40 percent. “The government ended up receiving only 34 percent of the net proceeds while the contractors came away with 66 percent, “ the auditors countered. And we are just talking here of the income tax payment. What about the others which have remained unexposed and feasted upon by the foreign contractors? This anomaly was what I had expected those who went full throttle blasting the MOUs signed during the visit of Chinese President Xi Jinping, particularly that on the exploration and development of our resources in the South China Sea/West Philippine Sea.
Unfortunately, they were more inclined to use the one-to-three-page MOUs as handle for their tirades against China and President Duterte not in giving advice on what should be done to properly and responsibly translate these MOUs into actual contracts, investments and good results for the country.
So, as preparations are underway to nurse these MOUs into ongoing projects and programs, it is not yet too late for Foreign Affairs Secretary Teddy Boy Locsin to have his staff get in touch with other agencies to draw up all the issues and concerns about the Malampaya Project to avoid the pitfalls and unsavory remarks which attended its implementation. It is time we came around as a people to demand that we truly get our fair share in the development of natural resources.