Government intends to pay SGS — Camacho

The Department of Finance (DOF) said the government had every intention to honor its contract with Societe Generale Surveillance (SGS) but the Department of Budget and Management (DBM) said the 2003 national budget made no provision for the P6-billion bill for services rendered.

Finance Secretary Jose Isidro Camacho said the Arroyo administration was waiting for Congress to approve the appropriation for the settlement of the SGS bill but this could mean another full year that the company would not be paid.

SGS has already initiated legal proceedings against the Philippine government before the Washington-based arbitration court, the International Centre for the Settlement of Investment Disputes.

The Philippines is the second sovereign that SGS has taken to court. Two months ago, the company also sued the government of Pakistan for violations of its $20-million contract.

According to Camacho, however, the Philippine government had full jurisdiction over the case and it was prepared to resolve the conflict as soon as possible. "Our policy is to honor the obligation," he said. "We have every intention of resolving this expeditiously."

However, Budget Secretary Emilia Boncodin told reporters that the 2003 budget has made no provision for the P6 billion that the government still owed SGS for pre-shipment inspection services that it provided over a period of over two years from September 1998 to March 2000.

"There is no appropriation for it in the 2003 budget," Boncodin said simply.

Although the 2003 budget has not been ratified by Congress, it was unlikely that the administration would be willing to load it up with the P6 billion appropriation, considering the pressures of meeting its target deficit.

The administration’s standing policy, is to maintain this year’s P725 billion budget for 2003 in order to meet its programmed deficit. Should the government miss its 2002 target, the policy was to impose more budget cuts rather than adjusting the 2003 deficit target.

According to the influential Philippine Chamber of Commerce and Industry (PCCI), it was only right for the government to settle its obligations with SGS.

PCCI president Sergio Ortiz Luis told reporters that government would have to make provisions for the settlement of the SGS claim since the services have already been rendered.

"A contract is a contract, unless it was proven illegal," Ortiz-Luis said.

The government’s inability to settle its unpaid bill with SGS has been the cause of additional strain between the Philippines and Switzerland, whose relations are already strained by the quagmire surrounding the Swiss bank accounts suspected to contain the Marcos wealth that the government has not been able to access.

SGS has agreed to the government’s proposal to settle the debt in several installments over several years.