ZTE in the making?

For a while, many thought that the SICPA controversy was already dead.

However, Finance Secretary Gary Teves’ “undue interest” in the SICPA project has kept the project alive, albeit silently.

In October 2007, Swiss firm SICPA Product Security S.A. submitted an unsolicited proposal to the Department of Finance to use the SICPATRACE System under the build-operate-transfer (BOT) scheme. 

The foreign firm proposed the use of tamper-proof strip stamps on cigarettes and the installation of scanning and activation software to monitor the number of tobacco products produced in the premises of tobacco manufacturers.

Total project cost is $300 million for seven years and according to insiders, SICPA justified the project by substantially overstating cigarette volumes and government revenues once SICPATRACE system is installed.

The contract with SICPA will be awarded by the Bureau of Internal Revenue after NEDA approves it, then it goes through a higher level of scrutiny by a Cabinet-level committee. Sources say Teves tried to short circuit the process by pressuring the BIR to award the contract without passing through the normal process.

Some Cabinet members are questioning Teves’ eagerness to award the project. He never stopped pushing it and he is in a hurry. People who are knowledgeable about the deal are wondering what’s in it for him?

SICPA’s capabilities, both financially and technically, have been questioned but never been answered satisfactorily. The NEDA Investment Coordinating Committee looked into the financial and technical capabilities of SICPA before the DOF and BIR can act on the unsolicited proposal.

SICPA Product Security SA complied with only 35 out of the 83 technical requirements set by the BIR itself for the project. This was contained in the committee findings.

Among others, the committee found out that SICPA has a paid-up capital of 1.3 million Swiss francs or about P54 million which is much less than the P2 billion needed to initially implement the project. The project cost may reach P13.3 billion in seven years.

The committee “temporarily” declared SICPA as not “possessing the financial capacity to sustain the financing of the project.” The panel fears SICPA may be overleveraged or has more than the acceptable amount of debts in its books than it has capital.

NEDA wrote the BIR to remind it of the rule that a company