Another black eye

The Philippines is fast becoming an unreliable investment destination, no thanks to the absence of a sound investment policy and a stable business environment.

After entering into a validly executed joint venture agreement with an Australian company, the Philippine Charity Sweepstakes Office (PCSO) turns its back on its commitment without any justification.

TMA Australia is a manufacturer of thermally coated papers products essential to operations requiring security papers and forms such as banking, lottery, air and rail transportation, among others. It has facilities in Australia, China, and New Zealand and is publicly listed in the Australian Stock Exchange. The company also supplies PCSO with bet slips and thermal rolls manufactured in Australia which PCSO uses in its lotto operations.

In 2009, PCSO and TMA Australia entered into a contractual joint venture agreement (CJVA) whereby the latter will put up and operate the first thermal coating plant in the Philippines at the cost of P4.4 billion. The plant will produce thermally coated paper products which will be exported and sold locally. PCSO will source its thermal paper requirements for its lotto operations from the joint venture.

Before its execution, the CJVA passed review by the Office of the Government Corporate Counsel (OGCC) which declared the agreement as legal, valid, and having complied with the legal requirements for a JV between a government and private entity.

Also under the agreement, the net profits from the joint venture will be shared by PCSO and TMA Australia at the ratio of 20-80 percent while all losses will be for the account of the latter. TMA Australia later organized TMA Philippines as its local representative.

The TM Group began looking for a lot in Laguna, as suggested by PCSO, to serve as site of the thermal coating plant and found one inside the Filinvest Technology Park in Calamba covering an area of 51,549 square meters which it agreed to buy from Filinvest Land at a price of P96.6 million.

TMA Australia then began the process of pulling out its facilities in various places abroad for relocation to the Philippines and informed its various customers of its impending relocation here.

When the present PCSO board led by Margie Juico took over, they suddenly suspended implementation of the CJVA, saying they are conducting an over-all routine review of contracts entered into the old board. The unilateral suspension was made by virtue of Board Resolution no. A-00024.

In connection with the alleged review, PCSO requested the OGCC to conduct another review of the CJVA. The OGCC reiterated its previous opinion that the agreement was valid.

But because the PCSO board was allegedly intending to repudiate the CJVA, refusing to reply to TMA’s demand for the implementation of the agreement and even saying in one meeting with TMA officers that PCSO will conduct a bidding for the supply of lotto paper, TMA Australia and TMA Philippines filed a case against PCSO asking that the latter be restrained from canceling the CJVA and that PCSO be required to resume the implementation of the agreement.

The Makati City RTC on April 13, 2011 issued a temporary retraining order restraining PCSO from performing any act that will lead to or constitute cancellation of the CJVA, including the bidding out of its lotto paper requirements. On May 13, 2011, the court ordered PCSO to immediately lift the suspension of the implementation of the joint venture agreement and to resume implementation without delay. It also granted the prayer for a preliminary prohibitory injunction when it directed the agency to cease and desist from performing act that will lead to a cancellation or nullification of the agreement.

Unfortunately, the PCSO has yet to comply with the court directives.

TM Australia has said that being a publicly listed corporation in Australia, cancellation of the joint venture agreement will impair its standing and integrity in the market and will adversely affect its portfolio. Moreover, TM Philippines has already entered into an agreement with Filinvest Land for the purchase of the lot as site for the thermal coating plant, thereby causing the former grave and irreparable injury.

It has also been claimed that in furtherance of its intention to welsh out of its perfected and partially implemented joint venture agreement, PCSO is seeking a new opinion from the OGCC which will be the opposite of its two previous opinions that the agreement is valid, legal and binding on the PCSO. To ensure that it will get a favorable opinion, PCSO allegedly caused the reassignment of all of its cases to another team of lawyers in the OGCC.

It is not the first time that the PCSO is reneging on its commitment. Publicly listed Berjaya Philippines, the local gaming unit of Malaysian conglomerate Berjaya, said that its wholly owned subsidiary Philippine Gaming Management Corp. (PGMC) is suing PCSO for violating an exclusive equipment leasing deal and forging a new contract with another company without prior bidding.

It is also not the first time that the Aquino government, in the process of reviewing contracts entered into by the previous administration, had either put on hold or totally set aside contracts validly entered into with private companies.

I can name at least three instances. Malacanang still has to approve the contract entered into between the Bases Conversion Development Authority (BCDA) and the Metro Pacific group for the operation and maintenance of the Subic-Clark-Tarlac Expressway (SCTEX) despite the fact that the contract has already been given the green light by the OGCC and that the supplemental toll operation agreement (STOA) has been approved by the Toll Regulatory Board (TRB).

 Then there is this contract between the Harbour Centre group and the Subic Bay Metropolitan Authority (SBMA) for the operation of the Subic port, and another one between a private consortium and Clark airport authorities for the construction of a second terminal.

Like the TMA agreement, all these originated from unsolicited proposals submitted by the private companies involves.

Unless our government takes its rules and commitments seriously, then it only has itself to blame for the quagmire our country is in. Investors look for stability in government rules and policies, and it is not difficult to find a new home given that other countries are more committed in attracting foreign investments.

For comments, e-mail at [email protected].