Government divided on sovereign guarantees to private companies, Ochoa admits

Executive Secretary Paquito Ochoa Jr. on Thursday admitted that government experts are divided on paying sovereign guarantees to private companies who have entered into partnership projects with the state.

 

At the hearing of the Office of the President’s (OP) P2.825-billion proposed budget for 2016 before the House of Representatives’ Committee on Appropriations, Ochoa said government officials are now extensively deliberating on the matter.

 

“This is still being subject to deliberations. During our meeting with the Office of the Solicitor General, there is conflicting views on this matter,” Ochoa told the House panel.

 

A sovereign guarantee is an incentive to attract private companies to enter into partnerships for projects and varies between projects. 
 

Ochoa confirmed that each year the government allots P30 billion under the OP’s Risk Management Program for payment of sovereign guarantee and other obligations.

 

The issue over the government’s payment of sovereign guarantee to various corporations under its Public-Private Partnership (PPP) program was raised by Bayan Muna party-list Rep. Neri Colmenares.

 

“Agreeable ba tayo dito sa sovereign guarantee? Isn't it a violation of the due process and the right of the people?" Colmenares asked. 

 

Colmenares specifically mentioned a recent Commission on Audit (COA) ruling disallowing the government’s act of shouldering around P53-billion worth of income tax obligations of Malampaya Natural Gas Project contractors, Shell Philippines and Chevron, as a form of sovereign guarantee payment.

 

“There is a COA decision saying na illegal ito. Do you share the opinion of COA?” Colmenares asked.

 

Ochoa, however, reiterated that the Malacañang has yet to decide.

 

“Because of the COA findings, we are looking at it more deeply. We have yet to come up with a definite stand on it,” Ochoa said.

 

Ochoa, however, maintained that offering sovereign guarantees is allowed under the law.

 

“Our understanding is sovereign guarantee is allowed by the law. It is part of the reason [why] we are obtaining credits from various sources, including international sources,” Ochoa said.

 

Colmenares meanwhile mentioned unconfirmed reports about the alleged letter that Transportation and Communications Secretary Joseph Emilio Abaya has sent to the OP asking that the government pay the amount of P7.5 billion to Ayala-Metro Pacific consortium Light Rail Manila Corp. (LRMC) as a form of penalty payment for the LRTA’s alleged failure to comply with some provisions and obligations contained in the contract for the operation of LRT 1.

 

“Totoo ba na nakatanggap ang Office of the President ng ganitong sulat?” Colmenares asked.

 

Ochoa said the OP has not received such letter. But when questioned further by Colmenares, the executive secretary admitted that “it is possible” that the letter was directly sent to President Benigno Aquino III.

 

Abaya had earlier denied the allegation.

 

“Nakakabahala talaga ang issue ng sovereign guarantee na ito…I really hope that the government position to the side of the people here,” Colmenares meanwhile said.

 

“Ang taong bayan humihiling na babaan ng konti ng kanilang income tax pero tinututulan ng BIR (Bureau of Internal Revenue). Ngunit ang dami namang bilyon [piso] ang naibigay sa mayayamang concessionaire dahil sa sovereign guarantee,” Colmenares added. — JDS, GMA News