DOF to review ‘onerous’ deal with Chevron
Carlos Dominguez III—DOFPHOTO
Chevron (formerly Caltex) Philippines has been leasing a 120-hectare industrial park in San Pascual, Batangas, from a subsidiary of the state-run National Development Co. (NDC) for a mere 74 centavos per square meter monthly over the past 44 years, the Department of Finance (DOF) said on Tuesday.The DOF said the arrangement was “grossly disadvantageous” to the public because the rent was way below the current fair market rate of P17.90 per sq m a month.
Finance Secretary Carlos Dominguez III, a member of the NDC board, said the deal between Chevron and Batangas Land Co. Inc. (BLCI) was “another government contract with onerous provisions.”
Chevron is using the Batangas property as an oil import terminal.
Dominguez said the Duterte administration would review all other government contracts with the private sector to rent public lands.
On Monday, the secretary said it was looking into a real estate contract with a supposedly onerous provision, but he did not identify the company involved.
Transparency
Asked by the Inquirer on Tuesday if the government would no longer renew the Chevron contract or just renegotiate to reflect current market rates, Dominguez said, “Definitely, we have to implement a totally transparent method of getting the best deal for the rental of all government property.”
“The goal is to have a contract that is advantageous to the taxpayer, achieved in a transparent manner,” he said.
In its statement, the DOF said “some offices” had asked the interagency Privatization Council to renew the deal. The council, however, “found the contract grossly disadvantageous based on current fair values,” it said.
“At P10.66 million per year since 2010, the rent Chevron has been shelling out is only around 4 percent of the P257.76 million per year that current fair market rental rates in the area would suggest,” the DOF said.
The department came to this conclusion after its attached agency, the Privatization and Management Office (PMO)—a member of the Privatization Council—“compared the lease terms of the BLCI-Chevron deal with the fair market value of the land in the Batangas area, using data from appraisal reports of NDC and the asset pool of the PMO.”
“It was during this assessment that the PMO discovered the onerous provisions of the deal favoring Chevron,” the DOF said.
“[B]ased on documents submitted to the NDC board, the rentals paid by Chevron over the 44-year period covering 1975 to 2019 totaled only P146.51 million or about P3 million per year, in addition to real property taxes paid by Chevron under the lease agreement,” it said.
Yield too low
With the property’s current market value of P4.9 billion to P5.3 billion, the rental income translates into a yield of only about 0.2 percent.
For Dominguez, “based on current standards that the state imposes on similar contracts, to have a rental yield of less than 1 percent is surely grossly disadvantageous to the government and the Filipino people.”
“Despite the rental terms being subject to negotiation as early as 2000, it was not until 2010 that the lease rate was increased to the current rental amount of P10.66 million per year, which is still way below fair market rental rates in the province,’’ the DOF said.
“If the amount is adjusted to current fair market rates, the rental rate by now should be above P20 million a month or P257.76 million annually,” it added.
Bell Trade Act, parity rights
Under the Bell Trade Act passed by the US Congress in 1946, then American company Caltex acquired the Batangas property as American businesses had been granted “parity rights” allowing land ownership in the Philippines.
When parity rights ended in 1974, “Caltex, and now its subsidiary Chevron Philippines, was granted preferential treatment in continuing to occupy and use various real properties, including the Batangas industrial park,” the DOF said.
“Issued by then President (Ferdinand) Marcos, Letter of Instruction No. 276 required the lease-back of the properties occupied by Caltex for a maximum of 50 years from 1975, at minimum rates of 1.5-2.5 percent of the property’s valuation in 1974,” it added.
Last December, President Duterte ordered a review of the contracts with the two water concessionaires in Metro Manila and nearby areas as these had been allegedly laden with “onerous provisions.”
Dominguez has defended the administration’s move to review contracts with private corporations, saying that “it should be a signal to everybody that the private sector and the government are working together for the benefit of the nation, of all the taxpayers.” INQ
