Government to honor commitment with SGS - Camacho

Despite its cash flow problems, the Arroyo administration admitted yesterday that it had no choice but to honor its contract with the Societe Generale Surveillance (SGS), but only after Congress has sorted out how much it owes the company for services rendered, net of liabilities incurred.

Finance Secretary Jose Isidro Camacho said the Department of Finance was "open to directions" from either legislative committee reviewing the SGS contract, admitting that payment would not be possible without the cooperation of both houses of Congress.

Camacho told reporters over the weekend that the DOF "recognized" the need to honor the contractual obligations of the government, but has to balance this with revenue collection, expenditure management and sustainable deficit financing.

"It is in the best interest of the government to first determine what is actually due to SGS net of liabilities incurred," Camacho said. "Then we have to decide how to expeditiously effect payment considering the budgetary constraints faced by the government."

The SGS contract is being reviewed in separate investigations by the Senate and the House as well as the long-standing review by the technical committee composed of officials from the BOC and SGS itself.

"The DOF is fully cooperating with the Senate committee on finance and House committee on good government," Camacho said. He added, however, that the DOF was already satistified with the findings of the technical team that reviewed the contract, saying that the final report met the government’s standards of "fairness and legality."

"But the DOF is open to directions from the committees as to the review of the findings of the team since the resolution of the committee hearings is critical in securing the necessary fund appropriation to pay what is due SGS," Camacho pointed out.

Camacho said the technical committee had to sort through several "highly technical and sensitive issues raised that involved the review of thousands of records."

The SGS contract with the government started in August 1991 and expired on March 31, 2000. The company was hired to undertake pre-shipment inspection services of goods imported by the Philippines.

After inspection, SGS issued a clean report of findings (CRF) and this formed part of the shipping documents submitted to the Bureau of Customs which used it as the basis for determining the applicable Customs duty on all imported goods.

When the government shifted its valuation system from home consumption value (HCV) to transaction value, it no longer needed SGS to do pre-shipment inspection and the company’s contract was not renewed.

However, the government still had unsettled arrears with SGS and Camacho said that total SGS billings for services rendered for the period Sept. 1, 1998 to March 31, 2000 totaled CHF (Swiss Franc) 206.15 million, equiavalent to approximately P6.255 billion.

Except for a token payment of around P10 million in January 2002, Camacho said these billings were still outstanding.