DOF: Lease contract between Chevron, NDC unit ‘onerous’
Mary Grace Padin (The Philippine Star) - January 22, 2020 - 12:00am

MANILA, Philippines — The Department of Finance (DOF) has exposed Chevron Philippines for its “onerous” lease contract with a subsidiary of the National Development Co. (NDC), saying the company has been paying a “miniscule” rental fee for a state property in Batangas.

In a statement, the DOF said NDC subsidiary Batangas Land Co. Inc. (BLCI), under the terms of a lease contract, has been allowing Chevron to occupy its 1.2 million square meter property in San Pascual, Batangas at only P0.74 per sq.m.

“Comparative data from NDC appraisal reports and other official sources show that the current fair market rental value in that area should be around P17.90 per sq. m. per month,” the DOF said.

Finance Secretary Carlos Dominguez, in a text message, said the government would exhaust all efforts to ensure that it gets the best deal from the lease of the property.

“Definitely we have to implement a totally transparent method of getting the best deal for the rental of all government properties,” he said.

Dominguez, who is a member of the NDC’s board of directors, said some offices requested for the renewal of the deal to the Privatization Council, who then found the contract “grossly disadvantageous” based on current fair values.

Based on documents submitted to the NDC board, rentals paid by Chevron to BLCI from 1975 to 2019 amounted to only P146.51 million or about P3 million per year.

The DOF said the property’s current market value is estimated at about P4.9 billion to P5.3 billion, which means the government has a rental yield of only about 0.2 percent of the property’s value.

“Based on current standards that the government imposes on similar contracts, to have a rental yield of less than one percent is surely grossly disadvantageous to the government and the Filipino people,” Dominguez said.

According to the DOF, the rental terms were subject to negotiation as early as 2000, but it was only in 2010 that the lease rate was increased to P10.66 million per year.

“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,” the DOF said.

Earlier, Dominguez said the DOF has endorsed to President Duterte the review of all government contracts with onerous provisions.

This came after the review of the government's concession agreements with water firms, Maynilad Water Services Inc. and Manila Water Co. Inc.

Malacañang is also looking into the government’s contracts with the Light Rail Manila Corp., as well as the lease contract between the Ayala Group and University of the Philippines on the UP Ayala Land Technohub in Diliman, Quezon City.

Chevron Corp., was able to acquire the Batangas lot and other prime properties owned by the government under the 1946 Bell Trade Act passed by the US Congress.

Under this law, American entities were granted “parity rights” on land ownership in the country as a condition for the US government's payment of $800 million war damage claims to the Philippines.

These parity rights ended in 1974, after being extended for 20 years through the Laurel-Langley Agreement signed in 1955 by then-senators Jose Laurel and James Langley.

With the expiration of the 1946 Bell Trade Act, Chevron Philippines was granted preferential treatment in continuing to occupy and use various real properties, including the Batangas industrial park.

Former president Ferdinand Marcos also issued Letter of Instruction 276, which required the lease-back of the properties occupied by Chevron for a maximum of 50 years from 1975, at minimum rates of 1.5 to 2.5 percent of the property’s valuation in 1974.


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