Posted on Thursday, May 29, 2003

Rules that govern business in 
Philippines are not what they seem

By David Ll. Llorito, Research Head

WHY can’t the Philippines move forward? This question baffles most Filipinos because there are probably so many answers.

But  Juergen Lorenz, partner of the globally-known Rethmann Recycling that supported Pro-Environment Consortium (PEC) in its bid to handle a third of Metro Manila’s waste, believes he knows the big answer: the rules that govern business in the Philippines are not what they seem.

“The main issue is we came here in good faith, expressed our commitment to the government and submitted our bid,” he says. “It’s a socially oriented business.  But why can’t we start the project after winning it fair and square so that we can help solve  Metro Manila’s garbage problem? Why are we being held hostage by  the problems of Jancom?”

Lorenz, a German environmental engineer, is the managing director of  JL Business and Technology Consultancy, Inc. His firm serves as a partner to Germany-based Rethmann Recycling, one of the top 10 biggest recycling companies in the world. As envisioned, his firm would “oversee the over-all engineering, procurement and  construction aspects of the project.”

Other members of the PEC are the Environmental Dynamics Corp. represented by Jose Luis Yulo Jr., El Rosario Agro-Industrial Corp., and Macaria Properties.

Caught in the web

If one  examines the recent history of the garbage problem in Metro Manila, it would appear that Rethmann Recycling and the PEC are probably just the innocent victims of the growing web of legal tangles and garbage politics that began with the Jancom project.

Owing to Jancom’s failure to get the approval of the Interagency Coordinating Committee and the National Economic and Development Authority (NEDA), then-executive secretary Ale­xander Aguirre did not endorse the project, because it might “embarrass” the Ramos administration. When Joseph Estrada became president, his “garbage czar” Robert Aventajado learned that  Jancom could not be awarded a contract,  because the firm had failed to comply with the requirements of ICC-NEDA.

Then on October 29, 1999, the Greater Metro Manila Solid Waste Management Council, led by the Metro Manila Development Authority (MMDA),  realized that it could no longer carry out Jancom’s projects in San Mateo and Carmona, for  the following reasons:

1. On June 23, 1999, Congress passed Republic Act 8749, or the Clean Air Act, prohibiting incineration technology in municipal solid-waste management;

2. On July 12, 1999, the MMDA wrote NEDA that the MMDA failed to get the endorsement of the San Mateo local government for the incineration project. At that time, local residents were barricading the roads leading to the dumps, stressing that they had had enough of Metro Manila’s garbage. The eventual closure of the dump led to the garbage crisis.

3. On September 3, 1999, Ruperto P. Alonzo, chairman of the technical board of the ICC- NEDA, wrote to MMDA chairman Jejomar C. Binay about the “nonimplementability of the San Mateo and Carmona waste-to-energy project “due to changes in the policy and economic environments.” Alonzo was apparently alluding to the Clean Air Act; and

4. On December 16, 1999, the MMDA passed Resolution 99-26 endorsing a proposed sanitary landfill for bidding.

By February 13, 2000, the MMDA published and invitation to bid for a sanitary landfill that would be needed to handle at least 2,000 metric tons of Metro Manila’s garbage under a “build-own-operate” plan.

That’s where the legal battle between the MMDA and Jancom began because a month after Jancom filed a petition with the Pasig Regional trial court   to stop the MMDA from pushing the project.  The court favored Jancom but a counter suit at the Court of Appeals by the MMDA later reversed the Pasig court’s decision.

In response, 17 proponents registered for the bidding, nine submitted proposals and five   passed the prequalification process.  In the end, however only two–PEC and Vivendi-Dizon Mines–met the technical criteria set by the bidding’s terms of reference.

At this time Vivendi which was Jancom’s partner from the start had dissociated itself from Jancom. Either that Vivendi had lost out in the internal corporate struggle for control of Jancom or that it realized it no longer had the project with Jancom since the Carmona dump was closed.

“When we were figuring out whether or not we would join the bidding, we feared an apprehension that the bidding would not be transparent,” Lorenz said.

“Nevertheless, MMDA officials assured us that it would be a transparent process, so we joined the bid.”

On September 22, 2000, the financial envelopes were opened, revealing that the PEC submitted the lowest financial proposal: a tipping fee of US$18.89 per metric ton as against Vivendi-Dizon Mines’s US$32 per metric ton.

“We learned later that we were a dark horse,” Lorenz told THE MANILA TIMES. “We were not supposed to win, because the favored one was Vivendi-Dizon Mines.”

“We won the bid because we had no political backer,” he added. “So our cost was low but realistic.”

By December 2000  the MMDA issued a notice of award to PEC  after the ICC approved it at the Cabinet level.

PEC’s project involves two transfer stations in Las Piñas and Payatas. Garbage will be baled and transported in  40-foot sealed containers initially through the East Highway and the South Superhighway until the completion of its two piers. It will have a central processing, storage and disposal facility to be sited in Pililla, Rizal. The project will have facilities for segregating and composting, storing, and disposing of residual waste.

It will also have a social component including a “solid waste management institute, a pilot organic farm to train farmers in organic farming using the compost the farm will generate, and  housing for its workers.

Negotiations for a detailed contract between the PEC and the MMDA followed, Lorenz said. He was surprised to learn however, that while the negotiations were taking place, Aventajado and Binay were scouting for a new dumpsite. That dump turned out to be Semirara Island close to Boracay.

The Semirara site was supposed to be just an “interim” contract, which was awarded to R2 Builders owned by Reghis Romero and DM Consunji. It was a “controlled dump” where Metro Manila’s garbage would be transported through a barge, dumped, and covered.

Lorenz, said two barges that had left for Semirara could not unload the unwanted cargo, because of local opposition. In just a few days, the garbage started to seep and the crew got sick. “It was a horror story.”

Because of popular opposition, President Estrada  aborted the project on January 11, 2001. Estrada was in trouble himself: he was impeachment at the Senate. By January 16  the second People Power Revolution erupted and four days later Estrada fell.

Lorenz told The  Times that  Aventajado and Binay did not have to scout for “an interim site” because their proposals contained emergency measures to deal with the garbage crisis. But he believes Binay and Aventajado could have been forced to look for an “interim” dump because   a case Jan­com had filed  asserting that its contract was valid. Jancom’s case had already reached the Supreme Court.

Thus, when President   Arroyo came to power, she could not do anything except look for temporary sites like the ones in Montalban, Rizal, and in Navotas. For months PEC’s projects but in limbo when on November 29, 2001, the ICC Cabinet committee finally granted its approval. And by December 11, 2001, the NEDA board gave its final approval.

Under the country’s build-operate-transfer law, the approval of the NEDA board carries with it the President’s approval. On December the final contract   finalized and  ready for signing.

Supreme Court

Then came the shocker. On January 30, 2002, the Supreme Court decided that the Jancom contract, despite its infirmities (see Table 1), is “valid but not effective unless signed by the President.” 

The Court acknowledged that the Jancom contract did not have the signature of the ICC-NEDA and of the President of the Philippines but it stressed that a “meeting of the minds” among the signers “cured” all its defects.

President Arroyo, however, could not sign the Jancom contract, because the Supreme Court’s ruling has put her in a catch-22 situation.

According to   Bantay Kontrata, an NGO, if she signs the contract, she will be liable for impeachment, plunder and graft. If she   amends the contract, it will have to be done substantially to conform to the laws of the land and the terms of  bidding. Under the BOT law, doing this would require a rebidding. But she cannot also rebid the contract, because the Supreme Court had ruled it as “valid.” Signing an amended contract without rebidding would again expose her to violation of laws.

So the Jancom contract has become a   chicken-and-egg situation dragging down the DECS’ project. This baffles Lorenz because in his country, winning a bid is all you need to get a business going.

“I can’t understand it,” he complains. “Maybe this is   why this country isn’t  moving forward.”