SENATORS are strongly urging the Executive to reconsider plans to tap a state-run trading firm to buy Covid-19 vaccines after Senate Minority Leader Franklin Drilon reported Monday that the public funds parked with the Philippine International Trading Corp. (PITC) had reached P33.4 billion, indicating an apparent poor record in returning money to government agencies despite shortfalls in deliveries.
The PITC, an attached agency of the Department of Trade and Industry (DTI), is being eyed to handle purchases of Covid-19 vaccines for the Duterte administration, but senators are aghast at Drilon’s revelation that not only was it earning billions in commissions from the government agencies, it had also failed to return monies to them when there are shortfalls in deliveries. Of the P33.4 billion that Drilon said is “parked” with PITC, while the government has been scrounging for money in the pandemic, at least P9 billion was earlier cited as owed to the Armed Forces of the Philippines.
In a televised interview on Monday, Drilon said certain questions arise as the amounts deposited already runs to P33.4 billion back in 2019, noting, for instance, that “yearly this has grown, these parked funds earned interests. Is it remitted back to the government?”
After reviewing its audited financial statement, Drilon said, “I will repeat that, the latest audited financial statement indicates that customer deposits in PITC is P33.4 billion. Assuming that there are also some private fund deposits, which is not that much, we are talking about funds to the tune of P33 billion in government funds deposited in a small trading firm called PITC,” the senator said.
The chairman of the PITC, Trade Secretary Ramon Lopez had been reported as receptive to an inquiry by lawmakers, and is himself seeking an explanation from the DTI sub-agency’s officials.
In a CNN Philippines interview, however, Lopez assured the public there are no funds that are “parked” or “missing” at PITC and that unused monies revert to the Treasury.
Lacson’s warning
Sen. Panfilo Lacson likewise cautioned authorities against rushing the move to tap the PITC for the multibillion-peso purchase of Covid vaccines “given its poor track record.”
“Utilizing the Philippine International Trading Corp. for the procurement requirements of several national government agencies may have to be revisited and stopped, not only to save on unnecessary expenses amounting to billions of pesos in delays and commissions or service fees,” Lacson said in a separate statement.
The senator asserted that since the creation of the Government Procurement Service (GPS) under the Department of Budget and Management, “the PITC may have outlived its purpose.”
Lacson recalled that “initially, it [PITC] was only used to circumvent the procurement of medicines, especially for emergency needs. But later, it expanded into the procurement of other items like rice.”
That said, the senator suggested that “it is only prudent that the government at least take a long hard look at the involvement of the PITC in the procurement of Covid-19 vaccines.”
Just deposited, not obligated
According to Drilon, the deposits of PITC’s clients from a small P4.8 billion in 2015 suddenly grew to P33.4 billion in 2015. “What is happening is that government agencies, which are supposed to purchase products, would engage the services of this little-known trading agency and pass on the budget there so that they will say that these are already obligated, when, in fact, they are just deposited.”
Drilon, however, said this set up triggered certain questions, noting that these amounts deposited by government agencies, running up to P33.4 billion in 2019, have grown yearly.
For a start, the senator was keen to know whether the interest earned from these parked funds were “remitted back to the government?”
Next, he zeroed on the profits that PITC makes from its operations as the purchaser or procurer of other agencies. “They charge what you call a service fee which is anywhere between 1 to 5 percent. Therefore, their profits in 2019, it made over P629 million on the basis of the Commission on Audit reports. How much of that was remitted to the government?”
Moreover, the Senate Minority Leader voiced concerns over the key role of a “small trading company attached to the DTI” in the multibillion transaction to procure Covid-19 vaccine” from the world market. “What is a little bit worrisome to me is the agency is being tapped to handle the procurement of Covid-19 vaccines and the allocation, from what we heard, is about P20 billion. At a 1-percent commission, that’s about P200 million for P20 billion. If you add the other deposits, which are from other agencies, assuming they earn 1-percent commission, their potential profit is P540 million.This is a small trading company attached to the DTI,” said Drilon.
Drilon, a former Secretary of Justice, asserted that it was not necessary for State agencies to tap PITC to purchase goods they need, especially in buying Covid-19 vaccines.
He observed that “in every government agency, they have a procurement service. In fact, the DBM has a procurement service. I could not understand why PITC is there [earning] commission for the agencies.”
Asked if it was legal for PITC to get commission on these purchases or sales, Drilon replied: “I have been told that they are authorized to collect anywhere from 4 percent for projects P25 million and below, and 1 percent for projects worth P700 million and above.” He, however, hastened to clarify that “I have to check this. I understand this has some authority in a presidential decree or EO. Let me check that.”
Poor delivery record
In the same interview, Drilon was asked to assess the performance of PITC. “Just looking at their financial statements would indicate that indeed delivery is poor, because even as since 2015, their customers’ deposit has increased from P4.8 billion in 2015 to P10.9B in 2016 to P19.70B in 2017, P30.7B in 2018, and P33.4B in 2019. “It means that this money just stays there and it keeps on growing every year.”
As one example, the Bureau of Fire Protection (BFP) deposited in PITC P3.27 billion and in 2019 alone, P150 million more or less. “Surprising thing here, apart from fire trucks that were supposed to be purchased by PITC, 242 fire trucks were not delivered; surprisingly, they are tasked to build fire stations, 98 fire stations, in fact.”
Noting that the charter of PITC states they are a trading company, the senator wondered: “How is it that they are now engaged in the construction of 98 fire stations and they have not delivered?”
Drilon also cited reports that the PNP in 2016 deposited P1.347 billion for firearms, but only P311 million worth of firearms have been delivered. “The PITC is a can of worms. We will investigate this,” he added.
The Senate Minority leader rued that, even as billions are idle in PITC, I both “the Secretary of Finance and the DOF are having difficulties [raising] funds due to the drop in revenues.”
He continued: “Here you are, government agencies depositing their budgets in PITC so it is made to appear that they are obligated, where, in truth and in fact, it is sleeping in the coffers of PITC and interest is being earned but we do not know if it is remitted to the coffers of the national government.”
GCG on carpet
Drilon, one of the authors of the Governing Council for GOCCs (GCG), wondered aloud if the oversight body is closely monitoring the performance of the PITC, which is a government-owned and -controlled corporation.
Drilon said he was at a loss on why, given the poor track record of PITC, would it still be tapped by other government agencies “to purchase what they need instead of doing it on their own? I cannot answer that. Maybe they are not yet aware how poor the performance of the PITC was. Maybe [the Secretary of Finance]is not aware that there is P33.4 billion parked with PITC per COA audited reports and that they charge a commission.”
If the national government proceeds with letting PITC handle the vaccines purchase—estimated to cost P20 billion —the commission will run to about P200 million. “Going into that, the budget only provided for P8 billion for the purchase of Covid-19 vaccines.”