There is no certainty that the government could still recover the P1.9 billion that it paid as down payment for the 16 Mi-17 helicopters that it ordered from a Russian supplier, but whose contract it was already moving to terminate.
This cropped up during the hearing on Tuesday of the Senate’s sub finance committee chaired by Senator Ronald “Bato” dela Rosa on the proposed P310.9-billion budget of the Department of National Defense (DND) for next year.
Defense Officer in Charge Jose Faustino Jr. told the dela Rosa committee the DND is likely to experience difficulty in seeking for the return of the down payment as the contractor, SOVTECHNOEXPORT LLC, has already spend the downpayment money for its projects.
“[We may encounter] difficulty in working for the refund as the supplier has also invested the funds,” Faustino told dela Rosa, who asked the DND about the status of the scuttled contract worth P12.9 billion with the Russian defense manufacturer.
According to the senior defense undersecretary, the down payment was paid to the Russian company on January 10 this year before the contract for the acquisition of the 17 Russian helicopters was rescinded by the Duterte administration, days before it left office.
Last month, the DND announced that it was already in the process of formalizing the termination of the contract through a committee it has created, whose task would also include the recovery of the downpayment.
However, Faustino told the committee that the “project has not been formally terminated” yet.”
“It is still in the process of termination, but no formal… documents have been given to formalize (it),” he said.
During the same hearing, the military admitted that only five of its South Korean-acquired FA-50 fighter jets are currently flying due to spare parts supply problems.
A military official said that out of the squadron of the fighter jets, two are scheduled for maintenance, which is expected to be completed at the last quarter of this year, while five others are awaiting spare parts and may become operational before the end of the year.
Another military official admitted the challenges that the Air Force is experiencing in the maintenance and operations of its fighter jets, which he said was exacerbated by their “unprogrammed” use during the 2017 Marawi siege operations.
Some senators prodded the military to have the problem fixed, given that the country is facing a security problem in the West Philippine Sea (WPS).
During the same hearing, Senator JV Ejercito said that Horizon 1 or Phase One of the military’s modernization project, which has already ended a couple of years ago, still needs to deliver 20 projects.
Under Horizon 2, which will also end this year, he said only 13 out of the 96 projects have been completed or delivered.
The Horizon 3 or the last phase of the modernization program will begin next year, wherein multi-role fighter planes for the Air Force are projected to be procured.
Ejercito also raised the P1.3 billion that the Philippine Navy transferred to the Philippine International Trading Center (PITC) for its modernization program, noting that the funds denied the Navy for its immediate use.
He said there are also funds with the Procurement Service of the Department of Budget and Management.
Faustino said the “parking” of these funds happened in 2020 and the new leadership of the DND has already stopped the practice.
Faustino said he would also order for the review of the memorandum of agreement with telephone companies (telcos) that allowed them to put up towers inside military camps, including at Camp Aguinaldo.
The DND official’s response was prompted by questions from Senator Raffy Tulfo on why they allowed DITO to put up a tower at Camp Aguinaldo since the firm is substantially owned by the Chinese government and can be used for “spying.”
The senator said even the Department of Information and Communications Technology admitted that the DITO towers inside military camps pose security threats as China disputes the Philippine territory of Kalayaan Island and also the WPS.