Lawmakers slam ‘onerous’ Duty Free ‘midnight deals’ with HK companies

Duty Free Philippines Corp. (DFPC) entered into “midnight deals” with Hong Kong-listed companies for the supply of billions of pesos worth of merchandise that were sold tax-free in its various stores nationwide, the House of Representatives has learned.

Duty Free officials also admitted at the hearing of the House committee on good government and public accountability that its previous board had extended for another five years the supply and delivery agreements (SDA) with 12 foreign-owned firms in 2015, or three years before they were set to expire this year.

1-Pacman Rep. Michael “Mikee” Romero said the former and incumbent officers of DFPC might be charged with violation of Republic Act No. 8762, or the Retail Trade Liberalization Act of 2000, and RA 9184, better known as the Government Procurement Reform Act.

DFPC, an attached agency of the Department of Tourism, was created to operate Duty Free shops in the country.

‘Recurring criminal act’

“Every time you enter into such SDA, this may be regarded as a recurring criminal act. You have to be very careful about this because you can be implicated in the cases that may be filed,” Romero warned the DFPC officers.

Upon questioning by Ako Bicol Rep. Rodel Batocabe, DFPC legal officer Carlo Castillo disclosed that the companies, which bagged the supply contracts, were all based in Hong Kong and that they did not have any local office in the country.

Romero also questioned why the DFPC allowed Jose Ma. Esteban III, who served as its first general manager in 1987, to transact business with the agency as a representative of some of its foreign concessionaires.

“I think there is conflict of interest here. I don’t think he should, in any way, be doing business with [DFPC],” the lawmaker said.

Vicente Angala, DFPC chief operating officer, said their board had been scrutinizing all the contracts signed during the previous Aquino administration and the abbreviated tenure of former Tourism Secretary Wanda Teo.

Rescind the agreements

But Batocabe pointed out that the supposed violation of the law should prompt the DFPC to immediately rescind the agreements, which he described as “onerous and disadvantageous” to the government.

Foreign companies are prohibited from directly engaging in retail business in the country without securing a registration from the Securities and Exchange Commission and the Department of Trade and Industry.

“You have to cancel all these contracts because if you allow foreign companies not registered locally to do business here, it’s grossly disadvantageous to the government,” Batocabe said.

“How can the interest of the government be protected if these companies are not locally registered? As members of the board, you should have exercised due diligence,” he added.

1-Pacman Rep. Enrico Pineda also questioned the construction of the P700-million DFPC store at a shopping complex in Pasay City, pointing out that Duty Free shops may only operate within international airports and seaports.