Did Duterte have his facts right on Nayong Pilipino deal?

President Duterte is angry over the draft contract on the NayonLanding casino resort. Was he aware of final contract details when he moved to scrap the project?

Pia Ranada

10:44:7am August 27, 2018

2:27:9am August 28, 2018

DRAMATIC GROUNDBREAKING. The scale model of NayonLanding, the Filipino-inspired casino resort to be built on Nayong Pilipino Foundation land is showcased during the project's groundbreaking ceremony. File photo by Inoue Jaena/Rappler

MANILA, Philippines – At first glance, President Rodrigo Duterte’s decision to sack Nayong Pilipino Foundation (NPF) officials and scrap its deal with a Chinese casino builder is just another demonstration of his crackdown against corruption.

But a look at documents related to the case shows there’s more to it than meets the eye. 

The controversy revolves around the US$1.5-billion casino theme park that Landing Resorts Philippines Development Corporation (LRPDC), a local subsidiary of Hong Kong-based Landing International, is supposed to build on NPF’s land in Parañaque City.

The casino resort, dubbed NayonLanding, is supposed to feature a water park, resort, casino, and office space for NPF. In a dramatic turn of events, Malacañang announced the sacking of NPF officials on the same day they broke ground for the project.

Duterte had found the NPF-LRPDC contract of lease anomalous for being granted without public bidding, and disadvantageous to government for imposing lease prices supposedly much lower than prices for similar properties in the area. The final contract imposes a lease rate of P360 per-square-meter (sqm) and P827 million in advance rentals, said fired NPF board of trustees chairman Patricia Yvette Ocampo in a Business Mirror report.

Last August 17, Duterte also blamed sacked government corporate counsel Rudolf Jurado over the fiasco, claiming Jurado agreed with a “75-year” lease of the NPF land. This was supposedly one of the reasons why Duterte fired him last May. 

“Just imagine, his draft – it doesn’t really matter that it was not final – his draft that I saw, you’re a fool…75 years for this Nayong Pilipino? Are you a fool? That’s why I fired Jurado,” he had said.

Duterte has since ordered Justice Secretary Menardo Guevarra to render an opinion on the legality of the NPF deal with LRPDC. Guevarra’s department has spent two weeks preparing the opinion.

A look at documents pertaining to the NPF-LRPDC arrangement shows Duterte was mistaken with some of his facts. They also show that more questions need to be raised about the deal and who else must be held responsible for it. 

Basing decision on a draft?

Duterte consistently claims that NPF wanted the lease to last 75 years. This likely arose from the fact that the NPF’s initial draft contract proposed a 50-year lease, renewable for another 25 years.

However, the final contract whittled it down to 25 years, renewable for another 25 years, said Ocampo. This was after Jurado, in a March 9, 2018 legal opinion, said that LRPDC is only entitled to 25 years if it is a foreign corporation not engaged in investment in the Philippines.

“If LRPDC is a foreign corporation under relevant law but is not engaged in investment in the Philippines, the allowable period for the lease is only up to twenty-five (25) years, as stated in Presidential Decree No 471,” reads the opinion obtained by Rappler.

First page of the OGCC's legal review of the NayonLanding lease contract sourced by Rappler

Portion of the legal review that states that LRPDC is limited to a 25-year lease if it is a foreign investor but not engaged in investment in the Philippines based on Investors' Lease Act

If Duterte based his decision to sack NPF officials on the draft contract, is he unaware that the initial P150/sqm monthly rental was more than doubled in the final contract which imposes a P360/sqm monthly rate, according to Ocampo?

Would the contract still be considered “grossly disadvantageous” to government if he had considered the final contract?

In his March legal review, Jurado had agreed that the initial P150/sqm rate had to be studied.

“…we strongly suggest that NPF should further negotiate with the lessee the increase of the monthly rent, and ensure that the said rent is fair, reasonable and most importantly not disadvantageous to the government while taking into account the investment of the LESSEE into the property,” reads the OGCC opinion. 

It was this P150/sqm rate that was also red flagged by COA, not the later P360/sqm rate.

Public bidding or no public bidding?

The NPF was also roasted by Malacañang for not having conducted public bidding for the private entity that would develop their piece of land.

But Jurado’s opinion cited a recent GCG (Governance Commission for Government-owned and Controlled Corporations) memorandum circular as basis for allowing NPF to lease the land to LRPDC even without public bidding.

This Memorandum Circular No 2018-02 revoked an earlier memorandum circular, issued during the presidency of Benigno Aquino III, that specifically states public bidding is required for land bigger than a hectare to be leased for more than 10 years (GCG Memorandum Circular No 2013-03 Reissued).

Jurado said that because of the 2018 circular, NPF can dispense with public bidding. He overturned his office’s legal opinion in November 2017 when the circular was not yet in existence and the 2013 circular – requiring public bidding – was still in force.

Jurado made it clear in his opinion that, were it not for this 2018 circular, NPF would not be able to do away with public bidding.

“In view of the revocation of the GCG Memorandum Circular No 2013-03 (Reissued), we opine that the proposed lease is no longer required to undergo public bidding,” wrote Jurado.

The 2018 circular revoked the 2013 one, saying that it "contains provisions and processes that unnecessarily impede the timely approval and implementation of government projects."

Item 4.1 of the revoked 2013 circular states that, in case of lease agreements exceeding 10 years pursuant to the primary purpose of a GOCC, "Leasing areas involving at least one (1) hectare shall be bidded out."

A portion of the March OGCC legal review shows it waived the public bidding requirement due to a February 2018 GCG Memorandum Circular signed by two of Duterte's economic managers

The last page of the GCG memorandum circular revoking a 2013 memorandum circular bears the signatures of Finance Secretary Sonny Dominguez iand Budget Secretary Benjamin Diokno

Who signed the crucial 2018 circular that revoked the 2013 one with a bidding requirement? A copy, obtained by Rappler, shows the signatures of Finance Secretary Sonny Dominguez, Budget Secretary Benjamin Diokno, GCG Chairman Samuel Dagpin Jr, and commissioners Michael Cloribel and Marites Doral.

The question now is, was Jurado correct in interpreting the 2018 memo circular as eliminating the public bidding requirement for contracts like the one between NPF and LRPDC?  

This could be one of the findings of Secretary Guevarra’s assessment. The OGCC is under the Department of Justice.

Pagcor’s role

Duterte has declared his aversion to casinos and gambling, yet in this Nayong Pilipino fiasco, he has not said a word against the Philippine Amusement and Gaming Corporation (Pagcor), the gaming regulator responsible for approving casino projects.

Back in July, LRPDC announced that Pagcor had issued it a provisional license to operate a casino. This was over a year after Duterte imposed a 5-year moratorium on new Metro Manila casinos. Pagcor supposedly stopped accepting and evaluating applications last January.

Pagcor has said its license to LRPDC is separate from NPF’s lease contract. But it’s also clear that, without the Pagcor license, the lease deal would be terminated.

A draft of the contract of lease states that “if the provisional casino license is not issued to the LESSEE on or before 30 June 2018, or such other date as may be agreed by the parties to this CONTRACT, in which case the parties agree that this CONTRACT shall be terminated forthwith…”

Other elements

Is it just coincidence that weeks after Duterte moved to have the NPF-LRPDC deal scrapped, the chairman of Landing International was arrested on Friday, August 24, for alleged bribery? Yang Zhihui was detained by authorities in Cambodia then flown to China to answer the charges, according to a report by the Philippine Daily Inquirer

Interestingly, another Chinese tycoon with business interests in the Philippines had also been probed by the Chinese government for bribery allegations. Huang Rulun, founder of real estate company Century Golden Resources Group, was being investigated for bribing local officials, according to a Financial Times report in June 2017. 

Huang, like Yang, was able to secure meetings with Duterte. The Philippine President even called him a “good friend” after he donated a drug rehabilitation center in Nueva Ecija. 

Another interesting element to this whole affair is how the issues hounding the NPF-LRPDC deal were first made public by a distant relative of the President’s, Maria Fema Duterte. She had accused NPF officials of graft and corruption, even filing a complaint with the Office of the Ombudsman. Some of her allegations were backed up by a Commission on Audit report.

But Maria Fema has her own personal grievances with the NPF officials, claiming they refused to recognize her as executive director despite the blessing she secured from Duterte himself. But former NPF board of trustees chairperson Ocampo contested this, saying board members vote for the executive director among themselves. 

Then there’s the overarching Beijing policy against Chinese companies building casinos outside mainland China.

In August 2017, China’s State Council announced rules banning Chinese companies from making overseas investments in the areas of gambling, sex industry, and core defense technologies. 

The Beijing crackdown dovetails nicely with Duterte’s moratorium on new Metro Manila casinos effective since last January and then expanded to the entire country in February. – Rappler.com