Press Release
November 23, 2020

Transcript of Interview with Senate Minority Leader Franklin M. Drilon
ANC Headstart with Ms. Karen Davila

SFMD: After looking at the audited financial statement, I suspect it is over P33.4 billion. I 'll 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 deposits of their clients from a small P4.8B in 2015, suddenly in 2019 it grew to P33.4B. 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.

Certain questions arise: these amounts deposited by gov't agencies, as I said it runs to P33.4 billion in 2019, and yearly this has grown, these parked funds earned interests, is it remitted back to the government?

Number two, PITC makes profit in its operation. They charge what you call a service fee which is anywhere between 1 to 5 percent. Therefore, their profits in 2019, it made over P629M on the basis of the COA reports. How much of that was remitted to the government?

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% commission, that's about P200 million for P20 billion. If you add the other deposits, which are from other agencies, assuming they earn 1% commission, their potential profit is P540M.This is a small trading company attached to the DTI.

Q: A few questions on PITC. Number 1, is it necessary for gov't agencies to tap PITC for the purchase of goods that they need? Is it necessary for PITC to get into picture (of buying Covid-19 vaccines)

SFMD: No. 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 who earns commission for the agencies. Ordinarily in a business transaction, when you sell something you give a commission. In this particular case, the buyer gives the commission to the agent.

Q: Is it legal for the PITC to get commission on these purchases or sales?

SFMD: I have been told that they are authorized to collect anywhere from 4 % for projects for projects P25 million and below and 1% for projects worth P700 million and above. I have to check this. I understand this has some authority in a presidential decree or EO. Let me check that.

Q: Based on the budget deliberations, the performance of the PITC has been quite poor... so many items that are needed by the government and, yet, delivery time is poor

SFMD: Just looking at their financial statements would indicate that indeed delivery is poor, because since 2015, their customers deposit has increased from P4.8B in 2015 to P10.9B in 2016 to P19.7B in 2017, P30.7 in 2018, and P33.4B in 2019. It means that this money just stays there and it keeps on growing every year. We talked about the Bureau of Fire Protection, it deposited in PITC P3.27B 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. The charter of PITC says they are a trading company. How is it that they are now engaged in the construction of 98 fire stations and they have not delivered?

The PNP in 2016 deposited P1.347B for firearms, only P311 million worth of firearms have been delivered. The PITC is a can of worms. We will investigate this.

The Secretary of Finance and the DOF are having difficulties to raise funds due to the drop in revenues. But 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 in the coffers of national government.

Q: What did they do with the money? Was it remitted?

SFMD: Good question, I don't even know if they even remitted these profits. I don't know how much their bonuses and salaries are. Here we have a GCG, which is supposed to monitor the performance of GOCCs. We created, wrote and passed this law. Obviously, the GCG is not doing its jobs because here, suddenly, because of our question, we discovered that P33B in funds are being parked in the coffers of PITC and we do not know how it is being disposed of. It does not pass through Congress. There is really a valid basis to start looking into the operations of PITC and see whether we are being shortchanged or, worse, there are commissions running all over the place, you know what commissions are.

Q: What is interesting is that given the poor track record of PITC, why would an agency still insist on using this agency to purchase what they need instead of doing it on their own? Why would the government continue to tap PITC considering that its performance is so poor?

I cannot answer that. Maybe they are not yet aware how poor the performance of the PITC was. Maybe SOF is not aware that there is P33.4B parked with PITC per COA audited reports and that they charge a commission.

SFMD: It is really unfortunate. I repeat, at P20 billion purchase of vaccine, the commission will run to something to P200 million in commissions alone. Going into that, the budget only provided for P8 billion for the purchase of Covid-19 vaccines. According to DOH, to achieve a herd immunity, at least 60% of our people must be inoculated. Assuming you have to inoculate 60 million Filipinos, the papers today said the inoculation will cost $27 to $35, that's P1,000 for $20. If you multiply P1,000 by 60 million, you are talking about P60 billion just to achieve herd immunity. How much is the allocation in the budget? It's just P8B.

Just to be fair, the inoculation, I estimate, cannot be earlier than the second hanf of 2021. You talk about the logistics. First, we are an island nation and we have to establish inoculation centers in the Philippines. To inoculate 30 million Filipinos in six months' time, you have to inoculate 166,000 Filipinos per day.

Q: How much of the 2021 budget do you believe should be allotted for the purchase of Covid-19 vaccines?

SFMD: At least P30 billion.

Q: Where would you get the P30B from?

SFMD: First, we should realign a good portion of the budget, including the anti-insurgency fund. That alone is P16.4 billion. We should realign that.

Q: How much of the P16.4B of the NTF-Elcac fund should go to Covid-19 vaccines?

SFMD: It should be P16.4B. Why? Remember they are for cleared barangays, therefore, the ordinary budgets of agencies can handle for one-year whatever budget they are and postpone the implementation of the P16.4B for one year.

Q: What are the chances that the whole fund would be scrapped? Do you think this can still be done? It is in the bicam?

SFMD: In the Senate. We are still in the period of amendments. I wish again to highlight that we need to inoculate 30 million Filipinos in six months starting July 1, 2021. For P1,000 per inoculation, that's already P30B. The logistics alone are mind boggling. We have never done this before.

Q: The HoR already appropriated. You are saying the P16B should be realigned? That's roughly P24B, if you do have the support of the senators on this. Where would you get the other P6B?

SFMD: We can look at other funds. For example, there is P9.5B in confidential and intelligence funds. We should realign part of that. Let's look at the budget across the government to find a budget that we can realign. I repeat, we need P30B to inoculate 30 million Filipinos from July 1, 2021 and the other 30 million by 2020 to achieve a herd immunity.

Q: Moving forward to 2021, we are seeing a big contraction in terms of the country's economic growth...Do you believe that we should stick to P4.5-T or should there be room to borrow more funds?

SFMD: There should be room to borrow more funds next year. If you compare us to other SEA nations, we could absorb more debts in order to respond to the needs of the poorest sector of our society. There is no allocation for SAP of the DSWD. The DOH has only P131B, which is a reduction from P181B from 2020, including Bayanihan 1 and 2. The DepEd, the housing, etc. We should be able to borrow more funds in order that our social services can be addressed. This is not just a grant of money, because, look, our economy is consumer-driven. But you cannot enlarge the economy if you have nothing to spend. Therefore, you should stimulate the economy by supporting the demand side. What is the demand side? Spending by our countrymen. During the third quarter, the data would show that household consumption contracted by 9.3%.

Q: After finding out that DSWD ahs something P83B in unutilized and unspent funds. You said this is almost criminal. Ang tanong ngayon, paano magagastos ang pondong ito consider there is a month left in 2020?

SFMD: You know we are in the 21st centuries. We have different outlets - rural banks, GCash, etc. - I don't believe that you cannot distribute this. By the way we were informed that they could not distribute the cash because of the pandemic. I do not believe that. In this age of technological advancement, physically distributing P83B is not the proper way. In fact, we have a distribution system which allows us to distribute this sum of money electronically.

Q: Coming from the DWSD example, also the PITC parked funds...isn't it an overall problem of absorptive capacity of the government?

SFMD: In the course of the committee hearings, the recurring theme is the absorptive capacity. That problem of absorptive capacity runs across the bureaucracy. It is a big problem. It has been there for some time but I do not know if something drastic is being done. Because of the capacity to absorb, PITC becomes a very profitable operation. When I say profitable, I don't mean corrupt or corruption opportunities but you can make your own conclusions. The point is, when you make it appear that you have spent P10 billion but the truth and the fact is, you only obligate P10B and deliver it to PITC, that does not help the economy.

Q: My last question on PITC. Is there any way to suspend operations of the PITC, stop parking funds there until they have fulfilled all previous deliveries?

SFMD: Even if we don't stop operations, they are supposed to liquidate purchase of these P33.4 billion of funds deposited. Maybe with this exposure in the media with the way PITC operates, decision makers will think twice before delivering the money against PITC for procurement. Remember the DBM has a procurement service. All these point to either inefficiency or corruption.

Q: The DPWH budget has also been criticized for number one, underspending and another issue, this "skeleton" budget, etc. Where do you see the DPWH going after it goes through the Senate?

SFMD: It is difficult to answer that. With all these talks about congressmen having pork parked in various districts or projects, it is difficult to predict what will happen. We will see what amendments would be submitted by the Senate. For one, there is undue concentration of funds in the central office which is not very efficient, that is why more funds should be devolved to regional offices. We will make amendments to correct this inequity.

Another inequity that we see in the 2021 budget is the calamity fund. The proposed budget for the calamity fund for 2021 is P20 billion from P16 billion this year. If you look at the damages caused by the last three typhoons: Ulysses (P13B), Rolly (18B) and Quinta (4.2B). From these three typhoons alone, you are talking about P34 billion in damages and next year you only have P20 billion in calamity funds. It is totally inadequate.

Q: On the creation of the Department of Disaster Resilience. Do we need to create a disaster resilience department?

SFMD: It will be a disaster. What we need is additional funds for disaster response or calamity funds, not an additional bureaucracy. You know, you spend P1.5 billion in terms of salaries and MOOEs per department you create. Right now, we have 1.8 government employees in the national government, excluding those in the local government. There are 7 bills in the Senate calling for the creation of 7 departments. If you say P1.5B is needed per department, you can immediately say that about P10 billion would be needed that is why I said that creating a department of disaster would be a disaster because you need funds, especially today for Covid-19, calamity, housing and education, rather than additional bureaucracies. That is why I support the Senate President's bill that seeks to rationalize the size of the bureaucracy. We should support that bill...

Q: On the 2021 budget, you also noticed in the past that the DOH is lower than the present budget including Bayanihan 1 and 2. I am curious, of that P136B in health, is that figure going to change?

SFMD: We hope that it can be changed. We hope to have more funds. For example, for all the investigation about the corruption, we cannot close our eyes to the fact that we need funds for PhilHealth. Recall that during the investigation, upon my question, one senior vice president said that unless there are funds, PhilHealth might be bankrupt by 2022. The P71b budget for PhilHealth is grossly inadequate. The P136B for health is inadequate. We must address these. There are so many areas to be addressed and there is so little funds to be distributed. We must be able to focus on the right needs to be addressed at least for 2021. My belief is, given all these needs by our people particularly those belonging to the poorest 20%, we must address these, because unemployment has gone up and there are millions of families who went hungry. More than any other time in the past, this budget must refocus its concern to the health and social sectors of the society. The Senate budget is still being worked out by the committee on finance.

Q: On another note, Senate President Sotto said that Sen. Lacson is already inoculated. Did you ask him?

SFMD: No.

Q: Because the media is trying to get in touch with him...

SFMD: My advice to the media is, let's talk about issues that can really help the country rather than the issue of whether Sen. Lacson is inoculated or not. Talking about that, Sen. Bato is found Covid-19 positive. This is really a continuing serious concern that we should address.

Q: Anything you'd like to add?

SFMD: I just hope that the administration is listening and will open its ears and its options to all these options that we are bringing out. We have no personal agenda here. We are just after what we submit would be needed; for example, in the bias of the budget. We have no personal interest in that. But I think it should be accepted that the bias for the social and health sectors should be emphasized at least for next year so that we can help our people and at the same tie, help our economy recover, by stimulus on the demand side, putting money in the hands of the people so can make purchases, because our economy is a consumer-driven economy.

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