The Department of Finance (DOF) has recommended to the board of the National Development Co. (NDC) to shut down one of its subsidiaries by 2021 so the government can finally take back its sprawling 120-hectare (1.2 million sq.m.) property in Batangas now valued at around Php 5 billion, but which Chevron Philippines Inc. (formerly Caltex Philippines) has been leasing for a measly 74 centavos per sq. m. per month, only 4% of the current monthly fair market rental estimate of Php 17.90 per sq. m.
Heeding the recommendation of Finance Secretary Carlos Dominguez III, the NDC Board decided in December last year to terminate in 2021 the corporate life of the lessor of the property—the NDC subsidiary Batangas Land Co. Inc. (BLCI).
Dominguez, a member of the Board, made this recommendation after the DOF had uncovered onerous provisions in BLCI’s more than four-decade-old lease contract with Chevron, which uses the property as an oil import terminal.
Shortening BLCI’s corporate life will finally allow the government to exercise “full ownership, control, and rights over” this prime lot and other real estate properties occupied by Chevron, which are strategically located for the country’s future energy projects, Dominguez said.
He pointed out that the government should have exercised these rights as early as 1975, but Chevron was able to obtain preferential treatment to continue occupying and using these properties under the then-Marcos administration.
Dominguez said “these properties (including the Batangas property) should have been turned over to the Government as early as the 1970s, not only legally speaking but, more importantly, based on the principle that these properties should truly benefit the Filipino people.”
“These companies were given sufficient time to transition and pass on full ownership to the government. It is now high time for the government to exercise its rights,” Dominguez added.
The miniscule rental fee of 74 centavos per sq. m. a month, which amounts to only P10.66 million per year for the 120-hectare industrial park is the rate that Chevron has been paying to the government since 2010. This amount is only 4% of the Php 17.90 per sq. m. a month or Php 257.76 million a year that current fair market rental rates in the area would suggest based on comparative data from NDC appraisal reports and other official sources.
The property’s current market value is estimated at about P4.9 billion to P5.3 billion–translating into a rental yield of only about 0.2 percent of the property’s value.
The DOF also found out that the rentals paid by Chevron over the 44-year period covering 1975 to 2019 totaled to only P146.51 million or about Php 3 million per year, in addition to real property taxes paid by Chevron under the lease agreement.
Dominguez earlier described the lease deal as “another government contract with onerous provisions.”
He said that “based on current standards the State imposes on similar contracts, to have a rental yield of less than 1 percent is surely grossly disadvantageous to the government and the Filipino people.”
Dominguez said the request for renewal of the deal was recommended by some offices to the Privatization Council, which found the contract grossly disadvantageous based on current fair values.
The American firm Caltex was able to acquire the Batangas lot and other prime properties owned by the government under the 1946 Bell Trade Act passed by the United States Congress.
Under this law, American entities were granted “parity rights” on land ownership in the country as a condition for the US government’s payment of USD 800 million war damage claims to the Philippines.
Parity rights had allowed American companies to own land in the Philippines just like Filipinos.
These parity rights were extended for 20 years through the Laurel-Langley Agreement signed in 1955 by then-Senator Jose Laurel and Sen. James Langley. Such parity rights ended in 1974.
With the expiration of the 1946 Bell Trade Act, Caltex, and now its subsidiary Chevron Philippines, was granted preferential treatment in continuing to occupy and use various real properties, including the Batangas lot.
Issued by then-President Marcos, Letter of Instruction (LOI) No. 276 required the lease-back of the properties occupied by Caltex for a maximum of 50 years from 1975, at minimum rates of 1.5 to 2.5 percent of the property’s valuation in 1974.