POSTSCRIPT / July 20, 2003 / Sunday


Philippine STAR Columnist

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Who gave away RP skies to US carriers?

WHO DID IT?: Will somebody please identify the officials responsible for the onerous 1982 Air Transport Agreement between the Philippines and the United States? We want to know who gave away Philippine air space and sealed the death of local airlines.

The ATA is so one-sided that in the current air talks (that had collapsed), all the Americans had to do was sit tight and clam up when the Filipinos refused to grant the US more flight rights than are normally given to friendly partners.

When the RP panel refused last Wednesday to grant US demands, such as the granting of 7th freedom rights to US cargo carriers, the Americans simply did not show up the next day, Thursday. The Filipinos did not appear either, and the talks collapsed.

A stalemate favors the Americans since the present ATA is lopsided enough in their favor. If the talks are not resumed and the stalemate resolved, the existing agreement that guarantees “Open Skies” will be carried out in earnest starting Oct. 1.

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‘OPEN SKIES’ COMING: “Open Skies” means removing mutual restrictions as to frequency, capacity and destinations on the carriers of the two countries. Since Philippine carriers are no match to the giant American airlines, the local airline industry is expected to be swallowed up in the competition.

“If both parties agree to have another and final round of talks it might happen in September,” a member of the Philippine panel said. “But that is the last. If nothing happens there, then the US carriers will be allowed unlimited flights, while those of the Philippines are restricted, starting Oct. 1.”

There is persistent talk that President Gloria Macapagal Arroyo already agreed during her US state visit last March to allow “Open Skies” and to legitimize the illegal operations of US cargo liners that have made Subic and Clark as regional hubs.

That must have been the reason why the US panel, headed by Deputy Director Laura Faux-Gable of the Office of Aviation Negotiations, appeared to have been under the misimpression that an agreement was a “done deal.”

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SEVENTH FREEDOM: The Americans were surprised not to find the Filipinos ready to give them what they thought were already in the bag. They wanted 7th freedom rights and third-country code-sharing scheme privileges.

Seventh freedom would give US carriers the right to operate independent flights between the Philippines and third countries. For example, if United Airlines has an aircraft based in the Philippines and uses it to operate Manila/Hong Kong flights, with no connection to the US, that would be a 7th freedom operation.

The RP panel, led by the Transportation Undersecretary Edward Harun Pagunsan and Foreign Affairs Assistant Secretary Franklin Ebdalin, resisted.

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UNCONSTITUTIONAL: Seventh freedom is rarely given in air agreements. It is not in the existing RP-US agreement. Yet, it is actually being enjoyed now by US carriers using Subic (Federal Express) and Clark (UPS) to operate cargo flights to and from neighboring Asian countries.

The 7th freedom Clark and Subic operations of US carriers are not covered by any legal authority and, therefore, are technically unconstitutional. They are simply being tolerated by the Philippine government as a goodwill gesture to the US.

Yet, when the Filipino panel asked the Americans for a similar concession — to consider granting Philippine carriers the right to operate domestic flights in selected US sectors (Guam-Hawaii, for example) — the US was quick to dismiss this as non-negotiable as it would “violate their laws.”

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NO JOINT OPERATION: Despite the constitutional barrier, the RP panel still went out of its way to look for creative solutions to the impasse. It proposed a joint operation between Philippine and US cargo carriers, with the 7th freedom question to be dealt with in a side agreement between the airlines.

A Filipino official said the US side, particularly the cargo carriers, would have none of this compromise. The Americans were adamant that the grant of 7th freedom rights be included in the air services treaty. Pagunsan and Ebdalin rejected this.

Rebuffed on the 7th freedom issue, the Americans refused to even touch on the other equally important issues. The talks quickly ended in deadlock.

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READERS RESPOND: It’s remarkable that some readers have been motivated enough to propose solutions to serious national problems that we bring up in Postscript.

After Bataan Rep. Enrique T. Garcia Jr. suggested a technical way of preventing syndicates, conniving with bank officials, from cashing stolen checks intended for the internal revenue and customs bureaus, readers sent in their own suggestions.

The two bureaus, the major revenue earners of the government, lose an estimated P50 billion each year to syndicates that steal and divert checks to fictitious accounts that they then empty before the crime is discovered.

(The modus operandi is described in greater detail in our previous two columns. Please check Archive.)

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WHY NO ACTION?: Garcia suggested that the three unused digits at the tail-end of the numeric code at the bottom of every check be filled by the presenting bank to identify the beneficiary of the check (for instance, 888 for BIR and 999 for Customs).

He said this electronic identification of the payee can help prevent diversion or switching of checks. The presenting bank, which must add the three-digit codes for BIR and Customs, has no more excuse for crediting the money to another account.

With some 5,300 bank branches in the country still vulnerable, one would think finance department and Bangko Sentral officials would lose no time plugging the holes in the system.

The Garcia proposal was formally submitted a year ago, but finance and Bangko Sentral officials have ignored it. If they had a better idea for stopping the billion-peso tax diversion, they have not come forward with it.

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AUSSIE MODEL: But reader Lito Diwa, emailing from Sydney, Australia, was quicker. Upon reading Garcia’s proposal, he adapted a practice in his country of residence and proposed using it to achieve the same results of foiling fund diversion.

Giving the procedure the kicker “No Check, No Fraud,” Diwa described its mechanics thus:

“The solution is to force all payments to the BIR and Customs by way of direct bank credit to the two bureaus’ account.

“When the BIR prints the tax assessment forms, they must use special paper that has a tear-away bottom portion (deposit slip) with the Bank/Account micro encoding and the taxpayer’s TAN or tax account number (also micro encoded).

“The taxpayer tears the bottom part and goes to his own bank authorizing it to debit his account and credit the BIR/Custom account. This can be done even if the BIR/Customs has no account with the bank where the taxpayer maintains his account.

“The BIR or Customs can get the next day an electronic statement of its account and update its system that will show who paid the money to the BIR/Customs account.”

Diwa said this procedure has been in place in Australia, although it is not mandatory. (“But this is not a fraud-infested country,” he explained.)

“Also because of the confidentiality of TAN, the Australian Tax Office has issued an ABN (Australian Business Number) for every individual or corporation doing business,” he adds. “The ABN is linked to the TAN in the Tax Office data base, so they can print the ABN without identifying the TAN.”

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ELECTRONIC TRANSFER: Another reader, MDManio using a hotmail address, suggested earlier the wider use of electronic payments via the Internet that links the taxpayer to the BIR/Customs and enable direct transfer of funds.

Electronic transfer, as in making income tax payments and settling utility (electricity, water, gas and water) bills, has been in use in other countries. It is so simple that our refusal to adopt it has been a source of wonder to many.

With the payer himself transferring the funds to the beneficiary (BIR/Custom) directly with the use of his computer, the problem of a syndicate stealing a check and cashing it will not arise.

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(First published in the Philippine STAR of July 20, 2003)

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