POSTSCRIPT / April 17, 2005 / Sunday


Philippine STAR Columnist

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CDC, SM justify deal on Clark shopping mall

NOT TAX-FREE: The Clark Development Corp. and the SM Prime Holdings Inc. belied yesterday claims of some Pampanga businessmen that the opening of another SM shopping mall on Clark Field poses unfair competition and promotes smuggling in the former American base.

Dr. Emmanuel Y. Angeles, immediate past president and chief executive officer of CDC, said that SM-Clark would not be granted privileges normally given to duty-free shops and other commercial establishments in the Clark Special Economic Zone.

Angeles, under whose term the SM-Clark project was approved, reiterated assurance that all items to be sold at SM-Clark “will be slapped necessary and corresponding taxes normally imposed on other malls and commercial establishments outside Clark zone.”

New CDC president Antonio Ng stressed the same point, adding that the main gate of Clark in Angeles City would be moved inside the zone so the SM mall would be outside the zone, and therefore not qualified for tax exemptions enjoyed by duty-free shops.

Ng said that SM-Clark would not compete with other commercial establishments inside Clark since SM would be treated like other commercial establishments outside the economic zone that are required to pay taxes.

Romy P. Yusi Sr., regional governor for Central Luzon of the Philippine Chamber of Commerce and Industry Inc. (PCCII), said SM-Clark would generate some 12,000 jobs directly and indirectly for surrounding communities.

Yusi and several business and civic leaders, as well as executives in Central Luzon, have been saying that the establishment of malls creates fair competition benefiting thousands of customers.

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SM GIVES SIDE: Lawyer Epitacio B. Borcelis Jr., vice president and asst. corporate secretary of SM Prime Holdings Inc., said in a statement:

“SM cannot discuss the merit of the case filed by petitioners Ruperto L. Cruz, et al. against Dr. Emmanuel Y. Angeles, Clark Development Corp. and Premier Central Inc. in Regional Trial Court Branch 58 in Angeles City (Case No. 11353) because of the principle of sub judice.

“However, per court records, the said RTC had dismissed the case on the ground that the petitioners have insufficient or no cause of action against the respondents.

“Likewise, the motion for reconsideration filed by the petitioners was also denied by the RTC in its order dated Jan. 28, 2005, because the court found no reversible error in its order dated Oct. 4, 2004, and it ruled that there was no public interest involved, only private interests.

“The RTC also ruled that on the perception that the SM shopping mall will allegedly be extended special tax privileges, thereby making competition with other establishments in surrounding communities grossly unequal, the court finds the same premature and presumptuous as such tax privileges or payment of taxes, if any, have yet to be made.

“Further, while it is true that SM as locator at Clark Special Economic Zone was issued a Certificate of Registration and Tax Exemption (CORTE) as a CSEZ Enterprise, the importation privileges of SM is limited to the importation of equipment to be used exclusively for the construction of the SM mall.

“On the issue of official bidding, lease contracts of CDC which have been entered into in the regular course of business are within the approving authority of CDC’s governing board and are not subject to bidding process.

“Contrary to the claim that there was no public consultation before the CDC’s approval for the establishment of the SM project inside CSEZ, we are aware that CDC consulted various organizations to explain the benefits and potential of SM project in spurring economic growth, notwithstanding its positive impact in the livelihood and employment, although public consultations were not pre-requisite in the regular approval process being observed by CDC in its development activities inside Clark, not to mention the resolutions from the provincial board of Pampanga and Tarlac which favorably endorsed the SM mall project to be put up inside Clark.

“On the issue of moving the main gate further inside, it was CDC’s request for SM to construct a new gate further inside to enhance the traffic circulation in the area and to conform with the modern design of SM City Clark.

“The improvement and development of Bayanihan Park was part of the commitment of SM and the operation, maintenance of the park, terminals and all facilities to be introduced thereon shall be undertaken by SM and any income which may be derived therefrom shall be utilized solely to maintain and further develop the park and the facilities thereon.

“SM categorically denies the allegation that CDC has approved Henry Sy’s demand for some 100 hectares more inside the civil aviation area for SM’s expansion. There was no such demand from Mr. Henry Sy or from SM.

“Likewise, we believe that our presence makes local businesses more dynamic either by relocating to our malls, as many have done in San Fernando, or by striving to become more competitive.”

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SUPPLIER’S TALE: In the spirit of free, healthy discussion in pursuit of what is best for the majority, here is one of the email reacting to my April 14 POSTSCRIPT on SM-Clark. A businessman (name withheld) who described himself as an SM supplier wrote:

“There is no doubt that SM’s expansion program boosts both the local and national economy. But the question is how SM is funding their expansion. Is it coming from the millions of pesos of marketing support suppliers must give to them (or face the possibility of losing all their business with SM) or is it directly from their business turnover?

“If it is from actual business turnover, then it benefits the whole supply chain. But since this marketing support normally does not commensurate with the volume of business a supplier does with SM, then he may just be slowly bleeding to death. And because of SM’s size, most suppliers have no choice but to budget every year an amount of support regardless of their business turnover to SM.

“My company ‘gladly’ hands over to SM P300,000 yearly or face delisting, but our annual business turnover with them is just under P1 million.

“A good number of companies who went into this vicious cycle without sufficient marketing funds have either closed shop or down-sized. And this listing fee animal is now an accepted practice in the retail business wherein supermarkets are more and more in the business of display space lessors instead of retailing.

“If SM is allowed to import duty-free products through Clark — then even companies that are not dealing with SM will be affected — suppliers, importers, manufacturers, retailers. They will become the San Miguel of retail. But unlike San Miguel where there is a trickle-down effect, with retail business (not only SM) it is the reverse.

“My advice to suppliers is: Put your money instead in SM shares and let SM import all their products. It will lead to cheaper prices for consumers and force local manufacturers to be more efficient.”

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PRE-NEED SAFETY NETS: Still on feedback, on the crisis gripping the pre-need industry that has kept countless planholders sleepless, here are some options proposed by a planholder, Ricky S.G. Reyes:

“Given the magnitude of CAP’s coverage (800,000 planholders), the government cannot sit idly by as the life savings of the affected families have been squandered through corporate mismanagement.

“Here are some suggestions the government could undertake to ensure the education of planholders, once CAP’s resources fail to meet its obligations. They entail no cash outlay, given the government budget deficit:

“1. State universities and colleges and other government-run higher education institutions (UP, CLSU, MSU, Philippine Science) to provide free education to CAP planholders who pass the entrance exams.

“There is no cash outlay since the conduct of classes are, in accounting terms, ‘sunk costs,’ i.e. a teacher will be paid by the school to teach a class whether there are 5 or 45 students. Schools could identify courses where there is ‘under-enrollment’ (courses with only 10 or fewer students) and encourage CAP students to select from these.

“2. Another option is for government to discuss with selected private schools (St. Paul, St. Scholastica’s, JRC, Ateneo, La Salle, St. Benilde, etc.) the possibility of a tuition-for-tax-credit swap.

“In this solution, a CAP enrollee could enroll in, say, St. Paul College and a tax credit equal to the tuition fee would be issued to the college which could be used for tax payments at the national level, i.e. income tax, VAT or even import duties.”

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(First published in the Philippine STAR of April 17, 2005)

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