“US companies have realized that our chip supply chain is way too concentrated in just a few countries in the world,” US Commerce Secretary Gina Raimondo told Philippine business leaders in a forum in Makati City, on Tuesday, March 12.

Raimondo, who is in Manila for a two-day trade and investment mission, underscored that the US will lend a hand to the Philippines to double its semiconductor assembly facilities.

Electronic products are the Philippines’ top exports in terms of value, posting total earnings of $3.45 billion in January, representing 58.2% of total exports during the month.

The world relies on Taiwan, South Korea, and China for chips. Semiconductors are the backbone of modern electronics used in a wide range of devices, including transistors, diodes, integrated circuits, solar cells, and more.

“Forget about geopolitics, just at that level of concentration, you know the old adage: ‘Don’t put all your eggs in one basket.’ Why do we allow ourselves to be buying so many of our chips from one or two countries?” Raimondo said.

She added that the Philippines is on “top of the list” of countries that could develop its semiconductors industry.

Raimondo’s investment mission is “historic” and the first of its kind for the Philippines.

“The message from us is: ‘We’re all in on the Philippines’,” she said.

Philippines’ potential

The Philippines is one of seven countries that the US has identified as partners to diversify its semiconductor supply chain.

Under the CHIPS and Science Act, some $52.7 billion is being used to lure chipmakers away from China, either back to the US or to allied countries, in the form of tax breaks and other incentives.

President Ferdinand Marcos Jr. said that the US legislation would result in the Philippines to churning out some 128,000 semiconductor engineers and technicians by 2028.

The US is the Philippines’ top export market.

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US companies to announce investments of over $1 billion in the Philippines

The US and its chips

US President Joe Biden has been making sweeping efforts to slow down China’s technological capabilities.

The US Commerce Department issued a broad set of prohibitions on exports to China of semiconductors and other tech amid military tensions and the boom of artificial intelligence.

This export ban, alongside incentives for US chip makers to relocate to countries that it deemed friendlier, has been viewed as Biden’s clear strategy of capping China’s potential in various technological developments, including surveillance and military capabilities.

Japan, along with the Netherlands, agreed to match US export controls that limit the sale of some chipmaking tools to China, and has placed restrictions on the export of 23 types of semiconductor manufacturing equipment to Beijing.

China said that the scheme “seriously violated” international economic and trade rules. – Rappler.com

Raimondo is heading a two-day trade and investment mission, the first of its kind for the Philippines. The delegation includes executives from 22 companies including United Airlines, Alphabet’s Google, Visa, KKR Asia Pacific, and Microsoft.

The investments will span areas like solar energy, electric vehicles, and digitization, she said.

United said last week it would launch new flights from Tokyo-Narita to Cebu, Philippines, starting July 31.

US efforts to deepen economic ties with the Philippines come in tandem with increased cooperation in defense. Both US President Joe Biden and Philippine President Ferdinand Marcos Jr. are keen to counter what they see as aggressive actions by China in the South China Sea and near Taiwan.

Speaking at a joint briefing with Philippine officials after meeting with Marcos at the presidential palace, Raimondo said Washington’s commitment to expanding trade and investment in the Philippines extends to the larger Indo-Pacific region through the Indo-Pacific Economic Framework – a 14-nation US-led group.

Raimondo reiterated the United States has no intention of “decoupling” from China but it would not be allowed access to Washington’s advanced technology.

“My job is to protect the American people and to make sure that our most sophisticated technology, including semiconductor technology, artificial intelligence technology that we have and China doesn’t have, that they can’t access it and use it to enable the Chinese military,” Raimondo said.

She also reaffirmed the United States’ alliance with the Philippines, calling it “ironclad.”

The Philippines has a 73-year-old Mutual Defense Treaty with the US, making it Washington’s oldest treaty ally in the Asia-Pacific region.

After her Manila visit, Raimondo will travel to Thailand for two days of meetings. She will lead members of the US President’s Export Council to identify opportunities for the two countries to strengthen cooperation in areas such as manufacturing and supply chain resiliency. – Rappler.com

Of the 48.09 million Filipinos in the labor force, the unemployment rate reached 4.5%, more than the 3.6% in December 2023, according to the Philippine Statistics Authority on Friday, March 8.

However, this relative drop between months shouldn’t come as too big of a surprise, given the seasonality of certain jobs during the holidays.

National Statistician Dennis Mapa said this could be partly explained by the additional but temporary economic activities generated during the holidays. For instance, unpaid family workers who have been helping out in bazaars and stores might now have opted back out of the labor force to return to school or household duties.

“‘Yung seasonal activities natin noong fourth quarter – some of them, na-retain naman dahil tumaas ‘yung salary and wages – but of course, ganoon palagi, may mga nawawala kaya tumaas din ‘yung ating underemployment rate,” Maps said on Friday.

(Our seasonal activities in the fourth quarter – some of them which we were able to retain since the salary and wages category went up – of course, that’s how it always is, some disappear, which is why our underemployment rate rose.)

The rise in the number of unemployed persons in January 2024 comes after the unemployment rate hit a near two-decade low in December 2023.

At the same time, labor force participation fell to 61.1% in January 2024, lower than the 66.6% rate in December 2023. This translated to about a 1.8 million drop in the number of Filipinos in the labor force. Of these, 1.5 million Filipinos returned to schooling or household duties, according to Mapa.

Mapa also said that most of the shifts in the labor force came from those who are in the “self-employed without employees” and “unpaid family workers” categories, whose numbers went down by 1.48 million and 960,000 quarter-on-quarter respectively.

However, despite this drop, there were also gains in other parts of the labor force. The number of working Filipinos in the “salaries and wages” category went up by 640,000. This is good news as this class of workers is often used as a quick indicator for job quality.

“May mga class of workers na may pagtaas, at may mga class of workers na bumaba. Pero in terms of number, talagang nakita naman natin na bumawas ang kabuuan ng mga employed persons,” Mapa said.

(Some class of workers went up, some went down. But in terms of number, we can really see that the number of employed persons went down as a whole.) – Rappler.com

“The VAT exemption of these medicines for cancer, hypertension, and mental illness is a step towards a healthier country. The BIR shares the noble intention behind more affordable medicines for the public,” said BIR Commissioner Romeo Lumagui.

This is an update to the list of VAT-exempt drugs and medicines of the National Internal Revenue Code of 1997, as amended by the TRAIN Law and CREATE Act.

– Rappler.com

Laban TNVS president Jun de Leon said that Grab charges its operators around 21% in commissions. Operators also have to shoulder the 20% discounts granted to senior citizens, students, and persons with disabilities starting March 1, 2024. That means in some instances, Grab drivers might be left with just 59% of what they earned from a ride – not enough for the gas and time spent on a trip.

“‘Yung Grab ‘no, napakalaki po na kompanya niyan, pero kawawa po ‘yung mga sinasabing partner – pero hindi partner ang turing niya. Ginagawang gatasan ng Grab eh ‘yung mga drivers natin,” De Leon said on Wednesday, March 6, in a press conference that also included members of Manibela and Defend Jobs Philippines.

(Grab is such a big company, their so-called partners are pitiful – they don’t treat them like partners. Grab treats their drivers as cash cows.)

In response, the groups want the Land Transportation Franchising and Regulatory Board (LTFRB) to start regulating how much transport network companies (TNCs) like Grab and JoyRide can ask from their drivers and operators. The groups propose setting a commission limit of 10% to 12% across all TNCs to protect the livelihood of those working for ride-hailing and delivery services.

De Leon, along with Manibela chairman Mar Valbuena, said that they first petitioned the LTFRB about the matter in December 2022. LTFRB Chairman Teofilo Guadiz III then promised to resolve the issue but the government agency has yet to take action.

There is no law or memorandum circular that limits the commission rates that a TNC can charge its drivers and operators.

Grab told Rappler that it holds consultations with its drivers and operators ahead of any changes to its commission rate, during which the ride-hailing giant takes note of their opinions to ensure that the platform still works to their interests.

Grab may recruit riders to prepare for its motorcycle taxi launch – LTFRB

Who shoulders the 20% discount?

Aside from setting limits on the commission rate, the transportation leaders also called on Grab to shoulder the 20% discount granted to students, senior citizens, and PWDs. At present, this is which is deducted from a driver’s earnings.

Prior to July 2023, Grab used to shoulder this 20% discount. After July 2023, Grab only shouldered half of the discount, and starting March 2024, drivers were required to fully shoulder the discounts.

According to Grab, their decision to let drivers fully shoulder the 20% discount is based on an LTFRB memorandum circular from 2018. MC 2018-004 directs “all public utility operators and drivers to grant 20% fare discounts to persons with disability” and further states that “in the case of transportation network vehicle services and taxi service, the full 20% discount on the total fare shall be given to the PWD regardless of the number of his/her companions.”

Grab initially shouldered the discounts to lessen the impact on drivers’ earnings, but the decision to let drivers’ shoulder the 20% discount was communicated to them since the second half of 2023.

Nevertheless, the Laban TNVS president argued that drivers cannot earn a living if they have to shoulder this discount on top of the hefty commissions that Grab charges.

“Kung driver ‘yun, may gasolina siya, at meron pa siyang boundary, tapos may 41% na ikakaltas sa kanya. Wala na po talagang matitira sa driver (If that’s a driver, they still have to pay for gas, and then their boundary, and then 41% will be cut from their earnings. Nothing will be left to the driver),” De Leon said.

Angkas to Angcars? Here are the challengers to Grab’s ride-hailing dominance

– Rappler.com

Let us call a spade a spade. While it is decidedly tart, and bitter that it has turned quickly acidic, the charter change discussions are propelled by the desire to retain political power over constitutionally mandated limits. Any discussions on amending only the economic provisions are simply part of the smokescreen so that the attempt at political immortality might have some credence.

The lack of any quantifiable impact, or even ballpark numbers, and the obvious ignorance of those who evoke economic amendments, assuring that any change will be limited to these is glaring. While foreign chambers of commerce support opening equity structures to a hundred percent, the self-serving nature of their collective statement cannot be seriously considered objective. Nothing prevents self-serving statements in a free society, but recognizing bias should put these in its proper perspective. 

Unfortunately, the underlying risk aversion to foreign capital on the opposite side of the debate is just as biased if not downright flawed. 

The sidebar discussions, integral to the range of issues from term limits to economics, have allowed those with a socialist anti-capitalist bent an opportunity to throw verbal barbs not only against enterprises incentivized by Adam Smith’s often misinterpreted concept of profit but also against those who have boldly ventured into the previously risky and prohibitive arena of investing in crony capital-ridden volatile economies that teeter on authoritarianism. 

[ANALYSIS] Why charter change is needless right now

Save for specific enterprises that involve patrimonial assets, mineral resources, national security and other concerns that involve sovereignty, foreign capital is generally allowed either through a 40:60 equity window or, as has developed as we come to terms and realize that the Philippine economy is part of a much larger globally linked economic system, we have correctly, selectively and judiciously allowed as much as 100% foreign equity in some critical growth areas. Export processing, the amendments to the Public Service Act, small-scale retail trade as well as the liberalization of the generation sector in the energy industry are examples.

The Robin Hood persona and optics that politicians enjoy garnishing their image with – that they are pro-poor and are heroic representatives of the downtrodden – quickly fits the rebellious anti-corporate, anti-big business and anti-evil empire narratives enough to gain votes and win over the popularity contests that Philippine politics is notorious for. 

At the Senate, on both sides of the political aisle, and curiously on both sides of the popularity spectrum from the ruling class to the minority, between the senator with the greatest number of votes, to the least who barely made it to the twelve voted in in 2022, the cinematic optics of a heroic David slaying a powerful Goliath applies. 

On one end, by analyzing the initiative for charter change by the Senate chairperson for Constitutional Amendments and Revision of Codes, while he is cognizant of current allowable foreign equity structures, we see that he remains adamant that the tinkering will be limited to the economic provisions foremost of which is the question of corporate dominance by outsiders.

At the other end of the political divide, the only credible opposition senator has unknowingly provided fodder for constitutional amendments on allowable foreign equity. One had earned his mandate from evident populism, the other, from a cliché theme that demons corporate foreign capital is oppressive and opportunistic.

[In This Economy] Too much hand-waving in the economic charter change debates

On these we cite three cases in point.

One involves the understandable knee-jerk fears from the so-called intrusion of 100% equity under recent amendments to the Foreign Investments Act where micro and small domestic market enterprises are accessible to foreign equity through the reduction of start-up capital requirements. Imagine here where small family businesses and Mom & Pop stores must now compete with foreign capital and product, marketing, and logistical business technologies.

Republic Act 11647 introduced amendments where foreign equity in excess of the old limit of 40% is allowed depending on the level of advanced technologies, innovative products, processes, and business models introduced, plus an endorsement by government, and where its proposed workforce majority are Filipinos.

While this impacts on small to medium-scale trade and manufacturing in the domestic market economy and its traditional enterprises, there are similar fears in the financial services and banking sector where foreign banks are allowed to own as much as 100% of smaller rural banks. While the application of professionalism and international banking standards, procedures, processes, and global linkages are welcome, there are fears that the poor level of creditworthiness, the absence of adequate and acceptable securities from rural communities typically served by rural banks and the lack of sophistication by the rural market might lead to serious financial exclusion.

The third example is drawn from the side-bar discourses of the charter change initiative and the fears that the privatization of 40% of the operation and maintenance (O&M) function of our electricity transmission – an effective monopoly – is in the hands of foreign powers with hostile hegemonic designs. While the National Grid Corporation of the Philippines is technically a Filipino corporation, politicians are wont to demonize its 40% foreign control due to growing popular Sinophobia.

It is now a quarter of a century since globalization changed the global economy and drastically wrenched apart the previous model of nation states that relied on high trade barriers and quota borders. What were once distinctive competences protected by tariffs and nurtured by state subsidies that shielded vulnerable sectors from global competition, some underlaid by an anti-capitalist Marxist ideology that pandered to the weak and oppressed, all these should now be relegated to dustbins. Collectively they created a degenerative desire for isolationism, especially for economies ill-prepared to confront global competition.

But today we are part of the global economy. We need foreign capital. Welcome to Aldous Huxley’s World State. It’s a brave new world. – Rappler.com

Dean de la Paz is a former investment banker and managing director of a New Jersey-based power company operating in the Philippines. He is the chairman of the board of a renewable energy company and is a retired Business Policy, Finance, and Mathematics professor. He collects Godzilla figures and antique tin robots.

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Eric Ines, head of the Manila International Airport Authority (MIAA), has begun to crack down on its sanitation service contractors after his “disappointment over recent sightings of pests and insects in Terminals 2 and 3.”

Ines has tasked terminal administration groups to monitor contractors and evaluate whether the current housekeeping and pest control standard operating procedures were enough, given the number of passengers in each terminal.

Contractors must submit weekly and monthly commitments regarding their work. MIAA will also hike the penalties for liquidated damages when it comes to its service contracts.

MIAA stated that most of its housekeeping and pest control contracts are due to expire in 2024.

“Mag-eexpire na ang kontrata niyo. Hindi ko lang hindi iri-renew, iblablacklist ko pa kayo (Your contracts are expiring. I won’t just not renew your contract; I’ll also blacklist you),” Ines said in a press release on Tuesday, March 5.

Last week, on February 28, MIAA issued a public apology over reports that passengers had been bitten by bed bugs in Terminals 2 and 3. The airport’s operator then quickly removed the rattan chairs where the pests hid in. (READ: NAIA’s surot-infested rattan chairs, once its pride, are now gone)

But just days later, a passenger in Terminal 3 uploaded a video of a big rat scurrying along the airport’s ceiling lights.

What are contractors doing?

Here are the changes that the contractors have committed to, according to MIAA:

• increase frequency of surveillance and disinfection
• augment manpower deployment to ensure round-the-clock response
• increase visibility
• recommend a work program that would achieve greater impact of cleaning and disinfection methods without affecting seat availability

Contractors also said that they periodically change the chemicals that they use for deep disinfection since pests can develop immunity to the chemicals over time. These chemicals are approved and regulated by the Food and Drug Administration, according to the contractors.

MIAA’s senior assistant general manager, Beng Reyes, will head an inter-agency coordinating committee which will conduct monthly meetings between private and public sector participants. The committee is expected to generate recommendations for MIAA management to follow.

However, there’s also the question of how long MIAA has left to actually manage the airport.

NAIA will soon be turned over to the consortium led by San Miguel, which recently won the bid to rehabilitate the airport. San Miguel’s group is expected to assume operation by around September 2024.

San Miguel will need hefty loans to pursue NAIA’s long-overdue upgrade, but Ramon Ang has found a willing backer in BDO. Transportation Secretary Jaime Bautista told Rappler that BDO chairperson Teresita Sy-Coson has guaranteed to fund Ang’s group. BDO also recently confirmed that its subsidiary, BDO Capital, will serve as the financial arranger for the rehabilitation project, with BDO itself and other banks invited to act as lenders. – Rappler.com

NAIA is 4th worst airport in Asia. Can its new operator turn things around?

In a 36-page decision penned by Associate Justice Marvic Leonen, the SC said that the Republic Act No. 8749 or the Downstream Oil Industry Deregulation Act provision authorizing the DOE to take over oil industry players given certain conditions, is valid.

The High Court said that in times of national emergency or when public interest so requires, the DOE may temporarily take over or direct the operations of any entity engaged in the oil industry.

Chief Justice Alexander Gesmundo and 12 associate justices concurred with the decision promulgated on March 4. Two justices did not take part.

What went before

The SC decision stemmed from a petition filed by Pilipinas Shell Petroleum Corporation before a regional trial court, questioning the validity of the provisions of RA 8749 and an executive order of then-president Gloria Macapagal Arroyo in 2009.

In 2009, Arroyo ordered that oil companies maintain prices of petroleum products, following the onslaught of Tropical Story Ondoy and Typhoon Pepeng, which affected millions of Filipinos.

Pilipinas Shell secured a favorable from the RTC ruling, which was upheld by Court of Appeals in 2013, prompting the Office of the Executive Secretary and the DOE to bring the case to the High Court.

In its ruling, the High Court said that it could not find “actual proof” from Pilipinas Shell that the exercise of the takeover provision caused harm or injury.

The SC, however, noted that the law provides limitations on the takeover of power. Specifically, the legislature must grant the President emergency powers first for a limited period.

The President could then delegate responsibilities to agencies, including the DOE.

“[I]f, in the exercise of its delegated authority, the energy secretary acts in contrast with the president’s intent or instructions, the act will be deemed ultra vires (beyond the powers) and an unconstitutional usurpation of executive power,” the SC said.

The DOE has yet to comment on the matter, but told reporters that their legal team is still reviewing the SC’s decision. – Rappler.com

The latest figure reported by the Philippine Statistics Authority on Tuesday, March 5, is higher than the 2.8% reported in January, but lower than the 8.6% last February 2023.

Rice prices continued to accelerate, jumping by 23.7%, the fastest level in 15 years, according to National Statistician Dennis Mapa. Overall food inflation went up to 4.6% from 3.5%.

Transportation costs also went up by 1.2% from -0.3%.

The February 2024 figure is still within the government target range of 2% to 4%.

This is the first increase in inflation after a downtrend for four straight months.

El Niño threat

The National Economic and Development Authority (NEDA) issued a statement shortly after the latest inflation figures were released, noting that the government is intensifying its efforts to mitigate the impact of El Niño on food prices.

“The potential impact of a strong El Niño weather pattern on food prices is a significant concern for our community. Rising transportation costs, electricity rates, and volatile oil markets are putting pressure on household finances…. We must be agile, adaptive, and forward-thinking,” said NEDA Secretary Arsenio Balisacan.

Balisacan said that rice prices in the international market have started to ease, while local supply is expected to increase as harvest season begins in March.

Analysts expect that inflation will remain within target range.

Jean Olivia de Castro, head of fixed income at Manulife Investment Management and Trust Corporation said inflation in the first quarter will likely remain within 2% to 4%, but rice prices will continue to put pressure on the overall figure.

“Upside risks to inflation may stem from elevated rice prices and continued increases in global oil prices. Oil prices have increased over 8% during the first two months of the year due to OPEC supply cuts, conflict in the Middle East, and Houthi attacks on shipping lines in the Red Sea in the past few months,” De Castro said. 

De Castro noted that while lower tariff rates and an increase in rice imports would help cap the continued rise in prices, export restrictions remain from India, the world’s biggest supplier.

The Bangko Sentral ng Pilipinas has kept interest rates high at 6.5%.

In a statement on Tuesday, the central bank said it deems it appropriate to keep monetary policy settings unchanged in the near term.

“The risks to the inflation outlook have receded but remain tilted toward the upside,” the BSP said. – Rappler.com

These were no ordinary cars. Both were Bugatti Chirons – cars so rare that only 500 units were ever produced from 2016 to 2022 in a Bugatti factory in France. Each is priced at around $3 million or P165 million, an amount that would take the minimum wage earner more than 750 years of daily work to achieve.

The BOC didn’t so much find the cars as have their owners surrender them – perhaps out of fear after Customs called on the public to help spot the sports cars on the road.

But behind the triumph of Customs in its search is a host of questions: How did two of these vehicles find their way to the Philippines? How did the importers and owners cheat the government out of hundreds of millions in duties and taxes? And how did these illegally imported cars get their paperwork done by the Land Transportation Office (LTO) without anyone noticing?

It began in late 2022 when the two luxury cars likely entered the country, as evidenced by a bill of lading dated December 24, 2022 and a certificate of payment issued by Customs on December 27, 2022.

Things get fishy right from the start, as the certificate of payment shows only P24.7 million – or P24,787,838.82 to be exact – was paid in customs duty. Meanwhile, an estimate by Inquirer.net suggests that the customs duty should have been about P49.5 million, with the total duties and taxes supposed to reach more than P160.5 million.

But despite this questionable customs payment, the vehicles were somehow registered under the LTO. The blue Bugatti – with a plate number of NIM5448 – was registered under Thu Trang Nguyen, while the red Bugatti – with plate number NIM5450 – was registered under Mengjun Zhu.

The vehicles were registered with the LTO on the same day, May 30, 2023. This happened to be a turbulent time for the agency. A week before, on May 22, Jose Art Tugade resigned from his post as LTO head over the shortage in plastic cards for drivers’ licenses. Hector Villacorta, a communications assistant secretary for the Department of Transportation (DOTr), only stepped in as LTO’s officer-in-charge on June 1.

That means from May 22 to May 31, the LTO was likely in a messy transition period, and the smuggled vehicles just so happened to have been registered during this window. Coincidence?

Gaps in the system

So how did these vehicles get through the LTO’s system? It turns out that there are glaring gaps in the system used for vehicle registration, sources close to the LTO told Rappler.

The LTO is currently in the process of transferring all its operations from its old IT system provider, Stradcom, to the government-owned Land Transportation Management System (LTMS) portal. However, because not all processes have been fully swapped, LTO personnel may still sometimes register vehicles in the old Stradcom IT system rather than the LTMS.

This is, in fact, what happened in the case of the two Bugatti Chirons. The LTMS’ service providers – a joint venture headed by German company Dermalog – said that both luxury vehicles were not registered in the LTMS, asserting they “would not have been able to be registered in LTMS as the robust security features of LTMS would have prevented such registration to occur.”

Sources close to the LTO also separately confirmed to Rappler that the vehicles were not registered in the LTMS. Instead, it seems the vehicles were registered through the LTO’s old IT system provided by Stradcom.

The LTO wrote to Stradcom on February 21, 2024 to ask for an audit trail “to determine who are the personnel involved in the processing of the registration of the said vehicles,” based on an initial report seen by Rappler regarding the LTO-NCR’s investigation into the matter.

The problem is that vehicle registrations processed through the Stradcom IT system have a weaker audit trail, a source close to the LTO told Rappler. This is because under the old system, paper documents are not scanned, making it more difficult for other officers to conduct audits or due diligence.

Another LTO source told Rappler that it might be possible for an improper certificate of payment to get through the system because it is beyond the scope of the LTO’s work to double-check if customs duties were correctly paid. Once the Bureau of Customs electronically reports the certificate of payment, the LTO issues a certificate of stock reported (CSR), a document that acts like a car’s “birth certificate” and serves as evidence that it was manufactured or imported in the Philippines.

The LTO, in its initial report, also seemed to deflect responsibility away from the agency when it came to the issue of the improper certificate of payment and the resulting CSR.

“Liaison officers of the accredited manufacturers, assemblers, and importers are responsible for inputting data into the LTO system based on the Certificate of Payment issued by the BOC. They independently handle all stages, including evaluation, approval, and the printing of the CSR. The LTO’s role is limited to the processing of payments,” the LTO said in its report.

“The validity and processing of the CSR are dependent upon the issuance and successful transmission of the Certificate of Payment issued by the BOC. Although LTO employees play a vital role in vehicle registration, their primary function is to facilitate the application process and ensure adherence to established regulations. Their duties are purely ministerial in nature. As long as the requirements are met, motor vehicle registration would proceed,” the agency added.

But even then, a misdeclared CSR was far from being the only issue here.

P1 million Bugatti?

Aside from a CSR, an original sales invoice is one of the documents needed to register a vehicle with the LTO. But as with the undervalued customs document, there were also anomalies in the sales invoice for the Bugatti Chirons.

The LTO initial report seen by Rappler questioned why each Bugattin Chiron was listed as worth only P1 million – a fraction of the vehicle’s usual price – in two sales invoices dated May 30, 2023. The two sales invoices also did not indicate the breakdown for 12% value added tax (VAT), VATable sale, VAT-exempt sale, zero-rated sale, and total sale.

Remember, the Bureau of Customs estimated the value of the luxury car at around P165 million each. Similar to what happened with the customs payment, it’s possible that the vehicles were undervalued to lessen or avoid taxes paid.

The question here then becomes how the LTO and its system failed to flag the Bugatti Chirons with conflicting sales prices of only P1 million and customs duties of P24.7 million – both of which were obviously incorrect in the first place.

Rappler reached out to the LTO’s intelligence and investigation head for clarification but received no response.

Importer without a warehouse

The irregular sales invoices were issued by Frebel Import and Export Corporation, the same company that imported the vehicles into the Philippines based on the bill of lading.

Based on Frebel’s latest certificate of accreditation obtained by Rappler, the company’s address is at Room 317 Femil Building, A. Soriano Avenue, Barangay 656, Intramuros, Manila, putting it under the jurisdiction of LTO NCR West.

However, Frebel’s initial accreditation as an importer was processed by the LTO NCR East regional office when it should instead have been processed by the LTO NCR West regional office.

Frebel was first certified by Benjamin Santiago, then-regional director for LTO NCR-East on August 11, 2022. Frebel then received a certificate of accreditation as an importer and dealer from Teofilo Guadiz III, who was then the LTO assistant secretary. Guadiz currently sits as the head of the Land Transportation Franchising and Regulatory Board, where he has weathered accusations of corruption. (READ: From LTFRB to Malacañang: Insider says Teofilo Guadiz at center of bribes)

The accreditation history of Frebel as an importer and dealer was irregular, as flagged by the LTO investigation in its report. After the “discovery of the questionable processing of the accreditation of Frebel,” members of the Monitoring Committee for Accreditation of Regional Assessment and Compliance paid a visit to Frebel morning of February 19.

“The inspection report identified the absence of both a showroom and a warehouse at the accredited entity’s registered address. Additionally, the report noted the lack of any visible import or dealer signage,” the LTO said in the initial report seen by Rappler.

In light of this, the LTO’s investigation committee recommended issuing a show cause order against Frebel that would compel them to address potential violations. The committee, in its report, also said that “considering the severity of the alleged violations, the issuance of a preventive suspension is deemed necessary.”

The LTO will also investigate Frebel’s liaison officer and Customs broker, as well as the company’s Securities and Exchange Commission documents.

Who’s fault is it?

Again, the LTO seemed to downplay its responsibility to verify the legitimacy of its importers and dealers, pointing instead to a supposed “loophole” in the Manufacturers, Assemblers, Importers, Rebuilders, Dealers and Other Entities (MAIRDOE) portal system that handles the accreditation of importers and dealers.

“Online submissions for accreditation renewal of MAIRDs offered convenience and efficiency, but also raised concerns about bypassing verification processes. This approach offered a loophole that was manipulated to get accredited without meeting all the crucial requirements. In-depth verification procedures are crucial to ensure only qualified importers renew their accreditation,” the LTO said in its initial report.

But the question here is: why did the LTO not do its own due diligence before approving or renewing Frebel’s accreditation as an importer and dealer? A simple site visit would have already revealed Frebel’s lack of a warehouse and showroom. Rappler is trying to get the side of Frebel and will update this story once we are able to.

The DOTr has already requested the National Bureau of Investigation and Jose Lim IV, DOTr’s Assistant Secretary for Road Transport Non-Infrastructure and Special Action and Intelligence Committee for Transportation, to look into the smuggling of the luxury vehicles, a source close to the LTO told Rappler. A copy of the LTO’s report was also submitted to Transportation Secretary Jaime Bautista on February 23, 2024.

Investigators from the NBI and Office of the Solicitor General visited the LTO Central Office on Thursday, February 29, an LTO source told Rappler. Meanwhile, the DOTr has spoken up on the issue, declaring that “documentary and procedural irregularities appear to surround the eventual registration of these luxury vehicles.” – Rappler.com