No vaccine, no VFA
President Duterte declared last Dec. 26, 2020: “If they are not able to deliver a minimum of 20 million vaccines, they better get out. No vaccine, no stay here.” The President was telling the United States he will terminate the Visiting Forces Agreement (VFA) unless the US delivers the COVID-19 vaccine. While the Philippines will pay for the vaccine, the President has unfortunately linked access to the vaccine to territorial and maritime issues.
Clearly, the President has politicized access to vaccines. This gives China an opening to make access to its own vaccine subject to the condition that the Philippines must set aside its arbitral victory in the West Philippine Sea (WPS). Will China take the President for a ride again, as when the President set aside the arbitral ruling in exchange for China’s $24 billion in promised loans and investments, which never materialized?
The President fails to understand how vaccines are made and procured during this pandemic. In the West, vaccines are made by private companies whose executives are responsible to private stockholders. In China and Russia, vaccine manufacturers are usually state-owned companies that take instructions from political leaders. Chinese and Russian leaders can direct state-owned companies to sell vaccines to other countries even without advance payment. The US government cannot force private US pharmaceutical companies to sell to the Philippines without advance payment.
The US government risked taxpayers’ money by paying in advance vaccine developers. If the vaccine is developed successfully, part of the advance payment will go to the payment of the vaccine that will be ordered by the US government. This gives US citizens priority in case the vaccine turns out to be successful. If the vaccine is not successful, the advance payment by the US government is a total loss. The President, however, refuses to make any advance payment but nevertheless wants priority in access to the vaccine. Even if the US government convinces Moderna or Pfizer to accommodate the Philippines, they will still require from the Philippines advance payment for the vaccine which will normally be delivered not earlier than three months from the date of the advance payment.
The President refuses to make any advance payment based on an erroneous understanding that Philippine law prohibits advance payment beyond 15 percent. On the contrary, Section 88 of the Government Auditing Code (GAC) expressly authorizes the President to make advance payment in any amount in situations of national calamity like the present pandemic. Any advance payment will, of course, be refunded if the vaccines are not delivered. Under the President’s understanding of the law, only China, which does not require advance payment, can supply the Philippines with vaccines.
The President is willing to make an advance payment only through a foreign loan from the World Bank or the Asian Development Bank (ADB) since the loan agreement will allow for advance payment. However, under the Constitution such foreign loan is expressly subject to the approval of the President. There is no reason for the President not to directly invoke Section 88 of the GAC if he is willing anyway to approve a foreign loan allowing advance payment. The World Bank and ADB loans will not buy enough vaccines for 70 percent of the Filipino people.
There is another way for the US to satisfy the President’s demand. Since the US government funded Moderna’s vaccine development, it has priority in the allocation of the vaccine. The US government can transfer gratis 20 million doses of this allocation to the Philippines, which need not make any payment to Moderna until actual delivery of the vaccine.
This means, however, that 10 million Filipinos will jump over 10 million Americans in the queue for the vaccine. The US has a COVID-19 mortality rate of 91 deaths per 100,000 population compared to 8.19 deaths per 100,000 population for the Philippines. Any US President will have a hard time justifying to the American people the delay in delivery of vaccines to 10 million Americans just to save the VFA.
Bottomline, the President’s ultimatum to the US—no vaccine, no VFA—may result in precisely that because of the President’s stubborn refusal to authorize advance payment although he is clearly allowed to do so under Section 88 of the GAC. Welcome Sinopharm, goodbye again WPS?
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