A country’s honor

I want to take my column, “Better to work together” (6/15/17), on the contract of Marsman Estate Plantation Inc. with agrarian reform beneficiaries a bit further.

I’ve written about this time and again over the years, and will continue to do so until the message is fully understood, and complied with: Honor contracts as written.

If you have an existing contract, it can’t be willfully broken—except when both parties agree or corruption can be proven. If the contract is subsequently found “disadvantageous to the government” or one party, then that’s tough for the government or the other party. Be more careful in concluding future contracts. “Unfairness” is judgmental, and cannot be used as a reason to change a legally binding contract, as I argued during President Benigno Aquino III’s term when many contracts were violated. (See the Wallace Business Forum’s Special Report, Honor Your Commitments:https://www.wallacebusinessforum.com/wpcontent/uploads/2015/09/SR-Honor-your-commitments-SEPT-09-2015-LONG-VERSION1.pdf.) Contracts are sacrosanct. You force change on one contract, you put at risk all contracts. Worse, you deter new projects with a government, a government that allows it. You scare away investors.

The Philippines is lagging behind in attracting foreign direct investments, compared to major economies in Asia. One of the reasons is policy changes from one administration to the next, or even within an administration. This includes changes in contracts.

Foreign investors won’t come, local ones will think twice. The most recent one I’ve been talking about is the Marsman banana plantation where there’s pressure to, not amend, but cancel the contract. That pressure, unbelievably, is supported by the Department of Agrarian Reform (DAR). Canceling the Marsman contract will not only affect Marsman but also potentially lead to pressure to change other contracts. And not just in agriculture, which has tremendous potential to generate jobs in the countryside, but in everything else. What’s the point of a contract if the parties don’t abide by it?

With a localized war making every businessman hesitant to consider Mindanao at all, it is certainly not a time to be questioning a valid, sovereign contract. And it is certainly not unacceptable that a department of the government itself is lobbying to cancel the contract.

Once the war is over, I have no doubt that President Duterte will be doing all he can to not only resurrect Marawi but also get business onto his island so there will be fewer disaffected youth, and uplift the lives of all by creating more jobs.

You certainly won’t do it if you cancel a contract that earns some $30 million in exports, and leave overseas buyers with broken supply contracts. It will make Vietnam and Ecuador start to look very attractive.

Investors look for stability, consistency and predictability of the business environment. Rules must not be changed on a whim in the middle of the game. Contracts must be honored. The President agreed in his first State of the Nation Address when he said: “I direct all department secretaries and the heads of agencies to refrain from changing and bending the government contracts, transactions, and projects already approved and awaiting implementation. Changing the rules when the game is ongoing is wrong.” Yet here we have the DAR supporting the cancellation of a contract. It seems the DAR, led by Secretary Rafael Mariano, was not listening to its boss.

An Apec study in 2007 indicated that weak enforcement of contracts is among the most pernicious ways of turning off foreign investors.

At Marsman the farmers have a good, secure, well-paid life which they’re being convinced to forego on the ephemeral promise that they’ll do better on their own. They won’t. They and all the others in the cooperative will end up without a job and, eventually, without much income.

Violation of this one contract will have wide-ranging impact on the reputation and future of the country. Contracts must be inviolate. They are a gentleman’s or gentlewoman’s word of honor.

They are a country’s honor.

E-mail: wallace_likeitis@wbf.ph. Read my previous columns: www.wallacebusinessforum.com.