PM signs off on project for Minister’s husband 3 August 2009 Dili Tempo Semanal The murky waters of the dispute between kin inside the company Pualaka Petroleum Fuel Ltd has not just spilt over from Santacruz (the head office for Pualaka Petroleum Fuels) to the door of the Minister for Justice, but has spilt beyond into the Ministry of Finance right up the Government Palace to flood right up to the legs of the Prime Minister’s chair.
It happens that on the 19th of September 2008, Prime Minister Gusmão signed the contract with Americo Lopes, for his company Pualaka Petroleum Fuel Ltd to supply fuel to EdTL (Electricity of Timor-Leste). Luckily, the case of the locked out Pualaka employees at Tibar Port, and the falsification of the company shareholding statutes, which put an end to the continued supply of fuel to EdTL, otherwise, Pualaka and its boastfulness would still be supplying fuel to EdTL despite the ongoing power cuts which keep Dili’s electricity blinking on and off. The legal procedures for the Prime Minister to sign the contract with the Justice Minister’s husband, was not as a consequence of the PM exercising his whim, but the duty and powers given by law to the PM to sign contracts, but which is affected by the provisions of article 3 of Law No. 7/2007 on Constitutional Officeholders, in that bit creates certain prohibitions with regards to certain companies.
Clause 1 of this law states that Companies whose capital belongs in a percentage over 10% to a person who holds the office at a constitutional body will be prohibited from entering tenders for the supplying of goods or services, as well as for the exercise of trade or industry activities, in contracts with the State and other entities.
Clause 2, line a) of the law states that Companies whose capital, in the same percentage, belongs to the spouse of the holder, when there is no separation of persons and assets, to their
ascendants and descendants in any degree and to collaterals up to the 2nd degree, as well as the person who lives with the holder in a situation akin to marriage are also prohibited.
Line b) of clause 2, states that this also applies to Companies in which capital the holder of the office detains, directly or indirectly, alone or together with the relatives mentioned in the previous sub-paragraph a), hold a participation not below 10%.
Consequently, many now believe that there has been a breach of article 3 of Law No. 7/2004 because of the 10% limitation stipulated by the law, because Americo Lopes holds 30% of Pualaka. Though Americo Lopes is not an officeholder, but he is the husband of the Minister of Justice and has family links with the Prime Minister.
However, according to the Director General of State Finances, Francisco Soares, decree law 10/2005 was amended by a decree law in 2008 which sets out the tender process and who is empowered to approve contracts. He says that the Minister signs contracts valued at between five hundred thousand dollars to one million dollars, the PM signs contracts upwards of one million dollars and the director can sign for contracts five hundred thousand dollars and less, but that this is dependent on delegation of powers from the Minister. “We follow the rules,” Soares told this newspaper from the Ministry of Finance building , Thursday 03/07/2009.
However, FRETILIN MP Francisco Branco accused the Prime Minister of breaching the Constitutional Officeholders because he signed a contract in favour of a relative. Branco’s view is that the Prime Minister should delegate administrative power to the Minister of Finance to do this, so that the PM can have more time to better control his government’s activities. But some in civil society disagree saying that doing this will result in diminished power for the Prime Minister to properly control collusion, corruption and nepotism.
“The Prime Minister is the head of the government and has to be in a position to know all that is happening in the administration and to approve projects. It’s akin to a director of a company abrogating his or her power to authorize financial transactions to someone else. That would only be for a crazy director to do,” this civil society member said.
But Branco stressed that he was unhappy with the current situation because when the Prime Minister is the one to sign contracts, it facilitates more nepotism and closes off avenues for transparency and accountability. From Branco’s point of view the Prime Minister should delegate these powers because it is consistent with ensuring she has control over the budget and because the keys to the state’s coffers are already in her hands anyway. Branco accuse the Prime Minister of having interfered with the powers of others in his government by taking short cuts in signing the rice and fuel contracts, acts which did nothing to promote transparency and accountability in the public administration.
Soares says however that the Prime Minister signs contracts because the procurement law empowers him to do so. ‘The procurement law was enacted by FRETILIN, and under this law Pm Alkatiri previously signed contracts above one million dollars, as did the former Finance Minister Maria Madalena and the former Procurement Director Gregorio Sousa. So why are the opposition parties now questioning this law? It seems to me like perhaps they are not familiar with system which has been in place,” Soares said.
On another, Soares also mentioned that the UNTAET public finance law number 13/2001 was being reviewed and will be amended. Soares said that their work was based on principles of professionalism and integrity.
On the same occasion, when he spoke about why Americo Lopes won this tender, Soares explained that the Justice Minister’s husband winning the tender was political. The law must be changed if political questions result in a breach of the law. Only the council of ministers and the parliament can change the law, procurement only follows the laws that are approved by parliament and promulgated by the President of the Republic. “We don’t look at who bids in a tender, we only assess at their professionalism and integrity to complete the project. Because of this I always say that I am not concerned with whoever wants to take these things to court because I am ready to answer,” Soares said smiling.
But when responding to journalists regarding the law and the emergence of conflict of interest, the Director General explained that they are always careful avoid conflict of interest arising during a tender. “If my brother submits bid documents for a tender, then I cannot participate in the bid evaluation team so as to avoid a conflict of interest arising. But I cannot impede him from tendering because that is his right,” he spoke.
From the civil society perspective, Joazito Viana, General Manager of Luta Hamutuk thinks that this government has not yet been transparent in the way it manages tenders because it does not publish the selection process for companies that are awarded contracts for projects, such as how many companies compete in a tender and which are selected. Such a process can result in all sorts of speculation as to why companies miss out on selection. The government should rectify this by being transparent from the time a tender opens so that expectations do not build up from the companies that bid and avoid future public controversy. But because the government has failed to do this, then many problems have emerged such as with the rice contracts, Viana said. He elaborated saying that at present there is a lot of rice rotting away in warehouses, and not being distributed to the intended beneficiaries. Its these types of things that lead people to speculate that this government is promoting collusion, corruption and nepotism.
“We want to point out that right now we are seeing some increase in rice production in some districts because of the distribution of tractors through the economic stabilization fund, such as in the sub-district of Maliana in Bobonaro, where on Monday, 6 July 2009 there was a demonstration by farmers complaining that their production of nearly 400 tonnes of rice was rotting in the sub-district warehouse. We have to question what went wrong, because the government has been urging the farmers to increase production but at the same time it has entered into contracts with rice importers. This shows a lack of accountability by the government, especially in the tendering process.
So, we request the government to involve everyone in the bid selection process of companies who compete and to publish the name of the winning bidder, so as to avoid speculation and public questions that there has been family favoritism in the tender process,” Viana said.
Nevertheless, Viana defended the right for whomever to bid in tenders, whether they are the son or daughter of a minister or a brother or sister of the minister, because all citizens have equal rights. He added that according to the human rights convention and the convention on political, economic, social and cultural rights, all persons have equal access regardless of kinship. But such persons winning contracts for projects they bid on must ensure they complete the project with quality, because they qualified according to criteria set out in the bid conditions. But he also said it would be a better situation when the government created a mechanism to avoid family involvement in the tender process.
On the issue of the concern some have regarding the PM not delegating financial management powers to the Finance Minister, this member of civil society declared that this was this was one of the procedural issues that was not yet clear with the Ministry of Finance itself, because the Ministry of Finance only submits proposals to the Head of the Government for approval but does not sign contracts because the Ministry of finance also has the responsibility of preparing the contract through the procurement division.
“According to some documents that we have seen, the PM has signed some contracts, which he should not do. But in his capacity as Minister of Defence and Security he can sign contracts, not as PM. The PM only approves proposals submitted to him by the Ministry of Finance, with the Ministry of Finance acting like the master kitchen for smaller kitchens in smaller departments, managing the process right up to taking it to the PM for his approval,” Viana said.
On questions from journalists regarding the procurement law giving the PM power to sign contracts, Viana was clear in saying that he had power to sign international agreements. He pointed to a case where the PM did not have any power to sign, such as with the contracts with Conoco Phillips to explore, or when ENI won the blocks to explore for oil in the exclusive zone in the Timor Sea. These contracts with multinational companies for contracts valued at millions and millions of dollars, the PM does not have any power to sign.
As such whenever we speak of the PM signing for Pualaka Petroleum Fuel to supply fuel for EdTL with a contract price of US$1,473,360.00 (as is written in the contract document signed by Americo Lopes dated 3 July 2009), Vianan added that it shows that the PM did wrong because in signing with this company. Such a decision also points to an interference with the powers of others, because it should be procurement signing these contracts, after the PM has approved the proposal made by the Ministry of Finance for the contract. Viana suggests the government should change this system, the current procurement mechanism and procedures, otherwise one day the PM will also be signing for just one dollar.
On another matter, the Deputy Director of Luta Hamutuk, Edio Saldanha Borges said that law No &, article 3 of the law on Constitutional Officeholders already stipulates various prohibitions on companies in which they or their relatives to the second degree of kinship have a shareholding in excess of 10% to bid for state tenders. Because of this, if the PM signed a contract with the Minister’s husband with whom the PM has a family relationship with, then the PM has breached the law on constitutional Officeholders because a conflict of interest clearly arose when he signed the contract.
Therefore, Edio suggested that the authorities with the legal powers should act in relation to this case, but more than just sending it to the Provedor for Human Rights and Justice or an investigation by the Inspector General or by the Deputy PM for Administrative Affairs, but has to be sent to the Prosecutor General to formally proceed with an accusation so that everyone can see that the law was enacted to apply to everyone and not just to protect the high and mighty.
According to Edio, the way to curtail such conduct is for the National Parliament to use its oversight and monitoring powers to ensure that the government knows not to act beyond their powers.
“we should not treat this as case of ‘because it involves our big brother, we are all scared’. None of us want this. If someone breaks the law then we should not be afraid of correcting that, because it involves the peoples’ rights and nothing to do with it involving our ‘big brother’”, Edio stressed.
He added that when a leader commits a wrong then “we should look to whether the criminal code has been breached and whether it should be tried by the courts. The parliament can resolve political issues. But the Prosecutor general has to investigate if there is a criminal issue involved. This is how cases such as the Gleno Prison and the supply of uniforms for prison guards should be addressed, with prosecution to the end so that all can see that there is a commitment address this type of misconduct,” Edio suggested.