Commission on Audit

Duty Free workers worry for jobs as COVID-19 causes P379-M loss

Lian Buan
Duty Free workers worry for jobs as COVID-19 causes P379-M loss

DUTY FREE. The facade of Duty Free Philippines' Fiesta Mall.

Duty Free Philippines' Facebook Page

An internal memo describes the Duty Free Philippines Corporation's situation as a 'financial crisis'

Workers of the Duty Free Philippines Corporation (DFPC) are worried for their jobs after the agency incurred a loss of P379 million in 2020 because of the effects of the COVID-19 pandemic on the tourism industry.

“At this point, DFPC is facing a serious financial crisis that would affect the livelihood of hundreds of its employees,” said the United Workers of DFP Union in a message to Rappler. The UWDFP represents rank-and-file employees of Duty Free.

The 2020 audit of Duty Free by the Commission on Audit (COA) showed that the management was still able to meet its target sales, but only because they adjusted it from $245 million (P12.2 billion) to $62 million (P3.1 billion). Duty Free recorded $62.49 million (P3.1 billion) in sales, past its adjusted target, but it is still a 72% decline from 2019 when they hit $226.2 million (P11.3 billion) in sales.

“The travel bans and strict quarantine measures have deterred non-essential travel which decimated the duty-free industry,” said the audit.

Duty Free was also not able to remit 50% of its profits to the Department of Tourism (DOT), as mandated by law. Duty Free said, “Due to the global effect of the COVID-19 pandemic on the current financial situation of DFPC, the Board of Directors approved the request of management to defer the 2nd to 4th quarters’ remittance of DOT’s share in the net profit.”

Duty Free’s remittances are supposed to help improve tourism service facilities. The Duterte government has been continuing its Build, Build, Build program, boasting of future tourism roads in provinces. 

An internal Human Resources (HR) memo from March 8 asked Duty Free’s employees to answer a survey “in view of the effects of COVID-19 pandemic in the travel retail industry and financial crisis that the DFPC is currently experiencing.”

The audit report for 2020 also showed that while the pandemic also lessened the expenses of Duty Free, “the decrease [in expenses] was not enough to cushion the decrease in the net income.”

Duty Free workers worry for jobs as COVID-19 causes P379-M loss

The COA said Duty Free must “establish strategies that will adapt to the changes in trade and tourism industry to mitigate the effects of the COVID-19 pandemic to the Corporation and continue to observe cost-cutting measures to minimize further losses.” 

Duty Free told COA: “Despite the business disruptions of COVID-19 as DFPC is heavily reliant on international arrivals and departures which remain unpredictable due to intermittent lockdowns, DFPC plans to strive for sustainability and meet its recalibrated targets by implementing programs to maximize penetration of the limited travelers’ market while at the same time adapting to the current consumer conditions.”

The audit report also showed that Duty Free has not been able to collect P14.8 million in unpaid chocolates, liquor, and cigarettes from a client, all dating back from the 1990s. COA said it’s doubtful they can still collect the amount, so auditors have recommended that Duty Free write it off from their finances.

Duty Free has also not settled P28 million-worth of car plan benefits for its executives that COA disallowed for non-submission of documents within the required period. COA says the disallowance is on appeal.

The 2020 annual financial report of government corporations is not out yet. Duty Free is a government-owned and/or controlled corporation or GOCC.

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Lian Buan

Lian Buan covers justice and corruption for Rappler. She is interested in decisions, pleadings, audits, contracts, and other documents that establish a trail. If you have leads, email or tweet @lianbuan.