Date: April 2003

ECCP Airs Concern Over BOT Implementation

The European Chamber of Commerce of the Philippines (ECCP) has expressed concern over the unsettled dispute between the Philippine government and a consortium that won the contract to construct and operate the new US$500-million terminal at the Ninoy Aquino International Airport (NAIA).

According to ECCP executive vice-president Henry J. Schumacher, the dispute is dissuading foreign investors from participating in the government's Build-Operate-Transfer (BOT) projects, particularly after the government had also previously questioned the contracts awarded to foreign investors in energy projects.

The ECCP is particularly interested in the airport terminal case because Frankfurt Air Services Worldwide's (Fraport AG), a German firm, is the largest investor in the Philippine International Air Terminals Company, Inc. (Piatco), the consortium that won the contract.

The contract involved the construction and operation of a new terminal on a 65-hectare plot that will be three times the size of the existing airport terminal and can accommodate up to 13 million passengers annually. Under the contract, Piatco was given the exclusive right to operate the airport terminal, manage cargo, ground-handling, and meal/inflight services and choose its own concessionaires for a period of 25 years.

The terminal was supposed to open last December, but President Gloria Macapagal-Arroyo has deferred the opening until the controversy is resolved. The president has ordered a review of the prime contract, which was signed during the Estrada administration. The Airline Operators Council (AOC), the International Air Transport Association Consultative Council (IATA-ACC) and the Association of MIA-NAIA Services Operators (MASO) claimed that this contract was tantamount to monopolizing the operations and control of the international airport.

Fraport AG has been demanding that the Philippine government return the US$383 million in investments it has already poured into the project. Fraport AG chief executive Wilhelm Bender said that he was losing his patience in dealing with the controversy and that the company's board has decided to write off its Manila investments.

According to Fraport AG manager for international press Robert Payne, German companies no longer include the Philippines in their expansion plans in Asia for trade because of the problem over the terminal.

There are signs, however, that the controversy could be resolved before September at which time President Arroyo is scheduled to visit Germany. Transportation and Communications Secretary Leandro R. Mendoza admitted that the president wants the terminal open by August.

 

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