Date:
May 2003
Manila Airport Row May be Close to Resolution
An
end may be in sight to the long-standing controversy
over the construction and operation of the
new NAIA Terminal 3 at Manila International
Airport. The airport controversy has been
a thorn in the side of government for several
years and has tarnished the image of the Philippines
as a desired investment destination.
The Philippines Supreme Court last week annulled
all five contracts issued to the Philippines
International Air Transport Company (PIATCO)
to build and operate the terminal. The ruling
from the High Court was promulgated on May
5 with PIATCO given 15 days in which to appeal
the decision.
At the same time the Court also declared null
and void the 1997 Concession Agreement also
given to PIATCO saying that it contained "material
and substantial amendments" that had
the effect of converting the original agreement
into an entirely different document.
According to the ruling the government may
temporarily take over the passenger terminal
"in the public interest" and must
reimburse PIATCO for costs incurred in construction
(but not necessarily for loss of future earnings).
Neither should any bribes paid be part of
the recompense.
President Arroyo has stated that any government
operation of the facility would be temporary
and with a view to privatizing Terminal 3
during the next administration. She expects
the new terminal to be operational within
4 months. A number of foreign banks and investment
houses are reportedly expressing interest
in financing the takeover.
In explaining its decision the Court found
that the winning consortium was not qualified
to bid in the first place and subsequently
had obtained preferential terms that were
not offered to other interested parties. The
Court further ruled that those responsible
for the flawed bidding should be held accountable.
It is now up to the Ombudsman's office to
press legal action against those parties involved
in misconduct.
The final contracts are said to be riddled
with irregularities and gave PIATCO a monopoly
over all airport related services. Claiming
an investment of US$500 million in equity,
the Cheng Yong group which controls PIATCO
contributed only $16.5 million to finance
the airport whereas German operator Fraport
invested $103.5 million in equity and provided
a further $255 million in loans. Fraport clearly
had the greatest financial exposure yet was
given only 30% of the equity.
President Macapagal-Arroyo has assured Fraport
that it would recover its investment in NAIA
3. The Philippine Ambassador to Germany has
been instructed to inform the German government
that Fraport would be treated fairly and equitably
in any settlement negotiation.
The president had long sought to annul the
deal with PIATCO, which was signed during
the term of former President Fidel Ramos and
then subsequently revised under the Estrada
watch. According to the current administration,
the contract had been amended so many times
that it bore little if any resemblance to
the original contractual documents and contained
burdensome provisions that would impact financially
on government. In short, the contract was
tainted with irregularities.
The Anti-Graft Commission has already implicated
several past and present transportation officials
in connection with the PIATCO contracts.
While initially, PIATCO's lawyer's appeared
intent on challenging the High Court decision
through a motion for reconsideration, by week's
end they appeared to have accepted the writing
on the wall and had agreed to negotiate an
amicable settlement with government.
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