spot_img
28.1 C
Philippines
Friday, March 29, 2024

An erroneous claim

- Advertisement -

"Given these developments, how can the DOF stall the construction of the airport project in Bulacan?"

 

An erroneous claim regarding the proposed New Manila International Airport (NMIA) project of San Miguel Holdings Corp. (SMHC)  in Bulacan resurfaced recently. This claim falsely alleged that the Department of Finance (DOF) was either blocking or delaying the project. The claim is not only false, but also based on outdated data. 

Finance Secretary Carlos Dominguez had already sufficiently explained in September last year that the DOF had even supported, rather than blocked, SMHC’s unsolicited proposal to build a new international airport in Bulacan. In fact, as a result of the support of the DOF and the board of the National Economic and Development Authority (NEDA)  for the project, the Swiss challenge process for the NMIA project was set in motion in April this year. The Department of Transportation (DOTr) published the Swiss challenge documents last May 6, and has scheduled a pre-bid conference this month and the submission of the comparative proposals for the project in July. 

A Swiss challenge bidding process is required for an unsolicited proposal like the NMIA project. Under this process, other bidders will be allowed to submit what they deem to be better proposals in implementing the project than the one first submitted by the original proponent, in this case, SMHC. After the comparative proposals are submitted, SMHC has the right to counter-match any better offers received for the project. 

With the project now at the Swiss challenge stage, how can the DOF delay the project?

- Advertisement -

In September last year, Dominguez told a joint hearing of the  Senate committees on public services and on economic affairs that the DOF had even assisted SMHC and offered a few suggestions in accelerating the approval of the project. 

Among these helpful suggestions was for the DOTR to require the original proponent, SMHC, to come up with a “Joint and Several Liability Agreement” with its mother company, San Miguel Corp.  (SMC) to ensure that the latter would stand behind SMHC in building the project. Under this agreement, both SMHC and SMC are held liable for the same act and are all held responsible for the payment of any restitution or damages.

Dominguez had proposed this solution because SMHC’s total equity in 2016 (the year the unsolicited proposal was submitted) was only  P60 billion. This was deemed insufficient given that the usual financing mix of 70 percent debt and 30 percent equity for a Public-Private Partnership (PPP) project would require the company to shell out at least  P200 billion to implement the P735-billion NMIA project.

During the hearing, Dominguez pointed out that the DOF even wants airport projects to be swiftly implemented, which was why the Duterte administration took the initiative to rehabilitate the existing Clark International Airport, which is now one of Asia’s fastest-growing airports. Clark’s passenger traffic breached the 2.5 million mark last December,  with many travelers, especially those coming from northern Metro Manila, opting to use this airport rather than endure the carmageddon on EDSA to fly from the congested NAIA in Pasay.

The NMIA project is no different when the DOF said it wants airport projects to be implemented as fast as possible. 

However, the DOF, being the steward of the country’s fiscal policy, has to ensure that the State’s financial resources are prudently managed.  It has to make sure that the government does not incur any financial liabilities that would burden taxpayers when PPP projects are implemented. 

This was the rationale behind Dominguez’s initial concerns about the NMIA project. Such concerns included the financial capability of the proponent to which Dominguez himself offered a solution;  the effect of the project on traffic in the area and any additional infrastructure that need to be built to avoid congestion; and its effect on the real estate value of New Clark City in Central Luzon, which is being funded with government money. 

Dominguez is correct in pointing out these concerns because the evaluation of infrastructure projects should be carefully and meticulously done, not only to ensure that these are profitable but also to ensure that the government is free of unwarranted commitments. 

Take the case of the Mactan-Cebu International Airport, which, is undoubtedly, a profitable enterprise. According to Dominguez, the airport earned P1.1 billion in 2017, which was 48 percent higher than the P752-million projected net income during the appraisal stage done to secure the NEDA Board approval for the project. Yet, despite the fast-growing passenger demand in Cebu, the government cannot just build or approve the construction of a new airport in the area. Why? Because the past administration which approved the project committed that there will be no other competing airports in Mactan and Cebu. Imagine, even when passenger demand requires that a new airport be built there, the government can only do so if it reimburses not just the market value of the infrastructure assets, but also the future profit of the operators of the Mactan-Cebu airport until the end of the concession.

Such lopsided provisions in PPP contracts are the things that Dominguez seeks to avoid because the taxpayers end up footing the bill for them.  

When Senator Grace Poe, who chairs the Senate public services committee learned about these, she ended up thanking Dominguez for ensuring that the interests of the government and the Filipino people are projected. Poe said she was “reassured” by Dominguez’s statements.

The initial concerns raised by Dominguez about the NMIA project were apparently already adequately answered because the NEDA Board approved the concession agreement for it last December, which means the project is a go. Again, given these developments, how can the DOF stall the project? 

ernhil@yahoo.com

- Advertisement -

LATEST NEWS

Popular Articles