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Questionable BCDA deal

"How lucky can that Malaysian firm get!"

 

In the wake of claims that the P11-billion deal entered into between the Bases Conversion and Development Authority and the MTD Capital Berhad for the construction inside the sprawling 9,500-hectare New Clark City is questionable, the BCDA and the Government Corporate Counsel have defended the controversial contract.

The New Clark City is where government offices called the National Government Administrative Center (NGAC) are being built as well as sports facilities that include a 20,000-seater athletic stadium, a 2,000-seater aquatic center and an athletic village.

According to BCDA president and CEO Vince Dizon and Office of the Government Corporate Counsel head Elpidio Vega, the partnership underwent all the legal requirements and that it was, in fact, very advantageous to the government.

The OGCC, which is the counsel of all government-owned and/or controlled-corporations, in response to clarifications made by the BCDA, unequivocally said the provisions of the executed Joint Venture Agreement and the legal framework of the project are in compliance with existing laws, rules and regulations.

Santa Banana, despite what the BCDA and the OGCC are saying in defense of the deal, there are several questions that must be answered:

What was the deal signed by Dizon and MTD Capital Berhad director Issac David anyway? The 67-page JVA which became effective Feb. 22, 2018 stipulates the Malaysian firm will earn at most P2.5 billion a year in a return-of-investment scheme. Moreover, the BCDA and MTD Capital Berhad will have a 50-50 sharing scheme from the income of the sports facilities for 25 years, renewable for another 25 years upon agreement of both parties.

My initial reaction is: How lucky is MTD Capital Berhad, getting the better of the deal and not using Malaysian money at that, but a P9.5 billion loan with the help of BCDA from the Development Bank of the Philippines? Perhaps this DBP loan also needs looking into since the Malaysian firm spent only P8.5 billion. Where did the P1 billion go? I am not sure if the BCDA is the guarantor of the loan.

Santa Banana, how did the obligation of the Philippine government become P11 billion when the Malaysian firm spent only P8.5 billion to build the sports facilities?

In the contract, BCDA would acquire ownership of the facilities by paying annual installments worth P2.2 billion for 5 years. Within that period, my gulay, the BCDA shall have paid P11.1 billion to MTD Capital Berhad by the last installment. This is why I said how lucky can that Malaysian firm get! While BCDA can opt to pay for a shorter period with an adjusted amount, whichever option the BCDA takes, it will pay more than P8.5 billion than the Malaysian firm shelled out, Santa Banana!

Amid mounting criticisms of the billions of pesos spent for the New Clark facilities, which will host only the swimming and track and field events, no less than House Speaker Alan Cayetano, who is also the chairperson of the Asian Games Organizing Committee Foundation, was all praises for the complex, giving the assurance it would not be a white elephant.

This brings up the question: Will the government profit from the facilities then?

Note this provision of the agreement: The parties hereby agree that the net profit after tax and the losses relating to the sports facilities: 50 percent to or by (as applicable) the BCDA and 50 percent to or by (as applicable) the winning private sector proponent MTD Capital Berhad.

In the payment scheme, the BCDA will repay MTD Capital Berhad the project cost in 5 years or less, but the Malaysian firm will reap profits for at least 25 years, extendable for another 25 years. Santa Banana, the Philippine government will forever be indebted to that firm.

Note this and weep: The OGCC's opinion now is different from its contract review where it flagged contentious points of the deal on so many points.

1. A document from the OGCC has emphasized two points, namely: The agreement between the BCDA and the Malaysian firm MTD Capital Berhad was not a joint venture but a Build-and-Transfer scheme.

2. Build-and-Transfer scheme projects are subject to public bidding.

3. Santa Banana, what happens when the Government Corporate Counsel is now changing its tune?

Let's be clear: The BCDA entered into a joint venture agreement with MTD Capital Berhad to build the New Clark City and its two major components. As such, it is common sense to know that the sports facility segment as a rule is subject to public bidding. It was in a contract review for the draft JVA at the time. But BCDA claimed that it was eventually able to obtain a separate opinion from the OGCC which affirmed the legality of its JVA. The Government Corporate Counsel, in his Opinion No. 182, series 2018, confirmed that the provisions of the executed JVA contract and the legal framework of the project are in compliance with existing laws and regulations.

Since the JVA was one with partnership agreement, in 2017, MTD Capital Berhad was subjected to a Swiss Challenge, which it won. It further said that the P2.2-billion annual payment of the BCDA for 5 years, which amounts to P11.1 billion to MTD Capital Berhad by the last installment, was a “reasonable return of investments.”

According to the OGCC, the agreement over the NGAC was the real joint venture, adding that the joint venture should include every component of the project, and not to carve certain portions thereof under a different framework, i.e. build-transfer under Republic Act No. 6957.

This runs contrary to an earlier contract review that, in a joint venture, that (developer) is being chosen in a partnership regardless of the cost, whereas in a build-transfer, the first consideration is the cost. Why then did the Government Corporate Counsel now change the first contract review?

What did the BCDA do to change the first OGCC opinion to the present one? The contract review was dated Jan. 30, 2018, and the BCDA got authority to enter into a JVA on Feb. 2 of the same year. The JVA became effective Feb. 22.

The question now is: How did the BCDA's multi-million New Clark deal slip through in spite of the OGCC's first contract review saying that the deal should be subject to a Build-and-Transfer public bidding deal?

Let us put everything in proper perspective. On Jan. 30, 2016, the contract review was issued by OGCC chief Rudolf Jurado on the JVA draft and flagged some provisions of the construction of the New Clark's sports facilities.

Later, in the final JVA draft, with the amount of P2.2 billion per year payment of BCDA to the Malaysian firm, Jurado said the deal constituted a Build-and-Transfer scheme and not a JVA. Recall that Jurado was fired by President Duterte in May 2018, after which the President appointed Elpidio Vega as the new OGCC chief on October 1, 2018.

OSG Memorandum Circular 2008-02 signed Jan. 3, 2018 said that when entering into major development projects, the required favorable legal opinion and/or contract review by the OGCC shall be secured by the GOCC before entering into such agreements.

Just how the OGCC justified the BCDA JVA agreement with MTD Capital Berhad, facts are not clear. Section 4.9 of the final JVA says that “any subsequent changes in this sharing of gains and losses shall be subject to the mutual agreement of the parties.” This means that upon full payment and complete turnover to BCDA, BCDA will receive 100 percent share of the revenues.

Frankly, there are questions in my mind since the JVA agreement says that both the BCDA and the MTD Capital Berhad shall have a 50-50 share of profits and losses. Now, which is which?

In any case, a Senate Blue Ribbon investigation of this deal is urgently needed if only to clarify some questions, and let the axe fall where it may.

For his part, President Duterte should also have the deal looked into and if there is need for an investigation, he should order it. Frankly, I smell a rat in this deal.

Topics: Bases Conversion and Development Authority , Rodrigo Duterte , National Government Administrative Center , New Clark City
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