A partnership worth saving

The yuletide notwithstanding, the Bases Conversion and Development Authority (BCDA) lashed out at Camp John Hay Development Co. (CJHDevco) in connection with the seemingly never-ending discord between the two over the latter’s lease of the erstwhile US military facility in Baguio City.

According to BCDA president and chief executive officer Arnel Casanova, CJHDevco has resorted anew to “smokescreen” tactics to obfuscate the fact that it has long reneged on its financial obligations to BCDA as the private developer of the sprawling Camp John Hay.

Casanova described CJHDevco as “a delinquent lessee obviously throwing a smokescreen to conceal from public scrutiny its own unsettled financial obligations.”

The BCDA portrayed its private partner as some sort of a trickster, making it appear that CJHDevco got what it wanted from the government under its thrice-revised memorandum of agreement (MoA) with the BCDA and that the government ended up with the raw end of the deal.

CJHDevco however says that it has paid close to P1 billion in cash and property to BCDA on a staggered basis despite BCDA’s violation of the original 1996 MoA and its three revised versions.

This resulted in CJHDevco suspending rental payments until such time that the nagging dispute is fully resolved. It said the repeated violations by BCDA has prevented CJHDevco from doing its business the right way and in earning even just a modest return on its investment to keep the project afloat.

It added that has put—and will continue to deposit—its proportionate rentals in an escrow account pending resolution of its tussle with BCDA.

Fifteen years ago when the lease agreement was signed, CJHDevco already demonstrated its good faith by paying P250 million in advance to the BCDA.

The firm’s initial show of good faith was but one of a series of examples proving its resolve to push through with the Camp John Hay project, despite several transgressions or violations committed by the BCDA not only in their original MoA but in the three subsequent restructured agreements or RMoAs as well.

From 1996 when the original agreement was signed, and up to 2003 when the second restructured deal was finalized, CJHDevco already delivered a total of P775 million in cash to the BCDA—P250 million in 1996; 425 million in 1997;and P100 million in 2003, plus P75 million worth of properties, even though no substantial development has been made yet in the Camp John Hay Economic Zone that would allow CJHDevco to initially recover what it had invested so far in the project. 

The delay in the development of Camp John Hay was all the government’s doing, but CJHDevco still decided to stick it out with the project.

CJHDevco’s sustained show of good faith was further demonstrated in 2003, when after paying a total of P100 million to BCDA in that year alone, it decided to still push through with the project even after the Supreme Court nullified the grant of tax and duty exemptions, and all other financial incentives and privileges in the Camp John Hay Special Economic Zone that it was supposed to avail as the BCDA’s private partner.

Because the SC had virtually struck a deathblow to the project, CJHDevco informed the BCDA in December 2003 that it would suspend the payment of lease rentals pending the resolution of the legal obstacle created by the High Court’s ruling.

What had compounded the problem in the past was the move by the city government under then-Mayor Braulio Yaranon to join the fray and side with BCDA.

In August 2004, the construction and development in the Camp John Hay economic zone stopped altogether after Yaranon issued a directive to various government offices and agencies in Baguio City “to hold in abeyance the processing and issuance of permits being processed by CJHDevco.”

It is also being alleged that the BCDA failed to set up a One-Stop Action Center (OSAC), its primary obligation under a third restructured MOA inked between the BCDA and CJHDevco in July 2008.

The OSAC was to remove red tape in the processing of local and national licenses, permits, and certifications for the benefit of the locators or investors.

Under the new RMoA, the BCDA guaranteed, through this OSAC, to process all the permits within 30 days from the completion of all applications and requirements.

True, the BCDA had already set up the OSAC as a structure. CJHDevco, however, claims that the BCDA merely accepts applications for permits and licenses and then passes them on to other government agencies. 

Last year, BCDA sent a letter to CJHDevco demanding immediate payment of over P500 million in current rentals and arrears plus interest fees.

But turning the tables on BCDA, CJHDevco president and chief executive officer Ferdinand Santos wrote a letter to the state-run corporation demanding immediate operation of the OSAC as agreed upon in the third RMOA, and stating that failure to comply with the foregoing demands “will be considered by us as a confirmation of BCDA’s fundamental breach of the RMOA, which will entitle CJHDevCo to avail itself of the rights and remedies under contract and under the law, without further notice or demand.”

After informing the BCDA of the suspension of payments, the firm opened an escrow account where the “proportionate rentals” are to be deposited until such time that the latest dispute is resolved to the mutual satisfaction of both parties. 

It’s about time that the two put an end to this dispute. After all, this is one private-public sector partnership that deserves a chance to succeed.

For comments, e-mail at [email protected].