For many foreign investors, the Ninoy Aquino International Airport’s Terminal 3 offers a cautionary tale about doing business in this country. If President Aquino wants to attract job-generating foreign direct investments to the Philippines, his government must speed up efforts for a final resolution of this controversy.
While the government has started operating Terminal 3, which was already crumbling after years of being a white elephant, foreign carriers refuse to use it, fearing that they could be caught in the crossfire of a legal battle between the Philippine government and German air services giant Fraport AG and its local partner Piatco or the Philippine International Air Terminals Co.
The government says the project was overpriced by as much as $300 million, most of which allegedly went to payoffs and commissions. When the government invalidated the contract with Piatco and Fraport, the Germans demanded a $565-million reimbursement and the case went to an international arbitration court in 2003.
The Philippines won the case in 2007, but Fraport elevated it to the World Bank’s International Center for the Settlement of Investment Disputes, which ruled last December that the German firm was denied “the right to be heard” and the case should go back to square one. Fraport has announced that it would re-file the case this week with the World Bank, and this time it would seek $800 million as reimbursement to include interest.
Allegations of corruption in the aborted deal must be established beyond reasonable doubt, but this case, like many others, has suffered from the weakness of the country’s justice system. The government, which has so far spent $56 million on foreign lawyers’ fees, cannot wait another decade for a final resolution of this dispute. It must explore a settlement even as it continues to pursue punishment for anyone who benefited illegally from the deal.