NAIA-3 hinges on right price

The government is mulling three ways to resolve the issue of the Manila airport’s Terminal 3. One is diplomatic; another, operational; the third, judicial. Disparate as they are, all three hinge on a fourth matter: how much to pay for a facility mired in defects and corruption.

Several congressmen want an amicable settlement over the Ninoy Aquino International Airport. House Bill 806 arose from two events. One was the re-filing by German airport operator Fraport AG. of a collection suit in Washington. The other was the German government’s call, backed by the European Union, for negotiated resolution. For the congressmen, the diplomatic approach would refresh decaying ties with German and European governments and investors.

Fraport, partly owned by the German state, is the partner of build-operate-transfer Filipino contractor Piatco. In 2007 it lost its $625-million suit before the Washington-based International Center for Settlement of Investment Disputes. Upheld was the Philippine defense that Fraport (like Piatco) was un-entitled to remuneration because of fraud. ICSID rulings normally are final, but not for the world’s third biggest economy. Last January, on a technicality, the ICSID granted Fraport the right to re-arbitration. Fraport’s declaration to sue the Philippines anew worried the congressmen. While the Philippines will resubmit previous evidence of dummying, bribery and money laundering, it cannot be sure of winning again. Certain, though, are the huge defensive legal expenses. The ICSID lawsuit, and Piatco’s parallel case before the International Chamber of Commerce in Singapore, had cost the Philippines $26 million (P1.3 billion). From 2003 to 2010 foreign lawyers, licensed to practice in Washington and Singapore and experts in industrial quarrels, had to be hired; Filipino counterparts had to be dispatched abroad to explain the evidence.

Striking a compromise would not be easy. Any deal must first hurdle the question of how much. Here Fraport and Piatco widely differ with each other, much more with the Philippine government. While Fraport had demanded $625 million in Washington, Piatco asked for $1.7 billion in Singapore (it also lost its case, in 2010). When the government expropriated the facility in 2004, it estimated the 96-percent construction to have cost $149 million. Deductible from this is $53 million (P3 billion) that the government paid Piatco in 2006 for the court to grant a writ of possession. That leaves a balance of $96 million, as far as government is concerned. The writ allowed the Manila International Airport Authority partially to open NAIA-3 to two airlines. Piatco is trying to collect usage rent, but the Office of the Solicitor General objects.

The Department of Transportation and Communications, meanwhile, wants the NAIA-3 fully operational by December. Only half the terminal is presently in use under the writ of possession. Engineers deem the other half inoperable because of shoddy work, inferior materials, and Piatco’s withholding of the computer network. The DOTC has initiated contact with the original constructor, Takenaka Corp. of Japan, to finish the four-percent remaining works and correct the structural defects. But the talks focused mainly on how the Philippines legally may recompense Takenaka, with which it has no direct contract under the Piatco-Fraport agreement.

The DOTC realizes that any action with Takenaka would depend as well on the expropriation outcome. At best, it may prepare this early to have Takenaka finish the contract or bid it out to other constructors, and look for the financing. But it must wait for the fixing of just compensation by the expropriation court in Pasay City. For, on this will depend if Piatco-Fraport will still operate the finished NAIA-3. Too, how much should go to Takenaka, in case the government finally taps it to complete the project. The Japanese firm claims to have spent $361 million for construction, but values the structure at $408 million at the time of expropriation in 2004.

The judicial approach is the toughest, given the painful Philippine realities. Lawsuits must be filed against the Piatco-Fraport managers and the bureaucrats who perpetrated the dummying. Officials from three administrations need prosecuting for onerous revisions of the Piatco contract. Lawyers need jailing for fronting for money laundering. Alfonso Liongson, the main briber, must be hunted down in the US and extradited to Manila. All this the Supreme Court ordered as far back as 2003. An assistant solicitor general and his son, and a judge have been killed in prosecuting and hearing the main suits. The Ombudsman has dismissed the graft raps against other government appointees. The expropriation case continues to drag. Meantime, Germany disregards Philippine requests for documents seized from Fraport in a police raid for foreign corrupt practices. Hong Kong too ignores pleas for money laundering evidence, confiscated during a raid of the Piatco lawyers’ offices.

On the outcomes depend the determination of just compensation. A strong hand in the legal battle would give the Philippines leverage to haggle down the price.

* * *

Catch Sapol radio show, Saturdays, 8-10 a.m., DWIZ, (882-AM).

E-mail: [email protected]