The way forward

On NAIA Terminal

By Mar Roxas

January 12, 2011

GERMANY’S AMBASSADOR to Manila was recently quoted in the press as urging the government to bring the parties involved in the NAIA Terminal 3 dispute to the negotiating table “to facilitate a legal, fair and timely solution for an inherited problem.”

My take: What is there to negotiate? We face a clear-cut situation. The ambassador may have the best intentions, but there is nothing left to negotiate in this sordid controversy.

What is left to do? We need to properly and quickly implement the judgments and findings of various bodies.

Fraport ran to two international arbitration bodies to seek assistance and relief. Both have ruled in favor of the Philippine government: the International Court of Arbitration in Singapore (ICA) and the World Bank’s International Center for Settlement of Investment Disputes (ICSID).

The ICSID ruled that Fraport violated Philippine anti-dummy laws, but has reportedly modified its previous decision on account of procedural lapses, though the substance of its findings have not changed.

These are on top of the Supreme Court ruling with finality that in view of various infirmities and anomalies, the government has the power to take over and operate the facility provided it pays just compensation. Moreover an official investigation by the Senate blue ribbon committee received testimony of blatant violations of the anti-dummy law and possible payoffs.

All these proceedings, to which the government openly and willingly submitted, are more than enough proof of the Philippines’ adherence to the highest standards of legality and fairness, under any domestic or international standard.

Fears about alleged loss of investment confidence in the Philippine by European businessmen owing to this controversy are imaginary. The best way to maintain trade and investment confidence is clean governance and transparency, and these are what President Aquino stands for.

The way forward is to establish the value of Terminal 3 soonest, so that the government can pay just compensation and proceed to finish the project. Payment of just compensation has never been disputed by the Philippine government. The question has always been what amount to pay. And this is the crux of the matter.

The only remaining issue is as clear as day: Fraport and PIATCo, the consortium to which Fraport belongs, both as owner and lender, has demanded a whopping $565 million to $575 million in compensation! However, the turn-key contract, all in, of Takenaka, the principal contractor, is only about $350 million. That’s $350 million, all in!

The underlying problem is that Fraport and its partners in PIATCo are trying to recover more than this—about $175 to $225 million (P8 billion-P10 billion), including possibly improper “soft, facilitation” costs they claim to have expended.

There is no way that we, as taxpayers and as users of the facility, should pay for these invisible accounts. The principle involved is that the government, in the public interest, must not pay a centavo more than what is correct, while recognizing that Fraport/PIATCo is entitled to proper compensation.

So, what to do? There is an established procedure adopted by international agencies like the United Nations to determine value whenever there is a dispute like the one we are facing. They enlist third-party appraisers. In this case, we can hire two or three internationally accredited and reputable engineering firms to render an actual, materials-based appraisal audit. This means calculating the actual amount and cost of the cement, re-bars, equipment, etc. that went into the building. Then we can take the midpoint as the value.

It makes no sense beating around the bush when a fair and straightforward solution is right before us. We all want the simplest solution to any problem that will redound to the public interest.

We have endured no end the inordinate expense and inconvenience arising from this dispute. The imperative is to finally resolve the matter by finding a quick and fair mechanism for valuation, so that we can complete the project and move on to more aggressively attracting tourists, investors and others who will create jobs and livelihood opportunities here.

Perhaps the German ambassador would be kind enough to take this up with Fraport, so we can get to a transparent, rational process rather than go into another murky, lengthy and tedious negotiation that leads nowhere.

(Mar Roxas worked on the NAIA Terminal 3 issue as trade and industry secretary several years back and wrote this article based on notes he had taken.)

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