Solving the Naia mess

IN DECEMBER 1989, the Aeroport de Paris in France submitted to the Philippines (PH) the preliminary designs of a new terminal for the Ninoy Aquino International Airport (Naia 3). Realizing the futuristic needs of the incoming 21st century, President Fidel V. Ramos has—since his election in 1992—fittingly pushed for an even better Naia 3.

A PPP gone awry. Due to lack of funds, the government opted to bid out the Naia 3 via the “Build-Operate-Transfer” (BOT) scheme. Under this program, the private sector is tasked to produce all the funds to construct the project to be recovered, with reasonable returns, from terminal fees paid by airlines and passengers, as well as rentals of duty-free stalls.

The PH would get an escalating percentage of the gross yearly collection as concession fee. After 25 years, the facilities would be turned over free of charge to the PH.

Unfortunately, the project has been incredibly mired in complicated legal problems I outlined last week. Up to now, two decades later, Naia 3 is still woefully limping in controversy and inutility. It is a “Public-Private-Partnership” (PPP) gone awry. Naia now holds the dubious distinction of being the worst capital airport in Asia.

Knotty solutions. The big question is how do we solve this mess speedily, legally and fairly? One obvious answer is to maintain the status quo: to continue and hopefully win the pending litigations. With the December 23, 2010 ruling of Icsid, which I discussed last Sunday, expect Fraport to file a new claim for compensation, which the PH will have to fight anew.

Under the BOT, the PH is not supposed to spend anything; it is supposed to earn! But, in Naia 3’s case, the PH, per the Inquirer editorial on January 6, has already “spent at least P2 billion in legal and related expenses.” Experienced lawyers practising in the Icsid and ICC are paid about $1,000 per hour. Litigants also pay for stratospheric arbitrators and filing fees.

The expropriation proceedings in the RTC of Pasay are presently stalled. The presiding judge (Henrick Gingoyon) and the PH’s lawyer (Assistant Solicitor General Nestor Ballacillo) have been mysteriously killed. In any event, any decision here is appealable to the Court of Appeals and the Supreme Court. Almost eight years have lapsed since the Supreme Court decided the first litigation (Agan v. Piatco) but the compensation problem remains with no end in sight. No, unabated, expensive and tedious litigation/arbitration is not the speedy and fair solution.

What about a compromise, a negotiated peace? The problems are also aplenty. Who does the PH negotiate with? Piatco? Fraport? Takenaka, the main subcontractor? Other claimants? Their claims overlap because Piatco maintains it had paid the subcontractors. Why should Fraport be compensated separately when it is just a shareholder of Piatco?

Naia 3 was originally estimated to cost only $350 million, yet Piatco alone is claiming $450 million for the incomplete terminal. Where will the PH get the funds to settle? Note that public funds cannot be spent without an appropriation from Congress. Note too that a BOT is supposed to enrich the public treasury, not deplete it due to the incompetence, if not the malfeasance, of PH officials.

Who in the PH is authorized to settle? Criminally liable are those who enter into agreements (or payments) that are grossly disadvantageous to the PH. No, negotiated peace is not doable either. Too many knotty problems.

Best solution. What then is the best solution? It is in my Separate Opinion in Agan v. Piatco, which the past regime inexplicably ignored. Simply stated, the original concession contracts have been voided; hence, the rehabilitation and the operation of Naia 3 can and should be bidded out as a new BOT project. Upgrading Terminals 1 and 2 can be included. Building the airport is not the really profitable part of the enterprise; it is the operation of the facility for 25 years that attracts investors. This time, the bidding must be transparent, fair and legally upright.

The winning bidder must settle directly all claims based on the real and reasonable—not inflated—value of the Naia 3. How the payment or series of payments to the claimants will be staggered and scheduled, will have to be built into the bids, along with the annual guaranteed payments to the PH. In this way, this whole sordid mess could result in the full operation of the Naia and the proper payment of royalties to the treasury, without further hemorrhaging public funds.

Naia 3 was intended to cover the needs of Metro Manila for 25 years from its original bidding 10 years ago. So, at best, it would be good for only 15 years more. After that, it would be obsolete. Thus, to sweeten the pie and to make the bidding very viable, it could be packaged with the Diosdado Macapagal International Airport together with the rail, air corridor and highway links of the two airports.

Of course, the criminal aspects of the case, detailed in Bobi Tiglao’s January 13 column, should never be forgotten. While settling the commercial aspect, the PH should separately bring to justice those who mocked our Constitution, Anti-Graft Law, Anti-Dummy Law and bidding rules

Epilogue: Naia 3 is symptomatic of what ails our country: noble intentions and grand plans frustrated by sloppy execution, impudent law violation and extreme corruption. If President Aquino’s PPP program must succeed, as indeed it should, the Naia 3 mess must be unraveled, commercially solved and criminally vindicated.

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