BSP scraps foreign bank listing rule

FOREIGN banks will no longer be required to go public under newly liberalized rules, a monetary official confirmed yesterday, even as the chief of the stock exchange said this would rob local investors of the chance to partake in the fruits of multinationals’ local operations.

“Yes, that’s actually in the law. That’s one of the liberalized features,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Nestor A. Espenilla, Jr. told reporters at the sidelines of the Philippine Midyear Economic Briefing at the Philippine International Convention Center in Pasay City, when asked whether the listing requirement ceases to exist under relaxed rules on foreign bank entry signed into law last July by President Benigno S.C. Aquino III.

BSP Governor Amando M. Tetangco, Jr. had said last Thursday that the matter would be clarified once the central bank releases the implementing rules and regulations (IRR) of the law -- Republic Act (RA) No. 10641 or An Act Allowing the Full Entry of Foreign Banks in the Philippines -- within the year.

The regulators’ recent comments came nearly two weeks after Maybank Philippines, Inc. President and Chief Executive Officer (CEO) Herminio M. Famatigan, Jr. told reporters that the Malaysian-owned lender believes RA 10641 relieves it of a requirement to go public by 2015.

Philippine Stock Exchange (PSE) President and CEO Hans B. Sicat, however, expressed reservations about this latest development.

source:  Businessworld

“Obviously, from our side, we encourage listing of more companies, including subsidiaries of foreign banks here,” Mr. Sicat said at the sidelines of the same government briefing.

“That will be good, because it obviously adds to market liquidity.”

Mr. Sicat said the listing requirement “allows, at the very least, the local population to actually gain the benefits of what a [multinational] company produces locally.”

“You may argue that, from their end, perhaps capital raising is not their main priority, because most of these multinationals are quite self-sufficient or well-funded by the parent,” Mr. Sicat explained.

“However, participation in the broader public market is the primary issue,” he stressed.

“[Listing] broadens the ability of retail investors in any jurisdiction to benefit from the revenues and profits that the institution makes.”

The BSP, in Circular No. 775 dated Nov. 28, 2012, required Philippine-based lenders majority-owned by foreign banks to list on the PSE.

These banks were given three years to comply with the circular from the date of its effectivity, which was Dec. 4, 2012.

Mr. Espenilla last week clarified in a text message that the PSE listing requirement applied to “foreign bank subsidiaries.”

BSP’s directory of banks and non-banks, last updated on Sept. 5, listed Maybank Philippines and CTBC Bank (Philippines) Corp. as the only subsidiaries of foreign banks among universal and commercial banks in the country.

Other foreign banks with local operations, such as The Hongkong & Shanghai Banking Corporation and Citibank, N.A., are listed as “branches of foreign banks.”

Circular 775 cited as basis for the listing requirement the provisions of RA 7721, or An Act Liberalizing the Entry and Scope of Operations of Foreign Banks in the Philippines and for Other Purposes that was enacted in 1994.

However, RA 10641 -- enacted last July -- amended certain parts of the two-decade-old RA 7721, which permitted the entry of only a limited number of foreign banks into the country.

The newer law provided that more foreign banks -- which should be publicly listed in their home country, unless state-owned -- could operate in the Philippines through any one of three modes of entry: by acquiring, purchasing or owning up to 100% of the voting stock of an existing bank; by investing in up to 100% of the voting stock of a new banking subsidiary incorporated under the laws of the Philippines; or by establishing branches with full banking authority.

RA 10641 also did away with the part of RA 7721 that Circular 775 enforced. The circular enforced Section 3 of RA 7721, which mandated BSP’s Monetary Board to “secure the listing in the Philippine Stock Exchange of the shares of stocks of banking corporations established” under that older law.

Mr. Sicat said that the stripping of the listing requirement, however, could hamper the public’s participation in firms doing business in “the local economies that do provide a very good market for these companies to make good profits [in].”

Mr. Espenilla said that the removal of the listing requirement should not be an issue as “[foreign banks] have means of raising capital” other than tapping the bourse.

But the question of listing, Mr. Sicat explained, should not be “so much an economic one from [the foreign banks’] point of view -- they have to make that distinction.”

“The fact that these companies do earn profitably from the local economies, what you’re really doing [by listing on the bourse] is just being more participative -- in a corporate governance sense -- for local investors to also benefit,” Mr. Sicat said.

source:  Businessworld

World Bank funds Philippines’ first bus rapid transit system, other programs

THE WORLD BANK approved on Friday nearly half-a-billion dollars in financial package to fund the Philippines' first bus rapid transit (BRT) system and augment the government's budget for reforms, including a conditional cash assistance program for mothers to send their children to school.

THE WORLD BANK approved on Friday nearly half-a-billion dollars in financial package to fund the Philippines' first bus rapid transit (BRT) system and augment the government's budget for reforms, including a conditional cash assistance program for mothers to send their children to school.

In a statement released to the media on Saturday, the Washington-based lender said it is lending $141 million for the construction of a 23-kilometer BRT system in Cebu City.

A separate statement said the World Bank's Board of Executive Directors approved a $300 million new development policy loan (DPL) to support programs outlined under the Aquino administration's six-year Philippine Development Plan (PDP).

Combined, the fresh loans amount to $441 million or an estimated P19.7 billion (based on Friday's exchange rate of P44.72 to the dollar).

With the BRT system, the Philippines joins the likes of Los Angeles, Las Vegas, Ottawa, and Sao Paolo that built this mode of transport as wealth spills over to other urban centers from the main capital, bringing with it traffic and pollution headaches.

Cebu has seen rapid urbanization in recent years, with the Philippines' property conglomerates racing to build malls, towering condominiums and office buildings while the government works out a deal to upgrade the city's main airport.

The Cebu BRT system is expected to ferry 330,000 passengers daily. A BRT system has dedicated lanes and is cheaper to build compared to their light rail transit counterparts.

The project, the multilateral lender said, will also install a “state-of-the-art computerized traffic management system in the entire city” to integrate the BRTs with other modes of transport.

“When successfully implemented, Cebu BRT will provide an on-the-ground demonstration of how this system can address people’s need for a reliable, efficient and comfortable transport -- something that other cities in the Philippines and beyond can learn from,” World Bank Country Director Motoo Konishi was quoted as saying in the release.

The Department of Budget and Management has released P9.48 billion in August to fund the Transportation Department’s Cebu BRT project.

The BRT project is estimated to cost P10.62 billion and expected to be operational by 2018.

Broken down, P1.1 billion will be shouldered by the Philippine government and P8.39 billion will be sourced from loans.

The remaining P1.14 billion will be financed by the private sector, particularly in purchasing vehicles.

Meanwhile, the DPL, the World Bank said, will support six programs:

• building farm-to-market roads and roads for tourism areas
• simplifying registration and licensing of small and medium enterprises
• updating the National Household Targeting System (NHTS), a database of poor families that need social welfare, including health insurance coverage.
• expanding the conditional cash transfer (CCT) program to children up to 18 years old to encourage them to finish high school
• implementing reforms, including the implementation of “sin” taxes to “improve fiscal sustainability”
• standardizing budget, spending, audit and reporting classifications for agencies in a bid to modernize the public financial management information systems in the country. 

The $300 million aid also supports the government’s data.gov.ph project, an open data initiative which lists at least 600 data sets from government agencies.

“The government sees transparency around the use of public resources as fundamental to institutionalizing governance reforms. By making government data available to the general public, the government can get better feedback from citizens on how it can best deliver social services while making those in public service more accountable,” World Bank Senior Economist Kai Kaiser was quoted as saying in the release.--Mikhail Franz E. Flores

sourcE:  Businessworld

Aquino brings home $2.35-B in investment pledges

PRESIDENT BENIGNO S.C. Aquino III has returned to Malacañang, bringing to a close his lengthy 12-day overseas trip that yielded over two billion dollars in investment pledges and the support of allies in the country’s bid to resolve a territorial dispute with China.

In a speech he delivered upon his arrival at the Ninoy Aquino International Airport late Thursday, Mr. Aquino said he brought home $2.35 billion in investment pledges that would create at least 33,850 jobs.

The deals were from 22 companies that believed in the Philippines’ economic prospects, he said. 

“They’ve all expressed their confidence in our growing economy as a result of our reforms, and they’re hopeful this growth momentum will continue,” Mr. Aquino said in his speech.

The investors’ names were not made public; although last week Mr. Aquino’s spokespeople had said that in Europe, the President met with executives of oil giant Royal Dutch Shell PLC, banking giant HSBC Holdings PLC, Spanish construction firm Globalvia and banking conglomerate Bankia, in a series of meetings that also counted bankers, infrastructure builders, energy and construction companies, manufacturers and information technology firms. 

There, he also met with European leaders -- Prime Minister Mariano Rajoy and King Felipe VI in Spain; King Philippe of Belgium and European Commission President Jose Manuel Barroso in Brussels; and German Chancellor Angela Merkel in Berlin. Mr. Aquino won the European leaders’ support for Manila’s peaceful approach to ending its territorial row with China over the West Philippine Sea.

In the US, Mr. Aquino held a roundtable discussion with chief executives and senior officials of the US Chamber of Commerce, the US-ASEAN (Association of Southeast Asian Nations) Business Council and the US-Philippines society in New York. 

Although he did not mention the name of the companies -- out of concern the latter would violate non-disclosure rules -- the President hinted that one company worth “several billion dollars,” with investment in one location and employing 600,000 workers, is planning to set up a similar “production facility” in the country.

Mr. Aquino also said his administration has invited German carmaker Volkswagen AG to build its global manufacturing hub in the country. 

COCA-COLA CO. AND FRENCH RAIL COMPANIES
American bottler Coca-Cola Co., he said, has also infused $1 billion in investment ahead of a 2015 schedule.

That fresh capital from the US beverage maker, as well as the deal between the Ayala Corp-Metro Pacific Investments Corp. consortium and two foreign rail companies for extending the Light Rail Transit System Line 1 (LRT-1), was on top of the $2.35-billion investments that Mr. Aquino announced, Malacañang said.

“The one on Coke is just an affirmation of their previous commitment that before 2015, they would invest $1 billion in the Philippines. In NY [New York], their CEO affirmed and confirmed that they already invested that amount in the country,” Communications Secretary Herminio B. Coloma, Jr. said in a phone interview.

“[As regards] the railway project, the President was just asked to witness the signing of the deal… that’s not included in the $2.35 billion total investment,” he added.

PESO GLOBALIZATION?
In his speech, Mr. Aquino recounted an anecdote about a talk with a banker at a foreign lender who, he said, broached the idea of making the Philippine peso a global currency just like the US dollar. 

“Baka raw po dapat ay i-globalize natin ang piso… Nabigla po tayo sa mungkahing ito; kahit kailan po ay hindi dumapo sa isip natin ang ganitong hakbang… pero hindi po maikakaila ang sentimyentong dala ng kanyang mungkahi. Ang dating Sick Man of Asia, ngayon, bukal na ng kumpiyansa sa ekonomiya. (He thought the peso should be globalized… The proposal caught me off guard, but clearly it reflected the improving sentiment about the Philippines, the former Sick Man of Asia),” Mr. Aquino said.

Mr. Aquino’s Europe-US visit cost the government P31.9 million, said Executive Secretary Paquito N. Ochoa, Jr.

The scant details about the trip left at least one political analyst skeptical about the results.

“The trip earned pledges of investment and support for the Philippine position on the South China Sea issue. However, these are a given and nothing new,” Ramon C. Casiple, executive director of the Institute for Political and Electoral Reform, said in a mobile phone message reply.

“A good trip but I suspect there’s a lot more discussions done,” he said, referring to “investment policies, incentives, quid pro quo, investment regime.”

source: Businessworld

PH remains cheapest BPO destination

Tight office space supply is projected to ease up starting next year with more new buildings coming online along with the rise in rental rates but hikes in rental rates will not be enough to dislodge the Philippines as the cheapest and most competitive BPO destination in the world, a property management firm said.

CBRE, the world’s leading real estate management consulting firm, has estimated there will be a steady supply of at least 500,000 square meter of office spaces each year until 2016 in the Philippines from the 700,000 square meter office space that will come online this year and a take up of  600,000 sqm.

Rick Santos, chairman and CEO of CBRE Philippines, said that 80 percent of the available office space would be gobbled up by the BPO sector and the front end offices with the remaining 20 percent.

“No end in sight for strong BPO demand in the Philippine commercial real estate sector,” said Santos.

“With the robust progress of real estate developments and BPO sector in the Philippines, it can now be considered as the India of Southeast Asia,” he added.

The completion of new buildings means easing up of the very tight 3 percent average vacancy rate at present to about 5 percent on the average starting next year.

“We are in a very tighter market for tenants right now,” said CBRE Director Morgan McGilvray.

Makati, the country’s premier financial district, has a very tight vacancy rate of 1.37 percent with average rent of P970.10 per square meter; Fort Bonifacio with 3.78 percent at P797 per sqm; Alabang with 4.37 percent at P601.78 per sqm; Quezon City with 0.07 percent at P627.1 per sqm; and Ortigas with P8.75 at P572.8 per sqm.

In terms of rents, CBRE said increase in rates could grow faster of between 8 to 10 percent but this hike in rental would be a lot lower than the 20 percent increases in other countries like Hong Kong and Singapore.

“The Philippines rental rates still remain the cheapest despite continuing rise. The Philippines is still five times cheaper than other countries,” McGilvray said.

Even countries like Indonesia and Vietnam where infrastructure is not as developed or just at par with the Philippines have higher increases in their rental rates.

Moving beyond 2016, CBRE Senior Director Jan Custodio said there is no slowdown in the next 18 to 24 months stressing the new stocks in 2015-2016 are now in the radar for expansion of companies.

“We’re secured in 2016 and even beyond that as more supplies are coming in for BPOs to expand their operations,” Custodio said.

Jason Abraham, another CBRE Director added that some of their BPO clients which used to look for 200-seat capacity office space but are now asking for space for 1,000 employes which would require 5,000 to 6,000 sqm.

Abraham also noted of the growing sophistication of clients and the elevated quality of labor.

“They are no longer limited to the customer relations management and voice support but financial and accounting, legal researches and healthcare,” he said.

Morgan, for his part, said he does not see any bumps beyond 2016.

“I would start to worry beyond 2016 if my clients are worried but they are not. There is enough stock to be released in 2016 and beyond so that is encouraging,” he said.

For his part, Santos said the resiliency of the Philippine economy and the real estate sector is expected to continue beyond 2016.

“The continuous transformation of cities into business landscapes will only strengthen the position of the country as an investment destination in the coming years,” he said.

Companies are even going for longer term lease contracts of 10 to 15 years from what used to be 3 to 5 year minimum contract.

For the retail sector, Custodio reported that the Philippines will continue to be the best bet in the Asia Pacific region with rental rates of $38 per sqm, which is 2 to 3 times cheaper than other competitor countries.

Aside from retailers flocking to the shopping malls, Custodio also noted of the sprouting of new convenience stores that are taking up prime spots in new buildings in various business districts in the country.

Custodio said there are 200,000 sqm of retail spaces that are going to be completed by end this year.

For industrial space, CBRE raised concern on the tight supply of industrial parks for new investors. This has forced investors to look at other sites like Subic, Clark and the Calabarzon areas.

The consumption led economy has also encouraged more multinational companies to relocate into the country.

There is also an influx of small and medium Japanese enterprises from China following political squabbles between the two countries, CBRE added.

Phl to abide by rulings on Fraport, lake project

BERLIN – The Philippines will abide by whatever ruling is issued by the courts on the scrapped Laguna Lake rehabilitation project of a Belgian company and the Ninoy Aquino International Airport Terminal 3 of German firm Fraport AG, President Aquino said here yesterday.

The President said Belgian Prime Minister Elio Di Rupo mentioned the Laguna Lake project in passing when they met in Brussels on Sept. 16, while the Fraport AG case was also tackled briefly during his meeting with German Chancellor Angela Merkel.

Aquino has been assuring European investors in his many meetings with them that reforms have made doing business in the Philippines easier and that no one is “untouchable” in the fight against corruption.

He said that from cutting bureaucratic red tape to sending a former president to jail to ousting an ombudsman and a Supreme Court chief justice, breakthroughs achieved in the fight against corruption have ensured transparency and a level playing field for investors.

“It’s almost said in passing. So we said this is at the arbitration and we will, you know, we are bound by the result of the arbitration,” Aquino told reporters in a briefing Friday night (early yesterday morning in Manila).

“But we explained to the Prime Minister the main contention: there is an P18.7-billion project and, basically, it will remove silt from one portion of the lake and move it to another portion of the lake. So if the objective is to increase the water holding capacity of the lake, matter occupying space will not,” Aquino said.

The President said there was no “accusatory tone” in the Philippine position and “there was no belligerence.”

“So I think they were able to say it, we were able to respond appropriately without causing any tension and conflict,” he said.

The Philippine government is gearing up for arbitration of the P6-billion lawsuit that a Belgian firm, Baagerwerken Decloedt en Zoon N.V., filed against the country before the International Center for Settlement of Investment Disputes (ICSID) in Washington over the scrapped Laguna Lake Rehabilitation Project, with 22 Filipino officials as potential witnesses.

The P18.7-billion project was unilaterally scrapped in 2010 after the Aquino administration identified it as a “midnight deal” of the previous administration. The Belgian company sued Manila for breach of contract.

On the Fraport issue, Aquino explained that the courts would have to determine just compensation for parties involved. “And I reiterated that whatever the court would tell us and whatever the arbitration would tell us, we would abide by that,” Aquino said.

Earlier, Germany expressed hope that the transfer of five foreign airlines to the NAIA Terminal 3 would speed up the settlement of the legal dispute between the Philippine government and Fraport AG.

“It’s a good window of opportunity… Once they do this step, it might also be a good idea to come to a settlement,” German Ambassador Thomas Ossowski said. “Everyone should now be interested to come to a settlement.”

Ossowski said bilateral economic and trade ties between the Philippines and Germany had improved and German investors were satisfied with the reforms implemented by the Aquino administration to make the Philippines more business-friendly.

“We have moved a good way forward but more needs to be done,” he said.

Among the things that must be settled, he said, was the dispute with Fraport, which European officials said scared away investors.

The courts will determine the exact amount of compensation the Philippine government should pay Fraport and the Philippine International Air Terminals Inc. since the terminal building was almost complete before the project was scuttled a decade ago due to allegations of corruption.

Fraport lost the arbitration case before ICSID in 2007. The Washington-based court favored the Philippine government, saying Fraport and its Filipino partner, PIATCO, violated the Anti-Dummy Law.– Aurea Calica

source:  Yahoo!

DOE to offer e-trikes to coops after LGUs fail to make the cut

THE ENERGY department plans to expand the market for its electric tricycle (e-trike) project as it looks at accredited cooperatives in the country as off-takers of the vehicle units. The government started exploring this option after some interested local government units (LGUs) failed to meet a “stringent requirement“ of the Land Bank of the Philippines.

“We are still looking at rebidding 3,000 units for this year. We have to take note that the success of the project also lies on the off-takers of the e-trikes,“ Energy Secretary Carlos Jericho L. Petilla said in an interview last Tuesday.

Mr. Petilla said that one of the requirements as an off-taker is a “seal of good housekeeping” -- a certification given by the Department of Interior and Local Government to recognize good governance among LGUs. 

“Land Bank can only guarantee those that have borrowing capacity and seal of good housekeeping, which is now a problem with some LGUs,” Mr. Petilla said.

He said in order to secure a “seal of good housekeeping,” an LGU is judged based a set of standards that include good planning, sound fiscal management, transparency and accountability.

Since most of the interested LGUs don’t have this, Mr. Petilla said: “We are now looking at cooperatives accredited by Land Bank as alternative takers.”

The Energy chief said that with the project’s current situation, the government may not be able to meet the target of awarding 15,000 e-trikes this year.

“We hope to resolve this immediately. Otherwise, the project cannot move. I’m looking at maximum 3,000 e-trikes this year, minimum 500 [units],” he said.

The awarding of a contract to supply and deliver the first 3,000 of e-trikes was supposed to take place in the first quarter of this year.

Four foreign companies participated in the auction for the first 3,000 units in August last year. They were: Lirica Rising Sun & Shoyo-Terra Group (from Japan), Uzushio Electric Co. Ltd. (Japan), Eco One Co. (Korea), and Teco Electric & Machinery Co. Ltd. (Taiwan).

The e-trikes were supposed to be deployed in Luzon -- 2,000 units were allotted for the National Capital Region (NCR) and 1,000 units for regions 4A (Cavite, Laguna, Batangas, Rizal and Quezon) and 4B (Mindoro, Marinduque, Romblon and Palawan).

The e-trike project -- a joint undertaking of the Asian Development Bank (ADB) and the DoE -- aims to replace some 100,000 tricycles that run on gasoline by 2017.

The ADB allotted $300-million in funding for the $504-million project. The government will shell out $99 million, and the Clean Technology Fund, $105 million.

These e-trikes were supposed to be deployed to various LGUs under a five-year rent-to-own scheme. After that, the tricycle drivers would already own the units. -- Claire-Ann Marie C. Feliciano


source :  Businessworld

Boulevard losses from Boracay land dispute at nearly P40 million

HOTEL AND RESORT operator Boulevard Holdings, Inc. (BHI) on Wednesday said it has lost almost P40 million in foregone revenue since February, due to the disruption of its the operations on Boracay Island stemming from a land dispute.

However, the company assured shareholders that it is taking the necessary measures to recover part of its land which was reportedly “forcibly taken” by armed individuals associated with a former land owner. The dispute remains tied up in litigation.

“We still remain confident that in the end we shall recover the parcel… The end of October up through July next year is our high season for our resort business that we are trying to recover,” BHI Chairman, President and Chief Executive Officer Jose Marcel E. Panlilio wrote in a letter to shareholders.

He was referring to Friday’s Boracay Island Beach Resort in Aklan, a key revenue contributor which is owned and operated by subsidiary Friday’s Holdings, Inc.

“We only have less than 100 days until Christmas to unblock the barriers and set right the profit direction of BHI,” he added.

At present, the occupiers possess 60% of the property, alongside a “threatening presence of armed security guards, and construction of permanent improvements inside the premises.”

“So, now for Friday’s Boracay, just to recover what belongs to all of us at BHI, we must contend with Mrs. Mila Yap, Datu Yap and his armed men, the AMA College owner and his supposed lawyer Boy Reyno,” Mr. Panlilio wrote, referring to the defendants of the case.

The dispute has affected another ongoing resort project, Friday’s Puerto Galera, which is 65% completed.

“This is all at a standstill because of our disaster in Boracay,” Mr. Panlilio said, noting that its operator, Friday’s Puerto Galera, Inc., has P30 million in total payables, half to its main contractor and the rest to subcontractors and project manager.

“In all cases, we shall avoid getting into any bank debt,” Mr. Panlilio said.

BHI also operates Friday’s Puerto Azul resort in Ternate, Cavite.

In an Aug. 14 disclosure, BHI reported that its sales for the month of July dropped 54% year on year to P3.87 million.

BHI shares closed at 13 centavos on Wednesday, up P0.009 or 7.32%.

 

source:  Businessworld

Why Europeans will not rush into Aquino’s PPP

With the President speaking before European companies and financial institutions, I am optimistic that the conference will help bolster interest on PPP [public-private partnership] projects … we will be able to relay to potential European foreign investors that the country enables business that cultivates fair and transparent dealings.

— Trade & Industry Secretary Gregorio Domingo in Belgium, September 16, 2014

One of the plans I inherited was for a body of water south of Metro Manila called Laguna Lake. … what they wanted to do was move the mud from one section of the lake to another section of the lake, and that was supposed to enhance its water holding capacity. … that’s what they wanted to do for flood mitigation, and obviously it’s a joke.

— President Benigno Aquino 3rd in 2011 on why he scrapped a Belgian project

If one goes knocking on a company’s doors to get big money, it doesn’t help to call its executives jokers and crooks. Which is what President Benigno Aquino 3rd pretty much did in cancelling the P18.7-billion Laguna Lake dredging project of Baggerwerken Decloedt en Zoon (BDZ or Belgian Dredging Company) and the P11.8-billion undertaking of France’s Eiffel Matiere to build 72 roll-on roll-off ports.

Aquino claimed the contracts were anomalous, though no official communications ever formally canceled them or detailed exactly where there were irregularities. In fact, both projects underwent rigorous review by the National Economic and Development Authority, the Bangko Sentral, and the Department of Justice for financial viability, economic benefit, technical feasibility, and legal soundness.

Those two meticulously vetted yet arbitrarily cancelled contracts with European infrastructure giants would make President Aquino’s investment-seeking roadshow in Europe a very hard sell.

Sure, there would be photo-ops and positive pronouncements during his swing through the continent. But unless the government resolves several contractual disputes involving giants of European business in a manner seen as fair, reasonable, transparent and lawful, we should not hold our breath for the continent’s investors to take up big chunks of Aquino’s $20 billion in infrastructure public-private partnership projects.

If we want deals, we should honor them
Besides the cancelled Belgian and French deals, also riling Europeans is the 12-year-old gripe over the Ninoy Aquino International Airport Terminal 3, built by a joint venture of the local Philippine International Airport Terminal Co. (Piatco) and Frankfurt Airport Services (Fraport), controlled by a leading German political party.
After a thorough review, the Arroyo government found the NAIA 3 deal disadvantageous and took over the terminal in 2001. The following year the Supreme Court agreed that the deal was not in the government’s interest, due to radical revisions during the Estrada administration. Fraport sued for $425 million compensation with the International Center for the Settlement of Investment Disputes (ICSID) in Washington DC.

Then there’s last year’s scandal over an alleged $30-million bribe demanded from the Czech company Inekon for its bid to supply rail cars to the Metro Rail Transit to win. No less than Czech Ambassador Josef Rychtar backed the accusation, even as he wrote Aquino absolving his sister Ballsy and her husband Eldon Cruz of complicity.

The matter remains unresolved, even though MRT General Manager Al Vitangcol 3rd was ousted—a scapegoat for higher-ups, say Aquino critics.

The wrong and right ways to cancel contracts
What aggravates Aquino’s contract cancellations is its utter lack of due process and transparency. Take the BDZ dredging deal. As reported previously by fellow columnist Rigoberto Tiglao, Justice Secretary Leila de Lima back in 2010 pronounced the Laguna Lake project above board. So did the House Committee on Ecology, which evaluated environmental, legal and financial aspects of the project.

No dice: Aquino still told Finance Secretary Cesar Purisima to deny the Belgian firm the go-ahead to proceed. A 150-year-old company renowned for dredging worldwide, including a P5-billion ahead-of-schedule Pasig River project, BDZ sued the government in ICSID.

Potential cost to taxpayers: P1 billion in legal fees and P6 billion in claims, if the company wins. But the bigger loss is the flood relief denied the lake region and Metro Manila, which the dredging would have provided, according to extensive government and expert studies.

Also dubious was the scrapping of the Eiffel Matiere ports construction contract. Aquino claimed that the country did not need 72 more RO-RO docks, so only six would be built. Then-Department of Transportation and Communication Secretary Mar Roxas said the French builder would be paid for steel pipes and other materials already delivered, which could be used for public works construction or sold.

Former senator Aquilino Pimentel Jr., a staunch advocate of local government and development, disputed the DOTC report. “It is sheer folly to base decisions on such disinformation,” Pimentel argued, citing past assessments by the government, the Japan International Cooperation Agency, and the Asian Development Bank that the country needed as many as 243 RO-RO ports.

In contrast to the BDZ and Eiffel Matiere deal breaking, the NAIA 3 contract voiding went through careful study and full due process. A Cabinet-level committee with expert advice from leading accountant Gloria Tan Climaco, pored over project parameters and investigated Piatco’s multilayered ownership structure.

Among disadvantageous provisions reported to then-President Gloria Arroyo and her Cabinet was the shifting to the government of the consortium’s commitment to build the rail line linking NAIA 3 and other terminals. Climaco also detailed how Piatco’s corporate structure masked the controlling interest held by Fraport, in violation of the Constitution’s 60-40 ownership rule for public utilities. And the contract scrapping was upheld not only by the Supreme Court, but also by ICSID, which ruled that Piatco and Fraport violated the Anti-Dummy Law.

So will European investors snub Aquino’s PPP? There would be some takers. And in 22 months, the next leader will hopefully have the good sense to right his predecessor’s wrongs. Then European companies can finally do PPP deals with the confidence that they won’t be scrapped without due process, just because the new regime doesn’t like the old one.

source:  Manila Times Column of Ricardo Saludo

Metro Pacific-Ayala joint venture ready with downpayment for LRT1 Cavite Extension Project

MANILA - The joint venture of Ayala Corp (AC) and Metro Pacific Investments Corp (MPIC) on Monday said it is "ready" to comply with the requirements set by the government for the P64.9-billion LRT1 Cavite Extension Project. 

"We are ready to comply with the timetable set forth in the bid guidelines," Jose Ma. K. Lim, president of MPIC, said in a text message.

Light Rail Manila Consortium (LRMC) has 20 days to comply with post-award requirements, including the payment of 10 percent of its P9.35-billion premium, after which both parties may sign the concession agreement.

LRMC is composed of Metro Pacific Light Rail Corp, which leads the consortium with a 55 percent stake, AC Infrastructure Holdings Corporation with a 35 percent stake, and Macquarie Infrastructure Holdings (Philippines) Inc with a 10 percent stake.

Last Friday, the Department of Transportation and Communications (DOTC) awarded the project to Light Rail Manila despite the temporary restraining order (TRO) issued by the Supreme Court with respect to the common station component of the project.

DOTC had tucked in the design of the common station, which will link LRT1, MRT3 and the proposed MRT7, in the Cavite Extension project.

To recall, the High Tribunal issued the TRO in behalf of SM Prime Holdings Inc, which contested the transfer of the common station to an area beside Trinoma mall. SM Prime cited a 2008 agreement with state-run Light Rail Transit Authority (LRTA) that gave the Henry Sy-led mall developer the naming rights to the station. The same agreement also provided for the location of the station beside the SM North Edsa.

In a statement, MPIC said LRMC will invest P35 billion to construct the LRT1 Cavite Extension project. 

The consortium, which was the lone bidder for the project, has put together partnerships with global companies such as Bouygues Travaux Publics and Alstom Transport Pte Ltd to build the rail system. 

The consortium also pre-qualified 2 of the top operators that dominate the global rail industry, namely RATP Dev, which runs the Paris Metro, and Hong Kong's MTR Corp. 

“We envision a state-of-the-art train system that will bring a different rail experience to our commuters, including the introduction of an Automated Fare Collection System in the 11.7-kilometer Cavite Extension that will improve passenger comfort and convenience by cutting queuing time, and allowing seamless transfers from one rail line to another," Manuel V. Pangilinan, MPIC chairman said.  

AC chairman Jaime Augusto Zobel de Ayala said, "This project is a significant step forward in creating the right environment and infrastructure to address the many pressures that growth brings to urbanization."

Under the concession, LRMC will assume the operations and maintenance (O&M) of the existing 20-kilometer LRT1 construct the 11.7-kilometer extension of the rail line southward from the Baclaran station all the way to Bacoor, Cavite. 

This entails the construction of 8 new stations, of which 3 shall have intermodal facilities. The 8 new stations after Baclaran will include Aseana, MIA, Asia World, Ninoy Aquino, Dr. Santos, Las Pinas, Zapote, and Niyog. The intermodal facilities shall be located at Dr. Santos, Zapote, and Niyog.

The project will increase the span of LRT1 from 20.7 kilometers to 32.4 kilometers and provide commuters from Cavite and other parts of Paranaque and Las Pinas access to central Manila.

The government will acquire the right-of-way for the project, the satellite depot, and procure 120 light rail vehicles that will be financed through a grant from the Japan International Cooperation Agency (JICA).

The LRMC may begin construction work and take over operations of LRT1 within a a year from the signing of the concession agreement or by October 15. 

The project should be operational within 54 months or by May 2019.

source:  InterAksyon