January 17, 2019

The National Economic and Development Authority (NEDA) Board on Monday said it had approved the concession agreement negotiation report for the Bulacan International Airport.

The agreement is between San Miguel Holdings Corp (SMHC) and the Department of Transportation (DOTr), NEDA said in a statement.

The public-private partnership (PPP) proposal involves the construction, operation, and maintenance of the airport on a 2,500-hectare land in Bulakan, Bulacan, the statement said.

The airport will be located in the 2,500-hectare lot in Bulakan, Bulacan, a project worth P735 billion.

Bulacan area is fast becoming the next growth area. It is a strategic neighbour of Pampanga and adjacent to Metro Manila, thus accelerating and strengthening the growth corridor for investments and tourism for the Central Luzon-Northern Luzon corridor.

Airport development is linked to economic growth and having a world-class airport at no expense to the government should be a priority.

NEDA said that under the agreement the government had not given any guarantee or subsidy.

A total of P735.63-billion unsolicited proposal was approved by the government in April.

Important features of the Bulacan International Airport Concession Agreement include no government guarantee or any form of subsidy, NEDA said.

After the NEDA Board meeting, the DOTr will proceed with finalizing the concession agreement and convey the NEDA Board approval of the report to SMHC.

The revised CA will go through a final review of the Office of the Solicitor General and the Department of Finance before it is advertised to parties for a Swiss challenge.

Finance Secretary Carlos G. Dominguez III said that the Cabinet-level, the interagency body approved the concession agreements for the proposed Bulacan International Airport as well as the operation and maintenance of the Clark International Airport expansion project, with the condition of zero guarantees from the government.

In a text message Saturday, Socioeconomic Planning Secretary and Neda chief Ernesto M. Pernia said that since there was no government guarantee in the concession agreement as agreed with SMC, it effectively “raised the bar beyond the Mactan-Cebu International Airport.”

Under the concession agreement between the Aquino administration and the private sector partner for the Mactan-Cebu International Airport, the government must shell out a termination fee of about P20 billion in case it builds another airport in Cebu and Mactan islands due to passenger traffic increase.

“In the case of the Mactan-Cebu airport, it earned P1.1 billion in 2017, which was 48% higher than the P752 million projected net income during the appraisal stage done to secure the Neda Board approval for the project. And yet, the government still made the commitment that there will be no other competing airports in Mactan and Cebu. Now, should the government later on want to build a new airport in the area to serve our OFWs [overseas Filipino workers] and other tourists, we would be required to reimburse not just the market value of the infrastructure assets, but also the future profit of the commercial business until the end of the concession,” Dominguez pointed out during a Senate hearing in September.

The Department of Finance had some reservations on the financial viability of SMC’s P735.6-billion Bulacan airport proposal as it will be rolled out by the subsidiary San Miguel Holdings Corp., which had only about P60 billion in total equity in 2016.

Dominguez wanted the execution of a joint and several liability agreements that would allow the parent-firm SMC to guarantee that its subsidiary could finish the project.

With the concession agreement approved, the proposal will be subjected to the Swiss challenge.

Under a Swiss challenge, other companies can bid for the project, after which the original proponent that submitted the unsolicited proposal will be allowed to match or submit a better bid before the project is awarded.

The proposed new international aerotropolis, or a metropolis revolving around an airport, would involve a massive complex to be built at a 2,500-hectare location along Manila Bay in Bulakan town.

The airport project, which had been awarded an original proponent status by the Department of Transportation, would have an initial capacity of 100 million passengers or over three times that of the Ninoy Aquino International Airport, the country’s gateway to Manila.

This would be a new world-class airport financed solely by the private sector but benefitting the whole nation is one infrastructure project that should receive the full support of the Duterte administration.