[OPINION] At last, a decent airport

DEMAND AND SUPPLY – Boo Chanco | June 11, 2018 – 12:00am

At the inauguration of Mactan Terminal 2, I heard the President say, “sana ang Davao meron ding airport na tulad nito.” Umasa ka pa, Mr. President.

Sayang talaga. Dapat next year, he would have been inaugurating a much improved airport terminal in Davao. But it will not happen.

Blame the President’s class valedictorian he appointed DOTr secretary. Yes… Art Tugade is the culprit who bashed the President’s dream of a better Davao airport terminal soon. The President’s lavish praise of Mr. Tugade was undeserved.

Five regional airports, including Davao, had been bundled ready for bidding when the Duterte administration came in. The private bidders had done their studies and were ready to compete. Unexplainably, Tugade unbundled it and up to now there is no indication any bidding is about to happen.

Because it only took three years to construct Mactan Terminal 2, President Duterte could have been inaugurating not just that Davao airport terminal by next year, but four others too.

Given DOTr’s lack of urgency and competence, wala na. The regional airports were bundled by the PPP Center precisely to have economies of scale to attract the big players who can introduce new technology and assure quality.  A businessman like Tugade should have understood that.

I suspect politics intruded. The Speaker probably wanted a favorite local, but inexperienced contractor to get the job. And now, a high flying Chinoy from Davao, who claims to be close to the President, wants to do it too.

It was a low hanging fruit and Tugade allowed it to rot. Check out my column of March 3, 2017 for details of this horrible Tugade mistake.

From invitation to pre-qualify in December 2012 to the inauguration yesterday, it just took five years more or less to make Mactan Terminal 2 a reality.

From their speeches, President Duterte and other officials gave the impression government had a lot to do in the project’s successful execution. PPP was not given enough credit. The fact is: neither DOTr Secretary Art Tugade nor his predecessor Jun Abaya did much.

But in fairness to Tugade and Abaya, they kept out of it for the most part and allowed Megawide-GMR to get its job done. Lesser bureaucrats would have meddled to give themselves a false sense of importance, even if the project gets delayed or end up more expensive.

There is also this unfortunate failure to acknowledge the contribution of Cosette Canilao, the one person in government who did the painful task of shepherding the project through the labyrinth of NEDA, DOF, DOTC and other bureaucracies. Ms Canilao was the executive director of the PPP Center at that time and she made sure the selection process was fair, clean, and moved fast.

I had my initial doubts about the Megawide-GMR consortium’s selection in the light of competitors that included Changi and Incheon. But Cosette insisted the process was fair and made sure the winner was competent and had the financial resources to do the project. Yesterday, we all saw how right Cosette was and I am eating humble pie.

Hopefully, Ben Diokno and Sonny Dominguez will dump their belief that PPP projects are more difficult to get off the ground than ODA and GAA financed projects. Any difficulty had always been on the side of bureaucrats wanting to study and restudy and delay the day a decision must be made. Ben and Sonny can and must remedy that.

If government streamlines its processes and have dedicated, no nonsense officials like Ms Canilao, PPP infra projects can be fast tracked.

There are also not enough bureaucrats who are competent in assessing private sector infra proposals. Hangang hurdle rate lang sila. Feeling unappreciated, Ms Canilao is now advising foreign governments how to do their PPP right. Sayang. Our government can use her talents and tenacity to get BBB going.

It is frustrating the already approved Bulacan airport project of San Miguel may take anywhere from six months to a year or more before honest, not ceremonial, groundbreaking can happen. Unlike other big infra projects, there is no funding or right of way problems.

I can understand why the DOF must reassure itself that government will not be saddled with contingent liabilities in the future. I can also understand the need for a Swiss challenge. But we need that airport badly and the Duterte economic managers must show a strong sense of urgency and get this project started.

One other thing the Megawide -GMR Mactan Terminal project showed is that PPP is not necessarily more expensive than ODA.

I pointed out last March 21 in this column the report prepared by Castalia Strategic Advisors for the Philippines-Australia Partnership for Economic Reform and NEDA comparing a JICA-financed airport project and Mactan T2.

“The consultants noted that the JICA funded Iloilo Airport Project took nine years and two months from NEDA ICC submission to project completion. This was in January 1998 to March 2007. The size of the new passenger terminal was 13,700 sqm. While the financing cost is significantly lower compared to commercial loans, the final all-in project cost ballooned by 42 percent due to cost overruns and variation orders.

“The Mactan Cebu Terminal 2 project, on the other hand, will be delivered in three and a half years from NEDA ICC submission to target completion in June.”

Additionally, a Megawide official pointed out that:

“The size of our new passenger Terminal 2 is 3.75 times larger than the New Iloilo Airport. In terms of the cost overrun risk, the government is protected as defined in the concession agreement, project cost overruns are solely shouldered by the private proponent. And lastly, the private proponent paid the government upfront premium of P14.4 billion for this project.”

Given change in the fiscal and economic environment, PPP is government’s best chance to deliver ambitious infra projects under BBB. So far, that Duterte economic program is still all hot air.

Source: https://www.philstar.com/business/2018/06/11/1823390/last-decent-airport