Foreign investors want ‘fair, swift resolution’ of NAIA 3—German gov’t

Published by rudy Date posted on May 28, 2011


It was a diplomatic statement from the German government in Manila, but it was clear it was not happy with the Pasay City Regional Trial Court judge’s decision on the “just compensation” awarded to the Philippine International Airport Terminal Corp. which was merely a fifth of what Piatco was seeking from the Aquino government as payment for its having expropriated the air terminal.

The German government said foreign investors would want to see a fair and swift resolution of a decade-old terminal investment row involving a German company and its Filipino partner before investing in President Aquino’s much-touted public-private partnership for country-wide infrastructure development.

At the same time, Germany declined to comment on a recent local court decision awarding $175.757 million in just compensation to Piatco, the consortium with local partner of German airport builder Fraport, for the expropriation of the Ninoy Aquino International Airport (NAIA Terminal 3 but called for negotiations to break the legal deadlock.

Piatco has appealed the lower court decision, saying the settlement amount is

merely a “fraction” of what it had invested.

“A fair and swift solution would be an encouraging signal for the international business community to engage in long-term investments, such as Public Private Partnerships,” a statement Friday by the German Embassy in Manila said.

The Aquino government has been scrambling to get foreign investors to take part in its $12-billion public works projects for roads, urban rail, sea ports and airports construction. While some countries have expressed “keen interest” in the development program, the government has yet to receive concrete proposals.

The NAIA-3 problem has created negative sentiments and has eroded investor confidence from Germany and the European Union, which have been calling for a settlement to the dispute. The refusal of government to pay compensation for expropriating NAIA-3 has caused a setback in diplomatic relations between Germany and the Philippines, and investments from Germany have been few and far between.

Germany likewise informed the Philippine government that financial cooperation with the Philippine government can only be resumed after a mutually acceptable resolution of the case.

“Neither the German government nor a German company are party of the expropriation trial at the Regional Pasay Court. Thus, we abstain from commenting a court decision on third parties,” the embassy said.

Germany, however, reiterated that “a negotiated agreement between all parties involved would be the best way out of the present impasse.”

A swift settlement would also encourage the international business community to invest in the Philippines which is trying to attract private capital to fund much-needed infrastructure, the embassy statement added.

Philippine officials welcomed the court decision, but Piatco has already announced it will be filing an appeal.

Fraport has also separately submitted the case to the International Centre for Settlement of Investment Disputes in Washington.

These moves may just prolong the legal dispute and prevent contractors from completing and renovating the terminal, the German embassy warned.

The expropriation unleashed a prolonged legal battle that caused many delays in the completion of the terminal, originally built to serve 13 million passengers per year.

It opened for limited use by three local budget carriers in July 2008 but foreign carriers still use a crumbling 29-year-old terminal that was built to serve 4.9 million passengers per year.

The problem started under the presidency of Gloria Arroyo after the $650-million airport project undertaken by the German airport builder Fraport AG was expropriated by the her government in 2002.

Fraport filed an extortion complaint against the Philippine government before the World Bank, implicating two of Arroyo’s aides, who allegedly demanded millions of US dollars in exchange for getting favorable government action on the airport dispute. Arroyo nullified the contract with the Fraport-led consortium Piatco allegedly due to its perceived onerous provisions.

In 2007, the World Bank’s ICSID junked the claim of compensation by Fraport. This decision by the lower panel was, however, reversed by a higher body.

NAIA 3 opened in 2008 after six years of being idle.

But Germany said the pending legal battle for NAIA-III before the World Bank prevents “domestic and international companies to finish, manage and use the urgently needed international terminal.”

“The Philippine Supreme Court has clearly stated that acts of ownership are only allowed until full payment of just compensation has taken place,” it noted.

In Dec. 23, 2010, the ICSID Ad Hoc Committee nullified the tribunal’s previous findings that Fraport and certain Piatco officials violated the anti-dummy law.

With this ruling, the government of President Aquino has no choice but to return the NAIA-III to its rightful owner, Piatco, along with its foreign partner, Fraport, or compensate them for the facility on the full extent of the Germany company’s claims.

In a related development, with business confidence going down by almost 20 percent, a member of the minority bloc in the House of Representatives yesterday called on President Aquino and his economic managers to rethink their policy direction as their present route has not only failed to pump-prime the country’s economy but has brought it to near-collapse.

In a text message, Zambales Rep. Milagros “Mitos” Mgasasay said that despite the hype being made by the Aquino administration, it has failed miserably in sustaining the economic growth spurred by the previous administration.

“The business optimism going down from 50.6 percent to 31.8 percent only shows the very slow response of the Aquino administration to issues like the oil crisis which spiked prices, under-spending which caused economic slowdown and unemployment which brought down investor confidence in the country,” said Magsaysay.

The other day, the Bangko Sentral ng PIlipinas (BSP) released the result of its Business Expectation Survey which showed that the business confidence index declined to 31.8 percent in the second quarter from 47.5 percent in the first quarter.

During the fourth quarter last year, the business confidence index was pegged at 50.6 percent.

Rosabel Guerrero, BSP Department of Economic Statistics director, blamed the weaker business sentiment in the second quarter of the year could be attributed to surging operating costs, slow business procedures, and delayed disbursements for government projects.

“They (respondents) cited some domestic constraints to the business environment that contributed to their weaker sentiment, namely, higher operational costs as well as slow business procedures and fund disbursements for government construction projects,” said Guerrero.

While Guerrero did not elaborate on the issue of delayed disbursements for government projects, some sectors blame it on the government’s attempt to manage the budget deficit project at P134 billion this year, resorting to under-spending.

In fact, the Aquino administration boasted early this week it had made a P26 billion budget surplus for the first quarter of this year, the biggest in 25 years.

However, lawmakers identified with the minority bloc in the House claimed the budget surplus was merely a window dressing resulting from the government’s under-spending which include the non-release of the lawmakers priority development assistance fund (PDAF).

Magsaysay equated the government’s under-spending to the failure in pump-priming the economy resulting to failure in job generation which further resulted to less consumer spending, thus the country’s worsening economic situation.

“Despite the hype of the Aquino administration, it has failed in implementing government programs that will help boost and pump-prime the economy,” said Magsaysay. “Job generation was affected which resulted to less consumer spending.”

All considered, Magsaysay said it is about time Aquino and his economic team rethink their strategy to arrest the country’s economic woes.

“The economic managers of Aquino should rethink their position regarding policy direction as continuing the present route will make matters worse,” the lady solon said. –Charlie V. Manalo and AFP, Michaela P. del Callar

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