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Government readies Clark airport offer to investors

Posted on July 05, 2017

THE GOVERNMENT will offer to investors this month the P12.55-billion Clark International Airport Expansion Project that will test the waters for a “hybrid” financing scheme that will see a mix of official development assistance (ODA), state funding and public-private partnerships (PPP), the head of the Bases Conversion and Development Authority (BCDA) said yesterday.

Clark International Airport has long been positioned as a premier gateway to decongest Ninoy Aquino International Airport. -- BW FILE PHOTO
“We’re opening the tender this month, in a few weeks, for the Clark International Airport (expansion project). Hopefully, we can entice our German counterparts,” Vivencio B. Dizon, BCDA president and chief executive officer, told reporters at the sidelines of a signing ceremony for a Philippine-German agreement for maritime cooperation.

The National Economic and Development Authority Board -- led by President Rodrigo R. Duterte -- approved on Wednesday last week the National Transport Policy plus more infrastructure and other projects cumulatively worth some P304.45 billion.

The list includes the P12.55-billion Clark International Airport Expansion Project -- which will involve national government financing and PPP for operation and maintenance -- that will build an 82,600-square-meter terminal building that will be designed to accommodate eight million passengers a year, nearly double the current 4.2 million capacity, and which should be completed by 2019.

“The Clark airport new terminal will be the first of the hybrid PPP model under the Duterte administration where the government builds it and then the private sector will maintain and operate,” Mr. Dizon explained.

“[Bidding for] both will be this year: construction and O&M,” he added, referring to the operation and maintenance segment.

The government, which has made infrastructure its priority, has said it will reduce reliance on PPP which it says takes too long to implement projects.

Mr. Duterte has also recently complained of losing bidders stalling the progress of major projects they had targeted by securing court injunctions after questioning the bidding process.

Hence, the Duterte administration hopes to speed up infrastructure development -- for which the government hopes to spend a total of more than P8 trillion up to 2022 -- by financing construction itself or with ODA and then entrusting O&M to private concessionaires.

The infrastructure buildup is expected to prod overall economic expansion to pick up to a faster 7-8% from next year to 2022 from a targeted 6.5-7.5% this year and from 2016’s actual 6.9%. Such sustained faster growth is needed to generate more jobs and lift more Filipinos out of poverty.

Mr. Dizon said the government will not wait for the construction of the airport to finish before bidding out the O&M contract, citing the need for the private operator to have inputs in the design and construction. “The [tender] for the maintenance [and operation] will come right after... the O&M contract will come just a few months after, so they’ll still be involved in the construction phase... the O&M operator has to have inputs in the design and construction, they have to be there at the very beginning,” he said.

The government has been promoting Clark as an alternative gateway to help decongest Ninoy Aquino International Airport (NAIA) which has been accommodating passenger traffic far above its designed capacity. In 2016 for example, NAIA reported that it handled 39.5 million passengers, against its rated capacity of 30.5 million.

Increasing flights at Clark, both domestic and international, make it viable for investors, Mr. Dizon said.

Unsolicited proposals to expand the Clark airport had been rejected as the government decided it will pursue the project on its own first, and eventually bid out the O&M contract.

“I think they’ve already been rejected, since those proposals were for the pure PPP models,” Mr. Dizon said.

The Filinvest Group and JG Summit Holdings, Inc. submitted a joint P186.64-billion unsolicited proposal for the expansion and development of Clark airport.

GMR-Megawide Cebu Airport Corp. -- the joint venture of listed builder Megawide Construction Corp. and Bangalore-based airport operator GMR Infrastructure Ltd. that is expanding the Mactan-Cebu International Airport terminal and operates it under the PPP scheme -- also submitted a $5-billion proposal last year to develop Clark airport.

The BCDA executive noted that with the government building the airport, fees could be lower than should a private proponent build and operate the facility.

“It’s a very worthwhile investment, it will pay off. Once we offer that for O&M, the government gets a substantial share,”Mr. Dizon said.

“I think that’s the strength of the hybrid model: if it’s a pure PPP, if the private sector builds the facility, then they [sic] have to recoup their investment... via the fees which they get from the operation and maintenance... they’re allowed fair rate of return but because of that, they have to charge more,” he explained.

“With this, we don’t have to charge the public more. In fact, we can probably even charge them lower because the government is not in it to make money.”

Clark International Airport is located in the Clark Freeport and Special Economic Zone about 43.2 miles northwest of Metro Manila.

Aside from Clark airport, the Department of Transportation earlier said it will spend around P600-700 million to develop the former United States naval air facility at Sangley Point in Cavite also as a way of decongesting NAIA.

Both Clark and Sangley Point, besides Subic Bay Freeport, boast of ruways built by the US military.

The International Air Transport Association has urged the government to come up with a master plan for the country’s aviation sector -- either to build another gateway or maximize other airports outside Metro Manila -- in order to boost aviation’s contribution to the Philippine economy. -- Imee Charlee C. Delavin