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Professor Mark Turner
International passengers landing in Manila may wonder why they taxi past a brand-new terminal and disembark at one built in the 1970s which is definitely showing its age. The new terminal can handle four times as many passengers as the old one and has state-of-the-art equipment giving greater comfort and convenience for passengers. It was completed and scheduled for opening in December 2002 but has lain idle, a US$657 million monument to the difficulty of doing business in the Philippines. An alternative view is that it is a symbol of presidential efforts to build good governance.
The contract to build the terminal was awarded in 1997 (when Fidel Ramos was president) to Philippine International Airport Terminals Co (PIATCo), a consortium headed by the Cheng family, but including the German company, Fraport. Parts of the contract were revised during Joseph Estrada’s presidency, but his successor, President Arroyo, nullified the contract on 29 November 2002 on the grounds that it contained ‘onerous provisions’. The Supreme Court then backed up the President by declaring the contract and supplemental agreements null and void. The President declared that this was a victory for good governance. PIATCo accused Fraport of turning its back on its Filipino partners and trying to make deals with the government, which allegedly offered US$350 million to buy out Fraport. However, on 7 September 2003 Fraport applied to the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) to resolve the dispute. This has brought a fresh round of accusations from Fraport about demands by Philippine officials and a well-connected law firm for payments and to oust the Cheng family from the consortium.
This high-profile case has hit the headlines at the wrong time for President Arroyo. The latest Transparency International report on corruption has ranked the Philippines 92nd in its survey of 133 countries. What is especially worrying is that the Philippines has fallen from a rating of 2.9 out of 10 in 2001, to 2.6 in 2002, and now to 2.5 in 2003. (A score of 10 is the least corrupt and zero the most corrupt.) The President has questioned the accuracy of the figures by noting that they are ‘perceptions of corruption that do not take into consideration hard evidentiary cases or positive actions by governments’. She reported that the drive for good governance is ‘inexorably moving forward’. But a rival in next year’s presidential race is now accusing President Arroyo and her husband of corruption. Senator Lacson, a former police chief, claims he is in possession of documents that could lead to the impeachment of President Arroyo. The Senate has not been impressed with the evidence so far and the president’s husband has sued for libel. While Lacson’s mud-slinging may be more about next year’s election, the Philippines is unable to shake off its reputation for corruption. It has been described as a disease which holds back development. At Ninoy Aquino International Airport it may be a case of ‘terminal cancer’.
WATCHPOINT: When will the new Manila airport terminal open? Will Senator Lacson’s accusations of presidential corruption stick? Will President Arroyo’s actions lead to improvement in the Transparency International rating?
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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