Unsafe for business
October 11, 2011 at 17:32
This is a re-posted opinion piece.
The Aquino administration appears to have accepted the reality that its flagship public-private partnership program isn’t going to achieve the kind of success that the PPP did in Britain.
So the government is now counting on official development assistance (ODA) for the so-called hybrid PPP. But even in this it should expect turbulence.
The Japanese, whose aid arm was initially reported to be open to the hybrid PPP, have been spooked by the New People’s Army’s raid in Surigao, with Japanese employees among those trapped at the mining site.
Europe’s strongest economy (and one of our major ODA sources), Germany, has a new ambassador, Joachim Heidorn. Last week he agreed with Foreign Secretary Albert del Rosario that the two countries should move forward on other aspects of bilateral relations even while Germany’s Fraport AG sorts out its problems over the NAIA Terminal 3.
But Heidorn also told me that the Fraport issue must be resolved, and the earlier, the better. German investors want their government to give them a risk guarantee if they go to the Philippines, and Berlin isn’t giving it until the Fraport issue is settled.
Belgium, which hosts the headquarters of the European Union, as far as I know has already lost the deal to dredge Laguna de Bay. Shortly after assuming office, P-Noy had told us he was convinced that the project was useless for flood control and appeared tainted with corruption. If his suspicion has basis, it would help if his government filed charges against those who might have been involved. No government likes its ODA associated with corruption, and I think Brussels would support efforts in the developing world to fight this scourge. But Manila must present the basis for its accusations.
In the meantime, the Belgian company is turning to international arbitration.
France, which last year approved a huge ODA package for the Philippines, is also stewing over the possibility that one of its largest and oldest companies could lose its contract to provide modular roll-on, roll-off (RORO) ramps.
The Eiffel-Matiere consortium was awarded a 149.79-million-euro contract (about P9.15 billion) to supply 72 standard modular RORO ports including terminals all over the Philippines, at a cost of P83 million per port.
Enforcement of the contract officially started on Nov. 24, 2009 when the Philippine government made a down payment of P1.5 billion, or 15 percent of the project cost. The contract ends on Nov. 23, 2013.
That money was drawn by the Department of Transportation and Communications (DOTC) through the Department of Finance from French ODA, which will finance 38.9 percent of the project.
The French government owns 20 percent of Eiffel, or the Eiffage Group. The firm specializes in metal construction in marine environments, building offshore oil platforms for French oil giant Total in Nigeria, for example. The 144-year-old company built the Eiffel Tower in Paris and the all-steel San Sebastian church in Manila. Matiere is 78 years old.
The idea for RORO ports germinated during the Ramos administration, when the DOTC commissioned a study in 1994 for a long-term Philippine port development and operation plan.
In 2004, a study by the Asian Development Bank and JICA or Japan International Cooperation Agency showed that the Philippines needed 234 ports, with 66 as priority sites.
Before RORO, there was LOLO – for load-on, load-off technology. But LOLO was more expensive, requiring cranes, arrastre and boat charges.
Gloria Macapagal-Arroyo, during her presidency, liked the RORO idea and initially tried to get Spanish ODA for the project. But a Spanish firm could not meet certain requirements and the contract eventually went to the French through bidding.
When Manila applied for French ODA for the project, the commercial loan application was reviewed and approved by BNP Paribas and French export credit agency COFACE, which at the time was chaired by Christine Lagarde, now managing director of the International Monetary Fund.
Eiffel is the only supplier of Unibridge, a patented system of marine-coated movable ramps, causeways and berthing dolphin attached to a concrete port. The contract includes solar-powered, air-conditioned terminals with waterless urinals. The ramp sways with the tide so there’s no need to dredge and destroy the seabed; RORO vessels can dock regardless of the tide level. Unibridge has a guaranteed life span of 80 years, although it can last up to 100.
DOTC officials reportedly showed the design of Unibridge to a local company, in violation of international patent laws. The local firm said it could build a similar system for just P60 million, using a different quality of metal, with a life span of 40 years. The National Economic and Development Authority said the comparison was not apples to apples.
Under the contract, the DOTC, not the French consortium, picks the sites for the RORO ports, builds the concrete portion and installs the Unibridge system. So if the DOTC picked sites in the eastern seaboard that are vulnerable to typhoons (why call it a port if it’s not in a sheltered area?), it’s not the fault of Eiffel-Matiere.
Also under the contract, in case of arbitration, French laws will apply.
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So far Eiffel-Matiere has not received a formal notice from Manila of termination or suspension of the project.
But the government’s pronouncements that the contract would be renegotiated have put on hold about six other major French investment projects, including the supply of radar for 70 airports by Thales.
“There seems to be mistrust, suspicion on both sides,” French Ambassador Thierry Borja de Mozota lamented to me last week. “It’s not good. We feel that there is some kind of Europe-bashing going on.”
P-Noy should concede that launching the RORO was one of the achievements of the Arroyo administration. It has cut maritime transport costs and travel time significantly for both investors and ordinary travelers.
Filipinos support P-Noy’s emphasis on the “5Rs” – right project, right quality, right people, right cost, and right on time. Certain contracts are truly onerous and deserve to be scrapped or renegotiated. But the government must present its case clearly, by filing appropriate charges against crooks and sending them to prison.
In reviewing projects clinched by the Arroyo administration, it’s useful to bear in mind that investors – and foreign governments that guaranteed the projects and provided commercial loans – thought they were dealing not just with individual agencies or officials, but with the Philippine government.
At stake is the reputation of the country as a safe and stable place for investment. Businessmen and their governments presumed regularity in those deals.
They didn’t think they were dealing with GMA or her husband but with the Philippines.
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By: Ana Marie Pamintuan – Sketches
Source: The Philippine Star, Oct. 10, 2011
To view the original article, click here.
