New Mactan airport must be world class

The consortium of Megawide and the controversial Indian company GMR appears to have the upper hand after the first round of the bidding for the right to run the current Mactan airport as well as build its new terminal. But there is danger in dealing with a largely unknown entity when we can go with world class international airport operators like Changi and Incheon.

PPP Center head Cosette Canilao praised the consortium for submitting a bid that would build airport capacity way beyond what they expected. That started ringing alarm bells for me.

I am familiar with the strategy of submitting what looks like an impressive bid designed primarily to win the contest. The next step is to impress the bankers so they will finance the inflated project cost and reduce the exposure of the bidders. Then they will build in phases so slowly with a mind to turn around and sell after a few years at a handsome profit.

I am not saying the Megawide consortium has this in mind but that is something DOTC should think about before announcing a winner. It is important that the financial capabilities of the main consortium members are assessed well.

With the Henry Sy Group behind Megawide, there will probably be no problems with the local principal partner. But I have been googling all weekend about GMR and what I have found out is somewhat scary.

An article in Forbes.com about the most heavily indebted Indian companies is not reassuring. It appears from the Forbes list that GMR is among the top ten Indian companies with the highest gross debt level.

Not only that, quoting from a Credit Suisse report entitled House of Debt, the Forbes article reveals: “While many of these groups have projects including several infrastructure projects under construction, the net debt increase has outpaced the capital expenditure during this period, the report says. Meaning, they are borrowing more than they are investing.

“With rising debt levels, interest cover for most of the groups has declined as well.... Meaning, Essar and GMR amongst others, cannot pay the interest on their debt even one time... Credit Suisse says 2014 could be the year of reckoning for many of these companies...” http://www.forbes.com/sites/meghabahree/2013/08/19/top-indian-companies-burdened-with-debt/

The other thing I think the public should be shown before any award is made is the architectural drawings of the proposed terminal. The aesthetics are as important. The Megawide bid may seem financially promising but there is more than just money involved in the Mactan airport project. There is a lot of national pride riding on it.

The Megawide/GMR airport design may turn out to be nothing more than a glamorized warehouse. We need to see something grandiose because airports are a country’s calling card to the world and Mactan is the second most important international airport in the country.

I hope DOTC will not settle for a jeepney if a BMW is available at a cost that is not that far from the jeepney. To be safe, let the public see the designs. If we are going to invest a lot of money and political capital on modernizing Mactan, we have to get it right the first time.

I am also worried about the ability of GMR to carry out projects without hitches. Their ability to deal with local sentiment is also questionable as we can see with their experience in that Maldives airport project. That failed Maldives airport project of GMR is now under arbitration... reminds me of Piatco/Fraport and Terminal 3.

I googled news stories about it and found out that one reason there was strong political support for kicking GMR out is the way they disregarded local sentiment and requirements.

Apparently, the original master plan for airport development had proposed a second runway on the western end of the island. However, under the revised plan for which an agreement was signed with GMR, this plan was dropped.

What apparently GMR did was in place of the second runway, it opted to build a bigger terminal whose main feature is a duty free mall. But Maldi-vians say tourists go to Maldives to relax and be in the water and not to shop. They cannot compete with the likes of Dubai and other major airports in the mall business.

A Maldivian officer complained that “our traffic is a million (passengers per year). Why do we need capacity for five million now? (Sounds like the strategy for Mactan). We will develop gradually, as and when the need arises. That is how we have come this far. The second airstrip should be an immediate priority. At present, there is no provision for any emergency. The closest runway where a decent aircraft can land is 300 nautical miles south...”

The other concern has to do with the potential for corruption. As I reported last week, Hindu Business Line reported that in the case of GMR’s Delhi airport’s Terminal 3, the project ran afoul of India’s Comptroller and Auditor General, who pointed out that the GMR subsidiary was given land at a highly concessional lease rate. We all know special treatments like this do not happen because an approving bureaucrat likes your face.

The report of the Comptroller and Auditor General of India details how the original intent for the joint venture had been set aside and how the GMR subsidiary got special concession on rates. The report lamented: “Ministry has not been able to provide a convincing reply as to why a private operator should be levied a fee which is much lower than that fixed by Government as payable by its own department.”

We don’t want the Mactan project award to be tainted by even a suggestion of corruption. DOTC’s image is bad enough. P-Noy and his Daang Matuwid cannot afford doubts on the integrity of an award as important as this.

This report of the Indian Auditor General should be must reading for members of the bidding committee, of Sec Jun Abaya and even the key advisers of P-Noy in Malacanang. Here is the link to that report:  http://saiindia.gov.in/english/home/Our_Products/Audit_report/Government_Wise/union_audit/recent_reports/union_performance/2012_2013/commercial/Report_No_5/5.swf

I suspect GMR deliberately concealed their problems in Maldives. Poor Ms Canilao was quoted saying that they manage among other airports, the one in Maldives after they have long been thrown out.

The problem with our bureaucrats is they don’t do careful due diligence. Google is there waiting to be used at the very least. Google had been my only resource in trying to find out who the Megawide partner is.

Only world class infra companies with proven track records can help us get airports that will not land in the list of the world’s worst airports. One Philippine airport in that list, NAIA T1, is embarrassing  enough. Make sure you guys at DOTC choose a real winner.

Republic of Dasma

I know Mayor Binay was wrong to have insisted on getting special treatment from the security guards of Dasma Village. But I find it difficult to have any sympathy with the security officers of Dasma. My feeling is they got a measure of what they usually give. Nakatapat sila ng kasing gago nila.

I got this letter from Marcial Ocampo who experienced deplorable high handed treatment from Dasma sekyu officers.

It is time that the Damarinas Republic be brought to the ground. I was also bullied by the Dasmarinas guards and they arrested me for walking from the Indonesian Embassy when I followed up my visa as UNDP official to conduct a management audit of their Wind-Diesel Power Hybrid Project in 2010.

I have to park my car in Alphaland, and enter only in that one gate at EDSA. Then walk and queue for the Village Vehicle (L200) which goes to the Village Club House where you pay P150 for the two-way fare inside the village. No walking is allowed.

After getting my visa from the Indonesian Embassy, and since I missed the last round of the Village Vehicle, I can’t wait for another 1-1/2 hour for the next round, so I decided to walk towards the EDSA gate near Alphaland.

Lo and behold, I was arrested and put in a very embarrassing situation by this abusive village guards and club house officials. I have to shout to them and plead them to let me go because I am an on official UNDP trip. I should not be fined P1,500 for walking, and I am not a security risk.

It was only when I shouted and raised my voice that I will make a big issue about this and complain to the leading newspaper editors that they relented and allowed me to go. I already passed their security check since we presented our valid government IDs when we paid the P150.

It is about time that a law is passed to curtail this abusive practice. Thank you Mayor Binay for standing up to this people!

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco