Elastic award?
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - November 8, 2019 - 12:00am

We read the headlines… we saw the photos. DOTr Sec. Arthur Tugade and San Miguel COO Ramon S. Ang both smiling and exchanging documents. Finally, we thought, the $15 billion Bulacan airport project is a go.

Indeed, DOTr gave San Miguel a notice to proceed. San Miguel has scheduled groundbreaking next month. Now it seems, DOF wants to hold everything back.

DOF, through DOTr, expressed concern on six points after the agreement was signed and delivered. Maybe they just wanted reassurance.

San Miguel has replied that all those points are covered by the concession agreement and there is nothing government should be concerned about.

Does this mean the groundbreaking next month will not push through? Who really knows? It is no secret that Finance Sec. Sonny Dominguez doesn’t like this project. He will probably try to wear RSA down until he just gives up.

 Sec. Sonny’s overriding concern is the impact of the Bulacan airport on the viability of Clark. But Clark serves another market. And if we are as bullish about the economy as government is, we will need those two civilized airports.

It seems until President Duterte says once and for all that San Miguel can start building that airport, the agreement will be nitpicked to eternity. In the meantime, we are losing precious time to build a facility we needed 10 years ago. Even a rehabilitated NAIA cannot provide the depth of service the Bulacan airport is designed to give.

Here are the not so new points raised by DOF and San Miguel’s response:

 Adjustment of regulated fees: SMC confirms that government is not liable under the CA in case the designated government airport regulatory body disapproves or fails to act on any application for increase of regulated aeronautical fees.

On extraordinary price adjustments (EPA): SMC points out that under the CA, ordinary inflation and normal exchange rate or foreign currency movements are not covered by the EPA. SMC accepts these as risks they assume.

On securing local consents: SMC accepts obligation to secure consents from LGUs. The executive branch will only assist in obtaining the consents.

 On financial close: SMC accepts obligation to achieve financial close within the periods set out in the implementation schedule and failure entitles government to exercise its rights.

On Material Adverse Government Action (MAGA): “Change in Law” in relation to MAGA is limited to events occurring as a result of the acts of the executive branch.

On cap on government’s liabilities to manage its contingent liabilities arising from its CA obligations: SMC reiterates that the project’s bankability hinges on government’s recognition that the investment in a greenfield project, with no government asset contribution, no existing cash flow and no guarantees on traffic and is protected through contractual mechanisms for compensation and/or termination in the event of specific defaults. The concession agreement provides for a termination payment formula which is consistent with existing government policy.

SMC has no objection to the principle of putting a cap on grantor’s (government) liability, consistent with the provisions of the CA, to cover consequential losses and damages arising from delays in government action, but not when government action constitutes default and San Miguel opts to exercise its right to terminate the CA.

 In his interview with Jake Maderazo over Radyo Inquirer, RSA expressed optimism they will be able to pursue the project. Hopefully, DOF will accept San Miguel’s acceptance of all the points they raised as finally sufficient.

Fat chance. Unknown to San Miguel, I just got word from a Palace source that Sec. Sonny sent a memo to the President against the construction of the airport. Attached is a personal note to “Rody” telling him that DOTr was wrong to have signed that contract and that the airport would be a white elephant.

No good intentions go without punishment, it seems. Assuming it ends up a white elephant, that’s the concern of San Miguel shareholders. No government money is at risk.

We can’t have an elastic approval of a major concession agreement. Government cannot sign a concession agreement and issue a notice to proceed only to come back and say mali pala. Ano ito, elastico? Government’s credibility is at stake. It is now a live contract.

 Rice cartel

JF Mangalindan, DVM of San Juan, wrote to say that local rice production is in reality much less than what the government says we produce — millions of tons less. This means the current importation substantially covers the actual deficit.

“Consider this — how can our country continuously produce the 5-9 percent more palay/annum when we lost more than 30 percent of our rice land and more than 50 percent of irrigated land in the last 20 years? Miracle!”

Maybe now is the time for Ramon S. Ang to come to the aid of his country once more. He had talked about the ability of San Miguel to import large quantities of rice and store them in state of art facilities to keep freshness.

He should now import enough volume with the intention of flooding the retail market at prices a lot lower than what we now have. Just announcing a San Miguel plan to import should help flush out whatever stock traders are hoarding and start bringing down prices.

RSA also once talked of buying palay from farmers. Again, now is the time to do this. We simply cannot trust NFA employees with the responsibility to buy from farmers.

Many NFA employees in the field have been in the past, co-conspirators of unscrupulous traders. This explains why all the money government is pouring to alleviate the situation of the farmers is not working.

The idea of letting LGUs, from provinces to towns and cities, buying directly from the farmers should be encouraged. Anything we can do to cut off the rice cartel should be good for the country.

Government must act with more urgency. We need a well-coordinated effort to make the objectives of the rice industry reform measures work. No turning back.

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

ARTHUR TUGADE
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