‘Use PPPs for infrastructure, not to raise revenues’

MANILA, Philippines — A member of a losing consortium in the privatization of the Ninoy Aquino International Airport (NAIA) has urged government to stop using revenue gains as a bid parameter in awarding public-private partnership (PPP) projects.

In a forum hosted by the British Chamber of Commerce of the Philippines, Aboitiz InfraCapital Inc. (AIC) president and CEO Cosette Canilao flagged the government’s decision to choose the new operator for NAIA based on the highest revenue offer.

She recalled that during her time as head of the PPP Center, projects were awarded to proponents who would require the least subsidy.

“The moment the bid parameter becomes the revenue share, that creates a lot of issues. Something that the government can probably reconsider in other projects, it needs to understand again that PPP is an infrastructure development tool, not a revenue raising scheme,” Canilao said.

AIC forms part of the Manila International Airport Consortium (MIAC) that lost in the bidding for the 15-year concession to run NAIA. The Department of Transportation (DOTr) chose the group led by San Miguel Corp. (SMC) for offering the highest revenue share to the government.

SMC SAP & Co. Consortium bagged the contract for pitching to the government a revenue split of 82.16 percent, beating the proposals of GMR Airports Consortium (33.3 percent) and MIAC (25.91 percent).

Last year, MIAC filed an unsolicited proposal to take over NAIA, committing an investment of as much as P267 billion, but the DOTr rejected this to solicit additional bids for the project.

When compared, SMC SAP & Co. Consortium will spend at least P122.3 billion for the upgrade of NAIA, less than half of what MIAC pledged in its earlier proposal.

AIC is expanding its wings in the aviation industry, particularly airport operations. The company bought out the operator of the Mactan-Cebu International Airport (MCIA) for P25 billion, and it holds the original proponent status for the P12.75 billion privatization of Laguindingan Airport.

Transportation Undersecretary Timothy John Batan, who chaired the bidding, told The STAR that the DOTr maintains the right to choose the bid parameter in the privatization of transport assets. In the case of the NAIA bidding, he noted it was the recommendation of the Asian Development Bank to use revenue gains as the basis for picking the winner.

Batan recalled that in the privatization of MCIA, the government used as bid parameter the best offer for upfront payment, proving that PPPs are processed differently for every project.

The partnership of Megawide Construction Corp. and GMR Group won the deal to handle MCIA for submitting the highest upfront bid of P14.4 billion.

PPP Center deputy executive director Jeffrey Manalo also said the government is inclined to use revenue share as bid parameter for projects that showcase financial potential like NAIA.

“As to revenue as a bid parameter, I think the approach under the administration has always been on a project-by-project basis. I don’t think there is a policy that for all projects, it is pure revenue share,” Manalo told The STAR.

Infrawatch PH convenor and former lawmaker Terry Ridon, said the government requires as much capital as it can raise to mitigate its fiscal gap. He noted that Canilao’s suggestion of using lowest subsidy as bid parameter for PPPs should be applied only to projects that may be challenging to do financially.

“The lowest subsidy parameter, or viability gap funding, is applicable only for projects which are economically viable but are not financially attractive to the private sector,” Ridon said.

As for NAIA, the government expects to rake in P911 billion in revenues with SMC at the helm of the airport.

The amount covers the following: upfront payment of P30 billion; annuity cost of P2 billion; and 82.16 percent share in revenue from NAIA operations.