Uncertain

Whoever might think of investing in rehabilitating the Manila International Airport so that it meets global standards must be watching events at the Subic Port very closely – and very nervously. What is happening there provides no assurance that long-term contracts with government will be honored in the long term.

Businesses at the vital Subic Port are in a state of great anxiety. Officials of the Subic Bay Metropolitan Authority (SBMA) seem to have pulled a disappearing act rather than help relieve the confusion. Perhaps President Marcos no less should step in and set policy.

The Supreme Court Third Division, after a decade of judicial deliberation and by a thin margin, ordered the SBMA to transfer control of the free port to Harbour Center Port Terminal, Inc. This enforces a joint venture agreement forged with the SBMA just two months before elections. The agreement, in turn, results from an unsolicited proposal submitted by Harbour Center.

Many issues have been raised about the circumstances leading to this controversial agreement. The Supreme Court Third Division glossed over most of these issues.

The agreement that grants Harbour Center monopoly over port operations at Subic Bay was stiffly opposed from the onset by the NEDA and the Office of the Government Corporate Counsel. The NEDA, in fact, invalidated the agreement in 2011.

Several reasons were put forward to justify the invalidation.

NEDA believes that the agreement ran counter to the principles of transparent governance applied to government contracts. The deal was approved just three months after an unsolicited bid was submitted by the private company to run the entire port. There ought to have been a competitive challenge to this proposal. None was conducted.

In addition, the joint venture agreement was forged within the period when a contracting ban was in place in the run-up to the 2010 elections. This alone should have invalidated the agreement.

It has been argued that the deal was clearly disadvantageous to government. Under the terms of this deal, SBMA effectively transfers control of all the piers and wharves to a private corporation.

All these arguments notwithstanding, the Supreme Court Third Division ruled as it did. A deal that should have been buried long ago was brought back to life.

Strangely, the February 2010 joint venture agreement contains an exclusivity provision that would create a monopoly at the Subic Port. This provision effectively displaces at least 12 locators who currently operate in the port, some of them since the nineties. These locators, mostly logistics companies, have invested over a billion pesos in their facilities.

In addition, nearly 2,000 workers in these locator companies will be displaced. There is no guarantee Harbour Center will rehire them.

The Court’s decision hit the Subic Port like a tsunami, leaving everyone doing business there in shock.

The adversely affected locator companies, many of them with long unexpired terms in their own contracts with the SBMA, have asked the authorities for guidance.  They would want to know what happens to their own contracts. They are seeking assurance of business continuity.

The SBMA does not seem to have answers ready to their many questions. This is why the officials of the free port have suddenly become scarce. In the meantime, all the businesses at the free port are caught in a lurch.

The Court decision itself offers little clarity. Does the decision awarding port operations to Harbour Center mean that the existing contracts of all the other companies now doing business at the free port are now voided? How will the existing locator companies be compensated? How much time do they have to wind down their businesses?

The existing locator companies hold long contracts with the SBMA. Amerasia has 17 years left in its contract, Mega Subic has 37 years and Subic Seaport has 57 years. These three companies have collectively contributed P2.7 billion in revenues to SBMA between 2009 and 2022. Are they now simply chucked out of the window?

The Subic Port is an important hub in the nation’s logistics network. After the disruptions caused by the pandemic, the country is only now beginning to repair breakages in its supply chains. The uncertainty – nay, the chaos – now prevailing at the Subic Port will cause even more dislocation in our logistics system. The entire national economy will be affected eventually.

The SBMA simply does not know what to do. The President must step in and provide some direction to what is happening. The economy cannot afford the logistics paralysis now setting in.

Subic Port was once heralded as the next logistics hub not only for the country but for the entire Asia-Pacific region. Today, that billing might appear to be a bad joke.

The vagaries of our political and judicial processes have taken a great toll on the nation’s progress. The situation at Subic adds to that.

We are not sure if the President grasps the full repercussions of Subic Port’s unraveling. He has made no statement on the record about it. We have heard nothing from Speaker Martin Romualdez, who appears to be the President’s de facto alter ego on everything economic. None of our normally noisy legislators have said anything about what is happening at this vital port.

It is bad enough that the SBMA is exhibiting bureaucratic paralysis in the wake of the Supreme Court decision. It will be worse if the national leadership is perceived absent while a crisis that will affect the whole economy unfolds.