Who’s winning in the current raging case of the Philippine International Air Terminals Co. Inc., builder of the Ninoy Aquino International Airport Terminal 3 (NAIA-3), versus the Philippine government?
Work on the airport, earmarked to be the country’s premier gateway to the world, started in 1997. But in 2002, the Supreme Court ruled the PIATCO contract “null and void” due to what it declared were flaws in the original contract. Yet the court ordered the government to pay PIATCO P3.2 billion as compensation for the almost finished facility.
As expected, the high court’s decision including compensation was contested by PIATCO (represented by partners Paircargo of the Cheng family and Fraport AG of Germany) in international courts in Singapore and Washington.
The Singapore court eventually ruled in favor of Paircargo while the Washington court ruled in favor of the Philippine government. But this sorry saga has to continue till this very day, muddling the fate of NAIA-3 even more.
While NAIA-3 was partially opened in 2008 due to a local court ruling that paved the way for government to expropriate the facility, the amount of legal fees continues to mount as a clear resolution to the many cases continues.
On top of the P3 billion that had already been paid to PIATCO to allow its partial operations, the government has already been shelling out more than P4 billion in external legal fees as well as for the services of the government law panel.
Clearly, this legal tussle is not favoring PIATCO or the Philippine government, much less the Filipino people who will ultimately be footing the final cost of this nine-year saga in the courts when and if an amicable resolution is arrived at.
Different views on valuations
As businessmen, those behind PIATCO know too well not to get embroiled in a long court case. Even as early as 2002, Fraport AG had already expressed agreement to relinquish control of the build-operate-transfer project for $400 million. But the Supreme Court decision nullifying the contract became a premonition that the case would drag for years.
Another chapter in this legal and political drama, for example, was recently added. In an effort to come up with a fair settlement on the case, the government through the Pasay regional trial court constituted a Board of Commissioners or technical experts to conduct an objective valuation.
The Commissioners came up with the amount of $376.15 million (including an attendant cost of $34.2 million) plus a 12 percent annual interest. But the regional trial court seemed to totally disregard this valuation when it came up with a decision stipulating compensation to PIATCO at only $175.79 million or about P7.6 billion.
In fact, the court-ordered amount is almost similar to the valuation presented by the Office of the Solicitor General. In its presentation, the OSG said that the fair value was at $149 million after considering the additional work that needs to be done to make NAIA-3 fully functional.
Inconsistencies of government estimates
It is amusing to note that the government estimates through the years has been inconsistent. In 2002 when PIATCO stopped work on the project, the total construction work was valued at $300.2 million. In 2004, when expropriation proceedings were filed at the regional trial court level, the valuation amounted to $263.4 million.
PIATCO, on the other hand, cited under a replacement cost method that the amount they had spent on the project to be $431.17 million. And if interest were to be imputed, the total compensation amount now would be at about $846 million.
Seeking a realistic figure
The big difference in figures, it seems, comes from costs that have been deducted from the government valuations. PIATCO is asking for $846.43 million while the court has decided to give $175.79 million only.
The regional trial court, in its decision, cites the “state of collapse and deterioration” of NAIA-3, parameters that PIATCO is questioning since the terminal is currently actively operating. There is also reference to “prodigious financial loss and tainted image” for the country, costs that are subjective and therefore difficult to value.
When Mar Roxas recently took on the job as transportation and communications secretary, one of his first statements was to reject outright the amount that PIATCO was asking.
But his position is not one that is set in stone, or so it seems from his succeeding communications. The good secretary had quoted $350 million as a more realistic figure: not quite what PIATCO is asking, but definitely better than what the trial court had stipulated.
Politics an obstacle to closure?
So can we expect closure in this case soon? And in what form?
As this dispute drags on, it is the lawyers on both sides through their legal fees that end up benefitting most. Definitely, the Filipino people and the country will be left with all the bills that have accumulated these past nine years.
My years in corporate life have taught me that there is a win-win solution to almost every problem if one just puts his heart and mind to finding it. I find PIATCO’s position over the years to be consistent with accounting practice and standards.
Unfortunately, it appears that the government party does not want to find an objective method in valuing the investment that the Cheng family and Fraport AG have put into the airport project.
It is when politics gets into the picture that the national interest is compromised. Is the current administration dragging its feet on a resolution of the project because the Chengs did not support P-Noy during the last elections?
Sadly, the NAIA-3 project is just one example of this kind of politics. When will we ever be able to prioritize the welfare of country?
