Outlook
NAIA 3: a cautionary tale 

By Rigoberto D. Tiglao
Philippine Daily Inquirer
First Posted 05:35:00 01/13/2011

Filed Under: Government Contracts, Graft & Corruption

Most Read

THE QUAGMIRE of the Ninoy Aquino International Airport Terminal 3—which would have been our main gateway to the world—is a cautionary tale of an epic scale for our country. It dramatizes questions of paramount importance for our country and, perhaps, for many developing countries as well:

Which should take precedence in terms of state policy and action: the anti-corruption value or realpolitik? Should, or can a compromise be reached between these two different guides to action?

It’s amazing how many have so easily forgotten why the NAIA 3 contract of the Philippine International Airport Terminals Corp. (PIATCo), a consortium dominated by an obscure Chinese-Filipino firm and the German Fraport AG, was aborted.

Next to the tobacco excise tax issue and the BW Resources stock-manipulation case, the NAIA 3 in 2001 appeared to be the biggest case of corruption under the Estrada administration and even, purportedly, the first instance of corruption by officials of the new Arroyo administration. While the contract to build NAIA 3 was completed during the administration of President Fidel Ramos, the Estrada administration amended it in ways that allegedly gave PIATCo much bigger revenues.

Among these changes: for PIATCo to collect terminal fees in US dollars while remitting government share in pesos, which would allow PIATCo to profit from the local currency’s depreciation; the state’s effective guarantee on PIATCo’s loans, making it a risk-free borrower; and the scrapping of PIATCo’s obligation to build underground tunnels to connect the three terminals, which would have cost it P700 million.

What was suspicious about the PIATCo contract was its huge, so-called “soft costs,” that is, costs that were not for construction but for the other alleged requirements of the project such as regulatory approvals—for instance, $4 million paid to a shadowy company Datacenta to get the terminal designated as an export zone. What became a favorite coffee-shop topic was the mysterious Afredo Liongson, a former drug salesman, who got a $200,000 monthly retainer plus $2 million for “public relations” expenses, including such costs as $250,000 for the support of a small government agency. Rumors circulated that PIATCo was able to quickly involve in their project powerful personalities in the new government of President Gloria Macapagal-Arroyo.

Ms Arroyo called several meetings of her top officials and advisers to get their views on the PIATCo issue. These turned out to be very heated, even emotional debates. One faction argued that it was Arroyo’s obligation, especially since she assumed power basically through an anti-corruption revolt, to stop the contract. “Madame President, it is your moral duty to stop this contract,” one of her respected senior Cabinet officials once solemnly said in a meeting.

The other faction, composed of “pragmatists,” argued that the project was 97 percent completed, and that there was no stopping it since opening a modern terminal was crucial in attracting more tourists and foreign investors. Another realpolitik argument was: since the project involved not only a German firm but Japanese construction firms, to scuttle the contract would frighten off foreign investors who would see the country as one which does not honor obligations made by a previous administration. However, the country’s top five taipans who were originally asked by President Ramos to undertake the project, especially Lucio Tan, were all up in arms against PIATCo, and obviously mobilized their media assets to portray the contract as grossly unfair to government.

Arroyo ordered in 2002 first Solicitor General Alfredo Benipayo, and then the feisty presidential adviser for flagship projects Gloria Tan-Climaco to study the case. Both had the same conclusion: the PIATCo contract was so riddled with corruption that it had to be declared null and void. The Senate undertook its own investigation and reached the same conclusions.

In December 2002, and on the basis of the solicitor general’s official position, President Arroyo announced that as the country’s chief executive, she had to cancel a contract disadvantageous to government and acquired through graft.

Her stand was vindicated in May 2003 when the Supreme Court ruled the contract null and void on two grounds: First, that the Filipino proponent had no financial capacity to undertake the project; and second, that the changes in the contract were undertaken during the Estrada administration in violation of the legal requirements for such amendments. A lower court had also found PIATCo in violation of the anti-dummy law, as the Fraport emerged as the chief financier of the project.

It seemed a morality tale at that time, the victory of good versus evil.

But then amoral reality kicked in: the reality of the powerful government of the third largest economy in the world, Germany, obligated to defend its companies right or wrong, especially since Fraport is majority-owned by two state entities; the labyrinthine, expensive world of international law; the technicalities of the Philippine legal system; and of course the reality of the country’s best lawyers and even former government officials seeing the case as a lucrative source of income, and hence coming to PIATCo’s defense.

Eight years after it was scheduled to open, NAIA 3 is only partly operating and limited to certain domestic flights, while our operating international terminal is a national embarrassment. International lawyers’ fees and other related expenses in the meantime have cost, by one reckoning, over P1 billion.

It is not only a cautionary tale on the risks of an anti-corruption crusade, but a national tragedy as well.