Manila's New Airport Terminal in Limbo Amid Court Battle

December 7, 2003

Manila's New Airport Terminal in Limbo Amid Court Battle 
Channel News Asia, Singapore
 
MANILA : Lying idle after virtual completion a year ago, Manila airport's new 
passenger terminal will be in limbo at least until 2005, caught in a protracted 
legal tussle that has shaken foreign investor confidence in the Philippines.

As the government and the 650-million-dollar project's German-Filipino 
investors slug it out in court over a contract dispute, the airport is stuck 
with perennial congestion.

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The Terminal Three project at the Ninoy Aquino International Airport was to 
ease overcapacity at Terminal One, which handles international flights except 
those of national carrier Philippine Airlines, which has exclusive use of 
Terminal Two.

But the new state-of-the-art Terminal Three has been riddled with problems 
since its conceptual stage in 1993, three Philippine presidents ago.

It has raised concern among foreign investors, who see a pattern of contract 
renegotiations for huge infrastructure projects every time changes occur in the 
country's political leadership.

"It is important to have predictability and sanctity of contracts, otherwise 
we'll be investing on shifting sands," Henry Schumacher, executive 
vice-president of the European Chamber of Commerce of the Philippines, told AFP.

"The Philippine government wants foreigners to invest in large infrastructure 
projects but here is one project which is standing idle as a white elephant," 
he said.

Terminal Three was 98-percent complete a year ago when President Gloria Arroyo 
cancelled the operating contract of Philippine International Air Terminals Co. 
(Piatco), the Filipino-German consortium that built the terminal.

She cited anomalous terms in the contract that she said have put the government 
at a disadvantage.

The Philippine Supreme Court upheld her decision, nullified the contract with 
Piatco, which includes German airport operator Fraport AG, and asked the 
government to temporarily take over the terminal's operations.

But Piatco swiftly filed an appeal with the court and also sought a hearing in 
a Singapore-based international arbitration court governed by the International 
Chamber of Commerce in Paris.

"I'm hopeful the Supreme Court will see the light and give due course for our 
motion for reconsideration," Piatco's chief legal counsel Frank Chavez told 
AFP. "The case is still pending and we don't know whether it will happen 
tomorrow or next year or (be) overtaken by a new president" after the May 
elections.

Fraport has written off its entire 293 million-euro (356 million-dollar) 
investment in the project and filed for arbitration with the World Bank against 
the Philippines.

But the write-down does not mean that Fraport will give up its claims, 
Fraport's executive board chairman, Wilhelm Bender, has said.

Even if the Supreme Court made a final ruling on the case soon, aviation 
experts believe the Terminal Three project -- undertaken by Japanese contractor 
Takenaka Corp. -- could only be open to the public in 2005.

"Even though 98 percent of the project has been completed, it has been lying 
virtually idle for a year and there are 42 outstanding items that need to be 
addressed before it could be used, including computer systems, air conditioning 
generator systems, internal access road and remedial works on the floor," an 
expert familiar with the project said.

The delay has put the authorities under pressure to rehabilitate and expand 
Terminal One, which had exceeded its design capacity way back in 1990.

"We had put off repair work and other improvements to Terminal One because we 
thought Terminal Three would be completed on time but now we may have to go 
ahead for the interest of passengers," a government official said.

 
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