The Department of Finance (DOF) has backed the approval of an unsolicited proposal to build a new international airport in Bulacan while ensuring that the implementation of the project would not adversely affect the sound and efficient management of the government’s financial resources, not only today, but also in the future.

During a hearing at the Senate, Finance Secretary Carlos Dominguez III made it clear that the DOF did not cause any delay in the approval of the proposal by San Miguel Holdings to build an international airport in Bulacan but had even made “helpful suggestions” to accelerate its implementation.

One of these suggestions that the DOF made, he said, was for the Department of Transportation (DOTr) to require that a “Joint and Several Liability Agreement” be executed to ensure that San Miguel Corp. (SMC), the parent company, would stand behind the financially incapable San Miguel Holdings in building the airport.

A Joint and Several Liability Agreement refers to an agreement in which two or more parties are held liable for the same act and are all held responsible for the payment of any restitution or damages.

Dominguez said the DOF recommended this because San Miguel Holdings Corp. (SMHC), the proponent of the Bulacan airport proposal, had a total equity in 2016 of P60 billion, which is insufficient given that the usual financing mix (70 percent debt, 30 percent equity) for Public-Private Partnership (PPP) projects would require the company to infuse some P200 billion to implement the project.

However, Dominguez said that based on the draft minutes of the 6th meeting of the National and Economic Development Authority (NEDA) Board held last April 25, a representative from the Office of the President (OP) pointed out that “the financial capacity of the proponent corporation should be the one evaluated and not the financial capacity of the mother company backing the proponent corporation up.”

“We take this opportunity to categorically say we have not caused the delay in (the approval and implementation of the) Bulacan Airport. As a matter of fact, we are even providing assistance to accelerate the approval and implementation of the project,” Dominguez said during the joint hearing by the Senate committee on public services chaired by Senator Grace Poe Llamanzares and its committee on economic affairs chaired by Senator Sherwin Gatchalian.

During the hearing, Poe said she was “reassured” that Dominguez’s “mindset” was to ensure that the interests of the government and the Filipino people are protected. “I appreciate that you are doing that, Sir. Thank you,” Poe told the Finance Secretary. “Ayaw nating niloloko talaga tayo ng maski na sino at yayaman sa paghihirap ng ating mga kababayan.”

Poe also took note of Dominguez’s clarification “that the DOF is not the cause of delay on the Bulacan Airport or any other projects.”

“There are considerations (mentioned by Dominguez) which we appreciate; implications to the economy and the state as a whole; the burden to the Filipino public or the advantage; the effect to roads and transportation; financial viability of the corporation,” Poe said.

In his statement during the joint hearing, Dominguez noted that private firms undertaking big-ticket projects usually extract several concessions from the government even though these corporations have a wide array of financing options at their disposal, unlike a farmer who has no access to financing and does not even own the land he tills yet is the one who clearly needs the subsidies and guarantees provided by the government.

“But these corporations who are making X percent profit, with access to banks, require guarantees. These government guarantees can make a project tangible, but it will not turn a bad project into a good one,” Dominguez said.

Dominguez assured senators during the joint hearing that the DOF fully agrees with their call for the speedy implementation of airport proposals to prevent a recurrence of the mishap last Aug. 16 when a Xiamen Airlines plane skidded off the runway at the Ninoy Aquino International Airport (NAIA), causing operations to be temporarily paralyzed in the country’s main gateway.

He said this was why among the first acts of the Duterte administration was to rehabilitate the Clark International Airport so that it could partially address the congestion problem at the NAIA.

“We are the first ones to take action. However, we simply cannot wave the magic wand and fix the problem overnight,” Dominguez said.

The Finance chief said that, given the prompt action by the government on the Duterte watch, the DOF was puzzled why the chair of the Senate public services committee stated during the previous hearing that the Department “needs to answer why they are hampering or delaying the approval of these (airport) projects.”

Dominguez explained to the two committees that the DOF needs to take into account several considerations before it can give the go-signal to unsolicited proposals offered to the government to ensure that the State does not incur financial liabilities that would unnecessarily burden the Filipino people in the future.

In the case of the Bulacan airport, Dominguez said the following concerns had to be thoroughly studied:

· How the Bulacan Airport will affect the Clark International Airport, which is a government project, and how will it affect the real estate value of New Clark City, which is only 65 kilometers away. Dominguez noted the real estate value of New Clark City is estimated at USD 14 billion, and the government, which is developing it, has committed to pour in an additional P12 billion;

· How the Bulacan Airport will affect traffic in the area. Will the project require the construction of additional lanes in the North Luzon Expressway? Will the project change the alignment of the proposed rail system to Clark?; and

· Who the proponent is and what its actual financial capability is?

Dominguez said these considerations had to be carefully studied by the DOF, given its job “to ensure the sound and efficient management of financial resources of the Government.”

“It is my responsibility to not only look after all of Government assets, but also manage our contingent liabilities, which for your information, is estimated to be at least 309 billion pesos in 2018 for PPP projects,” Dominguez said.

Several of these liabilities were incurred as a result of past acts by the previous administrations.

For instance, there are potential claims by water concessionaires against the government estimated at about P80 billion combined because of a performance undertaking executed in the past guaranteeing that the government will not interfere nor question water utility rates.

Citing an airport as another example, Dominguez noted that concession agreement for the Mactan-Cebu International Airport commits the government to a termination payment amounting to around P20 billion if it causes to operate any international or domestic airport in the islands of Mactan and Cebu even if there is unexpected increase in passenger demand in these areas.

Dominguez said the meticulous evaluation of projects is necessary to ensure that these profitable. In the case of the Mactan Cebu airport, it earned P1.1 billion in 2017, which was 48 percent higher than the P752 million projected net income during the appraisal stage done to secure the NEDA Board approval for the project.

“And yet, Government still made the commitment that there will be no other competing airports in Mactan and Cebu. Now, should the Government later on want to build a new airport in the area to serve our OFWs and other tourists, we would be required to reimburse not just market value of the infrastructure assets, but also the future profit of the commercial business until the end of the concession,” Dominguez said.

He said the examples he cited “emphasize that the actions we do and documents we sign have ripple effects to the next generations. The burden is upon my office to ensure that future generations do not suffer consequences from poor decisions of previous governments,” Dominguez said.

The DOF’s duties and responsibilities on these aspects are outlined under the Administrative Code of 1987 and reaffirmed by Department of Justice (DOJ) Opinion Nos. 61, series of 2004, and 13 series of 2013.

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