Secretary Carlos Dominguez III has maintained that the Department of Finance (DOF) wants San Miguel Holdings Corp. (SMHC) and its mother company, San Miguel Corp. (SMC), to enter into a “Joint and Several Liability Agreement” on SMCH’s unsolicited proposal to build an international airport in Bulacan to ensure that Filipino taxpayers and would-be passengers are not short-changed if and when this project is implemented.

Dominguez reiterated at a press briefing that the DOF did not cause any delay in the approval of SMHC’s airport proposal, and had merely asked the Department of Transportation (DOTr) to require such a joint liability agreement prior to acting on this project, just to make sure that SMC would stand behind the financially incapable SMHC in building this estimated P700-billion gateway.

He told reporters that the DOF has backed this unsolicited proposal and had even made “helpful suggestions” to speed up its implementation by recommending, among others, this joint liability agreement, because the total equity of the project proponent—SMHC—as of 2016 was P60 billion, or less than a tenth of the airport’s projected cost of P700 billion.

“It’s not qualified because its capital is only P60 billion eh yung project P700 billion,” he said of SMHC. “Kaya sabi ko nga, why don’t you get a joint and several liability agreement. Ako pa nag-suggest nun.”

“There is no such thing as a free lunch. Either the passengers will pay for it, the airline will pay for it or the taxpayers will pay for it,” he said.

Asked if he thinks the parent company is capable of funding the airport project, Dominguez said, “I know that certainly, the mother company is larger that all its companies so they should have a better capacity, financial capacity to undertake this project.”

In a statement issued separately by SMC, this corporation said it agreed with Dominguez’s position that both SMC and SMHC should undertake a Joint and Several Liability Agreement.

“In fact, as early as May 18, following the approval of the project by the National Economic and Development Authority (NEDA) board, SMHC conveyed to the DOTr its willingness to execute the agreement as soon as the terms of the concession agreement (CA) are finalized with the government. The final CA will form the basis of what SMC will be guaranteeing and jointly liable for,” SMC said.

Earlier, during a joint hearing of the Senate committees on public services and on economic affairs, Dominguez said the DOF recommended this joint liability agreement because the P60-billion equity of SMHC 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.

Dominguez said that based on the draft minutes of the 6th meeting of the 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 told the public services committee chaired by Sen. Grace Poe-Llamanzares and the committee on economic affairs chaired by Sen. Sherwin Gatchalian.

During the Senate hearing, Poe-Llamanzares 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-Llamanzares 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,” she 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 that 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,” he said.

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.”

He said the meticulous evaluation of projects is necessary to ensure that these are 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.

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