NAIA3 LESSON KEEPS INVESTORS AT BAY

Makati City, April 10, 2003 -- The bad experience of German airport 
operator Fraport AG in its $383 million investment in a new Philippine 
airport has made investors nervous and makes government infrastructure 
projects less interesting.

European Chamber of Commerce of the Philippines executive vice president 
Henry Schumacher said the Philippine government may be turning away 
investments by not honoring existing contracts like what it did with its 
deal with the Philippine International Airport Terminals Co. (Piatco) which 
is building the Ninoy Aquino international airport terminal 3.

Fraport owns 30 percent of that company as partner of the Cheng family.

"I would think the effect is on future BOT projects. When you enter into a 
contract, that contract becomes the basis of your investment decision, of 
your return on investments. When you have a new interpretation of that 
contract, investors don't like that," Schumacher said.

"The Philippines needs infrastructure or improvement of infrastructure and 
needs a third party to finance it which is what BOT is all about. But if 
the investor has no guarantee that that contract will be honored, the 
investor will not come in. I think the government needs to look at closely 
how to interpret the contractual environment in which BOT projects could 
blossom," Schumacher said.

Schumacher also reminded that terminal 3 is a government commitment that 
involves two administrations. The contract was signed during the Estrada 
administration.

"The Philippines needs an improved gateway. It's stupid not to use it," 
Schumacher said.

The airport has never opened since the government nullified the contract 
for allegedly being onerous in November. But during recent talks with 
Finance Secretary Jose Isidro Camacho, the German company received 
assurance from the Philippines that it is committed to open and use the 
terminal as soon as possible.

Schumacher said the Camacho also assured Fraport "that in one form or the 
other, those who invested will be compensated. "

On the whole, Schumacher said, the Fraport experience has not affected 
negatively the sentiments of European investors but "more of a wait and see 
effect" as business has to deal with other major global problems like the 
Iraq war and the outbreak of the severe acute respiratory syndrome.

"Life goes on. In fact I have German investors looking for factories (here) 
at the moment. It's a mistake to say Philippine business is bad," 
Schumacher said.

Fraport has decided to write off its investment after intensive discussions 
and repeated interventions by the German government have not produced 
sufficient tangible results.

Fraport's management remains optimistic and will continue to fight further 
for a solution to the problem through discussions with the existing 
partner, potential investors and the government for possible takeover but 
will not give up its claims, in whole or in part since the terminal's value 
clearly exceeds the construction costs," said Bender.

Reported by: Sol Jose Vanzi

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