NAIA3 LESSON KEEPS INVESTORS AT BAYMakati 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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