PALACE PONDERS NEXT MOVE ON FRAPORT-MANILA HOTEL ISSUE

MANILA, August 29, 2005
(STAR) By Paolo Romero - Though Malacañang is unsure of what to do regarding the reported buyout of a German firm’s stake in the consortium that built the mothballed Ninoy Aquino International Airport Terminal 3, Palace officials said yesterday they will try to reassert the government’s interests in the legal wrangling surrounding NAIA-3.

Executive Secretary Eduardo Ermita said the Palace policy group, tasked by President Arroyo to handle the government’s stand on the issues of expropriation, ownership and operation of NAIA-3, will meet tomorrow to plot the next action over Fraport AG’s planned sale of its 30 percent stake in the Philippine International Air Terminal Co. (Piatco) to Manila Hotel Corp.

"It behooves... us to look into this reported transaction and take appropriation action," Ermita told The STAR. The Palace policy group is headed by Ermita and its members are Transportation Secretary Leandro Mendoza, Finance Secretary Margarito Teves, Trade Secretary Peter Favila, Chief Presidential Legal Counsel Merceditas Gutierrez and Solicitor General Alfredo Benipayo.

Ermita refused to say whether the reported buyout would be advantageous or disadvantageous to the government, which took over NAIA-3 last year following a Pasay court ruling that ordered the expropriation of the controversial airport terminal and compensation of Fraport AG and Piatco.

"We still to have to discuss the matter. But in the world of business, it is natural for Fraport to seek compensation for the airport taken over by the government," Ermita said, citing the Supreme Court ruling that upheld a lower court decision voiding the contract between Piatco and Fraport, and the government.

Press Secretary Ignacio Bunye said there is no official and specific response yet from Malacañang but what is important for Mrs. Arroyo is to have NAIA-3 opened and operating as soon as possible.

"The President’s preference is to open the facilities as soon as possible with due respect to property rights," Bunye said in a telephone interview. "There would have be further discussions on the matter."

Benipayo, who is currently abroad, said his office received only "sketchy reports" about the deal. "In the meantime, if there would be some settlement, that would have to be looked into my office," he told The STAR in a telephone interview.

Both Malacañang and Piatco were reportedly kept in the dark by the reported deal that would have Manila Hotel Corp., owned by Manila Bulletin publisher Emilio Yap, pay Fraport AG $50 million upon signing the buyout deal and the remaining $150 million within six months thereafter.

Yap acquired the five-star hotel after the Supreme Court intervened in the award of the bidding to a Malaysian firm that won the bid. Yap, through his lawyer, invoked patrimony when he petitioned the court to award the sale of the historic hotel to a Filipino company and not to the winning Malaysian bidder.

Buyout nearly complete

Former interior secretary Jose Lina Jr., now the president of Manila Hotel Corp., confirmed yesterday that they are in the process of completing their buyout negotiations with Fraport.

"I am confirming the Reuters report," Lina told The STAR, but declined to elaborate except to say that Manila Hotel Corp. will issue an official statement "in due time."

Wire news agency Reuters reported Saturday that the sale still needs to be approved by Fraport’s supervisory board.

Pressed to elaborate if the confirmation included the portion about Reuters quoting official sources in Manila that Fraport would no longer pursue its claim for compensation from the Philippine government after the sale, Lina replied, "I confirm the entire Reuters story."

Lina clarified that he did not "refuse" to answer calls made by The STAR several times on his cellular phone last Saturday. He explained that he could not answer because he was in a meeting throughout the day.

Lina is the younger brother of former Customs commissioner Bert Lina, one of 10 ranking government officials who resigned en masse last July 8 and called upon Mrs. Arroyo to do the same, saying she had lost the capability to properly govern the country due to the scandals that rocked her administration.

Fraport, in a statement faxed to The STAR yesterday, confirmed that "a Philippine company has made a preliminary offer of $200 million to purchase Fraport AG’s shares of Piatco... and its shares in the other joint-venture companies: PTI, PTH and PAGS."

The German firm said it accepted this offer last Aug. 26, and "a corresponding shareholding purchase contract now has to be negotiated and completed."

Fraport confirmed that it will be paid in two tranches: $50 million after the purchase contract is signed, and the remaining $150 million within six months thereafter.

"The transfer of Fraport’s shares and various rights and claims will take place once the second tranche has been received," Fraport said, adding that the transaction still hinges on the approval of its supervisory board and that "other joint-venture shareholders have to relinquish their buy-first option."

Ermita said the government planned to operate NAIA-3 as soon as its Japanese engineering contractor, Takenaka International Corp., completes its electronic work on the airport terminal.

He said they were conducting weekly meetings with Takenaka for the immediate opening and operation of NAIA-3 when the unexpected news of the deal reached them.

Ermita said they have been told by the Department of Transportation and Communications and the Manila International Airport Authority that operating the terminal "would be profitable for the government."

But nothing would prevent the government to sell partly or in full NAIA-3 to private entities in the future, he said.

Fraport has been seeking $425 million in compensation from the Philippine government and Piatco is demanding $565 million.

Initially, the government estimated the airport construction project to be worth $323 million, but brought it down to $305 million when Piatco and Fraport failed to build an $18-million tunnel connecting it with NAIA’s Terminal 1, which was specified in the agreement.

The government has reportedly already advanced P3 billion to Piatco with the remainder of the compensation to be paid in installments in the course of its operation of NAIA-3.

Two arbitration cases are being heard in international institutions, one filed by Piatco before the International Chamber of Commerce of the International Court of Arbitration in Singapore and with the World Bank International Center for Settlements of Investment Disputes lodged by Fraport. — With Marichu Villanueva


Reported by: Sol Jose Vanzi

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