A cautionary tale on PPP
WITH floods inundating Metropolitan Manila in recent weeks, can you think of anything worse than Benigno Aquino 3rd’s stupid move to cancel the major flood-control project involving Laguna Lake in 2011, simply because it was Gloria Arroyo’s?
Not just one but two things worse. First, P1.2 billion in taxpayers’ money went down the drain as a result of the Belgian contractor’s suit, in the form of a P700 million payment to it and over P500 million in legal fees. (How many new floodwater-pumping stations could that have constructed? At P10 million per plant, 125, enough to make at least Quezon City flood-free.)
And second, and probably much worse, the flood-control project Aquino boasted would replace Arroyo’s, never took off after five years of planning — because of his and his bureaucracy’s sheer incompetence.
Do you wonder now why in the past weeks, huge swathes of metropolitan Manila have been flooded despite the installation of over two dozen flood-pumping stations in the past two years?
Here is a brief narrative of this, another episode of the criminal incompetence of the Aquino regime.
Just a few months after he assumed power, Aquino in November 2010 junked Arroyo’s Laguna Lake Rehabilitation Project, which would have dredged the lake of 4.6 million cubic meters of silt and waste so it could contain more floodwaters. The project would have involved the deepening of the critical 7-kilometer Napindan Channel in Taytay so that it could better and more quickly draw floodwaters away from the metropolis to the lake.
Costing P19 billion, the project was to be undertaken by the 150-year-old Belgian dredging firm Baagerwerken Decloedt En Zoon (BDZ) and financed by a loan from the BNP Paribas Fortis bank, with the Brussels government providing a P7-billion grant — the biggest ever financial aid it would have given the country.
However, Aquino claimed the project was ridden with corruption, and ordered it stopped in November 2010. I was told he even asked Sen. Franklin Drilon’s law firm to investigate it to the extent of even interviewing BDZ officials in Brussels. Six years after going through all the records, not a single hint of corruption was found.
The BDZ filed a suit at the World Bank’s International Center for Investment Disputes. The center handed down its decision that cost us P1.2 billion.
In 2012, Aquino announced that the Arroyo project would be replaced by a better, bigger project he called the Laguna Lakeshore Expressway Dike Project, costing P123 billion, or seven times that of Arroyo’s P19 billion project. A dike would be constructed around the lake, built from the material dredged from it. A 47- kilometer expressway from Alabang to Los Baños would be built on the dike. Some 700 hectares of land would be reclaimed to become a new city of commercial and residential areas.
After two years, Aquino ordered that the project be placed under his preferred type of infrastructure funding, the Private-Public Partnership (PPP) program, a highfalutin’ term for the private sector to finance public works they would turn into a high-profit enterprise, because of an infrastructure’s monopoly features. (For example, the SLEX and NLEX have monopoly features as the only expressways in their areas.)
Biggest PPP project
Aquino boasted in his 2014 State of the Nation Address about the numerous benefits of the project. He pointed out that it was the largest of his PPP projects, yet would cost almost nothing for taxpayers. “The only obligations we have in this project are for right of way. And a portion of the reclaimed land will serve as payment for the highest bidder (which would undertake the entire project.)”
The board of the National Economic Development Authority (NEDA) of which the president was chairman, formally approved the project on June 19, 2014, so Aquino could claim that the project was on track in his July 28 SONA.
“Bidding will open before the end of 2014,” Aquino bragged in that SONA.
After being postponed several times, the bidding was undertaken on March 28, 2016. More precisely, that was the “final, final” deadline that the Aquino government had set.
None of three consortia that qualified for the bidding — which Aquino had claimed were intensely competing for his project — submitted a bid. (The three were Team Trident, composed of Ayala Land, SM Prime Holdings, Aboitiz Equity Ventures and Megaworld Corp; San Miguel Corp.; and the Alloy Pavi Hanshin LLEDP consortium, which included Malaysia’s MTD Group, South Korea’s Hanshin and the family of former senator Manuel Villar Jr.).
Although couched in polite terms, the bidders blamed government for the failed bidding, because of its incompetence in its preparation of the P123 billion project.
San Miguel Corp. President Ramon S. Ang was quoted as saying: “Government will have to re-examine its assumptions and redesign a mutually beneficial contractual structure best suited for a deal as large and complex as this one.”
In a letter to the DPWH, the Korean and Malaysian consortium said there were unresolved issues affecting the propriety and validity of the procurement process for the project. “With due respect, we strongly believe the bidding process is illegal and an unenforceable transaction unless there is a signed presidential proclamation and signed tripartite agreement between PRA (Philippine Reclamation Authority)/LLDA (Laguna Lake Development Authority)/DPWH prior to the bidding,” it said.
A spokesman for Team Trident said it did not bid because of concerns over the project’s economic viability. “The other one is the fact that this is a very complex deal — consequently, the technical solutions for this deal were so challenging that the project costs almost doubled from the government’s initial estimates,” the spokesman said.
This episode is a cautionary tale on relying on a PPP model to build infrastructure, a model which fortunately President Duterte isn’t a believer of.
Arroyo’s Laguna Lake project would have been financed by a bank loan arranged by the main contractor BDZ, and a grant to the country from its Belgian government. In contrast, Aquino thought he could rely on his big-business friends to finance a project crucial to the well-being of Filipinos.
These big businesses all apparently expressed enthusiasm for the project only to back out at the last minute — putting on hold an infrastructure project that could have mitigated flooding in Metro Manila and in Laguna province, certainly an urgent need for us living in the metropolis. As in all PPP projects, a source claimed, the tycoons tried to wangle a better deal from government and thought they could, until time run out for them.
Aquino’s realised that he must undertake a flood-control project that would dredge Laguna Lake, as he stupidly junked that of his predecessor on a whim. But he also wanted this project to construct at the same time another new Bonifacio Global City of sorts by the lake, which his tycoon-friends in the property business would benefit from. That was his delusion that was impossible to undertake.
Aquino assumed that his successor would be as petty as he when he junked Arroyo’s flood-control project right after he assumed office. He therefore declared: “The bidding did not push through because my term is coming to an end.”
He told his audience in April 2016 that if they wanted the project to continue, so floods will be mitigated, they should vote for his candidate Mar Roxas. What a jerk.
This administration should correct in a massive way what Aquino messed up, so Filipinos will be delivered from the annual deluge that has made their lives a watery hell on earth.