Biz Buzz

Lobbying against PNCC fails

It’s no secret that one reason for the long delay in the implementation of the elevated connector road tollway project was that at least one influential Cabinet official wanted Philippine National Construction Corp. president Luis Sison replaced.

Sison—who has ably served the government since the time of President Corazon Aquino—was accused of “disloyalty” by this particular Cabinet official, who wanted two things. First, he wanted his own man running PNCC, and second, he wanted PNCC abolished eventually.

In fact, the anti-PNCC, anti-Sison lobby was so influential at one point that President Aquino singled out the state agency in his last State-of-the-Nation Address as one example of the dysfunctional government that he was trying to reform.

Fast forward to two weeks ago and the President was heaping praise on the connector road project along with Sison, under whose auspices the PNCC entered into a joint-venture deal with private sector partners San Miguel and Citra for the P26-billon project.

So how did the political winds change directions?

Biz Buzz learned that Sison—who was for the longest time isolated from the policy-making process in Malacañang—had, in fact, written President Aquino and requested for an audience to present the merits of the project (which was being stalled by at least two Cabinet heavyweights) and present his side on the issues raised against PNCC.

The briefing in Malacañang, with all stakeholders in attendance, including the Cabinet officials working against PNCC, apparently opened the eyes of the President. Soon after that, the green light was given for the project.

The sad thing about all this was that the connector road project as launched two weeks ago was essentially unchanged for the proposal first presented to the Palace three years ago. What a waste of time, no thanks to the lobbying Cabinet officials. Daxim L. Lucas

Bucking the downtrend

SM Prime Holdings, the country’s biggest property enterprise and now among the largest in the region, has bucked the emerging market selloff in the last few days. Last week, the property firm’s share price rose 4.8 percent as opposed to the 2.43-percent decline in the main-share Philippine Stock Exchange index (PSEi).

The reason? There’s rising expectation that SMPH—in the aftermath of a consolidation with affiliates—may benefit from an increased MSCI weight in the upcoming index rebalancing. The next rebalancing of the closely tracked indices is happening in February (then May, August and November).

While parent firm SM Investments got a significant reduction in the MSCI last year, stock pundits expect the bulked-up SMPH to merit an increased weight. SMPH has a market cap of P422.29 billion at present, topping Ayala Land’s P375.6 billion.

The SM-led property firm is widely expected by stock dealers to tap the capital market this year to raise equity for expansion and widen its public float post-consolidation. With the consolidation, SM Prime is no longer just a shopping mall developer but is now a full-range developer that can benefit from both recurring rental income and pro-cyclical residential development portfolio. Doris C. Dumlao

Anti-delay PPP provision

The pen is indeed mightier than the sword, especially when used as a delaying tactic for the awarding of lucrative public private partnership (PPP) deals.

Consider the P17.5-billion Mactan-Cebu International Airport deal, which has gone through the required bidding process but could not be awarded last Jan. 6. Last week, the transportation department issued a notice of award to the Ayala-Metro Pacific consortium for a smart-card PPP for Metro Manila’s elevated railways, but only after a month-long wait.

The reason for the delays are the string of appeals, protests and everything else in between filed by losing or disqualified bidders, causing the government, in this case the transportation department, to review and respond to each one. Nothing wrong with that, of course, as it’s all part of the open and transparent environment the government is seeking to foster.

But because of the risks these actions can pose—not only in terms of timing but in the eyes of wary investors ready to plough billions of pesos into infrastructure —the government is now considering options to discourage such delays, especially those without strong basis, and this would likely take the form of a monetary fee, sources told Biz Buzz.

Under the current build-operate-transfer (BOT) guidelines, bidders have to pay a fee of about 1 percent of the project cost for any appeal filed during pre-qualification, which is in the early stage of bidding process. The rules, however, are silent beyond that. This could be one reason why few appeals are filed during pre-qualification and instead, much later, when bidders have laid down their cards in the financial proposal opening, our sources said.

Thus, this is one area the government is seeking to address in its planned amendments to the BOT law: To extend that cash fee to all stages of the bidding process before the implementing agency can respond to any appeal. The rationale is that the fee would weed out any nuisance protests as the monetary commitment is no laughing matter given these projects often run into the billions of pesos, our sources said.

Such changes would need the approval of legislators but our sources expect the law could be amended within the year.

While changes would likely have no impact on PPPs now in post-qualification, it would give future bidders reason for pause before starting an appeal process that would soon get a lot more expensive. Miguel R. Camus

Speaking of which…

Over the past few weeks, the jockeying for the Mactan-Cebu International Airport terminal project between the Filinvest-Changi and GMR-Megawide consortia heated up, evolving from covert attacks on the latter by the former, to a more open kind of warfare through the media.

The latest edition is an accusation raised by the Filinvest camp against GMR-Megawide on an alleged violation, which was not revealed until after the latter had emerged as the top bidder for then P17.5-billion project.

The violation came about purportedly because a key official of a GMR partner in another airport project abroad is also the managing director for a firm which also made a bid for the MCIA facility. Thus, if the Filinvest camp is to be believed, it appears that this official holds a key position in two companies that are both involved in the bidding—a potential conflict of interest situation.

Of course, GMR-Megawide contends that this official had no participation at all in any of the bids (a statement that regulators will have to evaluate in their decision as to who will ultimately win the deal).

The project involves P17.5 billion in construction cost for the terminal plus several billions more (P14.4 billion in the offer of GMR-Megawide) to be paid to the government by the winning bidder.

The GMR-Megawide camp naturally feels that the attacks on them showed what a sore loser the Filinvest camp is.

If one were to listen to the Filinvest camp, however, the tactic being employed by GMR-Megawide in its battle for public opinion skirts the issue of conflict of interest, and instead diverts public discussion to financial matters and a comparison of the designs submitted. In the local version of poker, this tactic is referred to as “ïwas-pusoy,” which simply means avoiding a losing proposition.

Meanwhile, the project hangs. Daxim L. Lucas

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