The Philippines permits a ‘Swiss Challenge’ bid process for the New Manila airport project

The Philippines’ Department of Transportation (DOTr) will launch the ‘Swiss challenge’ bidding process for the PHP735 billion (USD14 billion) New Manila International airport project in late Apr-2019. This process allows other companies to contest San Miguel Corporation’s unsolicited bid to develop the airport, while San Miguel, the preferred bidder, will also be entitled to match any competing offers.


Summary:

  • A ‘Swiss Challenge’ will take place for the right to build and develop Manila’s new airport;
  • San Miguel Corporation appears to hold the best hand but is not home and dry, yet;
  • The driving force behind the project is the President. Unlike some other politicians he sees value “for the people” in the addition of transport infrastructure.

The project has already slipped. In Aug-2018 the DOTr was targeting the end of 2018 to award the 50-year contract to construct and develop the new airport. The project to build a new airport for the capital city at Sangley Point or Manila Bay goes back to May-2014 and even earlier and the government consistently deferred the San Miguel Corporation’s (SMC’s) unsolicited proposals.

SMC considered Manila Bay as a potential location right from the start, drafting blueprints to construct a four-runway airport at the 800ha reclaimed land plot. SMC originally intended Philippine Airlines to serve the new airport exclusively. The new airport would complement air traffic operations at the existing and congested Manila Ninoy Aquino International airport.

CHART – Despite congestion Manila’s Ninoy Aquino International airport is consistently adding more capacitySource: CAPA – Centre for Aviation and OAG

Japan International Co-operation Agency brought a counter bid for a new facility at Sangley Point and may be part of the forthcoming Swiss Challenge. Then, in Dec-2016, the government announced plans to redevelop the Atienza Air Base (Sangley Point Naval Base) as a general aviation reliever to Ninoy Aquino International, in addition to the long-term plan of developing a new airport in Manila. The government confirmed that Manila Bay would no longer be pursued as a site option for the new airport, with a proposal for a development in the Bulacan province as well as a dual-runway facility adjacent to Sangley Point Airport under consideration.

More recently, a Philippines’ business consortium comprising All-Asia Resources and Reclamation Corp and Belle Corporation submitted a USD12 billion unsolicited offer to develop and construct an airport in Cavite province called Philippine Sangley International airport.

The Philippines’ National Economic and Development Authority (NEDA) board subsequently (Dec-2018) approved negotiation results of the concession agreement between the Philippines Department of Transportation and San Miguel Corporation for the New Manila International Airport project. The PPP proposal involves construction, operation, and maintenance of the airport on a 2500-hectare area of land in Bulacan, now the preferred location, north of Manila Bay.

MAP – Bulacan province is located in the Central Luzon Region in the island of Luzon, just over 10 kilometres north of ManilaSource: Google Maps

The proposal entails a total project cost of PHP735.6 billion (USD13.9 billion). The acronym BOTOM (Build Operate – Transfer Operate – Maintain) is being used to describe the deal. In Oct-2018 Bulacan’s Provincial Government had stated it plans fully to support San Miguel Corporation’s proposal to develop the airport there.

Irrespective of the Swiss challenge procedure, Incheon International Airport Corporation (IIAC) has signed an MoU with the San Miguel Corporation to collaborate on the development and operation of New Manila International airport. IIAC intends to utilise its experience developing Seoul Incheon International Airport on reclaimed land to assist in the development of the New Manila facility.

That comes as a surprise. A year ago San Miguel Corporation said it did not require a partner to develop the proposed airport. SMC chief operating officer Ramon Ang commented at the time, “If you look at our balance sheet and our cash flow, we can easily do that airport alone”. Under the proposal, SMC will construct and operate the airport for 50 years upon completion. The National Economic and Development Authority (NEDA) had sought assurances from San Miguel Corporation that it is able to finance and construct the airport.

On the other hand a need for haste was identified early in the proceedings. According to the finance secretary, Carlos Dominguez, “President Rodrigo Duterte wants all infrastructure projects to be done quickly; he doesn’t discriminate whether it’s this or that, he just wants all the infrastructure to be done quickly because he believes that one of the reasons he was elected, is to make life easier for people and this requires precisely better infrastructure development”.

Bearing in mind what happened in Mexico, when an incoming President abruptly cancelled the project to build the New Mexico City International airport which was already underway, Duterte stands out as an individual who believes that “making life easier” can be achieved through new construction but this project is to be privately financed, which was not the case in Mexico