Gov't to tap Obuchi Fund for P18.2-B infra project

Government has decided to apply the P18.24-billion Manila Calabarzon Express (MCEx) project for funding under the Obuchi Fund of Japan and bid the contract to private developers.

This decision means that the original proponent, Ayala Land Inc. would lose its lead in the project and would have to make its own bid on equal footing with other interested groups.

The Presidential Committee on Flagship Programs and Projects (PCFPP) announced that the Department of Foreign Affairs has written a note verbale to the Japanese government, officially applying MCEx for concessionary funding under the Obuchi Fund.

PCFPP chairman Roberto Aventajado said government had to make a decision that would allow government to source the cheapest fund available, despite the fact that ALI had already spent on a feasibility study to package the project. This change in government policy opens the door for the Fil-Estate Group, Ayala's closest competitor in the property development sector, which had expressed interest in the project.

Although Ayala was the proponent of the project and had already submitted an unsolicated proposal, Aventajado said it has to withdraw its original unsolicited proposal after the company had already spent time and money conducting a pre-feasibility study.

Since government was going to change the funding scheme from build-operate-own (BOO) to the so-called operate-and-maintain (ONM) scheme, Ayala's withdrawal of its unsolicited proposal effectively wipes the slate clean.

Under the ONM scheme, private sector participation would be in the form of supply, operation and maintenance. In the case of the MCEx, the private participant would also have to come up with the counterpart fund to advance government's end of the funding agreement with the Obuchi Fund.

However, Aventajado said Ayala would not be taken completely out of the picture. "Government doesn't have the money to fill up the counterpart fund requirement and Ayala said it was willing to advance this amount provided it was assured that it would get the contract to supply, operate and maintain," he said.

Under the Obuchi Fund, government would be required to provide counterpart financing equivalent to 15 percent of the total project cost estimated at $85 million.

Counterpart financing has been the government's problem for all ODA-funded projects and the proposal to allow a private group to advance the money is a deviation from normal procedure.

"ALI has agreed to advance this amount," Aventajado pointed out. "Anyone who is interested in the project should be equally willing to put up this fund, because ALI's willingness to advance the counterpart fund would form part of its bid for the project."

Despite the overhaul in the financing mode, however, Aventajado said that as far as government was concerned, Ayala is still at the forefront of the project although Fil-Estate had signified its interest.

"Fil-Estate has to make its own offer which it hasn't done so yet," he said. He added that should the project fall through, other private sector groups would have an equal crack at the project.

"Out bottom line is to get the cheapest source of fund for this project," Aventajado said. "Of course we want the best deal that can be had."

The Obuchi Fund offers project loans with one percent interest, payable over 40 years with a 10-year grace period. -