Investing in Philippines future

The simplest facts first: we’ve waited 30 years for the country’s primary gateway, the Ninoy Aquino International Airport (NAIA), to get a much-needed upgrade. Not just a facelift: a real, honest-to-goodness rehabilitation, upgrade and expansion.

For the last 24 of those 30 years, there has also been no change in airport charges: essentially, a people-pleasing, populist move by past administrations.

As expected, this has not served travelers and NAIA itself well. The airport has been named among the world’s worst airports. It’s also been named as being one of the most stressful.

Let’s not even mention infestations of bugs and rats, power failures, conking generators and the like.

But finally, at long last, help is on the way. This September, government will officially turn over operations to New NAIA Infrastructure Corp. (NNIC), a group that includes prolific conglomerate San Miguel Corp. (SMC), which will be in charge of investing billions of pesos to upgrade and expand NAIA.

Just last March, the Department of Transportation (DOTr) and the Manila International Airport Authority (MIAA) signed the concession agreement with SMC-SAP & Company consortium for the NAIA public-private partnership project, the first PPP contract to be awarded since the new PPP Code took effect on Dec. 23, 2023. The consortium, incorporated as NNIC, is composed of San Miguel Holdings Corp., RMM Asian Logistics, RLW Aviation Development Inc. and Incheon International Airport Corp.

Project cost is estimated at P170.6 billion with a marked improvement in overall passenger experience expected through modernized terminals, optimized airport capacity, and reliable operations over its 15-year concession period, which may be extended for another 10 years.

The landmark PPP project aims to increase airport capacity from 35 million to 62 million passengers per annum and increase air traffic movements from 40-42 per hour to 48 per hour.

During his recent State of the Nation Address, President Ferdinand Marcos Jr. said that the NAIA PPP will go down in our history not only as among the largest and fastest approved PPP, but one that has set the bar in terms of openness, transparency and competitiveness of the process.

He noted that through this partnership, the country’s foremost aerial gateway is now primed for a revitalization. Once considered as among the worst and most stressful airports in the world, the President emphasized that NAIA will soon be a world-class international airport that Filipinos can be proud of.

But the reality is, those who will be using NAIA will have to shell out additional amounts for progress and convenience. The NAIA upgrade and the increase in airport charges have been long forthcoming, and justified by the passage of time, the continuing revaluing of the peso, and the evolving and increasing demands of our population and economic growth.

Unfortunately, there are those who have come out to seemingly torpedo what could be an otherwise positive start for the project.

The Air Carriers Association of the Philippines, the Board of Airline Representatives, and the Airline Operators Council, have jointly slammed the deal, expressing grave concern over the impending gargantuan increase of fees and charges coinciding with the recently awarded privatization of the NAIA.

They also complained that there was no consultation with them on the proposed cost increases and that these increases will make NAIA one of the most expensive airports in the region.

We were informed that all the bidders knew and accepted the bid parameters set by government for the NAIA PPP project. And these parameters, including the price increase, were based on the Asian Development Bank’s assessments comparing all airports in the ASEAN region. They are rates that have been carefully computed based on the different types of aircraft, flights, passenger classifications, among many other things, we were told.

In short, whoever won the bidding would have been tasked with implementing the increased airport charges. And maybe, even if the bidding did not push through, MIAA, which operates NAIA, would have implemented the increase anyway.

Contrary to what some groups are making the public to believe, San Miguel and its partners are not the ones that set the rates as well as the conditions that will be implemented after NAIA is turned over to them.

There are those who are saying that these complaining groups are probably acting at the behest of losing bidders. We hope this isn’t true.

The increase in airport charges may be a small price to pay compared to the multitude of benefits which the country and its citizens and visitors will reap from an improved NAIA.

For one, when San Miguel takes over, a significant portion, more than 82 percent of the airport’s revenues, will go back to our government. The project is expected to generate P900 billion in earnings for the national government or about P36 billion annually throughout its 25-year concession period. Imagine how many additional roads, school buildings and health facilities it could provide.

According to the President, the project will also attract around P88 billion in capital investments within the initial six years of operation. He has highlighted the economic repercussions of the airport’s shortcomings, as delayed and reduced flights have resulted in lower visitor arrivals and substantial losses in tourism revenues.

Likewise, the state of NAIA is a reflection of the state in which the country is in, especially in so far as tourists are concerned. We no longer want to be the laughing stock of the world.

To quote the President: “The gateway that should be the red carpet to our country has become a dirty rug that unfairly defines a visitor’s first impression.”

Indeed, this is an investment in our country’s future. Let’s hope that the detractors can also see it that way.

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