Press Release
February 25, 2014

Osmeña: Foreign firm in MCIA consortium has 'Shades of Piatco'

Sen. Serge Osmeña today called for a Senate inquiry into the delay in the awarding of the construction and 25-year management contract of the Mactan Cebu International Airport (MCIA) as he expressed fears that the DOTC may award the project to a foreign firm with a questionable operating background and unstable financial standing.

Osmeña, in a Privilege Speech entitled 'Shades of Piatco', showed concern that the award of the MCIA contract to the consortium of GMR Infrastructure Ltd. of India and Megawide Construction Corporation would cause a "grievous injury" not only to the people of Cebu but to "all future travelers to and from the Visayas and Mindanao."

"As a Cebuano, I am very much concerned because if this project is done well, it could send the people of Cebu soaring to higher levels of tourism and other commercial activity and would result in more jobs and higher incomes for tens of 7thousands."

"If done badly, it could send our hopes and aspirations crashing to the ground, with serious repercussions on the national economy, and on our international image," Osmeña said.

He added that, "should the project falter like the infamous PIATCO Terminal 3 of the Ninoy Aquino International Airport (NAIA), it is not only the people of Cebu province but all Filipinos who would suffer the consequences."

Osmeña bared "serious misgivings" about the corporate competence of the GMR Infrastructure Ltd. of India to carry out the 25-year project, citing GMR's 'shaky' financial standing and its partnership with the infamous German firm Frankfurt Airport Services Worldwide, also known as FRAPORT, which has previously figured in the scandalous PIATCO-NAIA 3 terminal project.

GMR is part of a consortium operating 2 airports in India, the Delhi airport and the Hyderabad airport. One of GMR's partners in the Delhi International Airports Ltd. (DIAL) project in India is the German firm FRAPORT, as shown in GMR Infrastructure's Annual Report for 2011-12.

Osmeña said: "Now, I believe we all know who Fraport is. Fraport was the operator partner and majority beneficial owner of the PIATCO consortium of the NAIA Terminal 3 which became notorious because of the numerous post award amendments, flaws and shortcomings in PIATCO's contract, many of which remain unresolved to this date."

The Senate Blue Ribbon Committee conducted an inquiry in aid of legislation into the PIATCO-NAIA 3 contract. In its Committee Report dated December 10, 2002, the Committee found substantial evidence of irregularities in the contract and referred its findings to the Department of Justice and the Office of the Ombudsman.

In 2004, the Supreme Court declared the PIATCO-Fraport contract null and void. Also, the International Centre for Settlement of Investment Disputes (ICSID) ruled in favor of the Philippine government in the arbitration case filed by Fraport in Washington, D.C while the International Chamber of Commerce in Singapore ruled in favor of the Philippines in the arbitration case filed by PIATCO.

"So, Mr. President, if a person were to be judged by the company that he keeps, what does GMR's association with Fraport tell us? Moreover, did GMR learn any tricks from Fraport?" he asked.

Osmeña said: "A Report of the Comptroller and Auditor General of India, found that GMR-Delhi International Airport enjoyed POST-CONTRACTUAL benefits that violated the tendering process which selected its joint venture partner. Shades of PIATCO!"

Osmeña also questioned GMR's financial capability to finance its P14.4 billion bid, citing various reports from prestigious foreign publications and large financial institutions abroad that "GMR's corporate finances stand on shaky grounds."

He noted that GMR's own Audited Financial Statements reveal that it had been suffering operating losses for the past three years, from 2011 to 2013.

He also pointed to "a damning article in the August 13, 2013 issue of entitled 'House of Debt,' which stated that the GMR Group was one of the companies 'that cannot even pay the interest on their debt on time.'" "My fellow senators, I fear that with its financial situation, GMR should not even be remotely considered a dependable investor to be entrusted with a long-term involvement in our Mactan Airport. I fear that GMR might merely flip its equity in this project for a profit. And where would that leave the Cebuanos?" Osmeña asked.

In his speech, Osmeña called on the Senate Committee on Public Services to conduct an inquiry, in aid of legislation, to find out, among other things, if the current process in undertaking public bidding fully protects the public interest.

He likewise appealed to the DOTC-PBAC and MCIAA to follow the PPP bidding rules, stressing that "this would be Daang Matuwid at its finest."

Osmeña also urged President Aquino to "take an official interest in this matter, since it is the Office of the President that ultimately bears the responsibility for maintaining the admirable growth in economic development that we have attained so far."

"We further pray that this President for whose family the people of Cebu have always been overwhelmingly supportive will not saddle the Cebuanos for the next 25 years with a terminal that looks like a poultry farm managed by a consortium prone to operational and financial shortcuts. But to reward the Cebuano people with the best airport manager in the world - for 25 years! The people of Cebu, the Visayas and Mindanao deserve no less."

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