Highlights of Sen. Pia Cayetano's Interpellation on the Aerocity Franchise Bill

Sen. Pia: I just like to put on record... that I really have not had enough time to study this. And the only reason I would like to contribute is because I'd like to avoid questions on its constitutionality, inconsistencies with different provisions, or confusions. I think it would be better for all of us.

I regret that there seems to be a need to pass this immediately and I apologize on behalf of the committee that I cannot perform my task as well as I have to because I do not have enough time to study this.

Sen. Pia asked for the DOF's position on the bill. Sen. Poe said she did not have DOF's position

Sen. Pia: I think it would be helpful now... I would have wanted to see their official statement on this... For such a big item, which includes tax incentives, I would've thought that we would go after their opinion on this...

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Sen. Pia: When we talk about mass transportation, wouldn't our incentives most likely be the same for various mass transportation projects around the country? Let's just assume Metro Manila and other surrounding areas, they would be the same, to the extent that this is now covered by a franchise and not covered by CREATE, then her honor is recognizing that there may be differences... There may possibly be different sets of incentives being given for exactly the same service?

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Sen. Pia: Noted that for transportation, there may be other agreements that may go in. So maybe I'll ask about a simpler service. You know how, when I look at mall developments, aside from the main mall made by top 3-4 developers, sometimes they have what you call big tenants that create their own building within the mall complex.

Would those kinds of constructions be included in the incentives because it's part of the airport city?

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Sen. Pia: Let me paint the picture... I don't think it takes 10 years to build a mall area. I doubt. I don't think there's too many technicalities compared to an airport... I am assuming they really wanna build a whole network here, a whole community. Let's say the mall is operational in 5 years, how would the tax construction then be, you already move them to the after? So they may now have the airport itself and maybe the essential services separated from non-essentials? Kasi that doesn't seem to be very clearly defined either.

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Sen. Pia: I am just really tossing to the committee what I am observing as we go along...

I also want to differentiate on whether what is operational or not are essentials or non-essentials. Because like I said, if there is an opportunity to make money, why not? Any businessman would... If there is one part of my business that can be operational, I'd rather start earning money then. So like I said, let's say the shopping center area... where there's people, there's shopping. So on that note, if the shopping complex can be completed earlier, that was one point. And then the other types of income, what taxes now would apply to these non-essential parts of the airport city?

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Sen. Pia: There is nothing there about shopping centers. And we know when there is an airport, there is shopping. And where there's hotels, there's usually shopping also. So I'd rather bring it up now than wait for it later on and for us to be confused as to what would apply.

Again, I also want to distinguish between essential and non-essential. For example, and this is an issue with CREATE now... In some ecozones, even the businesses that did not have anything to do with exports or services, but were really there to just support the ecozone - fast foods, gas stations - they applied for incentives and were given. But that is something that CREATE seeks to address, that this does not happen, because those are not the essential businesses that we are promoting...

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Sen. Pia: So that's clear, madame sponsor... that it is not the intention to exempt these lessors or concessionaires, these establishment owners. So what is the difference if it is owned by the San Miguel Group of Companies or not? What if SMC buys the franchise of McDonald's? Would that extend to them or no, because it's not an essential part? How do you draw the line?

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Sen. Pia: I didn't know from the reading of the bill if it is the intention to include them or not... So in other words, it appears to me that what his honor is including in the airport city are services that are essential to an airport's operation?

Then again, I would be a little bit uncomfortable because you can't really say a hotel is essential, although nowadays, I have seen hotels in all major airports... So it becomes convenient for an airport to be there... The construction of that hotel will be tax-free also... because they are part of the airport city? Is that her honor's intention?

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Sen. Pia: Would her honor know if DOTR has a master plan for airports? One reason why I support this is because when I travel to London, New York, I know that there are really options for airports. So I am familiar with that and I know we don't have these airports... But my question would be, is her honor prepared for the possibly unequal protection we would effectively be perpetuating because of an establishment of this magnitude... versus a smaller hotel that could just consider their other auxiliary services could maybe just be ⅓ or ¼? So in other words, they might say, "If we can't get the same type of incentives, then we won't put up those other services."

So would that not be a disincentive for other investors in the future to invest because we have set the standards quite high? I don't mean it in any judgmental way. I am just trying to foresee... My committee is SDGs, Innovation, and Futures Thinking, so I am just thinking fast forward, doesn't it sort of set a precedent...? I don't intend to belittle the contribution of this... but how do we differentiate?

And that is why from where I come from as author and sponsor of CREATE, it would have been the job of the FIRB to try to rationalize. Now, we are trying to do that as we speak... We're trying to rationalize that and ensure it doesn't have any detrimental effect in the future. That's the only reason why I wanted to think it through.

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Sen. Pia: The other example I wanted to consider would be like special aircraft maintenance services, similar to Lufthansa... I believe they are located somewhere near NAIA... And I was asking them in connection with CREATE, would they like to put up another one near Clark. Because there would be a demand for their service there because there is also a Clark Airport. And they said, "Yeah sure we could consider that." Because that's more business for them because iba rin ang aircrafts na nandoon.

My question would be... wouldn't it end up to be a disincentive, in the expansion of businesses related to airports, if one particular airport has extensive incentives, not in the airport only itself, but all those other related businesses, if first of all, the intention is also to grant...?

Would that not backfire on us? I'm talking about related services.

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Sen. Pia: In the case of Lufthansa... they are one of those also asking for consideration in terms of incentives they receive. Basically, they are saying it's tight as it is. And so, I am conscious of the fact that it's a very competitive industry. There may not be that much room for... the margin for profit might not be high. And if there are incentives on location vs. another location, then in the long-term growth of services that would ideally be beneficial to any airport in the area, we would have then effectively made it more difficult for that industry to grow there because they can't compete...

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Sen. Pia: How does her honor foresee CREATE unfolding? Because I can set aside and not pursue CREATE anymore if what will happen is we will have individual incentives given anyway to corporations. Under the CREATE Bill, the President can carve out his own set of incentives and provide for a maximum of 40 years of incentives for an investment of $1 billion or 10,000 jobs. Clearly, this investment is much more than that... I'm sure, if we had passed CREATE yesterday, pasok ito. Baka ito na ang unang una sa desirable industries...

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Sen. Pia: At this point, I can tie it with the concern of Sen. Lacson... I understand that the intention of that provision Sen. Lacson pointed out in CREATE on repealing and amending certain provisions and all other similar ones was because... the idea was to centralize the incentives so we have an accountability system... What do we then intend to carve out and what do we intend to fall under CREATE? I am really confused and wondering if there is a purpose...

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Sen. Pia: Who would be the final arbiter...? That is precisely why CREATE includes the FIRB. Because they will review what the offerings will be and all that. So I simply mention these questions because these are also questions I am being asked during interpellations. And at least I have an answer there because I know it's FIRB to the extent that IPAs are already doing that, there's a big chance it would still continue to be delegated to the IPAs. But here, there is none...

May I recommend to the committee that you look into who would be the final arbiter if her honor deems it better that there would be? Because these are tax issues and there would always tend to be questions on this... So I would pose it to the sponsor to consider if there would be. Because if there would not, then I guess it would be BIR? Am I correct?

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Sen. Pia: With the number of employees here, not just in the airport but auxiliary services that would fall under the airport city, anglaki din ng deductible kasi ng labor, at gustong gusto ni Sen. Joel Villanueva 'yun. Again, if I had more time to weigh in on it, there may be advantages in trying to see how they would have fit into the CREATE model. Kasi it's precisely aimed to benefit those who will be investing in this kind of matter...

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Sen. Pia: In connection with any possible environmental issue, whether it has to do with the flight of the birds or the mangrove areas, or even in the course of operating the business, there are sustainable and non-sustainable choices that can be made... If for whatever reason that became a law, then they would have to comply with these environmental laws...

The only amendment that her honor can expect from me... The one I am prepared to make is basically an amendment that simply says they should operate in a sustainable manner. Something to that, subject to style...

And I am pretty sure the proponents are on board. In fact, I can recall that the proponents, during the time of the pandemic, launched plant-based food. And I mentioned this because I support that, that is very research intensive. Because as they say, agriculture as we know it is already a thing of the past. So I know this company is very proactive when it comes to research and innovation. I just mentioned that to put on record, and I know that, and I am happy to see that. I am pretty sure they will choose sustainability over non-sustainability... They would choose to invest even if it takes longer to recoup their investment, knowing that is the way to operate their company.

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Sen. Pia: In terms of procedure, in the same way that my Committee on Ways and Means was secondarily referred... Would it not have been best to have the Committee on Environment and Natural Resources weigh in on it, just so we can get that clearance?

The point I was trying to make was that, normally wouldn't the committee weigh in on it in the same way that the Ways and Means Committee would weigh in on the declaration of a land being alienable and disposable?

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Sen. Pia: I submit to the desire of the body that this be expedited. There is nothing more that I can do within this limited time that I have... I would have preferred to have more time to make suggestions and recommendations to improve it, especially since I have spent an inordinate amount of time on CREATE and I would have liked to be of service to our colleagues in improving this bill and ensuring cohesion with CREATE.

I hate to put it this way, but I do have my reservations on whether we are able to capture any possible conflict with CREATE, if there are things left hanging, I am unable to respond to that in a responsible way because of the lack of time to study this properly. And I made that known on record. So I don't know what else I can do because I'm limited with the time. I am not able to research any further at this point. But there are hanging issues that I wish we could have been able to iron out clearly. I have my concerns on the implications in the future.

I am very happy though that we will have an airport. I am happy that we have a responsible and forward-thinking company that is doing this. My worry is without having had sufficient time to look at the impact of CREATE on this and other franchises, we may create more problems for us. And I submit to the wisdom of my colleagues for future bills that will require exemption from the CREATE bill that we intend to pass. I do not know how anyone now intends for this to transpire. I am a bit lost on your directions for me because I do not understand the set of deadlines we are following to carve out others.

But I do know and I have emphasized that this is a huge investment, a very important investment at that, and it would have, in all likelihood, gotten the highest amount of incentives under CREATE. That is my impression. But not falling under CREATE, I don't know what is the objective of the body if this will then serve as a precedent for other projects in the future.