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Manila's $2bn airport expansion pitch stalled by aviation shakeup

Calls renewed for government to back those seeking PPP deals

Manila's Ninoy Aquino International Airport has often been ranked among the world's worst airports.   © EPA/Jiji

MANILA -- A $2 billion project to expand the Philippine capital's airport is on the verge of collapse as the novel coronavirus pandemic wreaks havoc in the aviation industry, prompting calls for the government to reconsider its policy of not offering financial backing for big building projects.

A consortium of seven conglomerates, including Ayala, Cebu Air parent JG Summit Holdings and Philippine Airlines affiliate LT Group, said the government has rejected its revised terms for the Ninoy Aquino International Airport expansion project under a public-private partnership scheme.

"The far-reaching and long-lasting consequences of the coronavirus pandemic on airline travel, airline operations and airport passenger traffic necessitated a review of the assumptions and plans to ensure that the NAIA Project will be viable in the new normal," the consortium said in a joint statement on Tuesday.

The latest development underlines the need for greater government support for companies proposing large infrastructure projects as the pandemic squeezes their finances.

"We understand that some proponents of PPP projects have problems raising financing under the current situation," Finance Secretary Carlos Dominguez said during Wednesday's online news conference.

But Dominguez said "two other proponents" are willing to take over the project on the government's terms. A local construction group, together with India's GMR Group, had earlier submitted a counterproposal for the project.

Dominguez also said beers-to-infrastructure conglomerate San Miguel is pushing ahead with a $15 billion project for a new airport in the nearby province of Bulacan.

The breakdown in talks between the government and the NAIA consortium could revive calls for the government to rethink its refusal to provide guarantees for PPP projects. President Rodrigo Duterte's administration has sought to reinvigorate the paralyzed economy though aggressive infrastructure building.

"There should be leeway to help out and encourage PPP proponents that are at forefront of this infrastructure program," said Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, a unit of the Aboitiz Group, which is part of the consortium.

Vince Dizon, presidential adviser for flagship infrastructure projects, last year said the government was opposed to PPP proposals that require sovereign guarantees and guaranteed fare increases, arguing such provisions hurt taxpayers and consumers.

"I think it's fair to reevaluate and reflect on those conditions, keeping in mind the potentially dangerous terms," Asuncion said on Wednesday.

Finance Secretary Dominguez said the government is open to reviewing PPP proposals that face viability problems. "So, we will take it one by one and see what projects are going to ask for renegotiation or whatever, so we cannot have an answer for everybody because there are many projects," he said.

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