When was the last time you visited the Subic Bay International Airport (SBIA)? In recent times, the US-based company Cerberus Asia Pacific Investments, LLC (Cerberus) proposed to manage, operate and rehabilitate the said airport for P5.31 billion and it has been endorsed by the Public-Private Partnership (PPP) Center. The unsolicited proposal is officially being reviewed by the Subic Bay Metropolitan Authority (SBMA), according to a news report by BusinessWorld.
To put things in perspective, posted below is an excerpt from the business news article of BusinessWorld. Some parts in boldface…
THE P5.31-billion unsolicited proposal of US-based investment company Cerberus Asia Pacific Investments, LLC (Cerberus) to manage, operate, and upgrade Subic Bay International Airport (SBIA) is now being reviewed by the Subic Bay Metropolitan Authority (SBMA) after the go signal from the Public-Private Partnership (PPP) Center.
“This unsolicited project was endorsed by the (PPP) Center to the IA (implementing agency) after being determined complete… The Subic Bay International Airport PPP is currently undergoing the approval process of SBMA,” the PPP Center told BusinessWorld on Tuesday.
According to the PPP Center, the SBMA will be the approving body for the project. If approved, the airport project will be under an operate-add-transfer contract arrangement.
Once the SBMA approves the project, it will begin negotiations with the project proponent. The government will then formalize the Original Proponent Status and initiate the Swiss Challenge process.
The Swiss Challenge is a process where other companies can submit better offers, but the original proponent has the right to match them.
Cerberus Capital Management is an investment firm managing approximately $65 billion in assets. Its global network of affiliates includes Cerberus Asia Pacific, which focuses on investments in logistics, infrastructure, technology, and energy.
Cerberus already operates part of a 310-hectare lot of a former South Korean-owned shipyard located west of the airport for which it had submitted an unsolicited bid.
“In theory, competitive bidding is king. In the reality of the SBIA, Cerberus is the catalyst we need. It is time to choose strategic results over procedural delays,” Rene S. Santiago, former president of the Transportation Science Society of the Philippines, said in a Viber message.
Nigel Paul C. Villarete, a senior adviser on public-private partnerships at the technical advisory group Libra Konsult, said that solicited bidding would be more feasible and faster, as it enables the government to define the contract’s parameters and coverage.
“Many of our public facilities should be operated by the private sector to attain a lot of the efficiencies that they can do, which are often difficult to attain within the government realm,” Mr. Villarete said.
For Mr. Villarete, a government-led solicited procurement process will always be preferable.
However, since an unsolicited proposal has already been submitted, the government’s role is to enter into negotiations, introduce the necessary changes and amendments, and only then present the proposal to the public for challenge, he said.
“There should be a negotiation period for the two parties to discuss any amendments required by the government before this is published for challenge,” he said.
Cerberus’ proposal covers the rehabilitation of SBIA assets and the development of new facilities to expand capacity and attract new tenants.
The company has also committed to invest “considerable financial resources” and utilize its real estate management capabilities in developing the airport.
In its proposal the company said that it will maintain the existing leases but only for the “early years” of its concession period.
“Cerberus plans to maintain the status quo of existing operations by honoring existing leases and retaining incumbent employees. In parallel, Cerberus will invest significant capital expenditure to improve SBIA’s infrastructure and operations, whilst building new hangars and storage facilities to reestablish SBIA as a major hub for commercial cargo operations and to expand SBIA’s government logistics operations,” it said.
The company added that it will monitor and evaluate airport fees to optimize SBMA’s returns under the revenue-sharing agreement, while supporting efforts to attract and manage both existing and new airport tenants.
This revenue-sharing scheme would be the determining factor if the proposed 25-year concession agreement were extended, PPP Center said.
Let me end this post by asking you readers: What is your reaction to this recent development? What is your opinion about the current state of the international airport inside the Subic Bay Freeport Zone? Do you think so much more can be achieved with the Subic Bay International Airport in terms of expanding flight connectivity, attracting more tourists from overseas and paving way for more foreign commerce to enter the freeport?
You may answer in the comments below. If you prefer to answer privately, you may do so by sending me a direct message online.
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