(Last in a four-part series)
The Philippines’ huge outstanding public debt — only P8.22 trillion in 2019, jumping to P13.81 trillion in 2022 and P13.91 trillion in April 2023, and these numbers exclude guaranteed debt — remains a significant fiscal drag that can inhibit the country from sustaining fast growth.
Over the last three years, the government has been forced to borrow abroad to supplement domestic borrowings. Foreign debt securities to finance the annual budget deficit were priced with interest rates of 4% to 10%, rather high. This is also reflected in the jump in the 10-year government bond, which was only 3.9% in late June 2021 but 6.3% in late June this year. Other Asian countries, excluding India and Indonesia, only have 0.4% to 3.9% (see the table).
NAIA MODERNIZATION AND PRIVATIZATION OF OPERATIONOne recent development in Philippine modernization and infrastructure development is the unsolicited proposal (USP) by the Manila International Airport Consortium (MIAC) to develop the Ninoy Aquino International Airport (NAIA) from its declared capacity of 31 million passengers per annum (MPPA) to about 70 million. The consortium is composed of six conglomerates — Aboitiz Infrastructure, AC Infrastructure, Asia Emerging Dragon Corp., Alliance Global-Infracorp Development Corp., Filinvest Development Corp., and JG Summit Infrastructure Holdings Corp. Plus, a new foreign partner, Global Infrastructure Partners.
The MIAC plans a cost of P267 billion — a P57-billion concession payment to the government, and capital investment of P57 billion in the first five years, plus P154 billion over the next 20 years. Aside from the concession fee, the government is also projected to receive an additional P280 billion over the 25-year concession period from revenue sharing and taxes.
This looks too good to be true — one might wonder if there is a catch somewhere. Like passing the high cost to the airlines, passengers, and airport shops and contractors.
One option is to move from USP to government-solicited PPP in a faster procedure. In the USP PPP, private proponents make sure that the terms are in their favor whereas in the solicited PPP, the government has balanced perspective on all the parameters, terms, and conditions of the contract and can ask exactly what it wants from the bidders. The important thing is that NAIA rehabilitation and expansion should proceed at no cost to the government and taxpayers.
The solicited mode also has some P30 billion in upfront concession payments that can be used by the Department of Transportation (DoTr) to fund badly needed investments in the Air Navigation System. A solicited PPP can be awarded before the end of the year if things go well.
UP Professor Emeritus Epictetus Patalinghug also proposes that “DoTr should subject the NAIA Rehabilitation Project to a competitive bidding using the ADB NAIA PPP Framework as the comparator model which will form the basis for the bidders to offer a better rehabilitation plan.”
NAIA PRIVATIZATION OF LAND AND ASSETSMy favorite alternative for NAIA is not just the privatization of its management and operation while government retains ownership of the land. A better long-term option given the huge and burdensome public debt discussed above, is to privatize the entire land and assets of NAIA, with government to get the money and use it solely to retire some public debt. Reduce the debt from the current P14 trillion back to the P8 trillion level of 2019, or even lower.
The NAIA is said to have 646 hectares. I tried to check the official website of its administrator, the Manila International Airport Authority (MIAA, https://www.miaa.gov.ph/) but the website is down — proof that even in website administration, the government airport service is not efficient.
Using a conservative price of P100,000/sq.m. or P10 billion/hectare for NAIA’s land, multiplied by 646 hectares, that is a whopping P6.46 trillion in potential revenue over the long term and hence, avoiding the need for more borrowings and more taxation.
NAIA as it is will be closed down after some time and converted to other uses by the consortium of new owners. The new and/or upcoming airports in Clark, Bulacan, and Sangley in Cavite will absorb the international and domestic air traffic.
If the Marcos Jr. administration and the economic team will consider this, then the NAIA rehabilitation and management privatization can be shrunk down to a concession period of only 15-20 years.
Drastically reduced public debt means a drastic reduction in interest payment, savings can be used for more rural and provincial infrastructure. Which will further disperse business and investments to more parts of the archipelago, spurring faster growth and sustaining it for the long haul.
Bienvenido S. Oplas, Jr. is the president of Bienvenido S. Oplas, Jr. Research Consultancy Services, and Minimal Government Thinkers