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President Duterte Inaugurates Aquino Admin’s Biggest Airport PPP Project

Timely completion of Mactan-Cebu Airport Terminal 2 underscores continuity in infrastructure policy amid tumultuous regime change
By Roel Landingin |

Terminal 2 of Mactan Cebu's International Airport will be inaugurated on Thursday, June 7



Cebu City – President Rodrigo R. Duterte led the inauguration rites on Thursday, June 7, of the Mactan-Cebu International Airport (MCIA)’s Terminal 2 that will help decongest the country’s second busiest airport.



Related story: "One-Of-A-Kind Experience" Promised in New Cebu Airport Terminal



The new passenger terminal, which will begin commercial operations on July 1, will boost the airport’s capacity from 4.5 million passengers to 12.5 million passengers a year, according to the Mactan-Cebu International Airport Authority (MCIAA), the state corporation that operates the aviation gateway.


The Cebu airport’s existing terminal has been operating beyond its original capacity since 2009. Last year, the number of domestic and international passengers hit 10.1 million, up 13.8 percent from 2016.



Related story: How the New MCIA Terminal Will Help Decongest PH's 2nd Biggest Airport 



The inauguration was led by Duterte, Department of Transportation (DOTr) Secretary Arthur Tugade, key cabinet members, senators, congressmen, and executives from the private partner, GMR Megawide Cebu Airport Corporation (GMCAC), the DOTr said in a statement.



“It was our job to make sure that construction will be completed by June 2018 as stated in the contract, and that’s what we did, and that’s why we are here. No delays, no corruption,” said Tugade.


The construction of the new aviation facility is the biggest airport project awarded under the much-maligned public-private partnership (PPP) program of the administration of former President Benigno S. Aquino III. Costing Php17.5 billion, it covers the building of the new passenger terminal as well as the operation of the existing and new passenger facilities for 25 years.


Costing Php17.5 billion, MCIA's new terminal is the biggest airport project awarded under the public-private partnership (PPP) program of the administration of former President Benigno S. Aquino III



PPP refers to arrangements that allow the government to build costly infrastructure and other capital projects such as airports, roads or railways at little or no cost to the taxpayers. Instead, the government invites private companies to build and operate the project while collecting fees from users for a fixed number of years.



While the scheme looks attractive for governments short on money, they take a lot of time to roll out because of the need to align the often conflicting interests of the private companies, the users and the regulators. The Aquino administration’s PPP program is often derided by critics as all “Power Point Presentations” because they took a long time to materialize.


Of the 16 PPP projects awarded by the Aquino administration, only two were finished during its term. Two more were completed after he left office and Duterte came to power. The MCIA Terminal 2 is the third Aquino-era PPP project to be rolled out under Duterte’s term.


The delays and complexity of PPP projects prompted the Duterte administration’s economic managers, led by Finance Secretary Carlos Dominguez III, to prioritize official development assistance (ODA) as well as budgetary allocation in funding schemes for infrastructure projects. The new strategy is called “Build, Build, Build” program to emphasize the faster pace of project implementation.


Still, the completion of the Mactan-Cebu International Airport Terminal 2 and other Aquino-era PPP projects underscores another aspect of the Duterte administration’s infrastructure policy, which is to essentially continue with the projects already began by the previous regime.



The new passenger terminal, which will begin commercial operations on July 1, will boost the airport’s capacity from 4.5 million passengers to 12.5 million passengers a year



In contrast, Aquino himself froze and reviewed many of the infrastructure projects initiated by his predecessor, former President Gloria Macapagal Arroyo, on suspicion many of them were tainted by alleged graft and corruption.


The MCIA Terminal 2 project was awarded in April 2014 to a joint venture of two infrastructure firms: Philippine-based Megawide Construction Corp. and India-based GMR Infrastructure Ltd., operator of the Delhi International Airport and the Hyderabad International Airport in India. Public bidding for the solicited PPP project took place in November 2013.


The consortium, GMCAC, offered a premium of Php14.4 billion to the Philippine government for the exclusive contract to build and operate the MCIA Terminal 2 for 25 years. That’s on top of the estimated project cost of Php17.5 billion.



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Related story: Sneak Peek: A Photo Tour of Mactan Cebu Airport's Terminal 2



Like many PPP deals, GMCAC will recover its investment in the new facility from rental income to be paid by concessionaires and other retailers doing business at the terminal as well as fees to be collected from both airlines and passengers.


In October 2014, the MCIA approved an increase in the passenger terminal fee at the Mactan-Cebu International Airport from Php200 to Php220 for domestic passengers, and from Php550 to Php750 for international passengers starting November 1, 2014. The terminal fee for domestic passengers was increased further to Php300 starting January 1, 2016.







Roel Landingin is the editor-in-chief of Entrepreneur PH

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