Context, industry structure overview and characteristics of successful hubs
Urong-sulong: a telenovela of many parts
This paper was originally going to be about looking into the feasibility of setting up an air transportation and logistics hub adjacent to or in close proximity to the Iloilo International Airport. Critical to such an endeavor would obviously be the airport itself. The logistics hub would need to be structured, built, and capacitated based on the actual airport and its specifications and capabilities.
Over the past several months, as we began our research on the feasibility report, we eagerly anticipated the grant of Original Proponent Status to one of the entities which submitted unsolicited proposals to the Department of Transportation (DOTr) and the Civil Aviation Authority of the Philippines (CAAP) as the Implementing Agencies. The wait has been both interesting and frustrating.
The Iloilo International Airport project as currently structured will be lodged as a Public Private Partnership project under a Build- Operate-Transfer scheme. The estimated project cost is P6.89 billion.
Public pronouncements of public officials and other stakeholders as well as news reports relating to the status and progress of the so- called Rehabilitation-Expansion-Operation- Maintenance of the Iloilo International Airport project have been confusing, at best, and contradictory, at worst. Here is a sampling of these pronouncements:
June 3, 2019 (BusinessWorld)
A Businessworld news report announced that the CAAP had granted Original Proponent Status (OPS) to an unnamed entity of the Villar Group. The article goes on to quote former President and then House Speaker Gloria Macapagal-Arroyo, “(I)t is one step closer to bringing comfort, safety, and convenience to one of the busiest airports in the country,”. The news report goes on to say that the proposal would be forwarded to NEDA for evaluation and approval before being subjected to a Swiss Challenge.
December 9, 2022 (Panay News)
The Panay News report cites an announcement by DOTr Secretary Jaime Bautista in October of 2022, saying the Iloilo Airport is one of several airports set to be upgraded, expanded, and operated under a PPP scheme. This article also cites the PPP Center Executive Director, Ma. Cynthia Hernandez, as saying that they were working with the DOTr on whether the PPP airport projects would be bundled or not.
[So, wala na ang OPS granted to the Villar Group 3 years ago? Back to square one? What happened?]
December 15, 2023 (IMTNews.ph)
The online publication cites DOTr Sec. Bautista as saying that the airport will undergo improvement under a PPP scheme. Sec. Bautista is quoted saying, “(W)e notice that there is really a need to improve it.”. This article also mentions a report by the PPP Center specifying that there were two project proponents which submitted Unsolicited Proposals. These were the “Villar-led Prime Asset Ventures, Inc….in the amount of P6.89 billion and Aboitiz InfraCapital, Inc….in the amount of P9.95 billion.”. Sec. Bautista also said “(W)e need to get more information from them and they need to submit more documents for us to be able to assess their proposals...”.
January 12, 2024 (Summary of PPP Projects, PPP Center)
In the latest PPP Center update, the Iloilo International Airport Project’s status is listed as “Under Initial Evaluation by IA (Implementing Agency)”. [So two years after reverting back to square one, it seems that this project remains firmly footed there.]
It is also interesting to note that less than a month after the confirmation that there were two project proponents, only Prime Asset Ventures, Inc. remains listed as a project proponent in the update.
What is happening?
These are just a few of the developments (or, maybe, non-developments), that have happened over the years. There have been more of these same announcements in between the points in time that we use as examples. These beg the question, what is happening?
We ask this question given the following context:
- This is not a “first of its kind” project for the government to undertake and for the private sector to engage in. There have been NAIA Terminal 2, the Mactan Cebu International Airport, and Laguindingan – CDO. Granted, there should be some variations here and there, but process did not exactly start from scratch.
- The umbrella under which this project is being undertaken i.e. unsolicited PPP scheme, is a pretty straightforward process. We may be simplifying but essentially a private sector proponent submits an unsolicited proposal, the Implementing Agency (IA) verifies that the proponent is capable of undertaking the project, upon verification – the merits of the proposal are reviewed, an Original Proponents Status designation is granted, there is a Swiss Challenge, the Implementing Agency does final negotiations with the proponent selected and the project begins. We’ve skipped a few steps and there may be some back on forth on documentation, but this is basically the gist of it. This is what our own direct experience with and participation in the unsolicited PPP process informs us.
- For most of this process, the current lone remaining proponent seeking Original Proponent Status and the Implementing Agency/ies have remained the same. They have had enough time for this project to have been started already.
If both parties really wanted to get this done, it should have been done already. On the project proponent side, the application process, the documentation requirements, and the technical specifications are items which a truly qualified and well-intentioned proponent should have already been able to complete. On the Implementing Agency side, this project has been designated a priority project over the past 2 administrations, the requirements leave little room for changes in the proponent assessment process, and this is not something that is totally new to them.
This project as has been mentioned over and over again, is long overdue. The problem this surfaces is that the utility of this project decreases as time goes on. We may end up with an International Airport that may no longer meet current demand before it is even completed. The City and Province of Iloilo together with the rest of the geographic region which this airport serves, are among the fastest, if not the fastest, growing regions in the country. The GDP growth figures show this to have been true in 2022 and will likely be again the case when the 2023 numbers come out. The delay in this project has probably already impacted growth and will continue to do so, albeit on a larger scale going forward.
As we always caution and admit, there may be things not in the public domain or that we are not aware of, that may provide reasonable answers to questions about this delay. We can only go by what we have observed and the information that has been provided to the rest of the Ilonggo public. This, in itself, calls for greater transparency over a matter imbued with significant public interest and which affects the welfare of over 2.5 million Ilonggos.
The question remains – what’s the hold-up?
We end Part 1 of this topic here, providing context to the current challenge we face in expanding into the Air Transport and Logistics Hub. Part 2 will describe the industry structure of this subsector of the bigger Transportation and Mobility space and provide the underlying factors underpinning the creation of a successful hub centered on the upgraded Iloilo International Airport. Finally, we endeavor to also provide some suggestions on adapting our regulatory and economic framework to build a hub that meets global demands and standards.