The old joke is that you wait ages for a bus in London then three come along at once.
In not dissimilar fashion, Manila’s one airport has long lagged almost every other Asian capital city’s but the Duterte administration is now progressing four.
Named after Ninoy Aquino who was assassinated there in 1983 and whose widow and son both later became President, Manila’s existing airport NAIA has effectively only one runway, no rail link, no room for expansion and opens straight into Metro Manila’s infamous traffic. Its most recent expansion, terminal 3, led to one of the longest running infrastructure disputes in Asia (full disclosure: I acted as an expert witness for Fraport in one of the arbitrations) but at least the eventual addition of terminal 3 led to NAIA relinquishing that most coveted of titles, Worst Airport in the World according to The Guide to Sleeping in Airports survey, a title which it held from 2011 – 13. And it is close to Makati so somehow handled 45 million passengers in 2018. (This compares to 60 million at KLIA or 67 million at Soekarno-Hatta, for example.) Then in October 2019, after much negotiation, NEDA-ICC approved an unsolicited proposal from the NAIA consortium of seven Philippino conglomerates to rehabilitate and maintain the airport for 15 years, increasing its capacity to 65 million at a cost of $2 billion.
Next, 80 km to the north of Metro Manila is Clark air base. Originally built by the US military on a Spanish cavalry base and once its biggest overseas facility, Clark boasts the longest runway in the eastern hemisphere, built so as to handle the space shuttle, but the US went home when Mt. Pinatubo erupted in 1991. Access to the northern suburbs of Metro Manila, at least, is via the North Luzon Expressway (more disclosure: this was first financed by my HK team at WestLB) but it also benefits north and central Luzon. In 2018, it handled only 4 million passengers on a number of budget airlines but there is at least plenty of space in the freeport zone there and plans apparently envisage an enormous expansion with four terminals and a capacity of 110 million pax, all seemingly done by 2025. Already renamed for Diosdado Macapagal Arroyo, an early President, by his daughter Gloria, yet another President, Clark will next be known as Lipad which is somewhat pithier in Tagalog (“fly”) than the acronym in English (Luzon International Premier Airport Development). Meanwhile, in January 2019, a consortium led by JG Summit and Filinvest with technical input from Changi, signed a 25 – year Operations and Maintenance agreement for the existing terminal and another due to open in 2021 at a fit out cost of $115 million. (The material adverse government action (Maga) clause reportedly covers only executive orders and not future changes in law, a position which the government is keen to replicate, investors less so. This matters.)
After twenty years and two failed attempts, the rail link from Clark to Metro Manila is now under construction. In July 2019, the ADB signed the first US$1.3 billion tranche of an enormous $2.75 billion sovereign loan under the Government’s Build Build Build programme for civil works on the 53 km stretch from Clark to Malolos in Bulacan province; the associated $2 billion of rolling stock and E & M kit is to be financed by JICA; JICA is already progressing the next leg from Malolos into Tutuban in central Manila so travel time in from Clark would be less than an hour; and the North South Commuter Line will eventually reach all the way to Calamba in Laguna province 55 km to the south of Metro Manila. Once completed, hopefully by 2025, this would be significant progress indeed.
Third, San Miguel had submitted an unsolicited bid to build a brand new 100 million passenger airport with four runways in the province of Bulacan, 50 km north of Metro Manila. This was also subjected to the usual Swiss challenge whereby an unsolicited project is thrown open to other bidders for a trifling two months with the original proponent having the right to match any bids which ensue. As usual, none did. In September 2019, the Dept of Transport therefore signed a 50 – year Build Operate Maintain Finance and Design (hopefully not in that order) contract. At least two key questions stand out: how will San Mig raise the money? It may control 95% of the beer market in a country of 105 million and it will bring in partners eyeing up the real estate but $14 billion is still a big ask. And what assurances did the government give as to which airlines would move to the new airport? As ever, understandings with the government are crucial to the risk profile.
Fourth is to expand the Sangley Point air base in Cavite province, 40 km to the south west of Metro Manila. Named for Danilo Atienza who bombed it whilst defeating a coup attempt in 1989, it currently has a runway extending into Manila Bay but a terminal for only 160 passengers and an apron for only five turboprops. Expansion here was endorsed by a JICA study in 2015 and All-Asia Resources and Reclamation Corp, founded by the late Henry Sy, and Belle Corp had earlier submitted an unsolicited bid with a view, no doubt, to linking passengers to the huge SM Mall on the Manila waterfront. Instead, the provincial government is now requesting proposals from potential joint venture partners to build out another four runway / 130 million pax colossus under a – 50 year concession at an estimated cost of $10 billion. Issues will include rising sea levels and, as always, access to Metro Manila, in particular which parts of Metro Manila. The deadline for responses has been extended to 17 December perhaps due to bidder indigestion but seven groups are taking a look.
Much progress has been made recently. But the country does not need to expand current capacity by a factor of eight and, whether it is the Government’s money or the private sector’s, the country cannot afford to spend 1% of 2018 GDP on all four projects. The Government needs to put a stop to at least one, perhaps two, of them. Airports, like buses, are infrastructure that we want more and more of until we are confronted by the opportunity cost.
