Structural Problems Delay Manila Airport Opening

UNCLAS MANILA 000969 SIPDIS SIPDIS SENSITIVE STATE FOR EAP/MTS AND EB/TRA TOKYO FOR FAA COMMERCE FOR BERLINGUETTE E.O. 12958: N/A TAGS: EAIR ECON EINV ETRD RP SUBJECT: Structural Problems Delay Manila Airport Opening REF: A) MANILA 0388 B) MANILA 0355 C) 06 MANILA 4390 D) 06 MANILA 3743 Sensitive but Unclassified - Protect Accordingly ¶1. (SBU) Summary: The Manila international airport terminal (NAIA-3),expropriated in 2002 but never opened, will remain closed indefinitely due to safety concerns from structural defects. The Government still faces legal and financial squabbles over its expropriation. Lucio Tan's Asian Emerging Dragons Corporation will pursue the right to operate the terminal if it ever does open. The terminal risks becoming another inoperative effigy of corruption and inefficiency like the Bataan Nuclear Power Plant, built twenty-four years ago and never used. Expansion of the airport at the former Clark airbase, a viable alternative to NAIA-3, is scheduled to begin this summer. End Summary. Structurally Flawed -------------- ¶2. (U) Manila's unopened international terminal (NAIA-3), mothballed after its near-completion in 2002, faces another daunting hurdle to its inauguration. Engineering consultants assessed the terminal and identified structural flaws and safety code violations that could jeopardize occupants during an earth tremor. Manila International Airport Authority General Manager Alfonso Cusi told reporters the terminal is under warranty and the Japanese contractor Takenaka is responsible for making repairs at its own expense. ¶3. (U) Takenaka, however, is involved in legal action to obtain payment from the GRP for work already completed under the contract for construction of the terminal. According to Michael Chua, the son-in-law of Lucio Tan, Chairman of Asian Emerging Dragon Corp. and Philippine Airlines (see below),Takenaka is refusing to continue work until payment has been made. Takenaka also refuses to stand behind the quality of the work already completed, claiming that it was forced by the government to subcontract to local firms and cannot guarantee their construction. Both foreign and local airlines have told emboffs that while they desperately want to move to newer and better terminal space, they will not move operations to NAIA-3 without safety and financial guarantees that the government will accept liability for any shoddy workmanship in the construction of the terminal. ¶4. (U) The structural assessment was intended to be the basis for compensating the original consortium (PIATCO) tht built the terminal under a build, operate, tranfer agreement. The government expropriated the erminal in December 2004. PIATCO is suing the GRP for fair compensation in two international arbitration courts. The cases are still pending. Evidence of compromised structural integrity arose last year, however, when a portion of the ceiling collapsed in March 2006, days before an expected trial run. According to newspaper articles, many of the beams, girders, post tension slabs, columns, and piles need reinforcement before the terminal can be safely opened. The vehicular access ramp is also unstable. Damaging Metaphor -------------- ¶5. (U) NAIA-3 has become a symbol of government ineffectiveness and corruption which stings President Arroyo and affects the investment climate here. Travelers on all airlines except Philippine Air pass through the crumbling Terminal 1 in entering the country. They then see the hulk of NAIA-3 sitting empty as they leave the airport. Business contacts say their visitors almost always ask about it, and the story they hear back becomes almost a metaphor for the reasons not to invest in the country. Partly for this reason and partly in recognition of the real need of Manila for more airport terminal capacity, opening of NAIA-3 was at the top of the list of priorities which AMCHAM and many other business organizations in Manila maintain. ¶6. (U) The GRP has made plans to open the terminal several times. Court decisions and a partial payment to PIATCO seemed to have cleared the way for a soft opening of the airport early this year. The buzz was that the terminal would be opened in time for the President's April birthday. ¶7. (U) Press Secretary and Presidential Spokesperson Ignacio Bunye told the press on March 7 that President Arroyo wants to "fast track" the critical repairs and open the terminal as soon as possible. He said opening the terminal would be a "marker for confidence, investments, and jobs" but gave no projected date for completion. Legally Contested -------------- ¶8. (U) Legal issues over who will operate the terminal if and when it opens remain. Chua told Econcouns that his father-in-law's Asian Emerging Dragons Corporation (AEDC) will continue to pursue the legal right to operate the terminal. In the mid-90's, AEDC made an unsolicited bid to construct a new airport. When the Ramos Administration held a Swiss Challenge, however, PIATCO won the contract with a lower bid. AEDC claims its original offer became an enforceable contract with the GRP when the Supreme Court voided PIATCO's contract in 2003. The case is currently before the courts. ¶9. (U) The airport at the former Clark airbase has begun to receive more attention as a viable alternative to Manila (ref C). The Clark airport authority plans to double the size of the terminal to serve two million passengers later this year. There are plans to build two more passenger terminals and a cargo facility within the next five to ten years. The Joint Foreign Chambers of Commerce released a statement on March 20 urging liberalized aviation rights at the former U.S. bases at Clark and nearby Subic Bay. -------------- Comment -------------- ¶10. (SBU) The NAIA-3 terminal begs comparison to the country's mothballed Bataan Nuclear Power Plant, which was completed in 1983 but never opened due to corruption allegations and safety concerns. Econoffs toured the terminal in January and saw the gaping hole in the ceiling, still un-repaired from the collapse last April. Clark could be a viable alternative with major expansion, especially after completion of transportation projects connecting Clark and Manila. KENNEY