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
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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
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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
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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.

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Comment
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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