Saturday, June 05, 2010

Handcuffing SBMA

The business page headline story that came out the other day in a major daily—about two big companies filing a complaint before the Office of the Ombudsman to ask it to halt the signing of a joint venture agreement between Subic Bay Metropolitan Authority and Harbour Centre Port Terminal, Inc. owned by the Romero family—should not come as a surprise to those who have following media reports.

The filing of the complaint before the Ombudsman to stop the deal may be a little puzzling precisely because the signing of the agreement has not yet taken place. In fact, SBMA is still in the process of getting the legal opinion of the Office of the Government Corporate Counsel on the legality of the joint venture.

But the story assailing the proposed JV is not surprising at all. Even before this particular news story came out, SBMA had already been the object of a vicious media campaign which is obviously designed to handcuff the agency and prevent it from consummating the joint venture.

Those who have been following the attacks against SBMA on the proposed agreement with HCPT for cargo handling in Subic ports should have noticed that the negative stories about the proposed deal has not touched on the most important issue: the business angle.

What is sad is that the aggressive PR campaign launched against SBMA to handcuff it is grossly misleading the public. The prevarications should be unmasked in order to let the public judge the proposed agreement on its merits.

There is a danger that the truth would be drowned by the obviously well-funded PR blitz against the deal. Media veterans are well aware that the entities funding the PR blitz are not definitely groups that we can call “small”.

First things first. The primary job and mission of SBMA is as steward of that crown jewel called the Subic Freeport. As such, it is primarily business-oriented. SBMA is always on the lookout for excellent business opportunities. By this we mean those opportunities that would expand its revenues that in turn can be used to fund further improvement and expansion. This will create more jobs and contribute to the national economy.

The SBMA is duty-bound to look for and tap such opportunities. It would be a betrayal of its mandate should it see an excellent opportunity and then look the other way, pretending that the opportunity is not there.

This is exactly what happened.

The Romeros of HCPTI came up with a proposal that promises better revenues for SBMA and an assurance that the agency would be able not only to service the foreign loans used to modernize its ports but also and earn extra income.

The HCPTI offer is obviously better business than what SBMA is getting out of the current arrangement with the group of businessmen whose PR spinners have positioned as “small port operators”. Port operators, yes. But small is definitely a debatable adjective.

The proposal of HCPTI came via what is called an “unsolicited proposal” governed by the so-called joint venture guidelines of the National Economic and Development Authority and subject to a “Swiss challenge”. The proposal was unsolicited because SBMA did not ask for it. Never asked for it. HCPTI being a business entity is always on a lookout for excellent business opportunities and as a major player in port operations in the Philippines it saw one in putting Subic as part of its integrated port operations.

Contrary to what the “small” port operators would have the public believe, SBMA did not just swallow and accept the HCPTI proposal. SBMA strictly followed the guidelines for unsolicited proposal. It negotiated for HCPTI to improve its initial offer. Part of the process is the so-called Swiss Challenge where other interested parties including consortiums are asked to submit a better offer.

Nobody did. A couple of firms from the group of the self-proclaimed “small operators” have earlier made some offers but they were inferior to the proposal of HCPTI. Another firm bought documents for the Swiss Challenge but nothing was heard from it after that. At the end of the day, no one came up with a proposal to challenge the HCPTI offer. Clearly, as far as SBMA is concerned, the HCPTI proposal is the best it has on the table. It’s a good business decision to enter into a JV with the proponent.

There are two misleading propaganda lines that the multi-million PR blitz would have the public believe.

First that the joint venture is a “midnight deal”. Farthest from the truth. The unsolicited proposal process under the NEDA guidelines takes time. It is not like the proposal was received last month and processed immediately to beat the June 30 guideline. The unsolicited proposal of HCPTI, which triggered the process, was in fact sent last year. The fact that the venture, if OGCC opinion says it legal and aboveboard, is ready for signing just as the present administration is preparing to step down is the result of the long process.

The use of the pejorative term “midnight deal” is a propaganda line. The public should be wary about this.

The second misleading propaganda line is that SBMA would lose money if it enters into a joint venture with HCPTI. The claim is that the group of “small” operators was able to remit the amount of $840,000 in 2009 which is more than the $500,000 revenue for the first year of the JV.

The first “untruth” about this claim is that the $840,000 includes their lease and rental of the SBMA warehouse facilities and not from cargo handling payments to SBMA. The leases for the warehouses operated by the complaining operators will continue and SBMA should continue earning from them.

What are covered by the proposed joint venture are just cargo handling and arrastre services.

The line about the lost revenues for SBMA peddled by the “small” operators is vicious and maliciously misleading.

What the PR operators are not telling the public is this: that their principals are operating on an arrangement that has not guaranteed share for SBMA. The agency is at the mercy of the fortune or misfortune of their operations. It is dependent on the best effort of the operators and if business is bad for them, SBMA will get little money from their operations.

Under the agreement, SBMA has an assured and guaranteed income. This means that whether or not the venture makes money, there is a fixed pre-agreed amount that HCPTI must pay to SBMA.

The total amount of money the agency is guaranteed under the proposed deal is $32 million in 25 years. Given the average remittance made by the “small” operators under the present conditional and highly contingent arrangement, it would remit a total of $16 million in $25 years.

The $16 million expected from the “small” operators would not be enough to service the Japanese loan incurred by SBMA to construct and modernize its ports. The $32 million guaranteed under the agreement would be sufficient and would mean extra income for SBMA. And the $32 million is just the minimum guarantee. If the JV makes good business as expected then SBMA would earn more.

Given the comparative figures, the business decision was easy for SBMA to make.

No comments: