R-II’s Subic plan also unravels

It seems someone has filed charges against the people involved in an alleged plot to pay port operator Reghis Romero II for his failure to finish the Smokey Mountain reclamation project, right before the Arroyo administration steps down. But that’s not the only supposed “midnight deal” involving Romero that’s in the news.

Over at the Subic Bay Metropolitan Authority, members of the corporate-style board that runs the government corporation operating the former US naval facility are in a tizzy after the Ombudsman subpoenaed them en masse for approving a deal that handed over port operations to Romero’s Harbour Centre Port Terminal Inc. And SBMA Administrator Armand Arreza, Chairman Feliciano Salonga and the members of the board also have to deal with a motion to suspend them right before they leave office because of their involvement in the allegedly anomalous project.

The Ombudsman’s intervention is a victory for the small operators of ports in Subic who have been protesting the deal with Romero, because it basically renders their “live” leases to the berthing facilities useless. Furthermore, the operators allege that Romero’s Subic proposal will fry the government in its own oil, as they say, even as the state hands over a valuable revenue stream to the businessman’s company.

Subic watchers say Arreza and his board have no one else to blame for their current predicament, since they’ve been warned about pushing the deal with Romero repeatedly in the past. Arreza himself has often said that those who want the deal scrapped can go to court, since he has no intention of backing down on it.

What, exactly, is Romero’s deal with SBMA? And why did Arreza, Salonga and the authority’s board push for its approval, despite the warnings that it may be illegal, disadvantageous to the government and one-sided in favor of this ubiquitous port operator?

As we’ve written earlier, Romero’s company entered into an agreement with SBMA to jointly develop, operate and manage the ports at Subic last Feb. 24. The joint venture agreement covers all existing ports and wharves in SBMA property at Subic, facilities that are already being run by small operators who hold 25-year leases to them.

Arreza told the small port operators that their contracts will be respected by the agreement, even if it is not clear what ports Harbour Centre will get to operate. The joint-venture agreement, after all, covers the old Naval Supply Depot, Boton, Alava, Rivera and Bravo wharfs—all of which have been given to the small operators for many years now.

The deal began when the SBMA board “accepted in principle” an unsolicited proposal from the Romero last Nov. 20 to be the exclusive operator of Subic’s ports. According to the signed joint-venture agreement, the Romeros proposed a combined fixed and variable revenue-sharing scheme with SBMA for operating the bulk, break-bulk and general cargo operations at the freeport for 25 years.

In exchange for being granted the exclusive rights to the Subic ports, the Romeros agreed not only to share revenues and pay a fixed fee but also to improve and expand the ports, provide state-of-the-art cargo handling equipment and technology infrastructure and integrate the main commercial ports for non-containerized cargo. In the first three years, the Romero company committed to invest P200 million in the ports to start the development and to meet fixed annual cargo volume traffic quotas.

As an unsolicited proposal, the HCPTI offer was opened to a “Swiss challenge” from any other party who can offer SBMA better terms. However, according to the small port operators, the authority seems to have its mind set on accepting the Romeros’ proposal, because none of the existing leaseholders have the same declared capitalization (P2 billion) and capabilities as HCPTI. In fact, a week after the SBMA board accepted the Romeros’ offer in principle, Arreza and his board threw out a similar offer made by Amerasia International Terminal Services Inc. and another local operator, Mega Subic Terminal Services Inc. for insufficiency of content and form.

But most of the other small port operators did not challenge the Romero deal, fearing that they would have to give up their rights to their leased facilities and forfeit their contracts, thereby allowing HCPTI to claim that they won the rights to all the ports and wharves fair and square. Besides, if they did challenge the proposal, they would have to waive their right to sue SBMA—which is exactly what they did before the Ombdusman.

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The subpoenas issued by the Ombudsman were based on a complaint filed before the anti-graft body by Subic port operator Amerasia, alleging bad faith on the part of SBMA when it signed the deal with Romero and issued the call for an apparently rigged Swiss challenge. Now, another port operator, Subic Seaport Terminal Inc., wants the SBMA officials and board members suspended for pushing a flawed deal that is also greatly disadvantageous to the government.

According to the new complaint, the authority “gave away SBMA’s business and/or shared its profits with Harbour Centre,” the underserving beneficiary of this largesse. By “doing nothing” and becoming the de facto middleman in the port’s operations, the complaint said, Romero’s company will both reduce government’s take and cut into the revenues already being made by the current small operators.

Furthermore, the complaint said, the SBMA officials approved the joint-venture agreement with Romero despite Harbour Centre’s failure to meet the technical and financial requirements set by the National Economic Development Authority for such deals. In particular, the complainant said, the Romero company said it would provide only 22.3 percent of the equity share in the total cost of the project (financing the rest with loans) and that it failed to pay the required security bid set by Neda’s rules in the amount of P100 million.

In other words, Romero intends to fund a P6.4-billion port modernization project with loans and tariff revenues it will collect in behalf of SBMA as the overall operator and middleman. This is truly an amazing offer, considering that there are already port operators in Subic to begin with and even if the government will have to give up its revenues to pay for a middleman that it doesn’t really need, since being the overall administrator of Subic is already SBMA’s job.

Now, what could have possessed Arreza, Salonga and the other officials of SBMA to go into a quickie agreement that would hand over all of Subic’s ports to Romero’s company? That’s what really puzzles the small port operators, who claim that Romero—despite his high-profile claims of expertise in port operations and management—is actually a greenhorn in their line of work.

In a position paper to the SBMA board last April, the small operators noted that while 85 percent of the Subic project “involves cargo handling, [which is why] HCPTI must be disqualified because it has no direct expertise in the cargo handling business. In fact, all its cargo handling requirements [in its Manila port] are subcontracted.”

Of course, Romero’s powers of persuasion are now almost the stuff of legend, beginning with his feat of convincing the Ramos administration to fund the Smokey Mountain reclamation project and continuing until he now, when he is claiming payment on top of ownership of reclaimed land where he was originally just the contractor. And if it is true that Romero was able—almost—to convince the boards of both the Home Guaranty Corp. and the National Housing Authority to see it his way in Tondo, why wouldn’t these same powers serve him in good stead in Subic, as well?

by Jojo Robles - manilastandardtoday.com

A big gamble in Subic

After so much wrangling and fault-finding, the long-overdue plan to modernize the Subic Bay port and make it at par with international standards is about to take a leap from blueprint to implementation stage.

Since the Americans left the former naval facility in Zambales with the expiration of the bases treaty in 1992, government planners have envisioned the Subic port to be a highly competitive international service and logistics center in Southeast Asia providing efficient movement of travelers, products and services.

To translate this goal into a reality, the Harbour Centre Port Terminal Inc. (HCPT) submitted an unsolicited proposal to the Subic Bay Metropolitan Authority to develop and manage parts of the former naval supply depot in the freeport.

With the HCPT’s offer, hopes have been rekindled to arrest the decline of the Subic port for the past two decades due to the failure of locators and cargo handlers to improve port facilities. They fell short of the commitment to make Subic a magnet for progress and development in Central Luzon. As a consequence of their neglect, five of Subic’s existing ports where they operate are in a state of disarray.

Before the SBMA could consider HCPT’s proposal, industry players were given the opportunity to match the company’s offer through a

“Swiss challenge” in conformity with bidding practices. SBMA Administrator Armand Arreza urged interested bidders to submit their counter-proposals not later than April 22 but no new offer was received by the Authority upon the lapse of the deadline. That means the SBMA was free to give due course to HCPT’s offer. If it has not done so yet, it is because of the existing ban on the awarding of government contracts during the election period.

Under the terms of its unsolicited proposal, the HCPT will handle port operations and invest about P6 billion for improvements and acquisition of new equipment to enhance the Subic port’s global competitiveness. This will encourage more foreign investors to come in.

The Harbour Centre commits itself to remit to SBMA a guaranteed income of $32 million over 25 years, or $1.2 million to $1.3 million a year.

The SBMA would likewise have a share of 15 to 20 percent of total revenues each year for 25 years. Part of the HCPT’s proposal is to substantially increase the volume of goods that will be traded in the Subic port which will generate bigger revenues for the SBMA. These favorable terms are a far cry from what the SBMA earns under current cargo handling operations—less than P20 million a year plus a revenue share of 10-15 percent.

Detractors have criticized the proposed agreement between SBMA by raising the specter of a monopoly of cargo handling operations in the premier port at the expense of existing companies engaged in similar services. Perhaps a more relevant question is whether it is wise and judicious to put an end to the domination of locators and cargo handlers whose neglect of the modernization needs of the Subic port has caused its stagnation.

If the existing operators find themselves being eased out, they have nobody to blame but themselves. They have not even bothered to undertake a comprehensive plan to upgrade facilities. The cargo handlers at the Boton, Rivera, Alava and Bravo ports did not feel obliged to invest part of their income for the upgrading program and transform these ports into big players in the economy. Perhaps, they have the illusion that they have a franchise to the privilege and even proprietary right in running their business at Subic. As Administrator Arreza succinctly put it: “The existing cargo operators have no exclusive rights to operate at the Subic port. If they want exclusive right, then they should submit their bids.” But as events have shown, they themselves forfeited this right by not submitting any counter-bid that would be more advantageous to the government than what the HCPT has offered.