ASEAN KEY DESTINATIONS
Terminal expropriation turns off investors
The biggest impediment to attracting German and other European investors to the country is the unsettled dispute over the takeover by Manila of a modern facility at the major airport here, according to Germany's ambassador to the Philippines.
The German ambassador, however, said that he remained "optimistic" that the (Aquino) administration will finally be able to close the book on the controversial $650-million (NAIA 3) to pave way for a healthier investment environment in the country for European business concerns in general.
Weber-Lortsch suggested that the involved parties go back to the negotiating table "in order to facilitate a legal, fair and timely solution for an inherited problem" that is NAIA 3, a project completed during and confiscated by the Arroyo administration.
Fraport AG, the foreign partner of Philippine International Air Terminals Co. Inc. (Piatco), is a German transport company with interests in operations of airports around the world, including Frankfurt International Airport, Cairo International Airport, Indira Gandhi International Airport, Hannover-Langenhagen Airport, Antalya Airport and Xi'an Xianyang International Airport.
Piatco was the consortium contracted to build and operate NAIA 3 before then President Gloria Arroyo ordered the expropriation of NAIA 3 in 2004.
The Arroyo administration nullified the government's contract with Piatco, citing alleged irregularities in the deal, which was sealed during the Estrada administration.
Weber-Lortsch said that since his arrival in Manila in 2007, he has committed himself to "bring business and jobs to the Philippines."
He earlier admitted that the NAIA 3 case has adversely affected relations between Manila and Berlin.
On December 23, 2010, or after three years of consideration, the International Center for Settlement of Investment Disputes (ICSID) in Washington reinstated Fraport's "right to file an arbitration/compensation case against the Philippine government."
The Washington-based ICSID in 2007 ruled that it has no jurisdiction over Fraport's complaint that it was not compensated by the Philippine government after the confiscation of NAIA 3 because the German firm's involvement in the Manila project was not protected under the German-Philippines Investment Guarantee Treaty and that the Anti-Dummy Law was violated.
The Anti-Dummy Law prohibits foreign companies from fully owning a business operating in the Philippines.
Under this law, any corporation or association that operates in the country must be 60 percent owned by Filipino citizens.
Piatco is allegedly wholly owned by Fraport AG with Security Bank and Trust Co., Equitable Banking Corp., Chuah Hup Holdings Co. and Philippine Airport Ground Services, a group of Filipino-Chinese businessmen.
But with the recent ruling of ICSID and the Supreme Court's decision that ordered Manila to fully compensate Piatco and its investors, Weber-Lortsch said that "present operations and tenant agreements on NAIA 3 are considered illegal, as the parties involved including the German government reserve all rights and waive none."
NAIA 3 became partly operational for some domestic and international flights in 2008.
The Aquino administration, however, looks forward to wholly operating the terminal this year, saying that the issue is just a matter of how much the government must pay "previous operators."
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