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NEWS UPDATES 2 August 2010

Philippines to privatize transport projects

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The Philippines government plans to privatize the country’s newest international airport terminal and the light rail train system running along the main highway of the country’s capital.

On Saturday it was announced that the government won the a case against Philippine International Air Terminals Co. (Piatco) before the International Chamber of Commerce in Singapore.

In 2007, the Washington-based International Center for Settlement of Investment Disputes junked the compensation claim by Fraport AG, Piatco’s German partner.

NAIA 3 opened in 2008 after six years of neglect caused by a dispute among the parties that put up the facility. The airport terminal was an unsolicited build-operate-transfer (BOT) project undertaken by Asian Emerging Dragon Corp., a group of Chinese magnates, in 1994.

At present, Cebu Pacific and AirPhil Express operate in NAIA 3.

Besides the airport terminal, the government also plans to acquire the majority stake in Metro Rail Transit Corp. (MRTC) held by Land Bank of the Philippines and Development Bank of the Philippines (DBP).

The acquisition is aimed at expanding the service of Metro Rail Transit Line 3 (MRT 3).

Ownership of MRT 3 is the main stumbling block to state-run Metro Rail Transit Authority’s (MRTA) plan to acquire additional trains to ease congestion in the system.

Land Bank and DBP earlier bought 75 percent of MRT Holdings Inc.—a private consortium that owns MRTC—through Goldman Sachs for an estimated $800 million.

Philippine Bank of Communications, Bank of Commerce and United Coconut Planters Bank hold the remaining 25 percent of MRT Holdings.

“It is possible to acquire Land Bank and DBP shares on MRT3, [but] it depends on the terms of acquisition. Eventually our goal is to acquire ownership, then we can privatize it, at least [the] O&M,” the Transport and Communications Minister said.

The two state-owned lenders acquired control of MRT 3 because the government could no longer afford to subsidize the railway line’s operations.

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