Bulacan airport project deserves full govt support

‘Acontroversial project...” I can only shake my head when some media entities describe San Miguel corp’s P1.5trillion Bulacan Airport Project as controversial, without a clear and unequivocal explanation as to what makes it so.

My gutfeel tells me that some business groups with devious motives want to cast aspersion on the ongoing project, either out of spite or envy, by throwing all sorts of issues to derail the biggest investment the country has ever had coming from a single company. Some of our media friends are being overaccommodating in mouthing this nonsensical refrain.

The truth is that San Miguel is taking a huge risk in undertaking this project. While many businesses are explicably holding back, the company is pursuing big-ticket infrastructure projects, which will fuel economic activity despite the global financial contraction brought on by the pandemic.

One of the issues being thrown at the airport project is the decision of both houses of Congress to pass a bill granting it tax exemptions. This is not new. Since my early foray in business writing, the Philippines, through the Board of Investments (BOI), has already been offering tax incentives—tax holidays, import duty restrictions, among others—to attract foreign and local investments. I find it even weirder to see some former officials of the National Economic and Development Authority (Neda)—who themselves crafted many of the tax-incentive provisions that are in effect to this day—putting in a bad light giving tax incentives to the airport project.

Let’s do the math. Granting tax incentives to San Miguel will be more than justified. For one, the project is an unsolicited proposal, and the humongous amount of money to be poured into it may not yield the returns envisioned by its proponents. Remember that the pandemic has led to the bankruptcies of global airlines amid slow air traffic and cargo movement. Meanwhile, employment generation, through the sheer size of the investment alone, should be a welcome relief. In this time of pandemic, the country is suffering from a debilitating economic shrinkage, performing at its financial worst since World War II.

Economists see over a million direct and indirect jobs that would be generated by the project during the construction phase, and as many as 30 million jobs once the airport runs at full capacity. More importantly, the government will not be spending a single centavo for the project: no equity, no properties given, and no government loans to be availed of. San Miguel says that airport development alone is pegged at P740 billion. This will involve development of raw land and construction of facilities, (including expressways and a railway system) to make the airport easily accessible by all.

Based on my reading of Republic Act (RA) 11506, which grants the tax incentives, it is clear that the government will not bail out San Miguel for any future losses. The company assumes all financial risks and losses, without any government subsidies or guarantees.

Take note that guarantees and subsidies are different from incentives. The tax incentives to be given to the project are also for a limited time and just commensurate—as the government has determined—to the massive and unprecedented investment of San Miguel. In return, the company builds the project, generating millions of direct and indirect jobs; decongesting air and land traffic that have cost the country billions in lost opportunities; making air travel better, more efficient, more equitable, and safer for Filipinos and tourists, and ultimately, helping unlock the true economic potential of the Philippines. All these at no cost, no effort, and no risk to the government.

The naysayers argue: by not collecting taxes and duties, isn’t the government essentially giving away those amounts to the corporation?

Let’s not overlook the fact that, if San Miguel does not put up the money to build the airport, there wouldn’t be foregone taxes to begin with—enerated from a project that government invested nothing in. And clearly, there will still be no solution to our airport congestion woes since no additional runway—much less, a new terminal— will be built at NAIA and Clark any time soon, and both airports are still too far away from Metro Manila.

On the other hand, letting San Miguel build the airport—in these difficult times—and incentivizing it for doing so, would propel the growth of businesses and tourism nationwide. It will raise property values in Bulacan and even in nearby provinces. This means higher corporate income taxes and real-property taxes. Government also gets to collect income taxes from the millions of direct and indirect jobs that the airport will create. To top it all, the government gets a hefty share in the development’s income for the next 50 years. It would have none of these if the company did not invest in the construction of the airport in the first place. The development itself becomes government property at the end of the concession.

When will the tax exemptions end, and is there an “unknown competent authority” which has been tasked to declare when the company would have recovered its investments? According to the same RA 11506, it is only the Bureau of Internal Revenue (BIR) that can establish whether the initial investment has already been recovered, thus, ending all direct and indirect tax exemptions.

Another issue some critics have been harping on against the project is subsidence—or the sinking or settling of the ground surface—and rising tides that would allegedly make the airport a “white elephant” in 50 years.

The company’s engineers have put in place a long-term solution to address land subsidence caused by groundwater extraction by communities that use water pumps due to the decades-long absence of clean potable water. Geologists concede that excessive extraction of groundwater causes subsidence, primarily in the form of deep well construction and operation. In Bulacan, water sourced from deep wells would soon be a thing of the past. According to San Miguel, it has already started investing majority of the P35 billion Bulacan Bulk Water project for the construction of various infrastructure, facilities, and equipment to steadily supply 3,800 million liters per day (MLD) of clean potable water through direct connection to all the water districts in the province.

San Miguel would supply bulk water to the water districts at a cheap selling price of less than P10 per cubic meter. This affords consumers lower water bill, which will eliminate the need for deep wells. Since the Bulacan Bulk Water project sources its water from Angat Dam, the steady supply will discourage the use of pumps which will result in reduced groundwater extraction. This will definitely address the long-term subsidence issue in the province.

Environmental concerns in Bulacan are not just about groundwater. To resolve the issue about polluted upstream rivers leading to Manila Bay, San Miguel has already committed to cleaning the rivers that are part of the Marilao-meycauayan-obando River System (MMORS). The plan is to dredge, widen, and deepen these tributaries to address the risk of upstream f looding, and remove trash and silt that restrict the flow of water and harm the marine ecosystem.