Brother Sergio stands tall for the Cebu oligarchy

Ben D. Kritz

Ben D. Kritz

Despite criticizing his putative political fellow traveler in Malacañang for being “a bad manager” and having a Cabinet full of “non-performing assets” who, among other things, have failed to produce anything meaningful in the once-ballyhooed Public-Private Partnership initiative, Senator Sergio Osmeña 3rd has shown a curious willingness to be his own wrench in the gears of progress. In a press conference last week, Osmeña threatened to file a suit against the Department of Transportation and Communications (DOTC) if it proceeds with awarding a bid for the P17.5-billion Mactan Cebu International Airport (MCIA) project to the consortium of Megawide and India-based GMR Infrastructure, whose winning bid was protested by the losing consortium of Filinvest and Singapore-based Changi Airports International.

At issue is an alleged conflict of interest involving Megawide’s Indian partner and Malaysia Airport Holdings Bhd. (MAHB), the foreign half of the third-place bidder First Philippines Airports Consortium. GMR and MAHB are partners in three international airports in Istanbul, Delhi, and Hyderabad, and would be partners in a fourth in the Maldives, had the island nation not undergone a political coup in 2012 that resulted in the airport project being cancelled, at least for the time being. MAHB Managing Director Tansri Bashir sits on the boards of the four GMR-MAHB airport subsidiaries and obviously played an important role in First Philippines’ bid preparation; the sour-graping Filinvest-Changi consortium has accused Bashir of being involved in the Megawide-GMR bid as well, which would be an obvious conflict of interest, specifically prohibited by the project’s bidding rules, but something which the Megawide group has denied both in public and in filings with the DOTC.

As far as can be determined from corporate filings here and in Malaysia and India, MAHB’s Bashir, indeed, does not have anything to do with GMR’s Mactan bid; he is not listed as a board member or executive within GMR or any of its various offshoots. The GMR-MAHB partnerships in other countries is by no means a secret (both companies, in fact, seem rather proud of it); and while it naturally raises some suspicions, and probably should, anyone with an Internet connection and a phone could determine within a reasonably short amount of time that there is nothing obviously conspiratorial going on between the two companies with respect to the MCIA project.

The supporters of Team Filinvest seem to sense this as well, as the complaints against the Megawide-GMR consortium have subtly shifted from the “conflict of interest” accusation to questioning the financial capacity of both companies in tag-team fashion. Filinvest has been generous in spreading insinuations that Megawide’s finances are not as sound as they appear to be, while Osmeña has questioned GMR’s circumstances based on some unfavorable reports that followed in the wake of the chaos in the Maldives; Megawide and GMR have both denied these accusations as well.

Another reason why the side of the losing bidders has backed away from the conflict of interest angle is the, perhaps, ill-considered decision by Osmeña to involve himself in the dispute in so public a manner. Filinvest is, of course, the family business of the Gotianun clan, one of Cebu’s most powerful families and, if the old rumor which has never really been proved or disproved to anyone’s satisfaction is at all true, blood relations of the Senator from Cebu through a common ancestor in the person of the reputed father of former president Sergio Osmeña. All of a sudden, the protest against the outcome of the MCIA bidding begins to look less like legitimate questioning of whether the process and the resulting deal struck by the government was actually fair and transparent, and a lot more like neighborhood taipans fuming that some upstart company has landed the biggest (and probably only) significant PPP project anyone is likely to see under the current Administration, and in their own backyard no less.

The bigger picture is that regardless of what the reality is, it has discouraging implications for investment in this country. For the sake of argument, let’s suppose there is something to the complaints being aired by the Gotianuns and their Senatorial fellow traveler, and the winning bid of the Megawide-GMR consortium is illegitimate in one way or another.

That would be yet another indictment of the DOTC, more evidence of a lack of procedural commitment and competence that has characterized the agency’s efforts ever since future presidential runner-up Manuel “Mar” Roxas 2nd was placed in charge (and according to most knowledgeable people, never actually left, despite being transferred to the Department of Interior and Local Government).

If, on the other hand, things are as they appear to be, that means the Philippines still has a long way to go to evolve beyond a very immature business and legal environment in which well-connected oligarchs can easily thwart the outcome of a conventionally-managed bidding process for their own benefit with the help of “public servants.” In an interview with Bloomberg back in January, GMR Infrastructure head Sidharath Kapur revealed that he had been warned “not to go to the Philippines” by Fraport AG, the famously-jilted German investor in the chaotic Terminal 3 project at Ninoy Aquino International Airport, and it’s starting to become clear that the advice was not just a disgruntled opinion, but a fair assessment. Obviously, the entire investment environment is in need of a comprehensive overhaul; but that is just as obviously yet another project that will have to wait until the replacement of an administration that has demonstrated no ability to even conceive of priorities, let alone manage them.


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1 Comment

  1. Hi Ben,

    Quick question:

    How many bidders/ consortiums are/were involved in the Mactan Cebu Airport project?

    Thank you