POTENTIAL growth of the Clark Freeport Zone in Pampanga is being stalled because of a dispute surrounding the Global Gateway Logistics City (GGLC) project, a project developer warned on Thursday.
At the same time, prime contractor and developer Peregrine Development International (Peregrine) also said that over 1,000 direct and indirect jobs have been affected by the conflict.
“This dispute has caused a very real and serious impact to the local community at Metro Clark with hundreds of jobs lost and many subcontractors, suppliers and vendors not being paid,” Peregrine said in a statement.
The firm said that on June 3, all work on the GGLC project in the Clark Freeport Zone, including construction of the new Medical City hospital, was suspended indefinitely.
Completion of the hospital, which is expected to be ready for Clark’s hosting of one of the meetings during the 2015 Asia Pacific Economic Cooperation (APEC) Summit, is also now in serious jeopardy.
The trouble stemmed from a unilateral decision by GGLC to remove all project development funds from a working capital account (WCA) used by Peregrine for project development and construction.
Peregrine said GGLC has withdrawn all the funds from the account and refused to replenish it, in effect shutting down the WCA.
The developer questioned the GGLC’s move, saying that these funds had been previously planned, budgeted and approved to pay vendors, suppliers and employees, including work on the hospital.
Peregrine conceived the project in 2006 after signing an agreement with Clark Development Corp. (CDC) to develop the site.
Peregrine then completed environmental and land use studies and developed a conceptual master plan to create a modern aviation-oriented logistics and business park adjacent to the Clark airport, making it the country’s first aerotropolis, or airport city.
It then sought out third-party financing, which led to a Kuwaiti investor agreeing to finance and fund the development.
The rights of the two parties conform to what is called an Engineering, Procurement and Construction Management (EPCM) agreement. It is the EPCM agreement that is in dispute, which was further worsened when the Kuwait entity removed all means to pay for work performed.
Because of this, Peregrine was constrained to resort to the courts and was granted a 72-hour temporary restraining order (TRO) on June 10, which was later extended for another 17 days.
The TRO mandated GGDC to cease with implementation of the termination, fund the WCA account, and continue to maintain the status quo until the arbitration process in Singapore is completed.
GGDC filed the arbitration case in Singapore and filed an appeal at the
Court of Appeals (CA) regarding the TRO. Despite the TRO, Peregrine said GGDC continued to refuse to fund the project and has made attempts to retake the project site.
This prompted Peregrine to file an urgent petition for contempt against GGDC.
On June 27, a writ of preliminary injunction against GGDC was issued by the court, which effectively directed GGDC to “respect the terms of the EPCM agreement and continue to fund the GGLC project throughout the duration of the dispute.”
However, GGDC refused to abide by the writ. Peregrine said GGDC has again committed to accelerate funding and development of its project, this time committing $150 million, to finish five office towers with a gross floor area of 145,000 square meters, a retail and gas plaza, and a hotel and serviced apartment complex by the end of 2015, creating employment opportunities for more than 15,000 Filipinos from the region.
“The project, while brilliantly conceived by Peregrine and has gained both national and international attention, has suffered from the inability to adequately fund the pace of development required,” the developer said.