“Foreign (investors) have not come in ….The risk is bigger not on the market side. The risk that they are worried about is Government.”
by Ducky Paredes
We all support any move to institutionalize public-private partnerships (PPPs) as the game-changer that could attract more and bigger foreign investors into the country.
Foreign investors see the government’s ability to deliver on project terms as the biggest uncertainty, according to executive director Manolito Madrasto of the Philippine Constructors Association Inc. “Foreign (investors) have not come in. The risk is bigger not on the market side. The risk that they are worried about is Government,” he says.
The elusive, hoped-for rush of foreign direct investments (FDIs) will probably stay away for so long as there are the wrong bureaucrats and there are state-run firms engaged in the odd business of spooking investors by screwing private partner-developers in the government’s special economic zones (SEZs).
The systematic and relentless manner by which the BCDA, on Arnel Casanova’s watch, tightened the screws on the Camp John Hay Development Corp. (CJHDevCo) in Baguio City and SM Land Inc. (SMLI) in Taguig’s Bonifacio Global City (BGC)will drive investors away.
Casanova even outdid himself at Camp John Hay (CJH) this month following the Feb. 11 decision by the Philippine Dispute Resolution Center Inc. (PDRCI) to (1) rescind the original CJH lease accord, (2) order the BCDA to return P1.42 billion in rentals thus far paid by its lessee, CJHDevCo, and (3) order CJHDevCo.) to return to BCDA its leased 247-hectare property.
After applying strong-arm tactics against CJHDevCo for several years running—topped by an aborted government attempt to forcibly take over the leased property in 2012 and another one last month—Casanova and BCDA have, in the aftermath of the Feb. 11 ruling, started bullying sub-locators, concessionaires and lot owners who had in good faith acquired 50-year leases on properties at what has been transformed by its private developer into the No. 1 eco-tourism destination in the North.
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In their latest post-PDRCI statement, Casanova and BCDA legal services chief Peter Paul Flores said BCDA will not honor the sub-lease agreements of CJHDevCo since BCDA was never privy to these transactions. They, tell the the concerned sub-locators and other lease-contract holders to instead run after their lessor, CJHDevCo..
This is the latest silly and stupid of Casanova and BCDA. The truth is that neither BCDA nor Casanova have the power nor the authority to bully the sub-locators, concessionaires and lot owners, let alone cancel their legitimate sub-lease contracts with CJHDevCo.
In fact, Casanova and BCDA are not even in a position to order CJHDevCo to vacate its leased CJH property until:
The Writ of Execution has been issued by the Baguio City Regional Trial Court (RTC) affirming the rescission of the lease agreement as ordered last Feb. 11 by the PDRCI; and
BCDA has refunded the money reward of P1.42 billion to CJHDevCo as so ordered by the PDRCI.
Until such time that the Baguio RTC affirms the PDRCI ruling and BCDA settles its P1.42-billion refund, CJHDevCo shall continue under the law to exercise possession, control and management of CJH to maintain peace and order, assure the safety of residents, and enable its sub-locators and sub-lessees to conduct their business as usual.
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And even if both these conditions are met, Casanova and BCDA still cannot run after the sub-locators, concessionaires and lot owners because, according to CJHDevCo:
The BCDA simply cannot alter any part of the lease contracts for any and all properties leased by CJHDevco to third parties;
Homes, condotels and Golf Club were all issued building permits by the BCDA itself, through its wholly-owned subsidiary, the John Hay Management Corporation (JHMC).
BCDA consented to all sub-leases within CJH when it expressly gave CJHDevCo the right to sub-lease various areas;.
BCDA is likewise aware that the various properties were sublet to third parties in good faith.
In fact, BCDA is in possession of the various contracts covering these properties and has never raised any objection to them;
These sub-lease holders enjoy 50-year rights because from the very beginning, BCDA committed to 25-year contracts renewable for another 25 years at CJHDevCo’s sole option.
This makes third-party lease contracts good until October 2046;
Thus,, all third-party contracts in Camp John Hay were never a point of contention of PDRCI’s Arbitration Tribunal;
Article 1385 of the Civil Code of the Philippines states that an order for “mutual restitution” cannot include properties currently in the possession of third persons who have acted in good faith in acquiring them; and
CJHDevCo has assures all third-party sub-lease holders that the firm will stand by them and protect their rights and interests under their contracts, and will make available legal counsel for this purpose if and when needed.
During the public affairs show Headstart on ANC, CJHDevCo executive vice president-chief operating officer (EVP-COO) Alfredo R. Yñiguez III said that BCDA officials couldn’t claim to be clueless on the details of the third-party lease agreements, including their validity for 50 years and not just for 25 years, because:
BCDA has four members in the CJHDevCo Board of Directors, all of whom naturally had access to all information, documents and contracts pertaining to CJH; and
BCDA officials were aware from the start that the contracts were bid out as 50-year leasehold accords—25 years renewable for another 25 years at CJHDevCo’s sole option—because BCDA in fact owns five (5) log cabins and 26 condotel units, including those at two hotels (the Forest Lodge and The Manor).
There are on record 118 business enterprises like business process outsourcing (BPO) firms, restaurants and retail shops along with 85 residential buildings owned by private sub-lessees at the CJHSEZ, according to JHMC president-CEO Jamie Eloise Agbayani.
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Question: What went wrong with CJH when it has amazingly been turned in less than two decades into a world-class eco-tourism hub at the country’s summer capital?
And why would its horror story be the classic case of how and why, despite the country’s successive credit-rating upgrades and the proposed passage of business-friendly come-ons like the draft PPP bill, big-time foreign investors would rather go to, say, Vietnam or Thailand, than risk their money in PPP or other big-ticket Philippine ventures?
It is because the CJH story—as what Yñiguez has so aptly described on the ANC show—is “an example of a PPP gone bad.”
For Yñiguez, the whole problem boils down to a “relationship issue” between the lessor and lessee.
For those who have closely followed the long-running feud between the BCDA and CJHDevco over the John Hay special economic zone (JHSEZ), what Yñiguez seems to be saying is this:
This relationship issue has sabotaged CJH because Casanova and BCDA made it a priority to eject CJHDevCo over and above the far greater good of transforming the erstwhile camp into a PPP showcase, in full support of the host city of Baguio and the national government’s long-term investment program for both foreign and local business groups.
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Lawmakers are also fed up with Casanova’s bully tactics against CJHDevCo and, now, against the CJH sub-locators and concessionaires that two of them—Reps. Jonathan dela Cruz and Winston Castelo—are urging Congress to investigate BCDA’s mismanagement of the JHSEZ and the reverse privatization that Casanova wants to implement following the PDRCI’s rescission of the agency’s lease accord with CJHDevCo.
In House Resolution No. 1936, Castelo wants the House special committees on bases development and on national defense to jointly look into the lapses committed by the BCDA that resulted in contract breaches in its lease agreement with CJHDevCo , notably the agency’s failure to establish the One-Stop Action Center (OSAC).
In a separate privilege similarly seeking a House investigation, Dela Cruz said the questionable acts of Casanova in mishandling CJH has a “deleterious” effect on the modernization program of the Armed Forces of the Philippines (AFP), which is supposed to get 50% of lease revenues under the bases conversion law.
“From the time he assumed office in 2010, Casanova made it a point to make life harder for the Sobrepeña Group even to the point of sacrificing the development of Camp John Hay and the attendant consequences thereof is beyond question,” Dela Cruz said. “His highly publicized efforts to grind the Sobrepeñas even came to a point where no less than Baguio City Mayor Mauricio Domogan had to intervene at the last minute to ensure the opening of one of the core CJHDevCo projects—the Forest Lodge hotel—at the appointed time.”
The government’s PPP has “gone haywire resulting from the misguided, misplaced and high-handed management style of the current BCDA leadership,” he said.
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Casanova, who seems to have belligerence embedded in his DNA, has reason to be mad about the outcome of the arbitration case because although the PDRCI has directed CJHDevCo to turn over the leased property plus all physical improvements on it, it at the same ordered the BCDA to return the P1.42 billion in rentals thus far paid by its lessee from the time their original lease agreement was sealed in 1999.
Worse for Casanova, the PDRCI threw out BCDA’s contention that CJHDevCo owed P3.3 billion in overdue rentals, and found BCDA guilty of contract breach in failing to put up the OSAC—as it had committed in one of the RMOAs—that was supposed to speed up the issuance of business permits of the private developer and its sub-locators and concessionaires.
Yñiguez said during the ANC program that PDRCI’s decision vindicated CJHDevCo’s position that it owed nothing to BCDA in back rentals, and ) that its operations were hobbled by the BCDA’s failure to deliver on its RMOA commitment to establish the OSAC.
As noted by Yñiguez, only 18 hectares of the 247 hectares leased by CJHDevCo from BCDA had a “developable footprint,” and the private firm had managed to develop only four hectares of the 18 hectares, primarily because of the lack of business permits to clear the way to the commercial development of the remaining 14 hectares of “developable” lots.
There are 15 existing projects, including the CJH Suites, requiring various permits that the promised OSAC was supposed to process in a month’s time but which remain pending.
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In a separate statement, CJHDevCo chairman Robert John Sobrepeña said: “We are pleased and happy with the decision of the PDRCI…and we are awaiting our lawyers’ advise on its implementation.
“We feel vindicated by the Arbitration Tribunal in upholding our position that CJHDevCo does not owe any P3.3 billion back rentals to the BCDA,” he said. “Instead, it was the finding of the Tribunal that it is BCDA which now owes us P1.42 billion as reimbursement for all our rental payments.
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What is truly unfortunate is while the BCDA has repeatedly transgressed the MOA/RMOAs to its private partner’s detriment, CJHDevCo has continued to act in good faith all these years—in unequivocal support of the government’s public-private partnership program—in paying P1.4 billion in rentals and investing some P5 billion in various CJH facilities and other projects.
As of 2012, CJHDevco already completed 90 construction projects and was finishing another nine (9) projects in its leased area.
These 90 completed projects include the Camp John Manor Hotel, Golf Clubhouse, CAP Convention Center, luxury log homes and forest cabins, a new main gate, a filling station of the Eco-Village, and two buildings of the Ayala Technohub.
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