Saturday, July 13, 2019

BWorld 348, Private airports and government airport authorities

* This is my article in BusinessWorld on July 11, 2019.

As argued in previous columns, I advocate integrated Public–Private Partnership (PPP) — construction then Operations and Maintenance (O&M) all done and financed by one private entity — and not hybrid PPP — construction via foreign loan or national budget, O&M by local private entity. I like the development in some provincial airports that become bigger, more modern international airports, privately owned and managed, and helping attract more foreign tourism, investments and commerce.

I saw a paper, “Airport ownership, economic regulation and financial performance” (2016) by the Airports Council International (ACI). (See Table.)

ACI made four policy recommendations:

• No “one size fits all” approach to airport ownership;
• Create economic incentives and guarantee consistency in regulatory frameworks;
• Evidence-based policy making, and
• Fostering entrepreneurship and value creation.

Good. Private ownership and management of airports is consistent with attracting more private investors and traders, local and foreign.

Among the big, modern and privately owned airports in the Philippines are the Mactan-Cebu International Airport (MCIA) and, soon, the Davao or Francisco Bangoy International Airport (FBIA).

There are just some twists here. While the international airport is privately owned for 25 or 30 years or longer (after which it will be government-owned), there are government agencies that will “control, supervise, construct, maintain, operate and provide such facilities or services…”

These agencies are the Civil Aviation Authority of the Philippines (CAAP) for other provincial airports, the MCIA Authority (MCIAA, RA 6958 enacted in July 1990) and, soon, the Davao International Airport Authority (DIAA) under SB 2168 and waiting for President Rodrigo R. Duterte’s signature to become a law.

This seems confusing because the private owners of the new international airports are supposed to have overall control and management of the passenger terminals, the runway and plane taxi bay, etc. But there are government agencies that, on top of the functions quoted above, have the power to:

“Acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport facility, or property of whatever kind and nature, whether movable or immovable… levy and collect dues, charges, fees or assessments for the use of airport premises, works, appliances, facilities or concessions, or for any service provided by the Authority…”

The implementing rules and regulations (IRR) of such laws can be complicated but must clearly delineate where a government agency, its national and local bureaucracies, can or cannot intervene, in facilities and structures that were entirely built and funded by the private sector.

While the private sector has the incentives to develop modern international airports that they will operate for two to three decades or more, local and national bureaucracies do not have similar incentives as their outlook is short-term, dependent on their appointment for six years or less by the administration in power.

Let us hope that more investors, local and foreign, will expand current small provincial airports into big and modern international airports. More accommodating, more visitors-friendly international airports are often the gateway to more foreign tourism, trade and investments into the country.

So we wish for more modern, privately owned international airports and less-interventionist airport authorities and other government agencies, local and national. We expand the wish-list to include more budget terminals charging lower terminal fees, alongside main terminals by private contractors and airport owners; more airlines competition via the amendment and liberalization of the Public Service Act; and, abolition of the travel tax. The Philippines seems to be the only country in East Asia that penalizes its own citizens for travelling abroad.

See also:

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