VZCZCXYZ0009
OO RUEHWEB

DE RUEHML #0969/01 0850607
ZNR UUUUU ZZH
O 260607Z MAR 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5826
INFO RULSDMK/DEPT OF TRANSPORTATION WASHDC IMMEDIATE
RUCPDOC/USDOC WASHDC IMMEDIATE
RHMFIUU/TSA WASHINGTON DC IMMEDIATE
RHMCSUU/FAA NATIONAL HQ WASHDC IMMEDIATE
RUEHKO/AMEMBASSY TOKYO IMMEDIATE 3147

UNCLAS MANILA 000969 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EAP/MTS AND EB/TRA 
TOKYO FOR FAA 
COMMERCE FOR BERLINGUETTE 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EINV ETRD RP
SUBJECT: Structural Problems Delay Manila Airport Opening 
 
REF:  A) MANILA 0388 B) MANILA 0355 
       C) 06 MANILA 4390 D) 06 MANILA 3743 
 
Sensitive but Unclassified - Protect Accordingly 
 
¶1.  (SBU) Summary:  The Manila international airport terminal 
(NAIA-3), expropriated in 2002 but never opened, will remain closed 
indefinitely due to safety concerns from structural defects.  The 
Government still faces legal and financial squabbles over its 
expropriation.  Lucio Tan's Asian Emerging Dragons Corporation will 
pursue the right to operate the terminal if it ever does open.  The 
terminal risks becoming another inoperative effigy of corruption and 
inefficiency like the Bataan Nuclear Power Plant, built twenty-four 
years ago and never used.  Expansion of the airport at the former 
Clark airbase, a viable alternative to NAIA-3, is scheduled to begin 
this summer.  End Summary. 
 
Structurally Flawed 
------------------- 
 
¶2.  (U)  Manila's unopened international terminal (NAIA-3), 
mothballed after its near-completion in 2002, faces another daunting 
hurdle to its inauguration.  Engineering consultants assessed the 
terminal and identified structural flaws and safety code violations 
that could jeopardize occupants during an earth tremor.  Manila 
International Airport Authority General Manager Alfonso Cusi told 
reporters the terminal is under warranty and the Japanese contractor 
Takenaka is responsible for making repairs at its own expense. 
 
¶3.  (U)  Takenaka, however, is involved in legal action to obtain 
payment from the GRP for work already completed under the contract 
for construction of the terminal.  According to Michael Chua, the 
son-in-law of Lucio Tan, Chairman of Asian Emerging Dragon Corp. and 
Philippine Airlines (see below), Takenaka is refusing to continue 
work until payment has been made.  Takenaka also refuses to stand 
behind the quality of the work already completed, claiming that it 
was forced by the government to subcontract to local firms and 
cannot guarantee their construction.  Both foreign and local 
airlines have told emboffs that while they desperately want to move 
to newer and better terminal space, they will not move operations to 
NAIA-3 without safety and financial guarantees that the government 
will accept liability for any shoddy workmanship in the construction 
of the terminal. 
 
¶4.  (U)  The structural assessment was intended to be the basis for 
compensating the original consortium (PIATCO) tht built the 
terminal under a build, operate, tranfer agreement.  The government 
expropriated the erminal in December 2004.  PIATCO is suing the GRP 
for fair compensation in two international arbitration courts.  The 
cases are still pending.  Evidence of compromised structural 
integrity arose last year, however, when a portion of the ceiling 
collapsed in March 2006, days before an expected trial run. 
According to newspaper articles, many of the beams, girders, post 
tension slabs, columns, and piles need reinforcement before the 
terminal can be safely opened.  The vehicular access ramp is also 
unstable. 
 
Damaging Metaphor 
----------------- 
 
¶5.  (U)  NAIA-3 has become a symbol of government ineffectiveness 
and corruption which stings President Arroyo and affects the 
investment climate here.  Travelers on all airlines except 
Philippine Air pass through the crumbling Terminal 1 in entering the 
country.  They then see the hulk of NAIA-3 sitting empty as they 
leave the airport.  Business contacts say their visitors almost 
always ask about it, and the story they hear back becomes almost a 
metaphor for the reasons not to invest in the country.  Partly for 
this reason and partly in recognition of the real need of Manila for 
more airport terminal capacity, opening of NAIA-3 was at the top of 
the list of priorities which AMCHAM and many other business 
organizations in Manila maintain. 
 
¶6.  (U) The GRP has made plans to open the terminal several times. 
Court decisions and a partial payment to PIATCO seemed to have 
cleared the way for a soft opening of the airport early this year. 
The buzz was that the terminal would be opened in time for the 
President's April birthday. 
 
¶7.  (U) Press Secretary and Presidential Spokesperson Ignacio Bunye 
told the press on March 7 that President Arroyo wants to "fast 
track" the critical repairs and open the terminal as soon as 
possible.  He said opening the terminal would be a "marker for 
confidence, investments, and jobs" but gave no projected date for 
completion. 
 
Legally Contested 
----------------- 
 
¶8.  (U)  Legal issues over who will operate the terminal if and when 
it opens remain.  Chua told Econcouns that his father-in-law's Asian 
Emerging Dragons Corporation (AEDC) will continue to pursue the 
legal right to operate the terminal.  In the mid-90's, AEDC made an 
unsolicited bid to construct a new airport.  When the Ramos 
Administration held a Swiss Challenge, however, PIATCO won the 
contract with a lower bid.  AEDC claims its original offer became an 
enforceable contract with the GRP when the Supreme Court voided 
PIATCO's contract in 2003.  The case is currently before the courts. 
 
 
¶9.  (U)  The airport at the former Clark airbase has begun to 
receive more attention as a viable alternative to Manila (ref C). 
The Clark airport authority plans to double the size of the terminal 
to serve two million passengers later this year.  There are plans to 
build two more passenger terminals and a cargo facility within the 
next five to ten years.  The Joint Foreign Chambers of Commerce 
released a statement on March 20 urging liberalized aviation rights 
at the former U.S. bases at Clark and nearby Subic Bay. 
 
------- 
Comment 
------- 
 
¶10.  (SBU)  The NAIA-3 terminal begs comparison to the country's 
mothballed Bataan Nuclear Power Plant, which was completed in 1983 
but never opened due to corruption allegations and safety concerns. 
Econoffs toured the terminal in January and saw the gaping hole in 
the ceiling, still un-repaired from the collapse last April.  Clark 
could be a viable alternative with major expansion, especially after 
completion of transportation projects connecting Clark and Manila. 
 
 
KENNEY