Kiss and Make Up

In 1991, the Senate ended the stay of the United States (US) military bases in the country. This was followed by the passage of Republic Act (RA) 7227, the Bases Conversion and Development Law that authorized the privatization of all these former US military bases in the country. Further, the law requires the proceeds of this scheme will fund the modernization of the Armed Forces of the Philippines (AFP). The former Camp John Hay air station in Baguio City was one of those that were privatized.

In line with privatization scheme, the Taiwanese consortium Tuntex was tasked to prepare the overall development plan for this former American military facility to attract prospective investors. Investments were expected to enhance the economic activities in the area that can lead to the eventual conversion of the place into a special economic zone wherein locators will be granted tax holidays.

In 1994, the City Council passed Resolution No. 362, series of 1994 that outlined the city’s 19 conditions for the development of the former military base covering sensitive issues. Some of these are the sourcing of the camp’s water supply, the segregation of the 14 barangays from the coverage of the CJH watershed, the payment of local fees and business permits to the local government, the preservation and protection of the environment, the remittance of the city’s 25 percent guaranteed share from the agreed lease rentals, among others. The BCDA then bidded out the ambitious development project in 1997 but the winning bidder Manuela backed out of the project after it saw serious problems arising from the failure of the government to fulfil its obligations relative to the delivery of the whole 247 hectares special economic zone and the delayed issuance of the required Environmental Compliance Certificate (ECC). The BCDA then awarded the project to the second winning bidder, the Sobrepena-owned Fil-Estate Penta Capital consortium which proceeded with implementing several projects even without the conditionalities being fully met by the government. Under the bilateral agreement between BCDA and the developer, Baguio City will be entitled to a 25 percent annual share of the lease rentals in the special economic zone to be downloaded by no less than the State corporation in the form of identified priority infrastructure projects.

In 2004, the city government used the initial P50 million share from the BCDA as its down payment for the purchase of the Baguio Convention Center from the State-owned Government Service Insurance System (GSIS) . The succeeding amortizations, however, were discontinued by succeeding officials resulting in an accumulated debt and interests of P316 million paid by the city in 2012 to GSIS.

Under the Aquino administration, invoking transparent and accountable governance, the officials of BCDA initiated moves to unilaterally evict the developer based on alleged unpaid rentals amounting to P3.3 billion further alleging the latter declared dividends for its shareholders but did not pay the accrued lease rentals to the government.
The fierce legal and publicity battle between the contending parties ended up in arbitration. The Makati-based Philippine Dispute Resolution Center ruled for the mutual restitution of the lease agreement and directed BCDA to pay the embattled developer the amount of P1.4 billion in accrued payments while declaring BCDA’s claim for a P3.3 billion payment against the developer as invalid because of obvious breach of contract by both parties. The developer then questioned before the Court of Appeals (CA) the decision of a local court that ordered its eviction, including the third party lessees. The CA ruled in favour of the developer forcing the BCDA to appeal the CA ruling before the Supreme Court. This case in now pending in the court.

We deeply appreciate the open-mindedness and common sense of the present BCDA leadership. It opened the doors for greater opportunities to develop the available areas inside the facility. BCDA president and chief executive officer Vivencio Dion is very correct when he said what is important is to maximize the development potentials of the facility to spur economic growth not only in the city but also in the region. We need practical thinking leaders like Mr. Dizon. He values the importance of consensus and compromise over tedious, expensive legal battles without setting aside the interest of the government. The fact is, only 23 percent of the supposed 18-hectare area which can be developed within the special economic zone has been developed over the past two decades.

If there is someone to be prosecuted, we believe it should be the previous BCDA officials because they deprived the city opportunities for economic growth. In fact, the government lost P4.7 billion in the said arbitration case aside from the legal and publicity expenses incurred by the State corporation at the time of the crisis.

We salute the present BCDA leadership for sending a clear message to the local government and the developer the need to settle things in a peaceful but judicious matter while awaiting the final ruling of the SC on the pending case.

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