A $3-BILLION infrastructure project in the bustling Clark Freeport Zone in Pampanga province can now proceed without delay, after the Court of Appeals nullified an order from a lower court that had barred the project owners from entering the project site. This project involves a 50-year lease agreement that the Clark International Airport Corp. signed with owner Global Gateway Development Corp. (GGDC) for the development of the 177-hectare Global Gateway Logistics City (GGLC).
This is good news for the government, which has come under fire for the very slow turnover of crucial infrastructure projects. Logistics City, whose corporate vehicle is, in turn, owned by Kuwait and other Gulf countries, has set the construction of the 150-bed The Medical City to be completed by the end of 2014, ahead of the Asia-Pacific Economic Cooperation conference next year. Five other buildings, each having between 10 and 12 floors, are set to be constructed, as well, within the vicinity of the hospital.
As conceived, the project, formally called the Sabah Al-Ahmad Global Gateway Logistics City, is a master-planned “aerotropolis” in the former United States Air Force base. With plans to move Clark International Airport to another location, the GGLC project—which is expected to play a great supporting role to the airport once it is completed—is now gaining traction, especially in light of the need to decongest Metro Manila, which is now bursting at the seams because of unplanned urban development.
Beyond this, the economic benefits of the project are predicted to be huge once it is completed, and it could possibly resolve the issue of economic-growth exclusion, as far as the provinces of Pampanga and Tarlac are concerned. According to GGDC President Mark Williams, the GGLC would create 300,000 jobs and an annual payroll of $600 million. Also, about 5.8 million square meters of floor space are expected to be built within the logistics hub.
Williams vowed that the five buildings to be constructed after The Medical City will be completed by the end of 2015. The total cost for the buildings’ construction is $150 million. So far, the firm has spent $100 million for the project, which was delayed by its dispute with a contractor, whose services was terminated. Under the agreement signed between GGDC and that contractor, Peregrine Development International, any dispute is subject to arbitration.
The total investment commitment for Logistics City, whose lease agreement was signed on July 16, 2008, is $3 billion, an amount that could produce a host of economic benefits that would trickle down to the bottom of the socioeconomic pyramid in the region. The tourism potential of the area is also seen to boost not just trade, but also entrepreneurship, and this could translate into more economic benefits, such as the entry of other investments from the oil-rich Gulf countries.
In fact, GGDC was set up by the so-called The Port Fund, a private equity managed by KGL Investment Co., which is made up of government entities in Kuwait and other Gulf countries. The fund—which has diversified into the emerging markets, which the Philippines is one—has provided advisory services to more than 15 infra-logistics transactions in the Middle East, North Africa and Asia.
The fund’s entry into the Philippines via Logistics City, then, could pave the way for the entry of other foreign direct investments (FDI) from the Middle East. This is where our government could anchor its wooing of investments for its various infrastructure projects. So far, the Philippines has been trailing Indonesia in terms of FDI. Indonesia accounts for over $30 billion in investments, compared with the Philippines’s $9 billion.
An economic growth that is underpinned by investments would partly resolve the economic-growth exclusion problem. The exclusion of the poor from the economic growth posted by the country in the past five years has been the subject of negative commentaries. The earlier rise in GDP has relied mainly on consumption, which does not result in a recurring growth trajectory. An investment-led growth, though, would prove substantial and meaningful, as it would positively affect a lot of people, including the poor.
This is the reason for the snickering salvos from economists who twit the government for its failure to arrest the increase in unemployment. About one in five is unemployed, effectively negating the robust economic growth that the government is boasting of. This unemployment figure is even said to be false, as the definition of the unemployed has been altered to include those who do not want to seek a job.
Thus, the government has to make a pitch to other nations for their FDI, especially with the expected decline in interest from China, thanks to the ongoing territorial disputes in the West Philippine Sea (South China Sea). For starters, it could exploit the emerging aerotropolis in Clark to come up with an investment forum that would invite businessmen and other equity funds in the Middle East to showcase the Philippines as an investment destination.
E-mail: hugagni@yahoo.com.