The sell-out of the Iloilo Convention Center (Part I)

Just as I expected, the grossly-overpriced construction cost of the Iloilo Convention Center scared away potential private-sector operators, including the Megaworld Corporation, forcing the Tourism Industry and Enterprise Zone Authority (TIEZA) to literally offer the P750-million facility touted as “world-class” at a basement price just so it could find a willing management contractor.

This came out just last week in a letter sent to me over the weekend by Jethro Nicolas F. Lozada, Assistant Chief Operating Officer, Asset Management Sector of TIEZA. Mr. Lozada wrote this letter in reply to an email I sent to TIEZA more than a month ago inquiring how on earth did TIEZA come up with an asset valuation for the ICC for only P330 million in the terms of reference (TOR) for the public bidding for the lease, operate and manage (LOM) contract.

As a result of this desperation to turn over the ICC to a private management operator, TIEZA was also forced to sign a contract with Premier Islands Management Corp. to pay only a measly P74,054,268 over a period of TWENTY-FIVE (25) years. On average, TIEZA will be paid only P2,962,170.72 annually. On a monthly basis, that’s equivalent to P246,847.56.

PIMC is owned by Alfonso Tan, owner of the Hotel del Rio where Drilon always stays when he is n Iloilo, and a big contractor who has cornered many of his mega-projects in Iloilo. They are close friends.

For such a huge public investment, mostly from the Disbursement Acceleration Program (DAP) through facilitation by Senator Franklin Drilon, this amount is peanuts, a clear give-away, a sell-out of taxpayers’ money. The return on investment (ROI) on the public funds wasted on the project is not even 10% over a period of 25 years. The average period for payback, defined as the number of years to recover the initial capital outlay, for buildings and similar commercial structures is four (4) years.

How did this happen?

First, the total capital outlay for the ICC was outrageously high. A convention center to be feasible must only cost in the vicinity of P200 million. Which was precisely what was originally pegged in the Memorandum of Agreement (MOA) between Megaworld Corporation and the Department of Tourism (DOT).

As revealed by TIEZA’s Lozada, “TIEZA in its first two attempts to privatize the operation and management of ICC tried to recover the total expenditure amounting to about 750M, which resulted in two failed biddings because bidders cannot commit to the financial requirements of TIEZA.”

Lozada added that the two failed biddings forced TIEZA to revise the financial requirements. “As the only property for privatization in Tranche 2, it was marketed more extensively than the first two attempts, but still resulted in a failed bidding,” he wrote in the letter dated March 22, 2017.

Confronted with this situation, TIEZA had to bring down the total construction and development cost as much as possible. It had to scrap key components of the ICC that were not yet implemented. This was worth P88 million. TIEZA had to lower the minimum bid.

On January 15, 2015, then DOT Secretary Ramon Jimenez manifested before the TIEZA Board “that DPWH was not really interested in recovering their expenditures and that there is no obligation for TIEZA to recover its share.” The “share” of DPWH at that point was P332 million from DAP which was infused into the project by Drilon.

“TIEZA, in the end, still decided to recover its 330M expenditure on ICC, while the total expenditure by the DPWH, primarily for the purpose of development and construction of the ICC, was excluded upon the decision of the TIEZA Board as suggested by the DPWH Secretary,” Lozada wrote.

Interestingly, the TOR for the last public bidding which was eventually won by Premier Islands Management Corp. put the minimum annual fixed revenue at 1% of the asset valuation. TIEZA put the asset valuation at P330,000,000, which means that the annual fixed revenue, or rental payment, should be P3,300,000. The contract awarded to Premier Islands Management Corp., however, fixed the amount at P1.2 million for the first three years, escalating periodically. At its highest, the annual fixed revenue on the 25th year is P1.772 milion.

Not only did TIEZA undervalue the asset that is the ICC; it also under-priced it in violation of its own TOR!

At that price, store space in the city’s big malls come a lot cheaper than what Premier Islands Management Corp. is paying TIEZA. This is damning evidence of the sell-out of the ICC, for which P662 millon in total public funds were spent, at the behest of Drilon! Of course, TIEZA had no choice but dump the project even at such a big loss. It was only forced upon the agency by Drilon. It had no hand in the inflation of the project cost which was originally set at P200 million.

(To be continued)

About Manuel "Boy" Mejorada
Manuel "Boy" Mejorada is a journalist and social media activist. A former Iloilo provincial administrator, he is now waging a crusade against corruption and narco-politics.

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