San Miguel gets 50-year franchise for Airport City project in Bulacan as bill lapses into law

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Metro Manila (CNN Philippines, January 4) — San Miguel Corporation bagged a 50-year franchise to build and operate a new international airport in Bulacan after President Rodrigo Duterte skipped signing the measure into law on time.

House Bill 7507 lapsed into law as Republic Act No. 11506 on December 20, 2020, records from the House of Representatives website showed, after Duterte failed to sign the bill within the 30-day period given for Malacañang's review.

The measure grants San Miguel Aerocity Inc. a franchise to construct, develop, operate and maintain the New Manila International Airport in Bulacan, which is seen to cater to travelers from northern and central Luzon. It is also located near the recently upgraded Clark International Airport in Pampanga.

San Miguel bagged the ₱736-billion project in August 2019 following an unsolicited proposal it submitted to the Department of Transportation. The airport will have four runways for domestic and international flights, which should cater to up to 200 million passengers yearly.

The conglomerate run by businessman Ramon Ang will build from scratch the planned 2,500-hectare aerocity, which is eyed to decongest the Ninoy Aquino International Airport once operational in a few years. It will be built in Bulakan town spanning Barangays Taliptip and Bambang –– flood-prone areas which SMC assured will be addressed through engineering design.

READ: SMC taps Dutch firm for Bulacan airport project preparation

San Miguel Aerocity will own and operate the new airport for 50 years and will remit revenues to the government once profits are generated. The listed firm can also build, sublease, or collect income from infrastructure such as toll roads, railways, mass transport systems, hotels, warehouses, hangars, aircraft service facilities, and other developments "convenient or essential" to running an airport.

All developments must be aligned with environmental and sustainability standards and should be safe and inclusive especially for residents and the local government, the law read.

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The facility will eventually be turned over to the national government after the franchise period.

SMC will enjoy tax breaks during the construction period, which will last for a maximum of 10 years. This means that the conglomerate will not need to pay income taxes, value-added taxes, percentage taxes, excise taxes, documentary stamp taxes, customs duties and tariffs, as well as property taxes on land, buildings, and personal property.

SMC will also be exempt from paying business taxes, franchise taxes, and supervision fees collected by any national or local government authority. In turn, it must remit profits to the national government worth 12% of its internal rate of return per year once the Bureau of Internal Revenue deems that SMC has fully recovered the investment cost.

READ: Soon-to-rise ₱735-billion Bulacan airport project not a tax burden, says think tank

At times of war, rebellion, public peril, calamity, or "disturbance of peace and order," the law grants the President the power to temporarily take over and operate the airport.

SMC is given one year from the effectivity of the law to start building the Airport City and start commercial operations within the next 12 years. It must pay a cash bond to the Civil Aviation Authority of the Philippines, which will not be returned if the private firm fails to meet the conditions set by the franchise. 

The books, accounts, and gross receipts related to the aerocity project must be submitted to the Commission on Audit. The company is also told to go public by offering at least 20% of shares to other investors.

SMC is also required to submit an annual report to Congress regarding its compliance with the terms of the franchise. Failure to do so will merit a ₱1 million fine per working day of delay or non-submission to Congress. Other penalties may be imposed by CAAP.

This privately-funded project is part of the Duterte government's flagship list of 104 projects under the "Build, Build, Build" program.