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Legal woes hound Skyway 3 project

July 26, 2019

Second of two parts

SHORTLY after the Metro Manila Skyway Stage 3 project was launched, it encountered a number of obstacles that threw its ambitious construction timeline in disarray and caused costs to soar.

The project, which was described as 60 percent complete as of May by the Public-Private Partnership (PPP) Center, has been beset with a cycle of problems common to many large-scale infrastructure projects. Delays in obtaining rights-of-way led to construction delays, which alone can result in some penalty and higher than estimated costs to finally secure rights-of-way.

Motorists pass through a portion of the Skyway 3 project that was opened to the public on July 22. CONTRIBUTED PHOTO

Even though the 14.8-kilometer elevated highway follows the route of major surface streets along much of its length, right-of-way disputes in some locations did delay the Skyway project. In one instance, an entire section of the Skyway had to be redesigned and shifted to a different route to avoid the area around the Polytechnic University of the Philippines campus, adding months of delay.

Thus what began as a P26.5-billion project with an expected completion date of mid-2016 had become a P37.43-billion project by the time it was supposed to be finished.

In February 2019, San Miguel Corp’s Deputy Project Manager for the Skyway Stage 3 provided an estimated completion date of December this year, but disclosed that the cost has now ballooned to P46 billion. An update from the company on July 5 said the project was expected to be “90 to 95 percent complete” by Christmas, and would be opened to the public in the first quarter of 2020.

Right-of-way issues and technical difficulties such as rerouting power and water lines were not the only reasons the Skyway project is at least three and a half years overdue and nearly P20 billion more expensive. A long-running dispute between the two key joint venture partners in the project — the Philippines’ San Miguel Holdings Corp. (SMHC) and Indonesia’s Citra Lamtoro Gung Persada (CLGP), a conglomerate controlled by the eldest daughter of the late dictator Suharto — has also cast doubts on the future of the badly needed highway.

Serious graft allegations

The Citra Group has been involved in the Philippine toll road business since 1995 when it formed a joint venture with the Philippine National Construction Corp. (PNCC) and SMHC called the Citra Metro Manila Tollway Corp. (CMMTC). The president of CMMTC is Indonesian businessman Shadik Wahono, who is generally understood to be the operative for Suharto’s daughter Siti Hardiyanti Rukmana, commonly known as “Tutut.”

In 2012, in preparation for the Skyway project, SMHC and CLGP formed another joint venture, Atlantic Aurum Investment Ltd. B.V. (AAI), which was to be the vehicle for an initial public offering (IPO) to raise funds for the multibillion peso highway. SMHC took a 51-percent stake in AAI, with 44 percent being held by CLGP.

What happened next can only be deduced from court filings and rumors, as none of the principals involved wanted to speak on the subject; San Miguel Corp. declined to be interviewed for this story, citing ongoing litigation, and Citra’s Wahono, who is now facing arrest on a number of estafa charges in this country, was unavailable for comment.

Sometime between 2012 and 2014, according to a case of syndicated estafa filed against Wahono and four others by San Miguel, Wahono carried out $300 million in questionable transactions on behalf of CMMTC, and then used part or all of those funds to form the Citra Central Expressway Corp. (CCEC), which is the concession holder for the Skyway Stage 3. CMMTC then sold a controlling interest in CCEC to SMHC. The net effect of this transaction, from SMHC’s point of view, is that it was essentially robbed twice, sold a stake in something that was created with its own money.

SMHC also argued that Wahono’s allegedly fraudulent transactions effectively diluted the Citra stake in AAI to less than 5 percent. In response, San Miguel called off the proposed IPO and consolidated its shares in AAI in a subsidiary in partnership with Padma Funds, likewise consolidating all its concessions for toll roads south of Manila under AAI. These include the concessions for Skyway Stage 1 and 2, Skyway Stage 3, and the South Luzon Expressway under CMMTC, CCEC and South Luzon Tollway Corp., respectively.

SMHC’s first attempt to exercise total control over AAI, and as a consequence, all the above-listed concessions was rebuffed, however, when Citra was granted a preliminary injunction against San Miguel’s planned reconfiguration of AAI’s board in May 2016. Wahono himself put in an appearance to make the court filing, but has since disappeared.

In September 2018, the Department of Justice approved the filing of syndicated estafa charges against Shadik Wahono, Indonesians Dodik Marseno Catur Utomo and Sahra Mayor, along with two Filipinos, Alvin Bugtas and Joel Rayos, before the Regional Trial Court of Mandaluyong by SMHC. The court issued no-bail arrest warrants for the five accused, and that is where the case now stands.

Falling through the cracks

One glaring shortcoming in the entire confusing mess the Skyway project has become, from the relatively “normal” right-of-way delays to the contentious ownership structure of the project, is the lack of government oversight.

The implementing agency of the project is the Toll Regulatory Board, and the project was initially facilitated by the PPP Center. Although neither agency wished to comment officially on the issue, again citing the ongoing litigation, both admitted that intervening in the kinds of problems encountered by the Skyway project lies well outside their purview, which is obvious from a reading of their respective charters. Although carefully avoiding making a direct recommendation, representatives of both agencies agreed that the Skyway story “might be something that Congress would want to look into.”

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