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Land of the plea

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Breaktime

Land of the plea

/ 12:11 AM September 15, 2014

There is trouble in the land of the free port zone in Clark that is part of the 32,000-hectare industrial and logistics project of the government in the former US air base, said to be the main development catalyst in the entire Central Luzon.

It seems that the project called Global Gateway Logistics City, a 177-hectare hub being pursued by two foreign groups, is caught in a nasty legal battle between those two groups. Of course the trouble can only delay the projects, originally trumpeted by the government as a $3-billion logistics hub.

One of the two foreign groups, the Kuwaiti-funded GGDC (Global Gateway Development Corp.) already launched a media campaign, attacking its partner and contractor, known as the Peregrine Development International, seemingly to force Peregrine out of the project.

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According to GGDC, Peregrine should leave the development “amicably,” not for its own interest, mind you, but “for the benefit of Central Luzon.” And I could almost cry! Sure, foreign investors always pursue projects here for altruistic reasons!

Anyway, GGDC already went to town last week to claim that it would assume operational control over the project because of what it called a “favorable ruling” from the Court of Appeals in its plea for justice against Peregrine.

Wait a minute there—from what I gathered, the CA merely issued recently a TRO, directed against another TRO, which in turn was issued by the Regional Trial Court (RTC) in Pampanga last June.

In other words, the two foreign groups were pursuing plea after plea after plea before the courts in this land of the free.

Actually, it was Peregrine that initiated the case before the RTC, asking for a status quo in the Clark Freeport Zone project, when its partner GGDC, without much ado, simply terminated the contract unilaterally—you know, on its own.

The whole thing started way back in 2006 when Peregrine paid the Clark Development Corporation a measly $20,000 for the right to develop the 177-hectare site that the CDC designated for a logistics project under a 50-year lease.

Thus Peregrine claimed that its initiative led to the technical studies, such as environmental and land use concepts, the development master plan and financial models, which it then presented to investors.

In 2008, Peregrine partnered with the Kuwait group known as KGL as financier of the logistics project and the two signed an agreement called “engineering procurement construction management,” or EPCM.

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Under the agreement, Peregrine would be the developer and prime contractor, while KGL would take care of financing the project through its subsidiary in the Philippines, which eventually became known as the GGDC.

Last April, after almost six years as partners in the development project, GGDC sent to Peregrine a notice of termination, and then GGDC also filed an arbitration case in Singapore, alleging that Peregrine violated the EPCM big time.

As a response to its “termination” by GGDC, Peregrine filed the case in the Pampanga RTC, seeking status quo in the project, perhaps pending the outcome of the arbitration sought by GGDC in Singapore.

From what I gathered, operations in the logistics project suffered terribly for lack of funding. It seemed that GGDC stopped its funding support, even withdrawing from the project’s bank account more than $1 million used as working capital.

In other words, the development project was suspended outright, and so Peregrine went to the RTC asking for a status quo, which the RTC granted through the TRO, and eventually through its issuance of the writ of preliminary injunction, which GGDC then contested before the CA that granted another TRO against the TRO issued by the RTC. Whew!

But still, with its issuance of the TRO, the CA did not rule on the case, and contrary to recent reports, the CA did not authorize GGDC to take over operations of the logistics project in Clark.

Thus, the 60-day TRO issued by the CA means that, for the time being, the RTC order for GGDC to keep status quo in the project could not be enforced— for 60 days. What if the CA later would decide to affirm the RTC order!

In other words, neither did the CA authorize GGDC to take over the project, nor did it rule that the agreement between GGDC and Peregrine should be terminated, because that would be up to the arbitration proceedings in Singapore, whether it was valid or not.

In the arbitration, according to materials provided by the GGDC camp to Breaktime, GGDC accused Peregrine of things like “cost overruns, dealings unbeneficial to GGDC, the use of GGDC-funded assets for non-GGDC projects, failure to comply with applicable laws which materially affected the project’s implementation, failure to faithfully observe the procurement and bidding procedures to ensure competitive bidding and willfully committing other acts inimical and adverse to the best interest of GGDC.”

Here was part of Peregrine’s long answer: “For the past six years GGDC has evaluated Peregrine’s performance on a quarterly basis based in large part on monthly independent audits that GGDC itself conducts. These quarterly performance evaluations of Peregrine by GGDC reflect ratings of 100 percent for the last 10 consecutive quarters through the first quarter of 2014.”

Now, based on the usual practice in most development projects, the GGDC periodic evaluation of Peregrine was not mere empty words, because the evaluation would be translated into cash as financial incentives that GGDC must give to Peregrine.

From the looks of it, anyway, this ongoing trouble in the land of the Clark free port zone would still take a long time to resolve. And the whole thing would mean a opportunity loss for the CDC and its customers—meaning, the entire nation.

You see, boss, this GGDC claimed that it already invested $100 million in the project and that it would have put another $150 million by the end of 2015 —well, had it not been for the delay caused by the refusal of Peregrine to vacate the project.

Look at that—$100 million investment in a project that was originally trumpeted to invest some $3 billion in new facilities! And so it would only be $2.9 billion more to go for its full implementation, was that it?

Our info is that, after six long years, the infrastructure component in the logistics hub was not even half completed. To top it all, there was only one locator, the Medical City hospital, which was only 95 percent completed.

During those past six years time, the government already sold out virtually the entire Clark Freeport Zone to other foreign locators such as Texas Instruments, Yokohama, Phoenix Semiconductor, Singapore Airlines, Donggwang, HLD Steel, Viskase and various other large foreign investors.

Our info is that GGDC actually invested $70 million in the approved infrastructure component of the ambitious 177-hectare logistics hub, plus $20 million investment in the hospital.

Yet the GGDC has been egging the government to award to the Kuwaiti group the exclusive lease rights for the area for the next 50 years.

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TAGS: Business, central Luzon, Clark Air Base, economy, Global Gateway Logistics City, News
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