FTI sale fails for third time, risking deficit goals

Thursday’s auction of 103 hectares of the Food Terminal Inc. (FTI) complex in Taguig City — the third such attempt — was declared a failure after the expected bidders skipped the sale, officials said. This development puts government’s goal of capping its budget shortfall this year at P250 billion further at risk. Finance Secretary Margarito B. Teves admitted last week that declining tax collections amid rising expenditures has made non-tax revenues like state asset sales more crucial. The government has hoped to raise P30 billion from asset sales this year. The Privatization Management Office (PMO) was forced to declare a failed bidding after the deadline for the submission of offers lapsed without any bids. "It appears that the three o’clock deadline has passed and there are no bidders. There is a failure of bidding on the FTI property," said Felipe C. Gella, deputy privatization officer. The Finance department had set an indicative price of P12.956 billion for the property. In an interview, Mr. Gella said the PMO will come up with a report and recommendations to be submitted to the Privatization Council, which Mr. Teves heads. When asked if the government is looking into a negotiated bid once it decides to pursue the FTI sale anew, Mr. Gella said: "These options are possible. But it all depends on what the Privatization Council will tell us." A negotiated bid will not be declared a failure if there is at least one offer for the property. This compares to a regular bidding, which requires at least two offers to proceed. When asked if the resale of FTI will be done within the year, Finance Undersecretary Crisanta S. Legaspi said: "We will just await the recommendations of the PMO. We still have options." PMO data showed that four firms — Ayala Land, Inc., Robinsons Land Corp., Rockwell Land Corp., and JTKC Land — bought bid documents. None of them, however, submitted offers. ‘Not feasible’ Ayala Land spokesman Alfonso D. Reyes said in a phone interview that the bid terms of the government were "not economically feasible." "We still believe that the property is attractive. But at the end of the day, the bid terms put forth did not make the project economically feasible," he said. Rockwell President Nestor J. Padilla said in a separate interview: "We looked at it [FTI], but given that we have [other] sites we are working on, we want to focus on these first." Officials of the other firms were not immediately available for comment. University of the Philippines economist Benjamin E. Diokno said the failed bidding will affect the government’s aim to raise revenues to plug the fiscal deficit. But he said that the government should rely more on enhancing collection efficiency than on asset sales to raise revenues. "The deficit may rise... But privatization should not be regarded as a source of funding. They should focus more on improving revenue collection. [Among others,] Congress should not pass laws that would narrow the tax base," he said by phone. CB Richard Ellis Philippines, Inc. Director Victor J. Asuncion said in a phone interview that the bidding may have fallen victim to the economic slump and the lack of urgency to acquire new land. "A lot of properties have been auctioned on the Fort Bonifacio side. There is too much supply of land. The market is still weak. There is no urgency to acquire land," he said in Filipino. He cited as example the 8.38-hectare North Bonifactio property being developed by Megaworld Corp. The FTI is a 120-hectare agro-industrial commercial estate in Taguig City that is host to about 300 firms engaged in various lines of production and services. The state grain agency National Food Authority owns the other portions of the property. The government has been trying to sell the FTI area concerned since 1997. It tried but failed to sell the property in June and December that year due to lack of investor interest. The current administration planned to sell the property last year, but volatile economic conditions forced the government to defer it to this year. Aside from the FTI area, other items to be placed on the auction this year are the 50-year lease contract of a government property in Fujimi, Japan, and 40 percent out of the government’s more than 99 percent stake in Philippine National Oil Co.-Exploration Corp. Initial estimates place the value of the PNOC-EC stake at P11 billion, while the Fujimi property in Tokyo is expected to fetch some P6 billion. - Alexis Douglas B. Romero, Kristine Jane R. Liu and Reuters, BusinessWorld