Monday, September 20, 2021

7 QUESTIONS. Megawide says Carbon market deal has no defects, sees big economic benefits for Cebu City. Still, MW to 'keep lines open' to City Council and public. Project 'on as scheduled.'

QUICK LOOK: What Megawide Construction Corp., developer of the Carbon Market "modernization," says about previously murky issues on the much-talked-about P5.58 billion project in Cebu City:

[] MW does not see any "defect," which the City Council said must be "cured," in the joint venture agreement it signed with the city mayor as previously authorized by the Sanggunian.

[] MW says it is "not aware" of the Sanggunian request, formalized in a March 24 resolution. Meaning, MW has not received any formal notice about it from the City Council.

[] Work on project "is proceeding as scheduled," despite the City Council request for MW to "defer" it until the alleged defects are corrected.

[] MW says guaranteed income to the City estimated at P50 million a year, escalating every five years. MW commits to invest P5.58 billion in the project.

[] Displaced residents of Sitio Bato will be "the concern of City Hall," says MW, but the company will "remain open to helping ensure their welfare." Same as MW's promise to "keeping (its) lines open to the City Council and the public."

[] Freedom Park will be on the ground level and will not just be part of the marketplace but will have open space "for leisure and exchange of ideas." The new park (keeping its 6,000 sq.m. area) will retain "its essence as "avenue of free speech," MW says, but there will be regulations for the area's "care and preservation." It doesn't say yet if the forum will allow the political 'mitings' and rallies of old and how much space will be devoted for the forum.

Sanggunian's request to MW

[1] Last March 24, in a regular session, the Cebu City Council passed a resolution asking Megawide to "defer" the Carbon Market redevelopment until the local legislature's "concerns" are addressed.

Those concerns include: (a) annual cash and other economic benefits pledged to the city; (b) historical and cultural questions raised by CHAC or City Cultural and Historical Affairs Commission; (c) relocation of Sitio Bato residents; and (d) and similar related concerns.

The Sanggunian, through Vice Mayor Michael Rama, presiding officer, calls them "defects" that require to be "cured." It has not talked of rescinding the JVA, only about correction of alleged flaws.

Does Megawide agree with the City Council thinking that while the JVA has already been approved by the legislature and signed by the mayor and the contract is a done deal, MW must continue talking with the Sanggunian to "cure" the alleged "defects"?

What is Megawide's response to the March 21 City Council resolution?

MW: Megawide is not aware of any of alleged defect. In relation to this project, Megawide has complied with all the laws, rules and procedures and, together with the Cebu City Government, conducted an extensive due diligence process, including continuous consultations with the Carbon Project's key stakeholders, such as vendor leaders and associations, and presentations to the Cebu City Council, among others. The company has continuously maintained its lines open to the Council and the public. Any possible concerns will be addressed in the proper fora.

Megawide is not aware of any March 21 resolution. As such, it will not be in a position to make any response on this.

Status of project

[2] People would like to know how far you have gone since the JVA signing and ceremonial groundbreaking. Has the work begun as scheduled or has Megawide deferred any phase of it, per request of the City Council?

MW: The project is proceeding as scheduled. The groundbreaking ceremony was held on March 24, 2021.

Site development works, as well as construction works on the interim market building (the current Unit 2) the 24/7 Puso Village (a concept similar to Bangkok's Chatuchak Market), the Sto. Nino Chapel and Park will commence late 2nd quarter to early third quarter of 2021. We will be hosting a media briefing in the coming days to help keep stakeholders and the general public informed regarding the start of works.

Annual cash, other benefits to city

[3] The councilors have not been sure about how much the City will get as AGP. Either the JVA is not specific or the councilors have not read the JVA or they didn't understand the briefings. They also sounded unsure about how much the city has been earning from the five Carbon markets (Units 1-3, Warwick Barracks and Freedom Park). Councilor Raymond Garcia's "clarification" about income from the city's markets was made in an April 6 letter to SunStar, not in the City Council.

Are the figures that your recent news release specified -- P50 million (with escalation every five years) plus P20 million in business and property taxes -- or "close to P70 million" the same ones in the JVA, or have they been modified? Do the signed documents reflect that commitment.

MW: The amounts released in the news are the same as the ones indicated in the JVA: annual guaranteed payment of P50 million with 10 percent escalation every five years plus business and property taxes worth P20 million for a total guaranteed payment of about P70 million every year to the Cebu City LGU. The project will also have additional multiplier effects on the Cebu City economy as it will also open a multitude of direct and indirect employment opportunities, ensure local supply preference, boost tourism, support farm-to-market efficiencies, and the like.

The annual guaranteed payments alone are more than three times what the city is currently earning from the Carbon Market. Through this project, the Labella administration was able to ensure earnings for Cebu City three times more than its current income from Carbon Market, with P70 million in net income as compared to the P21 million it earned in 2019. To put it in context, Carbon reached its highest contributions to date of P21 million in 2019, also during the term of Mayor Labella.

'Privatization' of the markets

[4] Councilors believe the City Government will continue collecting fees from market vendors but will turn them over to Megawide. It would seem that if the City would still be doing the collection, a semblance of non-privatization would remain.

The City Council will fix the market fees but if it won't raise Megawide's targeted revenue, the deficit will be reflected in the proportionate reduction of the AGP Megawide will pay. In effect, that could impair the Sanggunian's legislative power, just as the turnover of fees would make the city treasurer's office the collection arm of Megawide.

What is the score on the privatization issue?

MW: The concern on privatization was one of the points raised by the vendors in their 10 formal requests regarding the project, and their point that Carbon should not be "privatized" is one that we agreed with. This is a public-private partnership project ("PPP") and by its very nature, all parties of a PPP must comply with their respective obligations in the contract for the benefit of all stakeholders - in this case, the people of Cebu, including vendors and consumers.

Thus, insofar as Carbon Market is concerned, enactment and fulfillment of policies, rules and regulations and setting of fees will remain with the LGU's Market Authority. Only the collection of the fees will be done by the proponent. Megawide will be collecting these market fees to ensure that the fees will be utilized in accordance with the JVA, and in particular, for proper maintenance of the facility.

Further, the government retains ownership of the land being developed, and all developed assets will revert to the government once the contract is finished. It is not "privatization."

Sticking to commitments

[5] Apparently, there's a need to make the provisions clear to the City Council. If they have not read them, a summary of the salient provisions may be given them, from Megawide or the Sanggunian's own staff. But other than the City Council, there's the public's trust to address. Even the public is not sure whether the city government is getting a fair shake from the JVA.

What may assure the city's taxpayers and stakeholders of Carbon -- including the market vendors, sitio Bato residents, and advocates of culture and history -- that Megawide's commitments will be fulfilled?

MW: Section 10.1 of the JVA contains the grounds for termination for the project should either party fail to comply with specific requirements for the project.

More importantly, however, both the LGU and the private proponent have already publicly made commitments to the market vendors and advocates of culture and history. The rehabilitation of the Cebu Carbon market is a partnership, which means that Megawide has staked its reputation to ensure the success of the project. The failure of the project will also mean that it is Megawide's failure as well.

Moreover, Megawide will have more at stake as it will invest a substantial amount of money (P5.5B) to make this project a success. In the reverse, Megawide will stand to lose a great deal if the Project will not succeed. As such, it will not be in the best interest of Megawide to breach its obligations.

As for Sitio Bato, Cebu City LGU will be the ones to address these concerns but Megawide remains open to helping ensure the welfare of its residents. CSR effort have in fact begun in the three host barangays with the help of the Barangay Chairpersons, starting with employment opportunities and livelihood trainings.

Freedom Park, culture, history

[6] Vice Mayor Rama has been harping on preserving culture and legacy, which seems to depend largely on the location of Freedom Park. He is not clear though if he refers to the old Freedom Park -- gathering place in the past for public rallies and political campaigns -- or the plaza or space but now occupied by all kinds of vendors who're not located at Carbon's Units 1, 2 and 3. VM Rama wants Freedom Park on the ground floor, not on the second or third floor.

The thrust is modernization of Carbon. How much of Carbon's "heritage" will be left? What has been Megawide's response to the Freedom Park clamor of Vice Mayor Rama and other concerns of the Cebu City Historical Affairs Commission? Would you have a Freedom Park for the same purpose as the past Freedom Park or would Megawide just use the name?

MW: While "modernization" is the term used for the project name, the thrust is merger and harmony: connecting the present to the future. Megawide and Cebu City believe that history should be respected without sacrificing progress.

As such, a coordination with the heritage committee already happened last 10 May 2021 and their inputs were carefully considered as applicable. C2W respects the history of the Carbon district -- in fact, this is part of what makes the district so distinct -- and has identified historical, archeological and cultural preservation to be among its priorities. We have also engaged with local heritage preservationists such as Architect Joy Onozawa to advise us on these matters.

This harmony between past and present also informs the architectural design that we have presented: no high-rise buildings, each one with a distinctly Cebuano element in the design. In terms of the Freedom Park, currently the location is part of the public market and through the years much of its identity as a public park has regrettably diminished. Vice Mayor Rama indeed brought this to our attention and through his suggestions, we have come up with a design for a Freedom Park on the ground level, which Cebuanos can enjoy not just as part of a marketplace as it currently is, but an open space with water features for leisure and the exchange of ideas as the original park was envisioned to be.

In summary, the entire development - from architecture to offerings -- will showcase a distinctly Cebuano feel, both of heritage and hope. There are no high-rise or "modern"-looking buildings here -- each block has a unique architectural feature inspired by Cebuano imagery.

Area, period; what's C2W?

(7) LOT OF LAND. Some of the councilors didn't know the total extent of the project: that itw ould cover the three units of the existing Carbon markets plus Warwicks Barracks, Sitio Bato and Freedom Park. They seemed to grasp late that the project involves a lot more land than the area the public associates with the name Carbon and recognize as Carbon and that the three markets would be demolished and the vendors relocated to a new building at Freedom Park.

MW: A multi-storey marketplace building will be built where Warwick Barracks and Freedom Park are currently located, which has more than enough space for all registered vendors of the current public market.

SPECIAL PURPOSE COMPANY. All along Megawide Construction Corporation had been the juridical person the City Government was supposed to have received the unsolicited offer from and negotiated with -- the name of the firm the public had been told would do the project. The councilors and the public must have assumed the City had been dealing with Megawide. It was only recently, two weeks or so ago, in Megawide's press release clarifying the city's economic benefits, that the name Cebu2World Development Inc. (C2W), Megawide's subsidiary, publicly surfaced. It's not yet known if C2W signed the JVA, not Megawide.

MW: In Section 8.1 of the JVA, Megawide is to form a Special Purpose Company ("SPC," a subsidiary of Megawide) to be the proponent to undertake the project and this will be covered by an Accession Agreement. That SPC is C2W.

Megawide signed the JVA. C2W, created per the JVA to oversee the development, signed an accession agreement with Megawide, so that C2W is bound by the terms and conditions of the contract.

LOT OF YEARS. The period of the JVA, some councilors thought, would be for 25 years renewable for another 25 years.

MW: The lifespan of the JVA is 50 years, renewable for another 25 years per mutual agreement of the parties and as indicated in the JVA.


[SunStar's Seares communicated with Megawide's Jingjing Marino-Farrarons for this Qs7 edition.]


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