The Demise of a Great Road Builder
The rise and fall of PNCC
In 1969, ten years before Franquista Mother Spain ever had its first dual carriageway highway, we already had 2 expressways; the North and South Diversion Roads. Both were built by CDCP - Construction Development Corporation of the Philippines - a company founded in 1966 by Messrs. Ricardo de Leon, Rodolfo Cuenca and friends. Their vision was to build the biggest construction company in Asia.
Big big co.
In CDCP's 50 year corporate life, it was to build anything and everything that would catapult the Philippines to developed status. In 1977, it was awarded a 30-year exclusive franchise to operate all toll highways in the country. At one time, it's Tierra Factors subsidiary was the largest customer of GM's TEREX brand of heavy equipment, nearly upending the market stranglehold of the Silverio Group's Komatsu.
In time it was to build the San Juanico Bridge, Manila's first Light Rail Transit, the Coastal Expressway and the City by Manila Bay. It restored the ancient city of Borobudur in Indonesia. Built ports and highways in Saddam Hussein's Iraq. Built highways for Saudi Arabia, Malaysia and the New Territories expressways in Hong Kong.
But something happened along the way. The sovereign debt default of many countries and its ensuing domino effect sent foreign financiers scurrying out of financing development projects. The protracted 1979 Iran-Iraq war and the 2nd oil crisis compounded this debt crisis. By 1983, our foreign exchange crisis forced the government to save CDCP from its creditors with an infusion of additional equity, leading to the change in corporate name to PNCC [Philippine National Construction Corporation].
Shrink to fit
With its visionaries chastened and its cash flow crimped by a heavy debt burden, PNCC had to narrow its focus to its last money spinning asset: the local toll highways franchise. But in time PNCC was to lose its experienced construction people to the high demand for Filipinos skilled in infrastructure projects for the Middle East. The dearth of investment of the late 80s didn't help as activist lawyers successfully prevented the PNCC from collecting tolls on both the deteriorating NLEx and SLEx. It had to take a sharp increase in road fatalities for government to act and restore order on the expressways.
By the 90s, the PNCC got a second wind when privately funded BOT [Build Operate and Transfer] tollway projects picked up, with PNCC as the default partner, thanks to its nationwide franchise. This led to PNCC taking minority stakes in projects like the Coastal expressway, STAR Tollway, Skyway, South Luzon Tollway and the Manila North Tollway.
Death by law
But the lawmakers were not to be kind to the PNCC. Because of its default on commercial foreign debt, the Philippine Legislature was not inclined to revive its corporate life by its expiration in 2006. Not extending the PNCC's corporate life meant not having to allocate a huge amount of foreign exchange to fund its old unpaid arrears.
One can understand the sense of foreboding when the day of reckoning approached. When MNTC's O&M [Operations and Management] arm, TMC [Toll Management Corp.] took over running the NLEx in 2005, only a fair number of PNCC employees were qualified to be absorbed. By end 2007, SOMCo took over the O&M of the Skyway and even though a good number of deserving officers and employees of the PNCC were absorbed, those that were not, resorted to civic action and barricades. The South Luzon Tollway was to be the PNCC's last management redoubt, their last refuge.
Meantime, MTD, the Malaysian project proponent invested in the rehab of the SLT in full trust of the PNCC as their local partner in SLTC [South Luzon Tollway Corp.]. Experienced in foreign expressway projects, MTD deferred to its local partners on how to deal with the effects of the Calabarzon micro-climate, local driving culture, local property laws, employment practices, highway safety, security against thefts and traffic. In hindsight, that trust was unwarranted.
Loss of expertise
With the relatively smooth lane transitions and counterflows instituted in the construction of Skyway Stage One in the late 90s and the recently rehabilitated NLEx, in cooperation with Leighton, one would assume similar efficiencies from the time the Alabang viaduct began restoration in 2006. What motorists did not expect was the obstacle course of confusing temporary lanes for a good part of 3 years. This haphazard planning of the construction zone and its pacing wreaked havoc on traffic flow.
This caused MTD's costs to rise as far more concrete barriers, safety gear, fencing, police complement, flashing lights, generators, bilge pumps, guard rails, not to mention more manpower was required to keep traffic and the severely delayed work flow going. And because of this disorder, so much of MTD funded equipment was lost to theft and back jobs due to poor planning. Until MATES, the SLTC O&M, 40% owned by PNCC takes over security patrol of the SLT from the inadequately equipped PNCC, the theft to SLTC property continues.
The end of PNCC's corporate life in 2006 meant that it was no longer a viable local credit risk, leaving MTD to source for funds on its own. Moreover, the "death" of the PNCC also meant more lawsuits from property owners who remained unpaid ever since the PNCC expropriated private property for the existing toll plazas.
Conspiracy to delay?
Meantime the PNCC handover, which ideally should have begun at the end of its corporate life in 2007 was stymied by a conflict in understanding of what constitutes "95% complete". This was already a contentious issue as much of the delays in construction was due to the haphazard planning of work stages, as if nothing was learned from the smooth deployment of NLEx and Skyway projects. PNCC employees were not motivated to re-qualify for transfer employment to MATES. Some assumed that the last of the rent seeking ways of what is left of PNCC entitlements was to carry on longer as the project kept stumbling from one delay to another, whether by accident or design. Regardless, SLTC was ready to absorb more than half of the PNCC staff.
Those who conspired to delay the SLT's completion did not count on the determination of MTD to fund the project and take it to its completion against all odds, in order to effect the lawful transfer of operations and toll collection to MATES. Whatever the arguments in court are, it smacks of a last dying gasp to hold the reigns and purse strings of a franchise PNCC no longer deserved. Physically detaining MATES personnel and confiscating their cell phones despite the Toll Regulatory Board's approved take over date was a vulgar act of desperation - whatever legal justification it gives.
Failure of no direction
In hindsight, CDCP's debt was due not so much to the over arching ambition of its founding engineers but to the confluence of the crises of debt and oil, plus Philippine credit unworthiness. Private capital to finance BOT projects came toward the tail end of PNCC's toll franchise monopoly but it was not enough to save it. The government's infusion of capital was not enough to tide over PNCC's heavy debt service. Meantime, its cadre of well trained engineers and managers already sought greener pastures. How else does one explain the smooth rehab and handover of the NLEx in 2005 to the mayhem of construction, culminating in the recent adversarial treatment of SLTC's takeover?
After this, what is to become of PNCC? It still has the TPCP, an established contractor for road signs and markings. PNCC occupies prime real estate on EDSA, right next to Greenfield City. And there's also CDCP farms. But the glory days of the biggest construction company in Asia are over.
Its still a minority partner in almost all of the private sector tollway O&M's. All the more reason it should help its partner private consortia start getting a good payback on their investment, which would ultimately benefit PNCC's own balance sheet. What a pity that its end will be marked by heavy handed desperate moves to cling to power and delaying tactics under the guise of Labor rights, harming the smooth transfer of employees and demeaning its own reputation as a reliable business partner.