Commission Decision 10-M-009/2018
Joint Venture between Bases Conversion Development Authority and MTD Capital Bhd.

ABSTRACT:

The proposed joint venture is set between Bases Conversion and Development Authority (BCDA) and MTD Capital Berhad for the financing, design, engineering, establishment, construction, and eventually the operation of the National Government Administrative Center (NGAC) in New Clark City.  The JV will rise in the Clark Special Economic Zone (CSEZ), a Special Economic Zone within BCDA’s jurisdiction covering the lands occupied by the Clark military reservations and its contiguous extensions in Pampanga.

MTD submitted to BCDA an unsolicited proposal to build NGAC in a joint venture with BCDA based on the 2017 BCDA Guidelines On The Privatization and Disposition of BCDA Properties and this was approved as declared in BCDA’s Board Resolution No. 2017-10-169. MTD and BCDA also subjected the project to a competitive challenge to private sector participants in accordance with BCDA Guidelines, where MTD as original proponent won.

The BCDA is a government owned and controlled corporation (GOCC) established under Republic Act No. 7227 (as amended by RA 9400) to accelerate the development and conversion into alternative productive uses of the Clark and Subic military reservations, while MTD Capital Berhad is a Malaysian investment holding company with interest in civil engineering and construction, infrastructure development, real estate and property development, energy, ports, and manufacturing of construction related materials.

Under the proposal, the establishment of the NGCAC will help achieve BCDA’s mandate of converting the Clark military reservation into productive civilian uses and promote a number of declared national objectives, including strengthening national security; help decongest Metro Manila and help solve its perennial traffic problems and other social and environmental problems; and spur economic growth in the area thereby providing business opportunities outside of the National Capital Region.

New Clark City, an approximately 9,450-hectare flagship project by the BCDA, is envisioned to be the country’s first smart and green city with a mix of residential, commercial, agro-industrial, institutional and information technology developments. The proposal aims to establish the NGAC as a modern, integrated and world-class community, accommodating the administrative offices of the national government, with support facilities, such as for housing, healthcare, education, public parks and museum, commercial centers, hotels and entertainment venues.

Under the proposal, BCDA shall allow the use of its idle land for twenty-five (25) years as site of the NGAC, but shall retain full ownership thereof, while MTD shall finance, design, build and develop the infrastructure, facilities and improvements comprising the NGAC. The JV Partners shall then share in the profits from lease and purchase payments and from the operation and management of the NGAC in proportion to the monetary value of their respective interest or participation.

The percentage of ownership in the JV as determined by the proportionate value of the equity contribution is as follows: ten percent (10%) by BCDA and ninety percent (90%) by MTD. BCDA shall contribute to the JV its development and usufructuary rights (DUR) over forty (40) hectares of the project Site for Phase 1A, which is assumed to have an equivalent value of ten percent (10%) of the total project cost. As for MTD, it is set to contribute the following to the JV: 1) Amount of PhP8,510,000,000.00 in cash representing the agreed project cost to construct the facilities and to be contributed in the form of unencumbered shareholders advances to the JV; 2) the amount of  PhP4,185,000,000.00 in cash as equity capital to the JV; and 3) any additional amount of cash as equity capital to the JV in order for the MTD to maintain its ninety percent (90%) interest in the JV.

The total Project Cost for Phase 1A is PhP13,160,000.00, while the development and construction of Phase 1B shall be determined in accordance with the BCDA rules. Upon full payment, facilities shall vest in the BCDA (or the entity  it shall name) and the DUR held by the JV for the facilities shall be transferred to the BCDA (or the entity it shall name) by the JV.

Ownership of the NGAC shall vest in the JV in accordance with the Engineering, Procurement and Construction Agreement.  Prior to incorporation of the JV Company, the BCDA shall hold legal title to the NGAC for the benefit of the Unincorporated JV if ownership of the NGAC cannot be placed in the JV’s name pursuant to Legal Requirements.  Following the termination or expiry of the NGAC JVA, the JV shall transfer full legal and beneficial ownership over the NGAC to the BCDA without any cost to the BCDA, and at the same time, the full DUR over the Project Site shall automatically revert to the BCDA without any cost to the BCDA.