Gov’t shift from PPP could speed up projects

THE GOVERNMENT’s decision to diversify financing for big-ticket projects from public-private partnerships (PPP) to state or donor-funded schemes may have roused initial uncertainty among investors, but the tack is expected to fast-track infrastructure rollout in the long run, BMI Research said.

Last month, the PPP Center said that the government decided to remove the plan to develop five regional airports under the PPP pipeline in favor of “other modes” of funding. In December, the Philippine Ports Authority withdrew Davao Sasa Port redevelopment from the PPP lineup to cut cost from about P14 billion currently.

The current government has since said that it will instead rely more on public funding and official development assistance (ODA) to avoid delays and higher project costs. Budget Secretary Benjamin E. Diokno even floated a “hybrid” model whereby the government will build while operations will be turned over to the private sector.

The Fitch Group unit said the administration’s about-turn from privately funded projects to state- led construction could initially hurt investor appetite, but should eventually bode well for the country.

“In the short term, ongoing revisions and modifications of proposed PPP projects will result

in increased uncertainty in the Philippines’ infrastructure market, as projects previously launched under the PPP program are withdrawn and switched to other procurement modes,” BMI analysts said in a June 28 report.

“We note while this will mean fewer opportunities for private investment in infrastructure. This shift will help reduce the likelihood of contractual disputes and uncertainty over financing that has weighed on proposed PPPs, thereby improving overall project implementation.”

The move forms part of the government’s infrastructure development plan that involves P8.4-trillion spending until 2022, when President Rodrigo R. Duterte ends his term.