PPP still in mix for funding major projects

THE DEPARTMENT of Finance said the public-private partnership (PPP) mode of financing will continue to be tapped for government projects, but added that the government must use some of its newfound fiscal clout and overseas resources to get the ball rolling on some initiatives.

Finance Secretary Carlos G. Dominguez III met with off icials of the country’s largest conglomerates on Monday to explain that the government- private sector cooperation continues to be part of the infrastructure mix, although the government is exploring an optimal mix for certain types of projects.

“People have been questioning us why we are supposedly ‘abandoning PPP.’ We are not abandoning PPP. For us it is just another way of financing projects,” Mr. Dominguez said during the meeting.

“The past administration relied on ( PPP) exclusively to finance the projects. The situation has changed a bit because our President is beginning to tap a lot of financial commitments, and thanks to the last administration, we have a big headroom for debt and they left us quite a bit of money. It’s incumbent upon us to use that… to push the projects ahead,” he added.

The government is touting a hybrid version of the PPP, with projects funded by the Treasury or Official Development Assistance, with private firms to be awarded operations and maintenance contracts. Mr. Dominguez has said that the government has proven that the hybrid mode is faster in delivering a project, noting that the Clark International Airport Expansion Project took 18 months, much less than the average 30-month period for the previous administration’s PPP projects.

Mr. Dominguez added that the private sector “won’t be out of the loop” on large-scale infrastructure projects because the government will still need private contractors to build them.

“Some banks are telling us they cannot grow their loan portfolio. Quite frankly, we tell the banks, that’s not true because if we go to the project, we will still need contractors to do it. We can start the projects quickly, they won’t be out of the loop because the projects will still go on,” he said.

Finance Undersecretary Grace Karen G. Singson meanwhile said during the meeting that the private sector can participate in either solicited PPPs, unsolicited proposals, or negotiated joint ventures.

Unsolicited proposals should involve a new concept or technology or should not be part of the government’s list of priority projects, according to Ms. Singson.

These proposals are subject to a Swiss Challenge, with the original proponent having the right to match the subsequent offers of other proponents for the same project.

“Contract terms on demand guarantees and fare increases will be tighter, especially for unsolicited proposals. Also, more equitable risk sharing in contracts is further sought with non-compete clauses removed,” Ms. Singson said.

These would “allow the government to take advantage of the efficiency and technological innovations while freeing the government from providing subsidies or guarantees to infrastructure projects,” she added.

Solicited PPPs must undergo public bidding, while government support cannot exceed 50% of the total project cost.

Negotiated joint ventures, on the other hand, can be initiated by the private sector or by the government “if it fails to identify an eligible private sector partner through competitive selection,” Ms. Singson said.

Among the business leaders and their representatives at the meeting were Michael G. Tan and Ismael S. Gozon of the Lucio Tan Group; John Eric T. Francia of Ayala Corp.; Josephine GotianunYap of Filinvest Corp.; Sabin M. Aboitiz of Aboitiz Equity Ventures; Lance Y. Gokongwei of JG Summit Holdings; Edgar B. Saavedra of Megawide Corp.; Kevin L. Tan of Megaworld; Giles B. Puno of First Gas Corp.; Ricardo C. Delgado of Citadel Holdings; and Jose Ma. K. Lim of Metro Pacific Investments Corp.

In May, the government removed from the PPP the development of the New Bohol (Panglao), Davao, Iloilo, Laguindingan and Bacolod airports, which would have been the second airport offer under this scheme after the P17.52- billion Mactan- Cebu International Airport Passenger Terminal Building project that was awarded in April 2014.

“Some (of these PPP projects) took 50 months, some took 60 months, primarily because the private sector is arguing with itself. Our President doesn’t want to wait that long,” Mr. Dominguez said.

The Duterte administration aims to spend P8.4 trillion on infrastructure during its term, which is expected to drive economic growth to 7-8% starting 2018 to 2022. —