ECCP: Easier to get things done via PPP
The Public-Private partnership (PPP) mode of building infrastructure projects is the "easier way" to get things done, European Chamber of Commerce of the Philippines president Guenter Taus said, citing the Mactan-Cebu International Airport Terminal 2 as the best example.
"While we certainly do not favor one over the other, since it really strongly depends on the nature of the project. In general, PPP seems the easier way to get things done, as the private sector takes ownership of the project," Taus told The FREEMAN.
The government is funding most of its infrastructure projects through official development assistance (ODA) from other countries such as China, Japan and Korea.
"Even with financial backing from World Bank and JICA (Japan International Cooperation Agency), ODA model is taking a while to implement," he said.
For instance, Taus cited the Build-Operate-Transfer PPP model of MCIA Terminal 2, which benefited connectivity and tourism in Cebu.
Private consortium GMR-Megawide had been awarded the 25-year concession agreement to operate and develop MCIA.
"When a single company is operating the airport and building a new terminal, it provides an incentive for that company to complete construction in a timely manner; It also adds an incentive to construct quality infrastructure since the same company that builds the project will have to deal with any mishaps later on," the business leader explained.
"Further, the BOT model ensures that there is continuity between operation and maintenance of the project since a single company will handle both phases," he further noted.
Earlier, the Department of Finance said private sector will continue to play a role in the administration’s infrastructure buildup, given that the construction as well as the operations and maintenance (O&M) component of the projects will still be undertaken by private contractors through the “hybrid” PPP model.
Finance Secretary Carlos Dominguez III said in a statement the government is undertaking the financing of big-ticket infrastructure projects to speed up the process and cut on projects costs.
With a steady revenue stream from the Tax Reform for Acceleration and Inclusion Act (TRAIN), increased ODA flows, and investment-grade credit ratings, Dominguez said this is also an opportune time for the government to build its asset base.
A “hybrid” PPP mode would prove to be the most viable way of implementing infrastructure projects because the government can borrow money at lower rates than the private sector and do away with protracted private sector negotiations that sometimes lead to lawsuits, the finance chief said.