Gov’t shift from PPP could speed up projects

July 3, 2017 at 10:29

Gov’t shift from PPP could speed up projects

By Melissa Luz T. Lopez, Senior Reporter | Posted on June 30, 2017


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.

The Philippine Ports Authority withdrew Davao Sasa Port redevelopment from the PPP lineup to cut cost from about P14 billion currently. — Photo by Carmencita A. Carillo

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uncertainty in the Philippines’ infrastructure market, as projects previously launched under the PPP program are withdrawn and switched to other procurement modes,” BMI analysts said in a June 28 report.’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

Mr. Duterte’s economic managers want to raise the share of infrastructure spending to 7.1% of gross domestic product by 2022 under the “Build, Build, Build” initiative, which in turn will help spur overall economic growth to a high of 7-8% towards that year.

The change in tack comes as the government is likely to grow impatient in waiting for the bidding process — which sometimes takes over a year to award contracts — and potential legal disputes that could delay completion of projects involved.

“We expect that other major projects currently part of the PPP program will be withdrawn and relaunched as government-financed or ODA-backed initiatives over the coming months, as the Duterte administration attempts to accelerate infrastructure development in the Philippines,” the report read.

Available funding also provides some degree of confidence for the government to take on these initiatives itself: “We believe Duterte is comfortable shifting away from the PPP model and private sector financing help given the support for infrastructure development the Philippines receives from China and Japan.”

Mr. Duterte’s visit to Beijing in October last year yielded $24 billion worth of investment pledges, followed by an $8.7-billion aid package from Japanese Minister Shinzo Abe announced in January.




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