BOT reform to tackle bid delays, PPP legal status

February 25, 2015 at 13:40

Posted on February 23, 2015 10:40:00 PM


By Melissa Luz T. LopezReporter


A HOUSE committee reworking the decades-old Build-Operate-Transfer (BOT) law heard testimony last week on the need to better address the needs of Public-Private Partnership (PPP) investors, including mechanisms to bypass delays in the bid process and proposals from business groups to institutionalize the PPP Center.

The House Committee on Public Works and Highways is considering a substitute bill drafted following a series of at least five meetings to consolidate proposed amendments to the current BOT law, which was enacted in 1990 and last amended in 1994.

The new bill, if passed, may allow joint venture contracts as part of possible PPP project agreements, and will exempt PPP participants from paying real property tax and transfer taxes, such as capital gains tax and documentary stamp tax, and all local taxes in the case of projects of national significance.

Investment incentives will also be offered on all infrastructure projects worth P1 billion or more, in order to attract more potential private sector partners.

The government relies on PPP projects to hasten and improve the construction of public infrastructure and services for sustainable development.

“We are banking on the PPP not only because we need the financing from the private sector but also on the efficiency and innovation of the private sector,” PPP Center Deputy Executive Director Sherry Ann N. Austria told lawmakers during the hearing.

To preclude delays in the PPP process, the bill also provides for the automatic grant of licenses and permits for winning bidders, as bureaucratic concerns have long been cited by business groups. It also includes prohibitions against the issuance of temporary restraining orders in the bidding, awarding, and construction of PPP projects.

“I was hoping to approve it now but there seem to be some questions with regard to the sharing of government funds or responsibilities with respect to the PPP projects,” committee chairman and Benguet Rep. Ronald M. Cosalan said in an interview on the sidelines of last week’s meeting.

“It may be disadvantageous now but in the long run, it will be good for the economy and for the entire country,” Mr. Cosalan added when asked how such a delay would affect the passage of the bill. He said he remained confident that the measure will see approval before June 2016, or when the present Congress closes.

Both the government and business groups have tagged BOT reform as a priority amid the various procedural delays and conflicts that have stood in the way of PPP projects since the program’s inception in 2010.

In a position paper submitted to Mr. Cosalan’s committee last week, the seven-member Joint Foreign Chambers in the Philippines pressed for urgent action on the BOT law amendments.

“The private sector is cognizant of the great need for massive infrastructure investments to support and boost the growth of the Philippine economy. We recognize that the government’s Public-Private Partnership Program provides the framework by which infrastructure development can be accelerated and properly tendered to interested and capable parties,” the groups said in a two-page letter.

“We call on government to swiftly enact the amendments to the BOT Law that will institutionalize the PPP Center and its processes, which we believe will further strengthen our PPP framework and prevent hindrances to the implementation of critical public projects.”

The coalition is composed of the American, Australia-New Zealand, Canadian, European, Japanese and South Korean chambers and the Philippine Association of Multinational Companies Regional Headquarters, Inc., which altogether have invested some $30 billion in the Philippines.

Pressed for details on particular changes that are needed, Peter L. Wallace of the Management Association of the Philippines said: “The one change I’d like to see is that after acceptance of all bids and their technical submissions these submissions are given to all participants who may raise objections. Once these are resolved no further complaints can be raised or accepted including to the courts (which the BOT law would state). Then the cost bids can be opened and the project proceed,” Mr. Wallace said in a text message.

“The other is that owners of land the project needs are offered twice fair market value which they may not refuse.”

Peter Angelo V. Perfecto, Executive Director of the Makati Business Club, added that institutionalizing the PPP Center would increase the attractiveness of projects it offers to the business sector, which would be reassured by the agency’s permanence and the consistency of its procedures.

“The key is to institutionalize a more effective PPP model that can further accelerate the country’s growth by tapping the combined strengths of government and the private sector. There is much our lawmakers can adopt and build on from the experience of the existing PPP Center,” Mr. Perfecto said in a text message.

“An institutionalized PPP Center will help ensure predictability in the rules and procedures that increases confidence of investors.”

The PPP Center was established in 2010, by virtue of Executive Order No. 8 signed by President Benigno S. C. Aquino III, serving as the link between the government and private sector.

The bill likewise carries provisions on the acceptance of unsolicited proposals. The Palace version of the bill asks for an option for the outright rejection of a project proposal as submitted by a private contractor. The committee, however, will be drafting clear criteria for rejecting a proposal, Mr. Cosalan said, as a “courtesy” to the proponent.

“We are supposed to legislate for the benefit of the people, what would benefit [them] most. But we have to balance it with business interests and of the government in the totality of the benefits we want to receive from such projects,” Mr. Cosalan said when asked how the Executive’s version of the proposed law was consideration.

Further talks will be held by the committee on the draft bill to address concerns raised during last week’s hearing, including a proposed rate of return cap for private sector partners.

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