Posts Tagged ‘PPP’

Govt has awarded, signed off on 7 PPP projects in only 4 years — President Aquino

InterAksyon, 30 July 2014

By Azer N. Parrocha, Philippines News Agency

 

MANILA — The government has awarded and signed off on seven Public-Private Partnership projects, with a total value of P62.6 billion in just four years during the Aquino administration.

This was among the achievements cited by President Benigno S. Aquino III during his fifth State of the Nation Address (SONA) on Monday.

President Aquino said that with this number, the government has surpassed the combined six approved solicited PPP projects of the past three administrations from December 2011 to June this year.

These PPPs are:

  • Daang Hari-South Luzon Expressway link road
  • School Infrastructure Project Phase 1
  • School Infrastructure Project Phase 2
  • Ninoy Aquino International Airport Expressway
  • Philippine Orthopedic Center modernization
  • Automatic Fare Collection System
  • Mactan-Cebu International Airport expansion

“Again: Good economics is borne of good governance,” the President said in his speech.

He also noted that more infrastructure projects will be nearing completion this year including more export expansions, fixing of roads and expressway projects, among others.

Currently, the biggest PPP project at P123-billion is the Laguna Lakeshore Expressway Dike, which is set to be completed by yearend.

 

Aquino Sona: Laguna dike, Subic green city among projects eyed by gov’t

Inquirer.net, 28 July 2014

By Kristine Angeli Sabillo

 

MANILA, Philippines – A mega dike in Laguna and a green city in Subic are among the top public private partnership (PPP) projects being eyed by the government, President Benigno Aquino III said during his fifth State of the Nation Address.

He said the public bidding for the Laguna Lakeshore Expressway Dike would begin before 2014 ends.

The project will address flooding in the area through the construction of a dike, which will also result in cleaner water for Laguna Lake.

Aquino said it would also help lessen traffic congestion because of the construction of an expressway, from Los Baños to Taguig, on top of the dike.

He said it won’t cost the government anything, only a portion of the reclaimed land, which will serve as the payment to the winning bidder.

On the other hand, Aquino said the Clark Green City will be the “center of commerce and industry in Central Luzon.”

He said it will be larger than the Bonifacio Global City.

 

 

Cement firms see flat sales growth on slow PPP approvals

Manila Standard Today, 28 July 2014

By Othel V. Campos

 

The cement industry expects a flat growth in sales this year, due to the slow approval of infrastructure projects under the public-private partnership scheme and a projected lower expansion of the construction industry.

“The general momentum is positive, but not sufficient or not moving fast enough.  PPP projects, though taking a tad too long, would definitely help improve sales,” the Cement Manufacturers Association of the Philippines said over the weekend.

Cement sales grew 5.9 percent in 2013 to 19.445 million metric tons from 18.356 million MT in 2012.  The cement sector posted a growth of 17.5-percent growth in 2012, the highest over the last 15 years.

Cement sales increased 3.2 percent in the second quarter to 5.519 million MT from 5.349 million MT a year ago and 5.7 percent in the first half to 10.718 million MT from 10.136 million MT in 2013.

CMAP said, however, PPP projects were not moving fast enough to start construction this year.

Cement companies are currently expanding capacity to support the expected increase in government spending for road construction, repair and rehabilitation to improve road networks and spur economic growth.

CMAP said demand for cement and construction materials would be led by the need to put up more infrastructure projects.

Three PPP projects were moving this year, including phase 1 of school infrastructure project with estimated cost of P16.28 billion, Daang Hari-South Luzon Expressway link road project and Naia expressway project.

 

Infrastructure buildup said needed to keep growth momentum

Business World, 29 July 2014

By Marites S. Villamor

 

CEBU CITY — The Philippines is well-positioned to withstand domestic and external shocks because of strong economic fundamentals, but government must implement more “hard” and “soft” infrastructure projects to sustain growth, an economist said here yesterday.

“The next wave of economic development is going to be about soft infrastructure, intellectual capital and services,” Brian Murray, chief economist and head of research of AIA Group Ltd., said in a press conference.

Mr. Murray, who was among the speakers during an investor forum organized here by Philam Asset Management, Inc. (PAMI) on Friday, said investments in “soft” infrastructure such as education and health care should be on top of the hard infrastructure projects being executed.

He lauded the government’s public-private partnership program (PPP), saying it is “exactly what the Philippines needs in terms of providing the basis for long-term economic growth.”

The government has rolled out seven PPP projects cumulatively worth P62.6 billion as of June.

However, Mr. Murray said the government should accelerate the rollout of PPP projects or risk losing the country’s competitive edge over other Southeast Asian countries, which are also implementing infrastructure projects.

“Thailand and Malaysia are also trying to build their infrastructure. If they execute (infrastructure projects) and have new airports and better roads and ports and the Philippines doesn’t, then it could be a problem in the long term,” Mr. Murray said.

He said the Philippines could afford to increase infrastructure spending, given its strong financial position.

“Public finances in the Philippines are actually good. Fiscal deficit is 1.5% of GDP (gross domestic product) and public debt is under 50% (of GDP). You could afford a higher fiscal deficit and you should have more fiscal spending to build more infrastructure,” he added.

Mr. Murray noted that the country’s GDP growth has been “stable, unleveraged and balanced.”

The Philippine economy expanded by a faster-than-targeted 7.2% last year and is expected to grow 6.5-7.5% this year. Growth, however, eased to a weaker-than-expected 5.7% in the first quarter from 7.7% a year ago. Mr. Murray said the consensus among economists is a GDP growth rate of 6.4% for the Philippines while the International Monetary Fund has cut its Philippine growth forecast to 6.2% from a previous projection of 6.5%.

“Your growth is not leveraged. It’s not based on expanding credit. On the contrary, it is based on high savings,” he said.

“Your growth is balanced. It’s not reliant on consumption like the US economy. It’s not reliant on investments like the Chinese economy. It’s not reliant on exports like the German economy.”

And while inflation has been picking up, Mr. Murray said, “[t]he bigger reason I’m not concerned is that the BSP (Bangko Sentral ng Pilipinas) has been very proactive in maintaining stable growth and not letting inflation threaten economic growth since the 2008 financial crisis.”

The country’s inflation rate averaged 4.2% last semester from just 2.9% in the same six months last year, according to latest official data.

He noted that the Philippines posted relatively strong GDP growth rates despite external shocks from the 2008 financial crisis, Eurozone crisis in 2010-2011, the big influx of liquidity from quantitative easing purchases since last year, and even the taper tantrum that led to outflows of capital last year.

The Philippines also weathered domestic shocks like Bohol’s powerful earthquake in October and super-typhoon Yolanda (international name: Haiyan) in November last year.

“You had a slowdown, a bit of an uptick in inflation,” Mr. Murray noted. “But GDP outlook and public finances haven’t fundamentally changed. On the contrary, they remain on the positive track.”

An obvious caveat is that if there’s war in the Middle East or the Russia-Ukraine situation escalates and oil prices spike, it would be hard for the Philippines to maintain high growth rates, Mr. Murray said. “I do think the Philippines would be resilient to the aftereffects of a big spike in global oil prices,” he said.

Meanwhile, he said the Philippines, with its strong fundamentals, is likely to attract capital inflows as central banks increase liquidity. He said capital inflows would come not only from the US, which is ending its quantitative easing program, but also from Japan and the European Union. “The bias in central banks, particularly in the developed markets, is towards more liquidity and towards more loosening. More liquidity is possible because inflation is not a threat in any of the major economies,” Mr. Murray said.

As of June, Japan reported a 3.3% inflation, but is targeting to end the year with 2% while the EU reported an inflation rate of 0.5%. “This is actually a deflation, so expect a quantitative easing program from the European Central Bank at some point this year,” Mr. Murray said.

PAMI is holding a series of forums to provide investors with the information and tools with which to make sound investment decisions. A similar forum will be held in Davao City next month and in Metro Manila at a later date.

 

Holcim Philippines reports 8.8% increase in 1H cement sales volumes

worldcement.com, 29 July 2014

 

Holcim Philippines has reported an 8.7% y/y increase in net income in 1H14, at P3.32 billion. In the April – June quarter revenues were up 8.5% y/y to P8.81 billion. Total sales in the first half reached P16.86 billion; sales volumes hit 92 million bags, an 8.8% increase y/y. Operating profit for the first six months of the year reached P8.81 billion, up from P8.11 billion in 1H13.

Growth was driven by reconstruction efforts in the Visayas, government spending on infrastructure and the start of some Public-Private Partnership projects. Net income was slightly down in the second quarter compared to the first due to higher power costs. In the second half, the company said it will concentrate on completing regular maintenance of the cement plants on time and on budget. CEO Eduardo Sahagun said the company is on track for full year sales volume growth of 8%.

“On top of the sustained government and private sector spending, we now see some major Private-Public Partnership projects being implemented in the metropolis, hence our strong sales. We were able to meet this huge demand with our ability and commitment to keep the market supplied during this period of robust growth,” said Sahagun.

Holcim and Lafarge recently announced their planned divestments ahead of their proposed merger. In the Philippines, the situation was a little less clear while the companies are ‘exploring the combination of their businesses’. At a media briefing, Sahagun told press that they estimate Lafarge’s market share to be 28% and Holcim’s to be around 34%, which brings their combined share to 62%. “That should be reduced,” he said.

 

Edited from various sources by Katherine Guenioui

 

 

Aquino: More PPP projects awarded than past 3 admins

Rappler, 28 July 2014

 

President Aquino says they’ve awarded more PPP projects than the past 3 administrations

MANILA, Philippines – The Aquino administration has awarded 7 public-private partnership projects (PPPs) versus the 6 solicited PPPs implemented by the previous 3 administrations.

President Benigno Aquino III boasted of this accomplishment in his 5th State of the Nation Address on Monday, July 28.

He stressed that sound infrastructure is needed for the Philippine economy to continue moving forward, be more competitive, accelerate the flow of goods and services, and attract attract more investors.

The President reported a significant increase in infrastructure budget to P404.3 billion ($9.31 billion*) from P200.3 billion ($4.61 billion) in 2011.

He said such increase did not require hike in taxes, except for the Sin Tax Reform Law.

7 PPP projects awarded

To date, the Aquino administration has awarded 7 PPP projects worth about P62.6 billion ($1.44 billion). These include:

The bidding for the most expensive PPP project to date – the National Economic and Development Authority (NEDA) Board-approved, P123-billion ($2.84 billion) Laguna Lakeshore Expressway Dike – will also be opened before 2014 ends. The project will be bid out under the Build-Operate-Transfer and is expected to reduce traffic and flooding in southern Metro Manila and Laguna with the construction of a 47-kilometer flood control dike on top of a 6-lane expressway.

There are more companies now willing to invest in the country through the PPP program, easing the burden on government expenditures, Aquino said.

He attributed this interest in shortened application procedures and decreasing opportunities for bribery in project biddings.

He said the Department of Public Works and Highways (DPWH) saved P28 billion ($646 million) after hastening the implementation of projects.

More infra projects nearing completion

Aquino also mentioned that the Puerto Princesa and Busuanga airports are underway.

He said the government was also able to get good offers for the Mactan-Cebu International Airport expansion project worth P14 billion ($322.92 million), and the NAIA Expressway Project Phase 2 worth P11 billion ($253.63 million).

Also, the DPWH has completed 12,184 kilometers of roads – fixed, paved, or widened – the same length as 4 national roads connecting Laoag and Zamboanga City.

The Tarlac-Pangasinan Expressway project is now facilitating traffic from Tarlac to Rosales, Pangasinan. The Urdaneta portion is expected to be completed before 2014 ends, while the expressway will reach La Union by next year.

Projects that took decades to complete are now seeing completion, Aquino said. They include:

NEDA board-approved projects

Once the C-6 road connecting to San Jose Del Monte, Bulacan is finished, it is expected to decongest traffic in EDSA.

To address the water shortage in Metro Manila by 2021, the Aquino administration approved the Kaliwa Dam Project in General Nakar, Quezon, and the repair of the lines of Angat Dam. The Water District Development Sector Project, under the Local Water Utilities Administration, has also been approved.

Other NEDA board-approved projects in the pipeline include the Laoag City Bypass Link Road project, the Cebu Bus Rapid Transit project, and the Light Rail Transit (LRT) Line 1 South Extension and Line 2 East Extension projects.

The modern Clark Green City in Capas, Tarlac has also been approved. The project is expected to boost commerce in Central Luzon and the rest of the country. This once desolated vast piece of land is seen to be the next, if not better than, Bonifacio Global City, the President said.

“These are only of the few infrastructure projects that we have no plans to pass to the next administration as problems, instead, they are now started to being enjoyed by our bosses, the Filipino people,” Aquino stressed in Filipino. – With a report from Lynda C. Corpuz/Rappler.com

 

*($1 = P43.37)

 

 

PNoy cites infrastructure deals under PPP program

GMA News, 28 July 2014

By Xianne Arcangel

 

President Benigno Aquino III on Monday extolled the numerous infrastructure projects the government was able to start and finish under the Public-Private Partnership (PPP) program as proof that his administration’s good governance yields prosperity.

In his State of the Nation Address, Aquino said his administration was able to sign and award seven PPP projects worth P62.6 billion from December 2011 to June 2014, which is more than the six solicited PPP initiatives inked in the past three administrations.

According to an earlier report, the seven PPP deals awarded by the Aquino administration are:

  • Daang Reyna-Daang Hari connector road to the South Luzon Expressway
  • 9,300 school buildings under Phase-1 PPP for School Infrastructure Project
  • 10,679 school buildings under Phase-2 PPP for School Infrastructure Project
  • Philippine Orthopedic Center modernization
  • Elevated expressway access to Ninoy Aquino International Airport Terminals I, II and III
  • Metro Rail automated, integrated ticketing
  • Three inter-modal mass transportation terminals at the outskirts of Metro Manila.

The PPP program was launched by the Aquino administration in 2010 as a way to boost the Philippines’ decrepit infrastructure, considered a major bottleneck in attracting foreign direct investments.

Aquino said that if before, the government had to offer corporations incentives to invest in the country, now businesses compete with each other for the chance to build infrastructure projects.

Proof that the country had developed a favorable investment climate for infrastructure, Aquino said, were the billions of pesos in premiums paid by the companies that secured the rights to build the Mactan-Cebu International Airport and the NAIA Expressway 2. The premium for the new Cebu airport was P14 billion while that for the new expressway was P11 billion.

The other major infrastructure projects the Aquino administration was able to complete since 2010 include the Tarlac-Pangasinan-La Union Expressway (TPLEX), Aluling Bridge in Ilocos Sur and the Ternate-Nasugbu Road connecting Cavite and Batangas. — JDS, GMA News

 

GANTT CHART | At halftime, here’s PNoy’s score on the PPP Program

InterAksyon, 27 July 2014

By Darwin G. Amojelar

 

MANILA – When President Benigno Aquino III delivers his fifth State of the Nation Address (SONA) tomorrow, he can claim to have awarded 7 infrastructure projects under the Public-Private Partnership (PPP) Program launched 4 years ago.

Barring last-minute hitches, another 2 projects — the P64.9 billion LRT Line 1 Cavite Extension and the P34.5 billion Cavite Laguna Expressway (Calax) — could be awarded within the next few months.

But midway through the Aquino administration’s term, the number of projects awarded to private sector partners comprises only 17 percent of the 54 lined up for the PPP Program (see chart below).

As of July 10, a number of projects of the Department of Transportation and Communications (DOTC) were moving towards formal bidding. Other projects were still in the preparation stage, with the implementing agency still drafting feasibility studies.

The government is banking on the PPP to plug the country’s infrastructure gap and create jobs in the process.

The National Economic and Development Authority (NEDA) had said the PPP initiative would require up to P739.78 billion in investments through 2016 to boost the country’s investment rate and by extension the Philippine economy.

Under its medium-term development plan, the government expects the economy to grow between 7-8 percent through 2016. The Aquino administration also aims to raise its investment rate to 18 percent of gross domestic product by the end of its term from 14 percent at present.

 

Next government to inherit fewer PPP headaches

Business World, 25 July 2014

 

A LEGISLATIVE MEASURE meant to end the problems that dogged President Benigno S.C. Aquino III’s key infrastructure program is expected to be passed by Congress by the first semester of 2015, an official of the Public-Private Partnership (PPP) Center said.

A successful passage of that law — sponsored by Mr. Aquino’s key allies in Congress — may prove to be of little use to a presidency left with only a few months in office by then, but still, Mr. Aquino would be leaving a framework that will help the next government pick up from where he left off, and with fewer headaches.

Sustaining the PPP

A staunch advocate of the proposed “Public-Private Partnership (PPP) Act of the Philippines” is the PPP Center, which pitched the bill as something that would ensure the PPP program would be a continuing legacy.

“Now our main challenge is ‘how do we sustain the PPP program?’ The first identified step is to amend Republic Act No. 7718 or the BOT [Build-Operate-Transfer] Law,” PPP Center Deputy Executive Director Sherry Ann N. Austria said at a July 18 economic forum hosted by BusinessWorld.

Sustaining the Philippine PPP program, hailed by global institutions as a model other economies should emulate, is crucial to drawing direct investments, creating jobs and consequently, greasing the economy that has graduated from being the “sick man of Asia” to being the “next Asian miracle.”

Aquino’s departure meant unfinished business — either because the projects have yet to hurdle the complex layers of the approval process or because they face legal questions.

Already, the incumbent government has trimmed its target list of completed PPP projects to just five before Mr. Aquino steps down from power, from a goal of seven 100% done, as existing regulations were unable to shield some contracts from administrative cases or even lawsuits.

Those five projects — already broken ground and expected to be fully complete by 2016 — according to PPP Center Executive Director Cosette V. Canilao, are the following:

• The P16.28-billion School Infrastructure Project (Phase I);
• The P3.86-billion School Infrastructure Project (Phase II);
• 
The P15.5-bilion Ninoy Aquino International Airport Expressway;
• The P2-billion Daang Hari-South Luzon Expressway; and
• 
The P1.7-billion Automatic Fare Collection System

Removed from the original list were the P5.7-billion contract to modernize the Philippine Orthopedic Center, and P17.5-billion project to upgrade the Mactan-Cebu International Airport (MCIA).

Both contracts were already awarded but the Orthopedic Center’s modernization project hit a roadblock when activist groups, health workers and party-list organizations filed a petition questioning the hospital’s privatization.

The Mactan airport project, meanwhile, stalled when losing bidder Filinvest-Changi consortium filed a complaint against winning bidder GMR-Megawide consortium, alleging conflict of interest.

Ms. Canilao told BusinessWorld, in an interview in Makati City in May
, that the orthopedic hospital and MCIA projects should instead be halfway done by the time the next administration steps in.

The proposed PPP law hopes to address the loopholes existing regulations failed to plug.

“Certain policy gaps can only be addressed by legislative amendments,”
Ms. Austria said at the forum.

“The amendments to the BOT law have been identified as one of the
 priority bills, and hopefully, we’ll be able to have it passed by 
first semester of next year,” Ms. Austria added.

“Except the Supreme Court”

The proposed bill inserts a provision that bars trial courts from stopping PPP projects, raising a few eyebrows.

“The proposed amendments of the bill include the following: … (i) Prohibiting the issuance by courts of temporary restraining orders, preliminary injunction or preliminary mandatory injunction against all PPP projects, except the Supreme Court but with a validity period on only six months,” the bill read.

Political analyst Ramon C. Casiple has misgivings over blanket provisions for PPP deals.

“The rationale is for PPP projects to be shielded from nuisance lawsuits. If you go to the Supreme Court, you must have good arguments or the SC will just ignore your petition. That will avoid challenges to the PPP bidding process and also to implementation,” Mr. Casiple said in a phone interview.

“But this is a blanket immunity. It should be limited only to those projects considered by the NEDA [National Economic and Development Authority] of national importance. Otherwise, you’re talking of possible abuse by those in power or businessmen going into PPP,” he pointed out.

Right of way, property tax issues niggle

Two sticky issues the bill targets to resolve are right of way and property taxes.

Those two were the main concerns raised by investors that tried to compete for the P64.9-billion Light Rail Transit Line 1 Cavite Extension project — the largest PPP deal so far bid out.

The government failed in its first attempt to bid out the LRT-1 project, and attracted just one bidder the second time around.

The legislative measure dictates that valuations for property that will be affected by a PPP project be based on updated estimates by the Bureau of Internal Revenue, the Assessor’s office of the municipal government and a government bank.

“One of the major bottlenecks in implementing a PPP project right now 
is the acquisition of right of way (ROW),” Ms. Austria said, although she and government officials could not immediately give information as to how much it would cost government to buy out affected landowners.

“The major deterrent is under the existing RA [Republic Act] 8974, wherein the default mode is negotiation but, on the part of the government, we
 cannot offer a huge amount because under the law only the zonal value
 can be offered,” she explained, noting that “owners will not
 accept [the offer] because it’s very low and the zonal values are not
 updated.”

Data from the PPP Center showed that 92.3% of the right-of-way acquisition requirement for the railway’s Baclaran-to-Dr. A. Santos segment was completed; 69.2% for the Dr. A. Santos-to-Zapote segment; and 84.2% of the Zapote-to-Niog segment.

The P35.4-billion Cavite-Laguna Expressway project, put on ice after rivaling bidders filed an appeal before Malacanang, also faced right of way issues, according to Special Bid Bulletin 14 issued by the Public Works and Highways department.

The bill pushes for the exemption of projects “of national significance” from all local and real property taxes as a sweetener that will lessen the bitter taste of risks tied to PPP projects.

“There are certain provisions that can only be cured or can only be
 addressed by legislative amendments. For instance, most of the local
 government units have been imposing local or real property tax and
 another local taxes on projects of national significance,” Ms. Austria
 said at the forum.

Projects of national significance, as defined by the PPP Center, are those that are able to “generate employment opportunities and follow the Investment
 Coordination Committee (ICC) prescribed parameters.”

Beyond 2016

Other provisions of the proposed PPP law include: treatment of unsolicited proposals, institutionalizing a pool that the government can tap for financing, and amending the franchise of the Philippine National Construction Corp. as the operator of the Nlex and Slex.

The bill also prohibits regulatory bodies from entering into any PPP contract that they regulate.

That jibes with a recommendation by the World Economic Forum (WEF) for the Philippine government to separate the functions of the agencies involved in PPP projects.

“The point here is to establish entities with separate authorities (i.e. policy-making, contracting, monitoring, and dispute resolution) with a clear governance structure in order to avoid any conflict of interests, and to have clear responsibilities and competencies,” Hanseul Kim, associate director and head of engineering and construction industry of the WEF, said in an e-mail interview with BusinessWorld in May.

The wisdom in that statement is obvious.

“This way, authorities can be independent from the political influence or other externalities, and be able to carry out long-term infrastructure plans, often over 10-20 years, that generally exceeds more volatile political duration,” Mr. Kim added.

The PPP bill may be an afterthought since the Aquino administration failed to deliver on its promise to boost the economy with its centerpiece program.

But its passage also means the next administration won’t inherit the problems that Mr. Aquino’s PPP program struggled with.

With the passage too, Mr. Aquino has made sure his centerpiece program would outlast his term.

 

PPP program: Of 54 deals, 7 awarded; 20 more at P900B

Philippine Daily Inquirer, 24 July 2014

By Miguel R. Camus

 

MANILA, Philippines–It has been battered and bruised but the Aquino administration’s public-private partnership (PPP) program, whose implementers admit is still a work in progress, remains committed to getting crucial infrastructure projects off the ground.

PPP projects have continuously drawn the spotlight given the crucial roles they play in driving economic growth today and in the decades to come. Reassuring the public and investors in President Aquino’s State of the Nation Address (Sona) on Monday, as the administration had done in the past, would help the program.

This reassurance is critical as the program has its fair share of critics—from impatient bidders to those who feel the process favors certain personalities—but the PPP Center that oversees the massive infrastructure drive says the criticism has not dampened investors’ interest thus far, according to its executive director, Cosette Canilao.

She said the lessons learned and reforms implemented over the last three-and-a-half years meant that the PPP deals could be ramped up until President Aquino steps down in 2016.

Going faster

“We are going faster now,” Canilao said. “We have a healthy pipeline of projects and everything is now moving.”

Canilao said a total of five PPP projects would be completed in two years.

These include the 4-kilometer Daang Hari-SLEx Road project, 7-km Ninoy Aquino International Airport (Naia) Expressway project, a smart-card system for Metro Manila’s railways and deals for the construction of new classrooms, she said.

The number of projects may seem small relative to the program’s overall scale and the administration has refrained from mentioning targets, preferring instead to mention specific projects and how they would benefit the public, based on last year’s Sona of the President.

Aquino’s previous address noted key airport deals like the P17.5-billion Mactan-Cebu International Airport, which has been awarded to a Filipino-Indian consortium, Megawide Construction Corp. and GMR Infrastructure.

The government got a P14.4-billion premium payment for this project, meaning Aquino was expected to highlight this PPP deal in his Sona on July 28.

While bagging a significant premium payment was noteworthy, the government may also highlight the robust participation for the PPP by other groups, both local conglomerates and global airport operators.

Sanctity of contracts

This is also to underscore the growing investors’ confidence in a country, where there is still some concern over the sanctity of contracts.

The President made reference to this in last year’s Sona, when he said the public “seemed to have lost confidence in the contracts the government undertook.”

He assured the public that transparency was observed in awarding contracts to PPP projects.

“We have no plans of entering into questionable contracts today just to bequeath problems to the next administration. Each project has to go through the correct process to ensure that our taxpayers’ hard-earned money will be spent the right way,” Aquino said.

Despite the heavy criticism on the slow pace, some in the private sector said the seeds sowed in the current administration were important for future projects.

Roman Azanza III, Aboitiz Equity Ventures first vice president for business development, said the recent successful projects under the program signaled that the Philippines was a safe place to invest and he “hoped” this could be sustained even under future administrations.

“This administration and the people that devised the BOT [build-operate-transfer] law made real efforts, deal by deal, and project by project, to get to a state where a process can be run that attracts the confidence of not just local investors but foreign players,” Azanza said.

More PPP projects, meanwhile, were on the way.

Canilao noted that getting a steady pipeline was the key in ensuring the program’s sustainability and keeping investors interested.

Indeed, the sheer scale of the program highlights how much work still needs to be done for government and on the other side of the fence, for investors, the pool of potential opportunities.

7 deals so far

As of July 10, the government had awarded seven deals out of a total of 54 identified projects. Those seven, including a P17.5-billion contract to expand and operate Cebu’s main international airport, have a combined value of over P60 billion.

The amount, however, is relatively small compared with about 20 more projects valued at P900 billion ready for awarding or to be rolled out.

Part of these are a P135-billion “subway” project in Metro Manila, a P271-billion commuter rail in Luzon, both of which are under study, and a P24-billion bulk water project for Bulacan province.

The remaining 28 projects, which include more seaports, expressways and a natural gas pipeline, are in various stages of development, the agency’s data showed.

Canilao said the list did not include new projects being considered, including the privatization of the operations of Manila’s Naia, the country’s busiest air gateway.

15 more contracts by 2016

All told, she said the government was still aiming to have 15 PPP contracts signed by the end of Aquino’s term, with 10 turned over to the private sector. Over the next 12 months, the PPP Center is planning to roll out another 20 projects, she said.

“We are now at this sweet spot in the next 12 months,” she said.

Most of the deals are being implemented by the Department of Transportation and Communications and the Department of Public Works and Highways.

Strengthening the capabilities of the two agencies is important to the program’s success, according to Canilao. Timing is also an issue and as the 2016 deadline looms, the PPP Center is keen on what happens beyond Aquino’s term amid concerns the future administration would take a different direction from what was started.

Amend BOT law

“What we need now is to institutionalize the changes that we have started. Part of this is amending the BOT (build-operate-transfer) law to reflect these changes to make the program more sustainable,” Canilao said as she hoped lawmakers would approve these revisions within the year.

She said recent reforms included beefing up its project development and monitoring facility, crucial in ensuring “a steady deal flow.”

Government units and agencies are now more used to dealing with PPPs and processes have been “streamlined,” while measures have been taken to address risks through the creation of a contingent liability fund, Canilao said.

“All of that creates a good environment to attract investor participation,” she said.

This was very different from how the program started out, Aquino said in last year’s Sona as he shared that “studies on which the projects were based were outdated; and the bureaucracy lacked the sufficient knowledge to implement them.”

Controversy

The projects, given their large size and potentially lucrative nature, have also attracted some controversy.

Recently, the awarding of the 45-km Cavite Laguna Expressway deal has stalled after San Miguel Corp. sought the intervention of Malacañang last month to reverse its disqualification, which it said was due to a typographical error.

The front-runner for the project is a tandem between Ayala Corp. and Aboitiz Equity Ventures.

Canilao said that despite these issues, investors’ interest had not waned.

Local conglomerates like Ayala Corp., Metro Pacific Investments and San Miguel are PPP regulars. They said they would continue to bid for projects they found attractive.

Larger projects

But Canilao noted that drawing foreign groups would be crucial in the months and years to come as the PPP Center introduced ever larger projects like the planned subway and commuter railway.

Foreign participation, which also comes with expertise, has been limited, thus far.

Apart from the foreign groups that participated in the P17.5-billion Mactan-Cebu International Airport, only Malaysia’s MTD Group has consistently shown interest in Philippine PPPs. But this has not deterred the agency.

Marketing abroad

“We’re putting forward a system to deliver marketing abroad on our PPP projects,” Canilao said, adding that she was optimistic more international groups would participate.

“We have done our homework in making the process transparent. With the big projects we have conducted, those call the attention of foreign bidders. It says we are open for business,” she said.–With a report from Inquirer Research