Reforms sought on a regulatory framework to tackle challenges on PPPs

At the Philippine Infrastructure Summit organized by PricewaterhouseCoopers (PwC) Philippines, the Management Association of the Philippines (MAP), and the Public-Private Partnership (PPP) Center held on October 27, PPP Center Executive Director Ma. Cynthia C. Hernandez talked about PPP legal and regulatory issues and how the Amended 2022 Implementing Rules and Regulations (IRR) of the Build-Operate-Transfer (BOT) Law addresses these critical points.

“The first set of reforms that the Revised 2022 IRR of the BOT Law focuses on stakeholder concerns on the financial viability and bankability of PPP projects,” Hernandez said.

“In amending the 2022 IRR, the BOT Law IRR Committee was guided by the following policy objectives. First, it must address stakeholder concerns about the financial viability and bankability of the PPP project. Second, it must also address concerns about potential delays due to extra steps, rigid processes, or ambiguous provisions,” the PPP Center chief added.

During the half-day Infrastructure Summit, guest speakers from the government and the private sector aired their concerns and strategies on clearing up regulatory and policy bottlenecks like right-of-way, potential delays due to extra steps, rigid processes, or ambiguous provisions.

Private sector airs challenges with PPPs

Representatives and panelists from the private sector aired their sentiments on issues that beset the country’s PPP Program. These range from gaps in the legal framework to issues on transparency, predictability, consistency of rules, the equitable distribution of risks to specific bottlenecks like right-of-way, and the need to revisit the approval process at the ICC.

According to Rodrigo E. Franco, President and CEO of Metro Pacific Tollways Corporation (MPIC), legislators need to fix the industry regulatory requirement that should accompany the PPP Law improvements. In spite of the challenges that MPIC has faced, Franco believes that doing PPPs can be successful.
“We think, and we’ve seen, especially as we have 6 toll road concessions already, that the PPP scheme works in the toll road sector. There are some problems but we think that this can be managed by all stakeholders working together,” Franco said.

Meanwhile, Cosette V. Canilao, President and CEO of Aboitiz InfraCapital, highlighted in her pre-recorded message that PPP investors point to bankability and the equitable allocation of risks between the government and the private sector as the primary reason for undertaking PPP projects. However, a deeper probing reveals that investors would normally go into a market with a deep commitment from the government to undertake an effective PPP program.

“The recently approved IRR Amendments to the BOT Law is a welcome development. The revisions will hopefully ensure the viability of PPP projects, provide a fair distribution of risks between the private sector and government, and resolve ambiguous provisions that could cause delays in the implementation of PPP projects. What we are hoping for next is the speedy evaluation and approval of numerous projects in the pipeline,” Canilao added.

Sanctity of PPP contracts

Issues with crafting, implementing, and managing PPP contracts were also seen as a substantial challenge to the success of the PPP Program.

Mia Mary G. Sebastian of Citadel Pacific Ltd. explained the value of efficiently managing PPP contracts.

“When you deal with PPP infrastructure projects, it is critical that public interest is protected. But there is a need to balance between regulations and how this partnership is implemented between the public and the private sector. At the approval stage you lay down the contract term and by doing so lower the risk premium of the private sector, providing certainty and stability during contract implementation,” Sebastian said.

Part of the provisions stipulated in a PPP contract is the allocation of risks. Jaime Raphael C. Feliciano of Megawide Corporation pointed out, “Often, all the risk is transferred to the private sector. Government has obligations as well. There has to be a consciousness that both parties have obligations to make the project work.”

Batting for the PPP Act

As the country’s mandated coordinator and monitoring agency of PPP projects, the PPP Center is also pushing for the passage of the PPP Act in the 19th Congress, which private sector participants of the summit echoed.

Executive Director Hernandez acknowledged that there are provisions in the BOT Law that are ambiguous or are causing issues, which cannot be addressed through amendment of the IRR, and which entail amendment of the law itself.

According to Hernandez, the passage of the PPP Act becomes critical as a legal remedy to address the issues that continue to hamper the growth and viability of the PPP Program. She added that the proposed PPP Act will address ambiguities in the existing law, address bottlenecks and challenges affecting the implementation of the PPP Program and foster a more competitive and enabling environment for PPPs.

Hernandez assured private sector partners that the PPP Center will continue to pursue innovative initiatives to assure both the public and the private sector of a PPP Program that delivers inclusive and sustainable public infrastructure and other development services.