Do We Need a New PPP Law?
By: Jeffrey I. Manalo, Director IV, Policy Formulation, Project Evaluation and Monitoring Service
The Philippines has a long history of public-private partnerships (PPPs). Over the years, we have witnessed the power of PPPs in shaping the country’s infrastructure agenda—from breakthrough PPPs that have survived us in the power and water crises in the 1990s; to the traditional economic infrastructure that have opened unprecedented opportunities, such as the popular north and south Luzon expressways, as well as the world’s first airport resort in Mactan, Cebu; and to the emerging development sectors where PPPs play a vital role, such as in Information Technology (IT) systems like the BEEPTM card, solid waste management projects, and health facilities, among others.
Needless to say, PPPs continue to be a major pillar in development, supplementing the limited government budget, and the scarce resources under official development assistance.
Today, our PPP Program remains to be at the forefront in the region, and the several countries officially visiting the PPP Center to study and replicate our frameworks are a testimony to this regional leadership.
However, we have also seen undesirable PPPs hounded by unnecessary delays or disadvantageous contract terms, which even caused some to resist the idea of PPPs altogether.
While these pitfalls and hard lessons learned are attributable to varying factors including lack of institutional preparedness, technical capacity, and politics, among others, it cannot be discounted that some of these are a result of the outdated legal and regulatory frameworks in place, which have become, over the years, inadequate to address existing gaps in policies.
The study by The Economist Intelligence Unit titled “Evaluating the environment for public-private partnerships in Asia (The 2018 Infrascope)” aptly captured the importance of a sound legal and regulatory framework in the success of PPP programs—”Regulations are the policies and guidelines that support government agencies, the sponsor market and financial institutions, and set stable expectations for the PPP implementation process. Regulations provide a blueprint for the many stages involved in successful project delivery, such as project selection and evaluation criteria (including cost-benefit analysis and compliance with environmental and social sustainability laws), competitive bidding and contract management. Regulations alone do not guarantee a successful PPP programme, with much depending on execution. However, they provide a necessary framework for building agencies’ capacity to deliver PPP projects successfully.”
In the last couple of years, the country’s efforts in improving institutional capacities, developing a project pipeline, negotiating better contract terms, and addressing policy gaps are commendable. However, institutionalizing all these efforts in a comprehensive PPP Law that will lay the foundation for better prepared and implemented PPP projects, remains to be a challenging work in progress.
This is quite in contrast with other PPP markets, such as among our neighbors in the Southeast Asia where 8 out of 10 of our peers have either recently enacted a new PPP law or updated an existing PPP legislation.
Amidst this backdrop, we ask—do we need a new PPP law? I submit the following:
1. We need a law with clearer and simpler rules that lead to faster decisions and actual project implementation.
Unnecessary restrictions in the law should be removed as these cause unnecessary delays in projects. One example in the existing Amended Build-Operate-Transfer (BOT) Law is restricting unsolicited proposals to non-priority projects, or restricting proposals to ones with new technology for those in the priority list. Both are unnecessary.
In a country like ours where infrastructure development is a catch-up game, we want all efforts—unsolicited proposals included—to be channeled to those projects that have been identified by the government as a priority. Spending resources for those proposals that are not considered priority will only delay us further in completing programmed projects.
Another area for reform relates to those vague provisions in the existing law. In the case of MRT-7, the project encountered a delay in the government’s review on whether the required Performance Undertaking is prohibited under the existing rules. If the provisions for determining matters such as what constitutes government undertakings were clearer in the law, then the five-year delay on the project could have been avoided.
2. We need a law with a stronger protection of public interest.
While measures to protect public interest are present in the existing law, our PPP experience compels us to strengthen these.
In the MRT-3 project, the government assumed a high degree of risk, which helped attract private investment, but resulted in considerable financial burden for government. A provision in the law that requires government to take only those risks that it could control should be in place.
Meanwhile, a PIDS study in 2010 showed that out of 12 unsolicited proposals, all but one project ended up being won by the original proponent. The law needs to promote competition as it is the public which stands to lose the most when government does not get the best value for its investment.
Good governance measures in PPPs also need to be enhanced. Among many other reforms, this could include requiring public disclosure of executed PPP contracts, defining the role of oversight agencies such as the Commission on Audit (COA) in the entire PPP process, and avoiding conflict of interest by prohibiting regulatory bodies from implementing PPP projects in industries they regulate.
3. We need a unified law that is responsive to the ever-evolving needs of infrastructure and other development sectors.
Today, apart from the Amended BOT Law, GOCCs may use either the rules under the NEDA Joint Venture Guidelines or the rules under their special charters in processing PPP projects. LGUs, on the other hand, may enter into joint venture PPPs using their own PPP Codes as approved by their respective Sanggunians.
The absence of a unified law governing PPPs results in varying standards of applicable rules and protracted processing of projects. This could be avoided if there is just one set of simplified rules to operationalize PPPs, that all implementing agencies should follow.
In the case of PPPs in the Philippines, our law has only been amended once in 1994, after it was enacted more than thirty years ago. Both in theory and in practice, laws need to evolve with the demands of the times. Three decades have passed since the BOT Law was enacted, and we have learned more than enough lessons from both successes and failures. It is imperative that we translate these into an updated legal framework that will drive the new wave of PPPs that are truly for the people.
And so, we ask again—do we really need a new PPP law?
Yes, we need a new PPP law. And we need it now.