For many developing countries, major infrastructure projects, which are needed to drive the economy, are difficult to undertake because of the huge funding involved.
Some countries tap the private sector to help in the funding part. In the Philippines, the Public-Private Partnership (PPP) program encourages private corporations to finance and build infrastructure projects, while the government provides for the sites for the projects.
To enable the private partners to recoup their investments and generate profits, contracts usually include concessions, which allow the private proponents to collect fees from end-users, such as motorists driving on toll roads.
Participants in PPP projects, particularly those entailing huge amounts of funding, usually comprise of consortiums or partnerships between local companies and private foreign investors.
Unfortunately, not a lot of big-ticket projects have been completed since the launching of the PPP program several years ago, under the previous administration.
President Rodrigo Roa Duterte’s decision to adopt an independent foreign policy after assuming office in mid-2016 also opened new funding sources for infrastructure development, as well as markets for Philippine products.
Even before concluding his meeting with Chinese President Xi Jinping in Beijing in October last year, the Chinese government announced that it was lifting its advisory to its citizens against travelling to the Philippines. It was a big boost to Philippine tourism because China is the world’s biggest source of tourists.
China has also lifted restrictions on Philippine banana exports, and has even committed to buy other agricultural products from the Philippines.
After his trip to China, President Duterte went on to Japan, where he received another commitment for investments and assistance.
Now, the Philippines is now in an enviable position of being wooed by Chinese and Japanese investors who want to participate in infrastructure development.
During his visit to Beijing, Duterte received a $24-billion package consisting of $9 billion in loans and $13.5 billion worth of pledges. In his trip to Japan, Duterte received an offer for a $48-million government loan plus more than $17 million investment pledges by Japanese companies.
During his visit to the Philippines last January, Prime Minister Shinzo Abe announced an $8.66-billion public-private sector funding to support infrastructure projects in the Philippines for five years.
Companies from both countries are now in a race to enter into partnerships with local companies not only on infrastructure projects but in other business activities.
Chinese Vice Premier Wang Yang, in a demonstration of China’s seriousness in honoring its commitments to the Philippines, met with President Duterte last March 18.
Wang’s delegation included Vice Minister Fu Ziying of the Chinese Ministry of Commerce, who exchanged letters with Finance Secretary Carlos Dominguez related to the construction of the Panay-Guimaras-Negros bridges project and the Davao City expressway project, which are among the nine projects that China would finance.
Last March 30, the Philippines-Japan Joint Committee on Infrastructure Development and Economic Cooperation held its first meeting in Tokyo to begin the process of implementing Abe’s commitment.
The Philippine delegation was headed by Finance Secretary Carlos Dominguez III, while the Japanese panel was led by Dr. Hiroto Izumi, the special advisor to Prime Minister Shinzo Abe.
During the meeting, the Philippine delegation presented a list of priority infrastructure projects for possible implementation with Japanese official development assistance (ODA).
The list covers projects in railway, irrigation and public works projects covering road and flood management.
There appears to be a competition between Japan and China because some projects are in both countries’ list. One is the proposed commuter line of the North-South Railway Project (NSRP). The 653-kilometer NSRP south line will consist of commuter railway operations between Tutuban in Manila and Calamba, Laguna, as well as long haul railway operations between Tutuban and Legazpi City in Albay province.
In addition to China and Japan, other funding sources for infrastructure as well as investments in other areas are opening up for the Philippines. President Duterte, who travelled to the Middle East during Holy Week, was expected to bring home more than $650 million worth of investment commitments.
With the new funding sources, the Philippines has breached one of the major barriers to infrastructure development. This should allow us to catch up with our peers, sooner rather than later.
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