THE congressional bicameral conference committee has approved the proposed Public-Private Partnership (PPP) Act, which includes “innovations” to boost green projects, Official Development Assistance (ODA), and returns of public-private projects to the government.
House Committee on Ways and Means Chairman Joey Sarte Salceda said Congress will likely ratify the proposal by Tuesday.
According to Salceda, they have introduced several amendments to include provisions to encourage green financing, allow commercial involvement in ODA for PPP projects, and boost the returns of the government on PPP projects by allowing an internal rate of return as a basis for bidding and negotiating PPP projects.
“I proposed several amendments to my colleagues and counterparts, all of which were accepted in some form. But the major ones are these three,” said Salceda, the chairman of the technical working group that drafted the House version of the bill.
Salceda also pushed to elevate the PPP Law into a code so that future amendments would be made to the code instead of in a scattered way.
“With my amendment, for example, the code explicitly allows projects involving green growth, low-carbon, carbon avoidance, sustainable development, and the use of alternative assets such as carbon credits, such as those pursuant to Article VI of the Paris Agreement, or ecosystem services. This opens the door to PPPs involving the generation and trading of carbon credits and other innovative climate finance mechanisms,” he added.
The lawmaker said the country needs one common set of rules to strengthen investor certainty and confidence.
“We have a lot of potential in the market for carbon credits because we are a low-per-capita emissions country with moral ascendancy and experience in disaster risk reduction and climate change adaptation and mitigation. In December 2022, [Environment] Secretary Toni Yulo said that they needed an enabling law to establish a carbon credit market in the Philippines. With this, you can already create that market through PPPs. I expect unsolicited bids from RE companies first, who are tax-exempt on the sale of their carbon credits. They stand to benefit the most,” Salceda said.
Salceda added that he also introduced amendments that will allow more ODA to finance PPPs.
Under the proposal, Salceda said that ODAs, when used to finance PPPs, are executive agreements and therefore do not require treaty approval.
“The amendment also allows ‘blended finance’ or the participation of the private sector on the side of the financing country in the use of ODAs for PPP projects,” he added.
“This is already standard practice among European countries that finance ODAs. The proposal will help diversify the ODA portfolio. Japan dominates our ODA sources, but France comes in at a distant second and is willing to do more if we can make these amendments,” he said.
Salceda said they also introduced a provision allowing a maximum rate of return for private PPP partners as a bidding parameter or a negotiation term in crafting PPPs.
“Anything in excess is remitted to the National Treasury, like San Miguel Aerocity’s franchise, which allows a 12-percent internal rate of return. The Public Service Act amendments also provide for this,” he said.
Salceda also brought up additional amendments, such as allowing local water districts in PPPs to combine to maximize efficiency and reduce consumer bills.
The proposal also allows all government agencies and instrumentalities to undertake PPPs.