By Catherine N. Pillas & Lorenz S. Marasigan
For investors who committed to support the country’s massive infrastructure-development program through the internationally proven public-private partnership (PPP) scheme, the Duterte administration’s shift to the so-called hybrid mode is really something to frown about.
This, according to AC Energy Holdings Inc. President John Eric T. Francia, is because the shift in tack not only puts to waste the momentum built by the PPP Program and the preparations undertaken by the state and private-sector partners, but also the infra projects earlier pipelined are now being shelved.
“I remember much promise during the previous administration when the Aquino [administration] announced big plans on the private-public partnership [PPP] projects. It took a long time before the program could get off the ground but we thought that was the right direction,” Francia said during Wednesday’s Oxford Business Group’s Report on the Philippines.
The previous government managed to gain traction in laying out the process, even after two years of slow movement due to initial jitters—all for naught today.
“I thought we had a good momentum going on; so our hope was that this momentum could continue and this administration could reap the benefits that were sowed. But what’s happening is a lot of these PPP projects are being shoved aside,” Francia lamented.
Clearly, the Ayala Corp. executive stressed, continuity in infrastructure development policy is sorely lacking in the country.
Just this March, the National Economic and Development Authority’s Investment Coordination Committee proposed to shift three major infrastructure projects to official development assistance (ODA) financing using the hybrid mode.
One of these is the P53.6-million Chico River Pumping Irrigation project that has been identified as a project to be financed by the Chinese government.
The same agency proposed changing the financing mode of the New Centennial Water Source Kaliwa-Dam Project from PPP to ODA—another project offered to China as a priority.
This was the same fate for the North-South Railway Project-South Line, with the Chinese expressing interest in financing the long-haul line and Japan International Cooperation Agency (Jica) interested in the commuter line.
“We haven’t seen a single PPP project bid out or carried out,” Francia said.
Ayala is a major player in the PPP arena. Under its belt are a number of PPP projects: Muntinlupa-Cavite Expressway, Automated Fare Collection System, Light Rail Transit Line 1 Cavite Extension and Integrated Terminal System South.
Francia observed that the infrastructure development in the Philippines is now characterized by an increasing reliance on ODA as a financing option, and the encouragement of unsolicited proposals. While the country’s low debt-to-GDP ratio allows flexibility in increased government borrowings, the trend of spurring unsolicited bids is “a waste of time and resources”. “It takes a lot of government effort to review all of these unsolicited bids, and let’s get real: will the government really accept unsolicited bids on critical infrastructure and award the original proponent status to one bidder just because it submitted first?” asked Francia, underscoring that the ambiguity in this mode may stir controversy.
He maintained that unsolicited proposals could be suitable for noncritical projects, or those not of national significance.
On the whole, however, Francia reiterated that the government must view infrastructure as a “multiyear” endeavor that transcends administrations.
“Six years is just too short for a government to lay out a new policy and roll it out. In an ideal world, it’s a “6+6”—the first administration will lay out the new strategy and the next administration will build on it, execute it and not reinvent the wheel. That’s not what’s happening now,” Francia noted.
Economic managers have admitted that the government has shifted its bias on infrastructure development, with a leaning on pursuing hybrid deals.
A project is considered a hybrid if the government assumes the responsibility of building the infrastructure, whether through public funds or ODA, while granting the operations and maintenance component to the private sector upon completion.
Oxford Business Group Managing Editor for Asia Paulius Kuncinas said there is really a need to address the gaping infrastructure divide in the Philippines. Today, experts tag the Philippines as experiencing an infrastructure crisis.
Image credits: Nonie Reyes
3 comments
The window of oppotunity must not be squandered . The mantra of build.build build should.live up to its name. If it comesnright down to it,al it needs is to stamp these projects as approved and get it going. PPP is a much better route as much of the risks will be borne by the private proponents.and is basically a user fee infra projects whereas ODA loans will add to the debt burden and if too much woukd destroy the govt balance sheet.
clearly this francia of Ayala corp is infuriated that the PPP was stumped by a hybrid version because it means less pure PPP, and less if no project for them. This article is a bit biased. Nevertheless, it has some point. Yet still I believe the current administration has its reasons for leaning a bit more on hybrid PPP, which i think is to fast track the actual construction of the projects. PPP would probably take a bit more time and study and paperwork. We just all hope that fast tracked projects won’t compromise the quality.
not all loss for the private sector as after these projects are finished thru hybrid pp, maintenance and operation may still be given to private companies.. that is if they are up to it, and not be as whiny as the AC corp executive