Hybrid PPP ensures private sector role in infra buildup

Date Posted : May 17, 2018

Hybrid PPP ensures private sector role in infra buildup

Date Posted : May 17, 2018

The private sector will continue to play a lead role in the Duterte administration’s “Build, Build, Build” program, given that the construction, as well as the operations and maintenance (O&M) component of the projects under this massive infrastructure buildup, will still be undertaken by private contractors through the “hybrid” Public-Private Partnership (PPP) arrangement, according to Finance Secretary Carlos Dominguez III.

Dominguez said the government on the Duterte watch is undertaking the financing of big-ticket infrastructure projects to speed up the process and cut on projects costs, so it could deliver the economic benefits of these projects to the people at the soonest possible time.

With a steady revenue stream from the Tax Reform for Acceleration and Inclusion Act (TRAIN), increased official development assistance (ODA) flows, and investment-grade credit ratings, Dominguez said this is also an opportune time for the government to build its asset base, which future administrations can later put on the auction block to raise funds if and when necessary.

“All the construction (under the ‘Build, Build, Build’ program) is done by the private sector. All of these are private sector construction so there are contracts given to private contractors,” Dominguez said. “Now, the opportunities will come when we bid out the O&M. So that is their opportunity as well.”

Dominguez cited, as an example, the 25-year concession to operate and maintain the Clark International Airport, which has attracted several bidders representing local and foreign firms from Asia and Europe.

A “hybrid” PPP mode would prove to be the most viable way of implementing “Build, Build, Build” projects because the government can borrow money at lower rates than the private sector and do away with protracted private sector negotiations that sometimes lead to lawsuits, Dominguez said.

“And let me add another thing. While we are doing all these projects ourselves, the government is building up an asset base that is going to be very large. Some future government, you know, down the road, 20 to 30 years from now, may need money, they can sell those and go to a privatization program,” Dominguez said.

The Duterte administration is investing about $170 billion over the medium term in 75 high-impact flagship projects under the “Build, Build, Build” program. Of these projects, 35 have already passed the approval process.

Earlier, Dominguez said this unprecedented infrastructure buildup “will drastically alter the Philippine economic landscape,” create over a million jobs per year and bring the country’s logistics backbone up to par with other fast-growing economies in the region.

Dominguez said that combined with other reforms such as the long-due modernization of the tax system and improvements in the ease of doing business, the Duterte administration envisions the infrastructure program to reduce poverty incidence by a third of the 2015 level of 21.6 percent to just 14 percent by 2022.

He expressed confidence in the economy expanding by 7 percent or better over the next five years on the back of the government’s “mammoth investment” in infrastructure.

In the first five months of 2018 alone, Dominguez said national government spending on infrastructure reached P281 billion, representing an increase of 42 percent over the same period last year, and which is on top of private sector construction and public sector projects financed through PPPs.


Date Posted May 17, 2018

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