Business groups: Delay in passage of PPP Act could prove costly

by: Lorenz S. Marasigan

Now in limbo, the Public-Private Partnership (PPP) Act, which generally amends the decades-old build-operate-transfer law, could have been instrumental in fast-tracking the movement of infrastructure deals out of the government’s pipeline of projects.

This is why the business community was generally disappointed after learning that this crucial piece of legislation that would have institutionalized the key infrastructure program of the Aquino administration was not passed during the last calendared session of Congress on Wednesday.

Businessmen fear that delaying the PPP Act’s passage—even by a year—could prove costly for the Philippines.

The bill was up for interpolation at the Senate. It initially hurdled the final reading at the House of Representatives, but was recalled on Tuesday evening following a late appeal made by Senior Deputy Minority Leader and Bayan Muna Rep. Neri J. Colmenares.  According to Colmenares, the approval of House Bill (HB) 6631 violated Section 28, Article VI of the 1987 Constitution, which, he said, clearly states that “no law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress.”

Only 136 congressmen voted during the third-reading approval of the PPP bill on Monday. With the House of Representatives rolls showing a total membership of 291, HB 6631 needs to be passed on third and final reading by 146 congressmen.

“It is sad that the PPP Act did not pass the Senate. However, everybody realizes that, without investments in infrastructure, the economy cannot continue to grow. The next president of the Philippines will be aware of this and will have to support the more effective infrastructure development implementation needed,” European Chamber of Commerce of the Philippines (ECCP) External Vice President Henry J. Schumacher said in a text message to the BusinessMirror.

With little hope left for proposed PPP Act  passage in the 16th Congress, Makati Business Club (MBC) Executive Director Peter Angelo B. Perfecto said the next set of leaders should set up a legislative agenda that could push further growth to the country’s local output—infrastructure being one of the drivers of economic expansion.

“I think what is needed is more inclusive public-private dialogue on PPP. In the next Congress, whoever the next president is, we must exert more effort toward charting better ways forward on a legislative agenda that will make our country more competitive while ensuring inclusive growth,” he said.

But there is still hope—even a flicker —as lawmakers return in May to resume interpolation and amendments.

“This legislation is important to accelerate needed infrastructure projects without which the country will be less competitive,” American Chamber of Commerce Senior Advisor John D. Forbes said. “There is a real cost to waiting another year or two.” PPP Center Executive Director Cosette V. Canilao explained that Congress could still pass this so-tagged crucial piece of legislation.

“We can still pass it, as there are still succeeding sessions in May,” she said. “But even without the PPP Act, we were still able to roll out a successful infrastructure program. We have awarded 12 projects, and we have a very healthy pipeline.”

When approved, the PPP Act would institutionalize the Project Development and Monitoring Facility, the PPP Governing Board and the contingent liability fund. The proposed amendments include the separation of regulatory and commercial functions of government-owned and -controlled corporations, as well as the creation of a list of projects called “Projects of National Significance.”

By virtue of being included on the list of projects of national significance, projects will be “insulated” from local laws, among others, by local government units (LGUs).

The proposed amendments also include allowing time-bound temporary restraining order and the extension of the period for Swiss Challenge to six months from the current two-month period.

“The PPP Act will address the issue of slow bidding and rolling out of projects. It will be to the benefit of the public if the PPP Act is passed because implementation, preparation and the whole bidding process will be much faster,” Canilao said.

But there were also concerns raised over the current versions of the PPP Act.

Former Justice Secretary Alberto C. Agra, a certified PPP specialist, said lawmakers must take a second look into the proposed measure, as it “recentralizes” the program instead of allowing LGUs a free hand to it for better implementation. Agra, a BusinessMirror columnist, said solons should specifically be cautious of approving the repealing clause of the PPP Act, which basically institutionalizes the PPP Program for sustainability.

“There are two basic issues. One, the original draft wants to repeal all local government ordinances on PPPs—I see that as an attempt to recentralize rather than enhance the decentralization of PPPs,” he told the BusinessMirror via phone.

Both HB 6331 and Senate Bill (SB) 3035 state in the repealing clause that “Joint Venture Guidelines issued by LGUs, and PPP Codes issued by LGUs, are hereby repealed.” The measure is among the administration’s priorities and is being pushed by business groups.

Back to ‘imperial Manila’

There are now about 62 LGU PPP codes and over 30 ongoing or approved PPP projects at the local government level. On the contrary, there are currently only 12 approved PPP deals at the national level, with some of them still being challenged in court for various reasons.

He said, by repealing these 62 LGU PPP codes, the initiatives that were introduced by local governments will deemed futile.

“It’s really a setback from the local autonomy that is guaranteed by the Constitution. Why go back to the olden days of imperialist Manila, and instead empower LGUs?” Agra lamented.

The decentralization of the PPP Program allows for the development of infrastructure outside the urban centers.

“This gives LGUs the authority to adopt their own PPPs, allowing them to develop other centers outside Manila,” he said.

PPP modes

Another issue that lawmakers should look into is the limiting of the modes of implementation from 24 possibilities to 11.

“It will be a misnomer to call it a PPP Act if they will not include the possible 24 modalities,” he said.

Modalities include the build-operate-transfer scheme, joint-venture scheme and build-lease-transfer scheme, among others.

“If you repeal the ordinances, the status of contracts awarded under those ordinances will be under limbo,” Agra said.

Cities with PPP ordinances include Manila, Quezon City, Parañaque, Cebu, Davao, Batangas and General Santos, among others.

“By one sweep, all these will be deleted. There is an adverse impact on local economy,” he explained.

Agra said the move signals that the national government lacks trust in local governments. He clarified, however, that he supports the other amendments to the law.

Colmenares, on the other hand, said the PPP bill is prejudicial to LGUs, as the measure prevents local governments from collecting real-property taxes and other fees.

“Under Section 20 [of the bill], or on the projects of national significance, all PPP projects are exempted from real-property tax. Local tax and fees and all necessary business permits will be automatically granted or issued to all projects of national significance. To sum up, the [PPP bill is] prejudicial because it removes the power of the LGUs to collect fees from PPP projects,” Colmenares said.

Under the bill, upon certification and recommendation by the  Investment Coordinating Committee, and prior consultation with the Department of the Interior and Local Government, the President may classify certain projects, such as energy, toll road, mass transit, water, sewerage and such other projects undertaken under this act as projects of national significance, which shall be entitled to the following incentives:

“All real properties, which are actually and directly used for the project, shall be exempt from any and all real-property taxes levied under RA [Republic Act] 7160, or Local Government Code. “All projects of national significance shall, likewise, be exempt from any and all local taxes, fees and charges.

“Automatic grant or issuance of the necessary business permits, including renewals thereof, in favor of the winning proponent.

Colmenares also questioned the mandatory approval of administrative franchise and license permit.

“Under Section 13, once a PPP contract is duly executed, LGUs shall automatically grant in favor of the project proponent an administrative franchise, license permit. They have no more power to deny [permits],” Colmenares added.

Section 13 of the bill provides that, once a PPP contract is duly executed, the regulator, licensing authority or LGUs shall automatically grant in favor of the project proponent an administrative franchise, license permit, or any other form of authorization required for the implementation of a PPP project subject to submission by the project proponent of the requirements by the regulator, licensing authority or LGU.

Also, the bill said any provision of law to the contrary notwithstanding, it shall be mandatory on the part of the regulator, licensing authority or LGUs to accept and approve the application for administrative franchise, license or permit, saying failure to act on a proper and complete application thereof within 30 working days from receipt of the same shall be deemed as approval thereof.

Source: www.businessmirror.com.ph