RELYING on government funds and foreign assistance could never be enough to solve the perennial crisis in infrastructure in the Philippines.

Experts say without the necessary legislation to fund and force agencies to implement public-private partnership (PPP) deals, it will be close to impossible for the country to achieve the so-called Golden Age of Infrastructure. 

Urging the government to fast-track policies on infrastructure buildup with the help of the private sector, former PPP Center Executive Director Andre C. Palacios said the key legislation that will help hasten the development of much-needed facilities in the Philippines should be passed sooner.

The particular bill—still pending before both houses of Congress—is called the PPP Act, which, in a nutshell, amends the decades-old Build-Operate-Transfer (BOT) Law to make it more relevant to the needs of the times. 

  “The PPP Act is vital to our national infrastructure program. Our infrastructure need is so huge and so urgent, but the government has limited manpower and funds. We need government budget and experience to be augmented by private-sector financing, expertise and innovation,” Palacios told the BusinessMirror. 

Hard climb

It is so important that he was confident enough to say that without it being passed into law, the Duterte administration will find it hard to achieve its goal of reaching the Golden Age of Infrastructure in the Philippines. 

“Unless the PPP Act is passed, we will not achieve our Golden Age of Infrastructure and we cannot solve the present infrastructure crisis,” Palacios, now a professor at a state university, lamented. 

Policymakers, chiefs of government agencies and industry players have long been pushing for the passage of the said piece of legislation into law. The Aquino administration tried to put pressure on lawmakers to pass a consolidated bill during the 16th Congress, but failed due to the lack of time to consolidate bills and approve one in a joint session. 

“The PPP Act will do three things: modernize the 28-year-old BOT Law; institutionalize the existing best practices that produced 13 successful PPP projects; and prioritize the PPP program so it can help accelerate our national infrastructure development,” Palacios said. 

Reforms

According to Jeffrey I. Manalo, director of the agency’s policy formulation, the piece of legislation aims to sustain good governance in the PPP Program through five things: the adoption of best practices, clearer and simpler procedures of project development, the creation of a risk management program, the refinement of modes of implementation, and the prohibition of regulatory bodies from implementing deals that they regulate. 

“One of the reforms being proposed is to simplify and provide clearer rules for faster PPP implementation. This includes providing time-bound and decision maker-specific procedures on project approval and procurement, including management of protests and appeals,” he told the BusinessMirror. 

Aside from this, the proposed law also aims to ensure sufficient competition in the market through open, competitive and nondiscriminatory tender processes by adopting a new framework on unsolicited proposals (USPs).

The said framework provides implementing agencies the option to convert USPs into solicited projects and allows unsolicited proposals for projects on the priority list.

“Another major reform that is seen to help accelerate the country’s infrastructure buildup is the proposed revamp of doing unsolicited PPP proposals. In the proposed PPP Act, interested private-sector partners would be allowed to submit proposals for projects on the priority list, provided the government has not incurred any investment cost—e.g., feasibility study—in the last five years,” Manalo said. 

He added that this would also be subjected to the conduct of a competitive challenge process aimed at getting the best bid for the public. 

It likewise extends the challenge period for USPs—minimum of six months to a maximum of one year from the current two months, and introduces “best and final offer” as basis of award.

“The revised framework on doing unsolicited PPPs intends to channel all efforts of both the public and the private sector in realizing the government’s list of critical infrastructure projects at the soonest possible time,” Manalo said. 

Insulation

The PPP Act will also accelerate the implementation of PPP projects by introducing the concept of “Projects of National Significance,” which means that projects will be “insulated” from local laws. 

Under its suggestions to Congress, the PPP Center hopes that the legislation will also provide incentives to PPP projects in relation to taxes, endorsements, approvals and other relevant permits; and prohibit the issuance of temporary restraining orders and other injunctive reliefs against projects.

The proposed legislation also includes the separation of regulatory and commercial functions of government-owned and -controlled corporations.

Also, the said piece of legislation will give the executive director of the PPP Center a fixed tenure, and will, likewise, make the said body a voting member of the Investment Coordination Committee and the Cabinet Committee of the National Economic and Development Authority (Neda).

Finally, the draft bill also institutionalizes the Project Development and Monitoring Facility, which may be tapped by national and local implementing agencies to procure and gain access to transaction advisors who can provide technical assistance in developing, structuring and managing the procurement of PPP projects, Manalo said. 

Still optimistic

In retrospect, according to Palacios, the bill “will improve project preparation by allowing access to international expertise for complex projects; streamline project approval by rationalizing the approval thresholds; tighten project monitoring by strengthening the PPP Center; and accelerate project implementation by prohibiting baseless temporary restraining orders, automatically granting a franchise to the winning bidder, and exempting projects of national significance from real property tax.”

Manalo said the agency is hopeful that these proposed measures will be included in the final draft of the law, which will soon be passed for second and third reading after the deliberations. 

“The PPP Center remains optimistic that all these proposals will be adopted in the upcoming deliberations, as these are a product of the rich learning experience by the government in doing PPPs. It seeks to update the existing law by instituting critical reforms needed to incorporate the lessons learned from the past and to adopt the good practices as currently observed,” he said. 

Currently, the Public Works Committee of the House of Representatives plans to discuss the finalized version of the nine consolidated bills that were retrofitted into one proposed legislation with the end view of complementing the Duterte administration’s Build, Build, Build (BBB) program, Rep. Joey S. Salceda of the second district of Albay said. 

The measure seeks to “institutionalize and strengthen PPP in infrastructure and development projects, the value of PPPs in delivering the country’s infrastructure requirements and utilizing the efficiencies of private-sector participation are crucial to the success of the BBB program,” the lawmaker  stated.

“Now is indeed the time to forge more public-private partnerships to deliver critical projects that will usher the country’s Golden Age of Infrastructure,” Salceda said. 

The substitute bill consolidated the salient features from separate proposals filed by Speaker Pantaleon D. Alvarez and Reps. Feliciano R. Belmonte Jr., Romero S. Quimbo, Romeo M. Acop, Vilma Santos-Recto, Gary C. Alejano, Manuel T. Lopez, Luis Raymund F. Villafuerte Jr. and Salceda. 

Salceda said the bill is an offshoot of the previous government’s “learnings,” and will accelerate the implementation of the Philippine Development Plan for 2017 to 2022.

The consolidated bill also includes the promotion of financing modes such as the listing of projects in the Philippine Stock Exchange, the encouragement of foreign investment in public infrastructure, and the definition of roles and participation of local government units in PPP deals. 

Urgency

With this development, Executive Vice President of the European Chamber of Commerce in the Philippines Henry Schumacher said businessmen are generally happy with the movement of PPP Act forward, but noted the necessity and urgency of the said policy.

“Industry is happy that the PPP Law amendment is moving in the House now, and we trust that both houses of Congress will approve the new law as soon as possible given the fact that the success of BBB hinges on making the implementation of infrastructure projects easier,” he told the BusinessMirror.  

PPP Center Deputy Executive Director Eleazar E. Ricote echoed Schumacher’s statement, saying that the agency is rooting for the quick passage of the bill into law. 

“Overall, we are pleased with the recent finalization of the draft substitute bill in the House of Representatives, but there is a need to hasten its passage into law. We also recognize that once the bill is passed, the Implementing Rules and Regulations (IRR) should be able to thresh out the details on how the new law will be operationalized,” he said. 

Ricote added that the IRR is equally critical to ensure that the objectives of the new law are realized. 

“This will make the PPP Act more responsive to the requirements of a robust PPP Program and contribute significantly to the country’s Golden Age of Infrastructure,” Ricote stated. 

Too slow

But for Palacios, the movement of the bill from proposal to actual law is a bit too slow, considering that the said legislation was considered a priority during the last few months of the Aquino administration and the first few months of  President Duterte’s term.  

“In terms of speed, the PPP bills are still pending in the Senate and House committees almost two years after they were filed, and nearly eight months after they were prioritized by the Legislative-Executive Development Advisory Council,” he said. 

PPP deals under the Duterte administration had to take the backseat, as the government took an apparent shift in bias toward developmental financing from private sector-led funding on infrastructure development, which was the cornerstone infrastructure-development program of the Aquino administration.

Aside from pronouncements from different economic managers, government data will prove that it has, indeed, changed its preference on project financing toward official development assistance (ODA) and state coffers.

Real score

From a staggering 14 projects under procurement in the first half of 2016, data from the PPP Center showed that there is only one national PPP deal that is up for bidding as of end-March.

This does not mean that the projects were awarded to their respective winners, but most of them were simply snatched from the pipeline, and was added to the Duterte administration’s “Build, Build, Build” (BBB) program.

Touted as the government’s “most ambitious infrastructure plan,” the BBB program lists 70 priority infrastructure projects that are seen to solve the infrastructure crisis that the Philippines faces today.

The new infrastructure thrust was born out of Duterte’s policy on increased infrastructure spending, an avenue wherein the previous administration failed miserably, with underspending plaguing government agencies tasked to develop crucial infrastructure, such as roads, rails and ports.

The majority of the projects under the newly minted program—roughly 39 of 70 deals—were contracts either signed, implemented and started during the administration of former President Benigno S. Aquino III, according to estimates made by the BusinessMirror.

Likewise, a thorough analysis of the project pipeline under the BBB program would show that in terms of financing options, the majority of the projects will be funded by the General Appropriations Act. This is followed by ODA grants and loans, while private-sector funding comes in last.

The Philippines is in the midst of ushering the country into the so-called Golden Age of Infrastructure, with President Duterte issuing a policy on increased infrastructure spending throughout his term. His mandate is to increase the budget for infrastructure development to as much as 7 percent of the country’s GDP from a mere 2.9 percent.

Over the next six years, the government will spend roughly P8.4 trillion to build, modernize and rehabilitate new and old infrastructure, as the country plays catch-up with its neighbors in terms of adequacy of transportation facilities, energy and water supply and other socioeconomic needs.

Infrastructure has always been the Achilles’ heel of the Philippines. 

Just recently, the World Economic Forum reported that the country ranked 97th out of 137 nations in terms of underinvestment in infrastructure, making interest in the Philippine economy low, despite ranking 22nd in terms of macroeconomic environment.