Groups make final push for proposed PPP Act
THE massive pipeline of key infrastructure deals—possibly at around a trillion pesos in total cost— is a reflection of how much money the Philippines needs to invest to improve the quality of life in the country.
With this issue at hand, funding mechanisms for public-private partnership (PPP) contracts must be expanded, stakeholders discussed during a forum in Makati City on Friday.
Capital markets, such as the Philippine Stock Exchange (PSE) and the Philippine Dealing and Exchange Corp. (PDEx), are enthusiastic about the idea of listing projects under the program. But, to provide easier access to these options, Congress will have to enact into law the proposed amendments to the build-operate-transfer (BOT) law.
Cosette V. Canilao, the former executive director of the PPP Center, said the passage of this legislation is critical in raising capital to finance projects of prime importance.
“The magnitude of the projects in the pipeline is getting bigger and bigger, and proponents would indeed have to tap other forms of financing other than banks,” she said. “There is an impetus to develop a framework by which PPP proponents to tap capital market.”
The infrastructure-development body has proposed several amendments to the BOT law. These, she noted, will help facilitate faster fund sourcing for PPP projects.
“If we wish to really tap the capital markets for infrastructure financing, we need to enact such an amendment,” Canilao said. “We hope that Congress would not pass the watered-down version, but a version that will help us develop the capital markets for PPP funding.”
PPP Center Executive Director Andre C. Palacios agreed, saying that his camp is hopeful that both houses of Congress could still pass the bill into law.
“The passage of the PPP Act is crucial as it will improve the capital market, and it will make create a better environment for private investments to go into infrastructure projects, which by themselves are high risk. The PPP Act will derisk the infrastructure projects,” he said.
When approved, PPP Act will 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 and create 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.
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.
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).
Palacios clarified that these provisions in the proposed PPP Act will lead to faster facilitation of private investments in infrastructure.
“The problem in getting private investments into infrastructure is the risk. For example, there is a risk called friction with local governments. The PPP Act creates a special class of infrastructure called projects of national significance,” he explained.
Palacios continued: “If a project is classified as such they will be exempt from real-property tax and permits. It will greatly reduce friction with local governments.”
PSE Senior Vice President Roel A. Refran supported the PPP Center in its push for the passage of the Act, saying that this would give investors—both retail and institutional—more options, while providing a blanket of protection against any unnecessary issue.
“We hope that it sees the light of day, as investor protection and fiscal incentives are in the act,” he said. “We will complement the government to make this happen.”
Philippine Dealing System Corp. President Cesar B. Crisol said his camp will also be ready to provide necessary funding, provided that necessary assurances be in place.
“If the proponents will access the capital markets one of the financing avenues would be project finance bonds, which will have to be issued out of a special purpose trust. This relies mainly on the revenues of the project,” he said. “We hope to be able to align ourselves with the initiatives of the Securities and Exchange Commission. Project bonds is an entirely new approach.”
Insurance Commission of the Philippines Deputy Commissioner Vida T. Chiong said her group is fully supportive of this cause, and vowed to continue to provide the necessary blanketing mechanisms for private proponents.
“The insurance industry will be able to mitigate the risks to these projects,” she said. “We support the government in these projects, and I can’t see any problems getting the required approval from Insurance Commission.”
Since 2010, various implementing agencies have awarded 12 PPP contracts to the private partners, more than the combined six solicited projects awarded during the past three administrations.
The government is currently tendering off 13 key infrastructure projects, which include five regional airports, a prison facility, a port modernization and water project, two information-technology projects and three rail projects.
Source: www.businessmirror.com.ph
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