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News Analysis: Dismal record of Philippines' public-private partnership program

Xinhua, August 21, 2015 Adjust font size:

When Philippine President Benigno Aquino III assumed presidency in 2010, he announced that the public-private partnership (PPP) scheme would be his centerpiece program to speed up the country's economic development.

Under the much-touted, much-publicized PPP program, the Aquino government offered several major infrastructure projects to local and foreign investors.

But after more than five years, the Aquino administration has little to show in its PPP program.

According to a document distributed by the Investor Relations Office (IRO), only five PPP projects would be completed when Aquino leaves office after his six-year term that expires on June 30 next year.

Under the Philippine Constitution, the president of the country has a fixed six-year tenure without reelection.

The five projects to be completed by middle of 2016 are not even big-ticket infrastructure projects.

According to PPP Center Executive Director Cosette V. Canilao, the five include two school projects, the automatic fare collection system (AFCS) for the elevated railway systems, a short road that connects to an expressway, an elevated freeway that would connect the Ninoy Aquino International Airport to the city proper.

The freeway to the Ninoy Aquino International Airport, costing 15.52 billion pesos (345 million U.S. dollars) is the only big- ticket project that the Aquino administration can boost of.

But this project is long overdue since most major international airports in Southeast Asia have unimpeded freeways that connect them to the downtown areas.

According to the PPP Center, there is a "robust" pipeline of PPP projects - at least 50 in the pipeline in various stages of the project cycle; at least 15 PPP contracts signed, as well as at least 10 infrastructure projects handed over to the private sector for operation and maintenance (O&M).

Only recently, the Manila-based Asian Development Bank (ADB) and the state-owned Development Bank of the Philippines (DBP) have announced that they would participate in the government's largest PPP project: the North-South Railway.

The North-South Railway, considered one of the 15 key projects under the ASEAN connectivity program, would be the backbone of transport in the Philippines since it would provide swifter links between the country's southern provinces and the capital Manila.

The 3.8 billion U.S. dollar project will build or upgrade 653 kilometers of rail lines from Manila through Legaspi City in Albay province down to the town of Matnog in Sorsogon province in the far south of the main island of Luzon, and to Batangas in southwest Luzon.

But the implementation of the project would not be undertaken under the Aquino administration but by the new government that would be elected in the May 2016 election.

Many Asian governments have been actively looking to use PPPs to bring private sector financing and operations into much-needed infrastructure projects but have struggled to structure transactions in a way that attracts private companies.

The PPP refers to a type of long-term cooperation between governments and private companies on the funding, building and operation of public infrastructure. PPP projects are usually designed, built and operated by the private sector company for a prescribed period, under the supervision of the public sector partner.

The low turnout in the Philippines' PPP program is inexplicable since the UK-based Economist Intelligence Unit (EIU) has named the country as having the "most-improved regulatory and institutional frameworks" and "improved investment climate and financial facilities."

The IBON Foundation, a local research group, has claimed that President Aquino made this possible through perks and guarantees " unprecedented in the history of privatization in the Philippines."

"Creating the most favorable climate for private investors has been one of the earliest and top concerns of Aquino," IBON said.

The research group said that Aquino made the PPP program more palatable to private business through explicit provisions guaranteeing that PPP proponents will be able to collect the contractually agreed fees or charges that they can impose on the public, regardless of regulatory intervention that may reduce such fees or charges. Endi