Time and cost factors top the Duterte administration’s concerns in its rollout of the ambitious “Build, Build, Build” infrastructure program, prompting the economic managers to veer away from the standard Public-Private Partnership (PPP) mode to ensure that projects are done via the fastest and cheapest route, said a senior Department of Finance (DOF) official.
DOF Undersecretary Grace Karen Singson said the traditional PPP, as implemented by the previous administration, consumed too much time renegotiating contracts, deciding on cost recovery issues and resolving legal disputes among contesting private bidders.
Singson pointed out at a recent infrastructure forum that some PPPs took as long as 50 to 60 month before breaking ground, while on the average, traditional PPP projects, regardless of size or importance, took 29 months.
“This is intolerable. Our people will not stand for this sort of pace,” said Singson during the forum. “Every day of delay in getting the vital projects done harms our people. They are the ones bearing the daily costs of congestion and inefficiency in movement.”
Another factor—cost—has also dissuaded the government from implementing projects through the usual PPP, which often leads to excessive user fees charged to the public to ensure that the private sector partners recoup their respective investments quickly and at wider profit margins, Singson said. Moreover, the government usually imposes front-end charges to meet its own needs, further driving up expenses for PPP projects.
“Our taxpayers deserve the best quality utilities. Quality, however, should not bind us to higher financing costs and future fiscal burdens such as contingent liabilities. That will be unfair to future generations of Filipinos,” she said.
Singson said a more viable alternative is for the government to finance infrastructure projects through the national budget and Official Development Assistance (ODA) provided by the Philippines’ development partners and country-allies, such as China and Japan, which have committed financing for infra projects at below-market rates and “favorable” or longer grace periods.
“A large fiscal space and access to favorable ODAs are the main reasons we have generally preferred to finance our infrastructure plans through GAA or ODA. We finally have the money to be able to do it now, as well as tap low-cost financing abroad when needed. This is in contrast to PPPs wherein past experiences have shown terrible delays and unforeseen expenditures,” Singson said.
She stressed, however, that PPPs have not been ruled out by the DOF, which continues to recognize the potential values of such partnerships, especially in terms of innovations and efficiency offered by the private sector that will result in better value for money and quality infrastructure.
Echoing Finance Secretary Carlos Dominguez III, Singson said PPP should add a fourth “P’” so that it becomes a Public-Private Partnership for the People.
With the government adopting a fresh approach to financing projects, Singson said that on the Duterte watch, it only took seven months from the approval by the National Economic and Development Authority (NEDA) and the Investment Coordination Committee (ICC) to start construction on the Clark International Airport. Its Operations and Maintenance component, a PPP project, is also underway, she noted.
Singson said unsolicited proposals from the private sector that require no direct government guarantees and include new technologies or concepts are welcome.
“Less government guarantees may make the project riskier, which also translate into larger equity investments by the private parties. But that’s the point: we, the government, would now like to challenge the private sector to have more skin in the game, take more risks and stand behind their projects,” Singson said.
The Duterte administration’s “Build, Build, Build” program is targeting to roll out 75 flagship infrastructure projects worth a combined total of $36 billion in investments.
A total of $158 billion over the next five years will be spent for the “Build, Build, Build” program, so that infrastructure spending would reach 7.3 percent of GDP by the end of the President’s term.
Singson said the enactment into law of the Tax Reform for Acceleration and Inclusion Act (TRAIN), which will ensure a steady revenue flow for the government totaling P786 billion over the medium term, complemented by prudent fiscal management and declining debt service payments will make this ambitious infrastructure buildup financially feasible.
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