Govt looks to PPP to prime economy

THE MANILATIMES
2010 YEARENDER

FACED with a budget deficit, President Benigno Aquino 3rd is reviving a scheme first implemented by his late mother to pursue big infrastructure projects using private-sector financing. In his first State of the Nation Address (SONA), the President highlighted the need to harmonize public and private sector initiatives to spur economic growth and accelerate infrastructure development.

The President’s public-private partnership (PPP) thrust is nothing new, as then President Corazon Aquino tapped the private sector through the Build-Operate-Transfer (BOT) Law upon the advice of the International Monetary Fund (IMF) and the World Bank.

Upon assuming the presidency in June, her son issued Executive Order No. 8, renaming the BOT Center as the PPP Center, which is attached to the National Economic and Development Authority (NEDA).

The President tasked the PPP Center to coordinate and monitor all programs and projects, providing the government with a platform to hasten private sector investments.

The approval process of PPP projects was also reduced to six months.

Last month, the Aquino administration presented a list of priority PPP projects that are ready for bidding in the first half of next year.

These projects include the P70 billion Metro Rail Transit (MRT)-Light Rail Transit expansion; P11.29 billion MRT Line 2 extension; P7.54 billion new Bohol airport; P4.36 billion Puerto Princesa Airport; P21 billion North Luzon Expressway- South Luzon Expressway link; P10.5 billion Cavite-Laguna Expressway-Manila side section; and P3.07 billion Daraga International Airport.

To attract investors, the government offered a sweetener in the form of insulation from regulatory risk.

Aquino also offered to compensate private investors if they are impeded –either by regulators, the courts, or the legislatore – from collecting contractually-agreed fees.

Private investors that expressed interest in the government’s PPP projects include Metro Pacific Investment Corp., San Miguel Corp., JG Summit Holdings Inc., Malaysian based MTD Capital Bhd., among others.

The NEDA estimated that the government’s PPP initiative would require up to P739.78 billion in investments in the next six years.

Global Source however said the government may face higher fiscal risks and “hard-to-manage” contingent debt in the long run given how these projects were drafted.

It also expressed doubts whether the PPP would bear fruit in the near term “even assuming that paperwork and physical execution” can be done quickly.

NEDA Director-General and Socioeconomic Planning Secretary Cayetano Paderanga said the impact of these PPP investments will take some time to unfold.

The NEDA chief expects investments to be one of the growth drivers for next year, adding that “we would like to bring it [investment rate] near to our savings rate [of] around 18 percent to 19 percent.”

Data from the Development and Budget Coordinating Committee (DBCC) showed that the national government’s capital outlays for next year would inch up 1.3 percent to P322.2 billion from this year’s P318.2 billion.

This amount, however, is only 3.6 percent of the country’s gross domestic product, or down from this year’s 3.8 percent.

“This is just part of the development program, to try to raise the level of investment in order to bring about employment, as well as overall economic growth,” Paderanga said.

State-run Philippine Institute for Development Studies (PIDS) had said that the country’s
investment-to-GDP ratio has deteriorated since 1994.

Last year, this ratio stood at 14 percent, lower than the previous year’s 15.2 percent and the 2007 level of 15.4 percent.

In 1994, this ratio stood at a high of 24.1 percent.

Paderanga said the PPP will boost economic growth for the next six years because of the reforms the new administration is putting in place.

For 2011 to 2016, the government expects the economy to grow between 7 percent and 8 percent. –DARWIN G. AMOJELAR SENIOR REPORTER, Manila Times