A change in the political wind particularly the transfer of power after President Aquino’s term to a political rival is the greatest fear cited by investors in committing investments to flagship projects of Aquino under the Private-Public Partnership (PPP) scheme, representatives from the private sector said at a recent PPP Breakfast Forum sponsored by PricewaterhouseCoopers (PwC).
Investors fear that a change in government leadership could threaten the stability of PPP agreements.
Mark Rathbone, partner at PwC Singapore, however, said that this could be avoided.
Firms should make sure, before any transaction occurs, that the government is fully committed to the venture and has put in safety measures so that any change in administration will not threaten the new project, he said.
In fact, every concession agreement should have compensation arrangements in case the project is terminated.
Manish Sharma, partner of PwC India, concurred. “The key (to success) is the legal framework. There must be laws to protect the private sector. There must be a bankable contract structure. It is important to get the structure right,” he said.
According to Rathbone, the two critical parts of a successful PPP program are leadership commitment at the highest level and detailed planning.
Yet another important factor in any PPP project is support from the general public, which should be willing to pay what is fair, or government must subsidize the difference to make these projects more attractive to investors.
It goes without saying, however, that the investor must know the country, as well as its legal and regulatory issues, implicitly, or find someone (with experience in PPPs) who is.
“Risk sharing agreements and resolutions should be in the contract so that if a problem arises, it will not reach the court,” Eli Ricote, director for capacity building and knowledge management services of the PPP Center, said.
“What is important is the commitment of government. (This is crucial) because PPP can be a very complex undertaking. Government must give a message to the private sector that it has the capacity (to follow through),” Yumiko Noda, partner of PwC Japan and PwC’s Asia Pacific head for capital projects and infrastructure, said.
She added that PPP can boost the economy of any country and that even developed nations are also using PPP in order to boost the economy and to provide better services. “Both developed and developing countries need PPP to spur growth,” she said.
The results of a recent PwC survey of some of the world’s top CEOs revealed that most of those interviewed believe that governments that venture into PPPs are actually boosting the economy. By helping create jobs in the private sector and by spurring investments in infrastructure, governments can create an environment conducive for growth — one that would support fiscal and financial stability in the long term. In fact, almost half of CEOs surveyed agree with that notion, saying that improving the country’s infrastructure and fostering a skilled workforce should be one of any government’s top priorities.
PwC has global experience in PPP projects, both for the private sector and government, including Southeast Asia. Some of its most recent projects are: the Bohol and Puerto Princesa Airports in the Philippines, a Bulk Water Supply project in Indonesia, and a Project Development Facility for funding the procurement process of PPP projects in Thailand.
“We are always ready to help the government in its efforts to promote PPP. In fact, PwC Philippines has conducted two tranches of capacity building activities for the PPP Center and implementing agencies. The training programs were aimed at strengthening the PPP teams of these key government agencies as well as helping them to prepare a good business case for each project,” Rose Javier, managing partner and chief executive officer of PricewaterhouseCoopers Financial Advisors Inc. (Philippines), said. –Daily Tribune
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