Long wait for deals now over, says PPP exec

It might have been off to a slow start but now at the halfway mark, President Aquino’s cornerstone public private partnership (PPP) program is gaining traction with a healthy project pipeline that should sustain it beyond the end of his term in 2016, the head of the PPP Center said.

Citing the tough lessons learned since the administration announced its ambitious program three years ago, Cosette Canilao, PPP Center executive director, on Thursday described the status of PPP projects, saying that about 50 deals would soon be in the pipeline.

The briefing comes at a good time for the program—the implementing government agencies have been receiving flak for the slow pace in mounting the crucial infrastructure projects.

Only a week ago, the government opened financial bids for two projects: a smart card system for railways in Metro Manila, and the expansion of Cebu’s main airport.

The two projects were adjusted after an embarrassing Aug. 15 bidding failure for the government’s biggest PPP project—the Light Rail Transit Line 1 extension, which has also been adjusted and will be auctioned off in April next year.

Both the smart card system and Mactan-Cebu International Airport lured bidders with deep pockets, resulting in a potential P15-billion payoff for the government. Counting the two tollroad projects that have been awarded, the figure goes up to about P27.4 billion.

“We cannot gloss over the LRT-1 failed bidding—it had to happen as well. So it’s a good year because we got to measure what we can push and what the private sector can also push toward us,” Canilao said.

Five PPPs have been awarded under the current administration, still a relatively small figure compared to the 50 deals in the pipeline, Canilao said.

The projects are estimated to be worth over $4 billion, including massive railways like the P65-billion LRT-1 extension, apart from big-ticket tollroads, airports and water supply deals.

“The expectations were really high in 2010, those who understood PPPs then really had their misgivings [about the pace],” Canilao said. “Now that we are ready, what supposedly should have happened in 2010 is here now—we’re at that stage.”

By the end of Aquino’s term, Canilao said, 15 PPP contracts may be awarded and 10 operations and maintenance deals “turned over” to the private sector.

She said seven projects will have been completed: the Daang Hari and Naia Expressway tollroads, two school building deals, the upgrade of Philippine Orthopedic Center, automated fare collection system and integrated transport system (bus terminals) in Metro Manila.

“Foreign bidders like our deal flow that, even if they lose, they can participate in other projects,” Canilao said.

She also cited an environment of “open and transparent” bidding that was key in drawing participants.

“Had we not had a good understanding of what it would take for the private sector to participate, then we would have stumbled,” PPP Center deputy executive director Emmanuel Reverente said in the same briefing.

Still, challenges and skepticism remain. One key item is the perceived risk being faced by concessionaires, especially when it comes to setting tariffs, beyond the current administration.

Canilao noted that contracts are meticulously prepared and any vague details that could pose problems years down the road are hashed out today. She said investors’ worries are also eased with provisions for arbitration and a so-called contingent liability fund.

Reverente said keeping open communication lines with bidders was important this early in the process and it remains an important thrust of the PPP Center.

“We have really turned a corner relative to the way we deal with the private sector. The fruit of good discussion: high participation,” he said.