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Where have all the projects gone?

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Where have all the projects gone?

When Transportation Secretary Arthur Tugade talked of “revisiting” the vision for public-private partnership deals last July, few in the private sector could have anticipated the drastic impact it would have on the cornerstone initiative of the Aquino administration.

More than nine months since the announcement, the pace of PPP deals, long-derided for not moving fast enough, has all but ground to a halt.

Of the PPP projects under procurement by the time President Aquino’s term ended, the Duterte administration has identified two deals it would pursue.

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These are the P50-billion regional prison facilities, beset by a string of delays, and the auction for five regional airports, collectively valued at P108 billion. The latter recently underwent a controversial “unbundling” process that led several earlier-qualified candidates to question whether they would still participate.

All the rest, including big-ticket railway and seaport projects, have been placed on review. Even newer deals, like a P74-billion deal to develop and operate the Ninoy Aquino International Airport, a project that grew intense private-sector interest, face uncertainly. The Naia project was approved by President Duterte last year, only to be placed on hold as the Department of Transportation finalizes its airport policy.

Meanwhile, legislation to institutionalize the PPP Program’s reforms via the PPP Act remains pending in Congress.

Would-be bidders continue to voice their support for PPPs. Privately, they muse: where have all the projects gone?

“It seems there is a dearth of news about PPPs, it’s all pledges,” Astro Del Castillo, First Grade Finance Inc. managing director, said in an interview.

The PPP Center was established by President Aquino in 2010, mainly to coordinate projects with the various implementing agencies and to provide technical support. The goal was to enlist private sector’s help in building crucial infrastructure to help augment government’s then relatively limited resources.

While born under less than perfect circumstances, years of painful fine-tuning of the PPP scheme brought about some completed results: the Muntinlupa-Cavite Expressway, Naia Expressway, the Beep card system for Metro Manila’s elevated trains, and new public classrooms.

Ongoing are a brand-new international airport terminal in Cebu’s main air gateway, the Cavite Laguna Expressway, integrated bus hubs in Southern Metro Manila and soon, the extension of the Light Rail Transit Line 1 to Cavite.

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With Mr. Duterte’s term came a big shift in policy as government indicated it wanted to do more overseas development assistance loans from Japan and even China, given recent warming ties between Malacañang and Beijing.

“We’re seeing more of a strategic shift,” Eduardo Francisco, president of BDO Capital & Investment Corp., said in an interview. “The ODA deals are going to be done, they just have to accelerate that.”

This shift, nevertheless, has cast doubt on the fate of about 40 PPP projects, most of which are expressways and rail projects. Also listed among those was a P5-trillion Manila Bay Integrated Flood Control project, proposed by a consortium backed by San Miguel Corp. in 2013.

Unsolicited projects, which President Aquino had a distaste for and thus ignored during his term, would again be on table under Mr. Duterte.

The private sector has responded in a big way, with various conglomerates proposing since July last year over P2.6 trillion worth of projects, a huge slice on account of massive airport proposals to replace Manila’s Ninoy Aquino International Airport and to modernize Clark International Airport.

Rene Santiago, a transportation expert and president of Bellwether Advisory Services, said in an interview that government should not necessarily take these proposals as a positive sign.

“Being entertained by the private sector with beautiful dreams and looking at it as a sign of strength when, in fact, it’s a sign of frustration of the private sector that the government is not able to deliver,” Santiago said.

Businessman Ricardo Penson, a staunch defender of the unsolicited process, said it was a mistake for Mr. Aquino to discourage projects of this nature, which the former administration perceived to be prone to corruption.

“There were lost opportunities. I don’t think we can never calculate (its impact),” said Penson.

His company, Ausphil Tollways Corp., was set to start work on the North Luzon East Expressway Project (Balara to La Mesa and then further to Norzagaray, Bulacan) before being hit by delays under the Aquino’s administration. It has since been revived under President Duterte, Penson said.

The new unsolicited projects are mostly devoted to easing transportation bottlenecks, given the billions of pesos in productivity losses booked daily, according to the Japan International Cooperation agency. The projects are mainly located in Metro Manila or involved in supporting the capital district.

As noted, the largest of those involved offers for new airports to eventually replace Manila’s Naia, which is already operating well beyond its design capacity.

For the air sector, San Miguel Corp. offered to build a P700-billion international air gateway in Bulacan province while a Belle Corp.-Solar Group venture eyeing a P1.3-trillion airport, seaport reclamation project in Sangley, Cavite.

Last year, Megawide Construction Corp. and India’s GMR offered to spend P250 billion to develop another alternative airport, Clark Airport. This rivaled the P187-billion offer of the Gokongweis’ JG Summit Holdings Inc. and Filinvest Development Corp.

Solving road congestion was also a major area that has drawn attention.

The Zobels’ Ayala Corp. and Henry Sy Sr.’s SM Investments Corp. proposed a P25-billion, 8.6-kilometer elevated tollroad. The project would move cars away from Edsa while linking their two biggest property assets in Metro Manila: SM Mall of Asia in Pasay City and Makati City.

Manuel V. Pangilinan-led Metro Pacific Investments Corp. is also poised to submit a P50-billion offer for an overhead expressway near C5 road. Two other expressway projects, the P41 billion Manila-Taguig Expressway and P67 billion Manila Quezon Expressway, have been offered to government in the second half of 2016.

For the ports sector, Enrique Razon Jr.’s International Container Terminal Services Inc. offered to spend P1.5 billion for a common-user barge and Roll-on/Roll-off terminal in Cavite. With a unit of Pangilinan-led Manila Electric Co., it offered to revive a P10-billion Manila-Laguna cargo railway line.

These projects presumably would not be covered by any subsidy or government guarantee—a key requirement of the Duterte administration.

Jose Mari B. Lacson, equities research head at ATR Asset Management, noted that while unsolicited proposals had advantages in terms of economic progress, the issue boiled down to balancing the goals the current administration wanted to achieve, namely inclusive growth.

“The thrust of the government is to push growth away from NCR (National Capital Region). So there’s a limit to projects the private sector is willing to propose,” he said. “It may not be in the interest of the private sector to support projects that push growth outside Metro Manila because they might not have assets in those places.”

With issues over traffic mounting, most in the private sector believe it was still better for the government to take a stand, even an unpopular one, rather than do nothing at all.

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TAGS: Aquino administration, public-private partnership, Secretary Arthur Tugade
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