Gov’t may set aside P30B for PPP breaches

CLARK, Pampanga—The government  is considering setting up a contingent liability fund—proposed to initially be worth P30 billion—that will handle the unexpected cost for the government arising from infrastructure projects under the Public-Private Partnership (PPP) program.

According to National Treasurer Rosalia de Leon, the proposal to create the fund has been submitted by the Bureau of the Treasury to the Department of Budget and Management for discussion and potential implementation.

De Leon explained that unexpected costs might materialize if the government would be unable to meet some of its commitments specified in the PPP contracts. In such cases, the government would have to shell out money to pay or the “breach,” she said.

For instance, she said that if the government failed to increase tariff on a public facility on time, then the private-sector investor might have to be compensated. If the government failed to fulfill some terms stated in PPP contracts, it might also have to buy out the private-sector investment.

De Leon said such scenarios were highly unlikely, but having a contingent liability fund was deemed prudent to avoid disturbances in the government’s budget.

“This is still under discussion, but the fund, once set up, would serve as a contingent measure just in case there would be breaches on the part of the government,” De Leon told reporters Saturday during the journalism seminar held here and co-organized by the Economic Journalists Association of the Philippines (Ejap) and San Miguel Corp.

The proposed initial amount of P30 billion might be sourced from unprogrammed portions of the existing national budget. De Leon said it was prudent to earmark an amount for the fund while there were still unprogrammed portions in the budget.

She added that having a PPP contingent liability fund would help make the PPP program more credible.

Moreover, De Leon noted that the proposed fund was a response to queries from credit-rating agencies on how the government would be able to shoulder contingency costs in case unexpected breaches happened.

The PPP is the key program of the government to realize its infrastructure-development agenda. Under the program, the government invites private-sector companies to invest in public infrastructure projects.

The objective of the program is for the country to address its significant lack of infrastructure without straining the government’s coffers.