AS PRESIDENT Aquino’s administration enters its last three quarters, some of the country’s biggest conglomerates are looking at the remaining big-ticket infrastructure deals that can still be bid out before a new leader takes over.
Tycoons always hope that it will be business-as-usual after an election, but history has proven that this period is marked by high uncertainty, with fortunes not always swinging the way they are expected.
This time around, the administration has led a relatively successful Public Private Partnership (PPP) initiative, having moved a large number of projects forward.
Even with less than a year left, big opportunities remain for the private sector to sink their teeth into. Recently, the National Economic and Development Authority (Neda) board, chaired by the President, approved two more railway systems for Metro Manila and nearby provinces.
“Investors are still very hungry to see more projects come in, more projects turned out,” Jonathan Ravelas, chief strategist at BDO Unibank Inc., said in an interview.
PPPs are not a selfless venture and private sector players expect to earn a return. Moreover, for most tycoons, investing in PPPs makes sense since it will benefit their businesses in the long term, especially when it comes to badly needed transportation projects that the government cannot deliver.
CANILAO
“They invest in infrastructure because it benefits them,” Ravelas said, citing, as an example, toll roads that also link to individual projects of companies.
The PPP Center, the main coordinating agency handling the government’s drive to tap private sector support for infrastructure projects, said its pipeline continued to grow.
PPP Center executive director Cosette Canilao said there were about $11 billion worth of PPP deals up for bidding.
This includes the the $3.79-billion (P170.7-billion) South Line of the Philippine National Railways’ North-South Railway Project, which the government hopes will be finished by 2020. The massive deal involves 653 kilometers of railway, including a link from Metro Manila to Legazpi, Albay.
Another $24 billion worth of projects, mainly transportation-related deals and social infrastructure-related projects like schools and hospitals, are being lined up.
Newly approved deals such as the Light Rail Transit Line 4 and Light Rail Transit Line 6, are already attracting early interest. Officials of San Miguel Corp., Ayala Corp. and Metro Pacific Investments Corp.—all active PPP players— said they would consider bidding for these projects once these were rolled out.
The PPP Center said the P64.7-billion LRT Line 6 will be a 19-kilometer railway extending from Niyog in Bacoor to Dasmariñas City, both in Cavite province. The LRT-4 is a proposed 11.3-km rail project estimated to cost P42.89 billion. It will run west from SM City in Taytay, Rizal, to the intersection of Ortigas Avenue and Edsa in Ortigas.
Tycoons interviewed by the Inquirer said they would continue to support the program even beyond Aquino’s term.
“We hope that this whole idea of using a PPP structure to allow private capital to contribute to the infrastructure needs will continue, but that depends on the future leadership,” Ayala chair and CEO Jaime Augusto Zobel de Ayala said last July.
ZOBEL de Ayala
“It’s a formula that’s working and I see no reason why it should stop,” he said.
San Miguel president Ramon S. Ang and Metro Pacific chair Manuel V. Pangilinan have also said they would continue to evaluate new projects.
The government has awarded 10 PPP deals so far valued at more than $4 billion.
These are the Muntinlupa Cavite Expressway (formerly DaangHari-SLEx Link Road), the first and second phases of the PPP for school infrastructure project, Naia Expressway Project, modernization of the Philippine Orthopedic Center, Automatic Fare Collection System, Mactan-Cebu International Airport, the LRT-1 Cavite Extension, the Integrated Transport System-Southwest project, and the Cavite Laguna Expressway.
Last month, the LRT-1 project was formally turned over to winning bidder Light Rail Manila Consortium, backed by Ayala Corp. and Metro Pacific Investments Corp.
In July, the Muntinlupa Cavite Expressway of Ayala started operations and starting Oct. 3, the AFCS project for Metro Manila’s railways would have been implemented across the LRT-1, LRT-2 and Metro Rail Transit Line 3.
RAVELAS
BDO’s Ravelas said future leaders were likely to continue reforms made in terms of addressing infrastructure needs as well as the present PPP structure.
“They’ve already put things in place,” he said. “To shy away from the present ‘matuwid na daan’ could send the wrong signal to investors. We know we got our investment grade because of this ‘matuwid na daan’, it was a game-changer.”
Keeping reforms intact are crucial given the magnitude of the work left as far as infrastructure investments go for the Philippines. Ravelas said stakeholders also needed to consider not just short-term plans, but medium—and even long-term roadmaps when it came to planning projects.
Various studies are in place, including those from the Japan International Cooperation Agency and the Asian Development Bank. ADB had estimated that the Philippines needed to spend about $127 billion between 2010 and 2020 alone for infrastructure.
“There is a huge gap that we need to fill up,” Canilao said, adding that PPPs could account for about 40 percent of the infrastructure spending requirements by 2020. “We cannot afford to stop [rolling out] these infrastructure projects.”