DoTC unveils ‘hybrid PPP’ plan for big projects

The contract terms for all future government infrastructure projects will become more “consumer-friendly,” making them more affordable for all Filipinos without compromising the quality of the structures, according to the Department of Transportation and Communications.

Because the government’s fiscal situation has been improving, the state itself can now afford to take on major infrastructure projects without tapping funds from private companies that are out to make profits, DoTC Secretary Manuel “Mar” Roxas II said.

“We are reconfiguring the financing of projects so we can avail of long-term, low-interest capital available to the government,” Roxas said Thursday.

The DoTC is the implementing agency for several of the Aquino administration’s priority projects. These include the extension of Light Rail Transit (LRT) lines and the development of provincial airports in high-growth areas.

Assistance

Instead of asking private companies to spend for the construction of these big-ticket projects, the DoTC has decided to tap official development assistance loans offered by multilateral lenders at low rates, Roxas said.

“Foreign lenders are competing with each other to lend us money. For the LRT line 1 extension to Cavite and the line 2 extension to Antipolo, JICA [Japan International Cooperation Agency] and Koica [Korea International Cooperation Agency] are both interested,” Roxas said.

Contracts for the operation and maintenance of these facilities—once completed—will be auctioned off to private firms.

The scheme, which Roxas described as a hybrid public-private partnership program, combines the benefits of the state’s access to cheap financing with the efficiency of the private sector in undertaking projects.

“By doing it this way, private companies will no longer have to [recover] construction costs,” Roxas told reporters. This would translate to significantly lower “user fees” such as highway toll or train ticket prices for consumers.

“This will be our default option,” he explained.

Access to foreign capital

Early next year, Roxas said, the DoTC would bid out construction contracts for parts of the Laguindingan International Airport in Mindanao, and the Puerto Princesa International Airport in Palawan.

Other projects will have to undergo feasibility and detailed engineering studies before being put on the auction block.

Roxas, speaking at the sidelines of the Association of Southeast Asian Nations (Asean) 100 Leadership Summit in Makati on Thursday said that because of the Philippines’ good credit standing, the government now has access to large amounts of foreign capital.

According to latest government estimates, the government’s full-year budget deficit may likely fall “well below” the state’s self-imposed ceiling of around P300 billion, he said.

Roxas attributed the improvement in the country’s finances to “prudent spending” by all government agencies following President Aquino’s lead.

“Because of this we can borrow 30-year money at an interest rate of 1 percent,” he said. “But if private companies take on the projects, they can’t borrow money for interest rates that low. And of course, they’ll have to make a profit as well.”

Reconfigured

Roxas said adopting the “hybrid PPP” scheme would put an end to “sweetheart deals” where private firms would be guaranteed exorbitant profits by the government, regardless of whether the facilities are operated efficiently.

A prime example of these questionable projects is the current contract for the Metro Rail Transit line on Edsa. He said the consortium that built the train line was assured of hefty profits, even if revenue growth stayed flat.

As a result, instead of the MRT line being able to pay for itself, the government was forced to shell out about P7 billion a year in subsidies to the private consortium because passenger fares had to be kept artificially low.

The DoTC, under Roxas’ predecessor Jose “Ping de Jesus, earlier tried to bid out a combined operations and maintenance contract for the LRT line 1 and MRT lines. But because all projects have been reconfigured, the combined operations contract for the two train lines has now been thrown out, Roxas explained.