Tweaking P-Noy’s PPP proves crucial to Du30’s ambitious infra plan
What is being billed as a “makeover” of the Public-Private Partnership (PPP) scheme through the adoption of a “hybrid” formula has led to the fast-tracked implementation of two Luzon road projects within the first nine months of the Duterte presidency, according to the Department of Finance (DOF).
Finance Secretary Carlos Dominguez III said that under this hybrid PPP formula, the government selects, finances and builds big-ticket projects through competitive public bidding and, upon completion, auctions off their operation and maintenance (O&M) to the private sector.
“There were two road expansions that were done in the north of Manila, which we decided that we were going to just do the projects ourselves and by deciding to do that, we have already started it in less than nine months,” Dominguez said in a press statement.
The Duterte administration has embarked on an P8-trillion infrastructure buildup program aimed at making the country catch up with its neighbors in terms of mass transit systems, roadways and bridges, airports and seaports, among others.
During the recent “Dutertenomics” forum, Public Works Secretary Mark Villar revealed these two projects were the Plaridel Bypass Road, which would link the North Luzon Expressway (NLEx) in Balagtas, Bulacan to the Maharlika Highway in San Rafael, Bulacan; and the Central Luzon Link Expressway (CLEx), which would connect Cabanatuan City in Nueva Ecija to Tarlac.
Both projects are now under construction.
Had the government utilized the traditional PPP scheme—where private contractors build and then operate and maintain the projects— Dominguez said the DPWH would have to wait almost 30 months to get these projects going because of the “cumbersome” requirements involved.
Adopting a hybrid formula is the fastest and most cost-effective way of utilizing the PPP mode in partly implementing the Duterte administration’s ambitious infrastructure buildup plan over the next five years, he said.
Dominguez explained that the previous administration’s version of the PPP program took an average 29 months for a single project to break ground from the time it entered the government’s pipeline.
“So we’re saying we can do it a bit faster, and secondly we can also borrow money cheaper,” the Finance chief said, adding that the project could be privatized at any stage of its implementation whether in the middle or the end of its development stage.
Dominguez also pointed out that the government has been in discussions with large foreign pension funds that typically don’t invest early because they don’t want to take on the construction risks.
“In that way, we think we can even attract more funds,” he said. “Or the private sector can attract more investors in the PPP project if we do it toward the end. So we can borrow money cheaper, we can save time in the negotiations, but eventually we will either sell the project or go into an O&M method.”