DOF: Review of past PPP proposals show ‘detrimental’ provisions

The Duterte administration was open to new public-private partnership (PPP) proposals to build more infrastructure but only if these were without “detrimental” provisions that had characterized previous PPP projects under the Aquino administration, according to the Department of Finance (DOF).

In a statement, Finance Undersecretary Karen G. Singson cited some examples of detrimental provisions as automatic rate increase, non-interference commitment, non-complete clauses.

She said a review of PPP agreements “in the past” showed that the previous administration had agreed to these provisions “which we view as detrimental to regulators, the government and, more importantly, a disservice to the Filipino people.”

“These types of provisions restrict the power of the government to perform its functions and address the needs of the Filipino people quickly and efficiently,” Singson said.

She said these leave “public infrastructure to the unregulated control of companies fueled primarily by profit motive.”

“The government simply will not subsidize private sector interest to the detriment of serving the public,” Singson added.

Singson said for the Duterte administration to enter into PPP deals, proponents “must display willingness to accept terms imposed by the government.”

This, she said, would reduce the time spent on evaluating and implementing the projects “especially since the financial interests of concessionaries are addressed by providing the private sector reasonable returns.”

A survey of PPPs, she said, showed that “actual returns have surpassed projected returns.”

“On top of this, the private sector is allowed to engage in commercial activities surrounding the infrastructure project,” Singson said. “We can no longer accept advice that the government must continue to provide guarantees for a significant portion of the project risk.”

She said this gives the private sector bigger returns but a “limited share of the risk.”

On Tuesday, Oct. 8, Finance Secretary Carlos G. Dominguez III said the Duterte economic team was ‘currently reviewing the list of flagship projects to include in the pipeline emerging projects to be rolled out by the private sector.”

The multi-trillion peso “Build, Build, Build” program—75 flagship projects—included only nine with private sector partners, eight PPPs and one entirely by the private sector.

The Duterte administration had shunned the PPP mode as its economic team earlier said the process from project approval to rollout had been slow during the Aquino administration, which implemented only 10 projects during its six years in office after pledging to roll out 10 projects each year.

Duterte’s economic managers had instead pushed for a “hybrid” PPP model wherein the government rolls out the projects, then bids out operations and maintenance to the private sector.

Under the ongoing Build, Build, Build review, slow-moving projects may be removed from the list, while huge PPP projects that were recently approved by the government but not yet part of the pipeline may be included.

The government recently gave the green light to the P735-billion New Manila International Airport of San Miguel Corp. in Bulacan, while the Neda’s Investment Coordination Committee-Cabinet Committee in September approved a proposal by the Naia Consortium, composed of seven of the country’s richest men, to bring the Ninoy Aquino International Airport, the country’s main gateway, to international standards.

Also being reviewed by Neda ICC and implementing agencies were airport projects by Aboitiz Group in Bohol, by Dennis Uy-led Chelsea Logistics and Infrastructure Holdings Corp. in Davao, and other PPPs to to expand Mactan-Cebu, Laguindingan and Kalibo airports.

In September, Socioeconomic Planning Secretary Ernesto M. Pernia told the Inquirer that PPP proposals “will be appraised in accord with the overall infrastructure plan, appropriateness and feasibility.”/TSB