The country’s chief economist on Friday, Oct. 25, said that as the Duterte administration stretches its ambitious infrastructure pipeline to up to 100 projects, the government must be more welcoming to private-led projects despite fears that concessions in these contracts may drain the country’s finances.
“There was some hesitancy to PPP [public-private partnership] projects before, but over time minds tend to adjust to reality and I think this is what’s happening,” said Socioeconomic Planning Secretary Ernesto Pernia.
“And also my philosophy is that we should look at the bigger picture,” he said.
“Let’s not be too obsessed about little gains to be made by the private-sector proponent or a little loss on the part of the government,” Pernia said at a press conference on the sidelines of a National Economic and Development Authority (Neda) symposium and forum.
The Inquirer earlier reported that the government was reviewing its “Build, Build, Build” pipeline to include more PPP projects that would be rolled out during President Rodrigo Duterte’s term.
As reported by the Inquirer, the San Miguel Corp. (SMC)-led Bulacan International Airport and other big-ticket airport projects such as the rehabilitation of the country’s main gateway Ninoy Aquino International Airport (Naia), and unsolicited proposals for new airports in Panglao, Bohol and Davao would likely land on the new “Build, Build, Build” list to be released next week, Pernia confirmed.
The economic team, however, had also deemed several “Build, Build, Build” projects to be economically and financially unfeasible as they were “challenging and costly,.”
Pernia said three projects that were earlier part of the pipeline would be taken out from the list—the P57.6-billion Luzon-Samar Link Bridge, P56.6-billion Cebu-Bohol Link Bridge, and P47.4-billion Leyte-Surigao Link Bridge.
According to Pernia, from the previous 75 big-ticket projects, the updated list will have a bigger number of about 100 projects as some substitutes were “smaller but still game-changing” and regional in scope, including roads, bridges and irrigation facilities.
Pernia said he was optimistic that half of these 100 “Build, Build, Build” projects would be completed or at least started before Duterte steps down in 2022.
At the start of the Duterte administration, its economic team had shunned the “pure” PPP mode as it claimed the process from project approval to implementation was slow during the Benigno Aquino III administration—it rolled out a total of just 10 projects during its six years in office despite an earlier plan to jump-start 10 each year.
To invite private sector participation in infrastructure development, Duterte’s economic managers nonetheless pushed for “hybrid” PPP under which the national government builds the projects, then bids out operation and maintenance to private firms.
It also encouraged pure PPP proposals to be pitched to local government units (LGUs) to support developments of provinces, cities, municipalities and villages.
But for Pernia, who heads the state planning agency Neda, the government, in entertaining PPP projects, must “look at the bigger picture—the impact of projects on the economy, in terms of employment, in terms of increase in GDP [gross domestic product] growth, in terms of many multiplier effects—direct and indirect economic activities generated.”
“So let’s count those things rather than this little cost to the government or gains to the private sector—it’s not that good to be too restrictive. Let’s think more of the forest than just the trees,” Pernia added.
Pernia added that the Duterte administration had been “very cautious” about the cost to government of PPP projects, unlike the previous administration that he said was “not so careful.”
The Department of Finance (DOF) had said it did not want any “unwarranted obligations” imposed on the government by PPP contracts.
Pernia said in the case of material adverse government action (Maga) clauses in contracts—under which the government needed to compensate the private firm commensurately if the state failed to live up to its part of the deal and disadvantaged the private proponent—these now cover local governments instead of the national government.
According to Pernia, he had yet to personally talk to Finance Secretary Carlos G. Dominguez III about his stand supporting pure PPPs, but he had already made known his position during a recent meeting where the DOF was represented by Undersecretary Karen G. Singson./TSB