The government plans to renegotiate terms of big-ticket infrastructure projects to be undertaken by the private sector and possibly give them longer contracts to allow them more time to recoup their investments in consideration of the economic woes inflicted by the COVID-19 pandemic.
Secretary Vivencio Dizon, Presidential adviser for flagship programs and projects, told the Inquirer after last Friday’s infrastructure committee meeting that lengthening the term of projects was one way to address the issue on the viability of public-private partnerships (PPPs) at a time when the economic recession also hurt the private firms’ operations.
Save for the rehabilitation of the Ninoy Aquino International Airport (Naia), whose proponent backed out as it could no longer afford the original project terms, proponents of other PPP projects in the “Build, Build, Build” pipeline have yet to express any such concern, Dizon said.
“Infrastructure will always be attractive, but we will need to discuss investment recovery periods given the effects of the pandemic. More time is needed for the demand to go back to normal levels,” Dizon said, citing as examples airport and railway projects given social distancing restrictions not only during project implementation but also when these facilities would be opened to the public.
The ambitious Build, Build, Build program’s pipeline of 100 projects—currently being reviewed taking into consideration the impact of the COVID-19 crisis—included 29 PPP projects to be funded by private entities, including 15 unsolicited proposals.
Another possible relief for private PPP proponents would be for the government to defer the collection of its share in revenues until the projects’ operations normalize, Dizon added.Dizon believes the economic returns of infrastructure projects, especially for transport, remain high despite the pandemic because “they have a very long-term horizon, plus we all badly need them.”
“The pandemic doesn’t change the fact that we badly need transport and mobility infrastructure, and other vital infrastructure, especially for water supply, ICT (information and communications technology), etc.,” he added.
Dizon acknowledged the issue on PPPs “because the private sector’s investment time horizon is shorter and the lower demand brought about by the pandemic affects returns in the short run.”
“This needs to be addressed to make PPPs more viable,” which Dizon said would be done by sitting down with project proponents as soon as the review of Build, Build, Build was completed this week.He said this policy shift to put in place terms that were friendlier to the private sector would have to be approved by the National Economic and Development Authority Board chaired by President Duterte in a meeting that might be held in August.
Renegotiation of PPP terms will begin as soon as the President approves this policy, he said.
Dizon could not yet say if the current pipeline of 100 Build, Build, Build projects would be reduced or expanded as those no longer viable or still in feasibility-study stage would be removed, while more health and ICT infrastructure projects would be added.
The updated Build, Build, Build list will also prioritize “shovel-ready” projects to speed up implementation, Dizon added.
Dizon said bilateral development partners such as Japan, China and South Korea as well as multilateral lenders like the Asian Development Bank, Asian Infrastructure Investment Bank and World Bank remained interested in financing infrastructure projects in the Philippines.Most PPP projects were in the mobility sector, while official development assistance will also finance health, digital, as well as agriculture infrastructure, Dizon said. INQ