DOF: PPP projects to lead spending in next 2 years

MANILA, Philippines—As work on big-ticket infrastructure being financed by tycoons’ deep pockets continued despite prolonged quarantine, public-private partnership (PPP) projects would take the lead in lifting the economy from its pandemic-induced recession in 2021 and 2022, Department of Finance (DOF) estimates showed.

The government also ramped up expenditures on infrastructure, which rose 14.4 percent year-on-year to P107.4 billion as of end-February.

The latest Department of Budget and Management (DBM) data on Monday (April 12) showed disbursements on infrastructure and other capital outlays increased from P93.9 billion during the first two months of 2020.

These went mostly to “payments for completed infrastructure projects of the Department of Public Works and Highways (DPWH) which were started late last year, and the mobilization costs for their current year’s projects (such as road widening, rehabilitation and improvement and flood control).”

In a report, the DBM also said higher infrastructure spending and capital expenditures were also due to farm-to-market roads of the Department of Agricutlure (DA) provided by the Bayanihan 2 Act.

Higher spending was also pushed by payments for farm machinery qnd equipment like tillers, tractors, seeders, threshers, rice planters and harvesters that had been given to “qualified” farm groups under the Rice Tariffication Act, the DBM said in a report.

In February 2021 alone, public infrastructure spending climbed to P56.1 billion from P45.6 billion in 2020 and P51.3 billion in January 2021.

At an online seminar organized by European business chambers on Monday (April 12) presidential adviser on flagship programs and projects Vivencio Dizon said actual infrastructure spending in 2021 “may be less than expected” amid the lingering pandemic.

The government had set aside P1.17 trillion, equivalent to 5.9 percent of gross domestic product (GDP), for infrastructure development in 2021.

But Dizon noted that some projects were being hampered by COVID-19. One of these was the delay in the planned transfer of government offices to the facilities used during the Philippines’ hosting of the 2019 Southeast Asian (Sea) Games because these were used for pandemic response as quarantine facilities and medical hubs.

The private sector would nonetheless help in the Duterte administration’s ambitious “Build, Build, Build” program with major projects underway.

Dizon said the National Economic and Development Authority (Neda) Board chaired by President Rodrigo Duterte was expected to soon approve the extension of San Miguel Corp.’s (SMC) Tarlac-Pangasinan-La Union Expressway (TPLEx) to San Fernando, La Union.

The latest data provided Inquirer by Finance Undersecretary Gil Beltran, DOF chief economist, showed that the biggest chunk, or P496.53 billion out of the P1.03-trillion worth of infrastructure, currently under construction and pre-construction in 2021 were PPP projects.

At a forum last week, Beltran said the 20 ongoing PPP projects, which included two airports, accounted for 2.38 percent of GDP.

“We expect that most of these projects being handled by PPP contractors will be in full swing even during the lockdown period because they have been exempted” from restrictions but subject to minimum health standards, Beltran said.

The value of infrastructure projects currently rolled out through PPP mode was bigger than the P447.65 billion being financed either by official development assistance (ODA) or the national budget.

GOCCs, meanwhile, will finance P81.64 billion in infrastructure projects in 2021.

For 2022, data analyzed by Beltran showed P1.17-trillion worth of infrastructure will be under construction or pre-construction stages, of which P581.58 billion, or 2.55 percent of GDP, were PPPs.

ODA or budget-funded infrastructure projects next year will amount to P561.03 billion, while state-run firms and government financial institutions would bankroll P40.49-billion worth of projects.

Dizon said the administration was confident that infrastructure spending in 2022 would achieve its target of P1.15 trillion or 5.1 percent of GDP.

The Build, Build, Build program had a pipeline of 104 projects worth a total of P4.13 trillion, of which 30 were PPPs amounting to P1.75 trillion.

Eighteen of the PPP projects under Build, Build, Build were unsolicited proposals.

To sweeten deals and attract more private sector participation, the government wanted to revisit PPP project terms and possibly grant private-sector proponents lengthier contracts to allow a recoup of their investments in consideration of the economic “new normal” given birth by COVID-19.

The government was also amenable to temporarily deferring its revenue share from PPPs until these projects’ operations normalized.

In 2020, the government spent P824.9 billion on infrastructure or 4.5 percent of GDP, below the P1.05 trillion or 5.4 percent of GDP spent in 2019 as it gave priority to pandemic response.

Some projects had also been delayed due to the restrictions on movement of people and nonessential goods to prevent coronavirus transmission at the height of the region’s longest and most stringent community quarantine.

TSB