‘Anti-market’ PPP rules seen scrapped before yearend

The country’s chief economist and lead overseer of the Marcos administration’s infrastructure buildup plan wants the supposed “anti-market” provisions left behind in the guidelines of the Amended Build-Operate-Transfer (BOT) Law scrapped before this year ends.

In an interview, Socioeconomic Planning Secretary Arsenio Balisacan also said the government might consider using the public-private partnership (PPP) mode at least for the three big-ticket railway projects stalled by the lack of earlier pledged Chinese loans. However, he said it would be up to the Department of Finance (DOF) to determine the best financing vehicle for each infrastructure project.

DOF officials had said they were renegotiating the relatively high interest rates that China had proposed to slap on these borrowings in the pipeline, as central banks globally hiked benchmark loan yields to arrest elevated inflation.

Balisacan, who heads state planning agency National Economic and Development Authority (Neda), confirmed the Inquirer’s report last week that he had sent a memo to President Marcos asking permission to convene the BOT implementing rules and regulations (IRR) committee, which came out with the “even more problematic” guidelines last April under then Neda chief Karl Kendrick Chua.

Balisacan said they have yet to receive the approval of the President which would allow the committee chaired by the Neda chief to review and, again, amend the IRR crafted by the previous administration for Republic Act (RA) No. 7718.

The committee’s upcoming  review will zero in on three issues raised by big business groups: the definition of material adverse government action (Maga); the government’s exemption from arbitration, and the financial capacity requirement.

“We’ll definitely revive, enhance, and reinvigorate PPP because (it will not only) help ease our fiscal burden, PPPs will also bring innovations. Institutional arrangements can improve the quality of services,” Balisacan said.

But Balisacan said the Marcos administration was open to any financing mode, whether PPP, official development assistance (ODA) loans and grants, as well as internally sourced funds from the annual national budget.

“Our policy is whichever provides the cheapest and most beneficial arrangement… The most important consideration is that you do a cost-benefit analysis, and if PPP is a better mechanism for these types of projects than ODA, then so be it. But if  the ODA will turn out to be better than [another mode], our job is to ensure that whatever we choose as a modality, it would be the most beneficial for the society,” the Neda chief said.

Asked if the pending massive railway projects seeking Chinese loans could be turned into PPPs, Balisacan replied: “We are looking into the possibility.”

The Duterte administration had shunned PPPs, especially unsolicited projects, as it did not want disadvantageous provisions like government guarantees, subsidies, and Maga clauses.

Chua had said that their administration updated the Amended BOT Law’s IRR to protect Filipinos from contingent liabilities arising from PPP projects’ “high” return on investment (ROI), which private firms charge and the government shoulders, and ultimately paid for by consumers who use these infrastructure.

Balisacan acknowledged the fiscal concern on contingent liabilities. “That’s why part of the review is to look into what those concerns are because there are obviousl immediate concerns… But again, don’t be lost by the noises. You have to look at and be clear of your objective.”

“Our objective is to ensure that the PPP arrangement is also a potentially viable option for financing our infrastructure. For example, contingent liabilities issues are the most critical. So you have to examine what can be justifiably or reasonably seen as Maga. If there are changes in the rules of the game during the implementation of the project, obviously the private sector will not go there. Obviously, that would discourage investment and engaging with government projects, if that’s the environment. We have to strike a balance,” he said.

The Cabinet-level Development Budget Coordination Committee (DBCC) had projected the contingent liabilities stock or the aggregate amount wrought by PPP projects to have risen to P456.2 billion last year from the estimated P311.8 billion in 2020. It was on top of the P60.4-billion “flow” of contingent liabilities or the amount which “may materialize within a specific interval of time taking into consideration a project’s risk factors” among 18 national PPP contracts signed from  2008 to 2020.