5 regional airports removed from PPP

The Public-Private Partnership (PPP) program, already suffering from the perception its projects are being sidelined in favor of government loans overseas, received another blow yesterday after the Department of Transportation (DOTr) canceled plans to bid out contracts to modernize, operate and maintain five regional airports in Davao, Bacolod, Iloilo, Laguindingan and New Bohol.

A DOTr spokesperson said the department would pursue the modernization and development of the projects, estimated to cost P108 billion, using funds from the government or through overseas development assistance (ODA) loans.

While no decision has been made, the DOTr insisted “the change in the procurement mode will not necessarily delay the implementation of the projects.”

Some individuals closely watching the progress of PPPs under President Duterte were skeptical. They also worried about the role of PPPs in the current administration, which said it was keen on tapping loans from China and Japan.

The regional airports PPP, whose bidding under President Aquino was postponed since it fell too close to the May 9, 2016, polls, was not the first to be terminated since Mr. Duterte came to power in July last year.

A slew of other big-ticket DOTr PPP projects under implementation were placed on review or were quietly removed from the PPP pipeline. Among these were the P170.7-billion South Line of the Philippine National Railways, the P75-billion Naia project and the P19-billion Davao Sasa project.

“We are still trying to figure out what projects are going to be pursued under PPP,” Michael Sagcal, the country head of Washington D.C., US-based Astris Finance, said in an interview yesterday.

He said there were clients in Europe and the United States that were keen on the regional airports.

“Some investors are now looking elsewhere like Vietnam and Indonesia,” said Sagcal, who was also a former DOTr spokesperson.

In its statement announcing the decision by the DOTr and the Civil Aviation Authority of the Philippines, the PPP Center sought to combat the perception that PPPs would play a diminished role.

It cited successful PPPs under Mr. Aquino that gave Filipinos the first steps toward a modernized Mactan Cebu International Airport, two new expressways in Metro Manila and more public classrooms.

“It is clear that PPPs remain as a viable option in the procurement of infrastructure projects, especially those that require an integrated approach (i.e. design-build-operate-maintain) in order to save on procurement timing, reduce interface risks and avail of private sector’s technology and efficiency,” the PPP Center said.

By contrast, Mr. Duterte’s economic managers communicated their preference for the government to first build the projects and then bid out the operations and maintenance contracts to the private sector later on.

Tagged as a “hybrid” approach, they argued this would lower the cost of public services since there would be no heavy investments for the private sector to recover.

Five groups were earlier prequalified to bid for the regional airport PPPs. These were Metro Pacific Investments Corp., San Miguel Corp. with South Korea’s Incheon Airport; Aboitiz Equity Ventures with VINCI Airports; Megawide Construction Corp. and India’s GMR Infrastructure, and the Filinvest Group with Japan’s Sojitz and Jatco.

“We have been looking forward to an expanded private sector role in operating and maintaining most of the functions at key regional airports, as seen in the Cebu terminal project,” said John Forbes, senior adviser of the American Chamber of Commerce of the Philippines.

“We therefore hope to learn more about the plans of DOTr for improving operations of airports through privatization using the hybrid approach of the new administration,” he added.

Would-be bidders, meanwhile, expressed support, but called on the DOTr to expedite the modernization of the air gateways.

“It is crucial for the airport development project to be implemented immediately because efficiencies in the airport system are greatly hampered by the lack of proper infrastructure,” Louie Ferrer, chief marketing officer at Megawide Construction Corp., said in a text message.

“We acknowledge the government’s decision to terminate the PPP process for the regional airports in favor of other modes of procurement,” Randall Antonio, chief operating officer of Aboitiz InfraCapital, said in a statement.

“We remain committed to supporting the government’s push to build the infrastructure necessary to promote inclusive economic growth for our people,” he added.