The PPP program’s fate is one of the main concerns of the business community as the country transitions from the current administration to the next
by Arnold Padilla
IBON Features – Some of those challenging the incumbent regime in the coming polls have raised issues on the public-private partnership (PPP) program. This as the Aquino administration has used its declared centerpiece program to highlight its achievements.
PPP as a program is certainly a legitimate electoral issue. Not only is the program marred by various controversies. At a more fundamental level, there is a question on its impact on public interest and development.
But leading presidential bets only scratch the surface and ignore the deeper and more vital policy issue with regard to PPP. Instead of the PPP’s basic flaws as a policy, most of the issues raised focus on flaws in its implementation.
Opposition bets use the horrendous traffic in Metro Manila amid delayed transportation projects to stress the failures of the Aquino administration. Vice President Jejomar Binay, for instance, calls Aquino’s PPP program as “epicenter of failure”. For the aspirant who poll surveys say is the man to beat, the main issue is the “inexplicable delays” in the PPP program.
So far, Aquino has already awarded 12 PPP projects with a combined cost of Php217.4 billion. The amount is based on the PPP Center’s report as of 5 January 2016.
But out of the 12 awarded contracts, government has completed just two projects. These are the Php2.01-billion Daang Hari – SLEX Link Road Project and the Php16.43-billion PPP for School Infrastructure Project (PSIP) Phase I. One of the awarded contracts – the Php8.69-billion Modernization of the Philippine Orthopedic Center – even got derailed. This after the investor backed out citing delays in the release of certificate of possession for the project site.
Presidential bets promise to fast track the implementation of the PPP program. One is Senator Grace Poe who is neck and neck with Binay in the surveys. Poe claimed that when elected, she would finish seven airports through PPP in the first half of her term. These airport projects are in various stages of bidding under Aquino’s PPP program.
Candidates are pressed to have greater clarity in their economic plans especially on PPP to assure interest groups like banks and investors. The Institute of International Finance (IIF), for example, said that compared to Poe and administration bet Mar Roxas, Binay is more populist. Thus, Binay could undermine the PPP program.
Responding to the US-based lobby group, the Vice President’s camp asserted they would, in fact, enhance the PPP program. A Binay presidency, they said, will revise the Build-Operate-Transfer (BOT) Law, pass a Right-of-Way bill, and address bureaucratic inefficiencies to hasten PPP implementation.
Indeed, the PPP program’s fate is one of the main concerns of the business community as the country transitions from the current administration to the next. For instance, the Philippine Chamber of Commerce and Industry (PCCI) asked Aquino to accelerate the implementation of PPP projects in the remainder of his term. PCCI said this will ensure that the next President can “hit the ground running” in terms of infrastructure development.
But the business community is also wary of political risks. Historically, pet infrastructure projects of the incumbent administration, when replaced by the opposing camp, are either delayed or totally scrapped. This early, the American Chamber of Commerce of the Philippines is urging the succeeding regime to continue “all properly awarded” PPP projects.
Contracts are often reviewed supposedly to protect public interest. In reality, however, the intention is to favor other business interests that have closer ties to the newly installed political camp.
The LRT-MRT common station controversy is illustrative of this. The common station was originally located near Henry Sy’s SM City – North EDSA in a deal forged during the Arroyo administration. It was part of the Php69.3-billion MRT Line 7 Project. But when Aquino took over, the station was moved to the TriNoma mall of the Ayala group, bundled with the LRT 1 project.
Nonetheless, investors are practically assured of the PPP program’s continuity even with Aquino bet Roxas lagging behind in surveys. For one, PPP projects are exempted from the poll ban on public works, said the Commission on Elections (Comelec). This means that scheduled bidding of some projects will proceed as planned. The PPP Center targets to award at least three more contracts before Aquino steps down.
Further, top presidential runners have already said they would not just continue the program but also improve its execution. All candidates have committed as well to increase infrastructure spending from 4% to 5% of gross domestic product (GDP). This includes the budget to protect PPP investors from political and economic risks.
The administration is also moving to guarantee investors the program will not be easily reversed by whoever will come into power. Aquino already certified as urgent the proposed PPP Law to expedite it in Congress before the polls. The bill would consolidate, institutionalize and expand the PPP reforms started by Aquino, which are feared to undercut public interest. Among them is further weakening public institutions that regulate private investments.
Indeed, the coming election is crucial for PPP investors. The next administration will oversee the implementation of awarded contracts and steering rest of the projects lined up under the program. These include mega-projects such as the Php122.8-billion Laguna Lakeshore Expressway Dike Project and the Php170.7-billion North-South Railway Project (South Line).
Contracts of such magnitude require a government that is able to address regulatory and commercial risks, noted the International Finance Corporation (IFC). The World Bank investment arm also said that greater foreign participation must be encouraged. Thus, foreign and local business groups and creditors are closely watching how contenders will handle PPP issues like regulatory risk guarantees and more liberalization of infrastructure development.
Candidates court ordinary people for votes. However, not one of them talks about how they will continue to bear an increasing burden to promote the commercial viability of PPP projects. None of them has confronted the flawed policy that has raised user fees in water services, power rates, transportation fares, toll fees, telecommunication rates, etc. None of them is raising the issue of how privatized infrastructure and services remain dismal amid skyrocketing profits of a handful business groups. —IBON Features