EDITORIAL - A lost investment

As this year’s host of the Asia-Pacific Economic Cooperation summit, the government presented the country as an attractive place for doing business. On the eve of the summit, however, its flagship private-public partnership program delivered a different message.

Megawide World Citi Consortium Inc., a subsidiary of listed builder Megawide Construction Corp., announced it had scrapped its contract with the government to modernize the Philippine Orthopedic Center.

The P5.69-billion build-operate-transfer project, awarded by the Department of Health to Megawide in December 2013, was supposed to be completed in 2017. Megawide secured loans from three government banks earlier this year to finance the PPP project, which would give it a 25-year concession to run the renovated hospital. The project would use land owned by the National Kidney and Transplant Institute.

Explaining its termination of the deal, Megawide cited the delay in the award by the DOH of the certificate of possession. The DOH explained that it had failed to persuade the NKTI management, where the health secretary chairs the board, to allow the use of its land for the project.

Pulling out of a contract with the government is not done lightly. The costs for project studies alone can be considerable. Some investors have complained that the government has been unwilling to shoulder the cost of the preliminary spadework for proposed PPP projects. Even worse, there are complaints that the government is remiss in doing its part – such as securing right-of-way agreements and awarding certificates of possession – once a project has been awarded.

The government has been blamed for the lackluster response to the PPP program. The experience of PPP participants can only further dampen investor interest. The first PPP project – the P2-billion, four-kilometer Daang Hari-SLEX link road, renamed the Muntinlupa-Cavite Expressway – was awarded in December 2011 but opened only this year, delayed by right-of-way and interconnection problems.

Responding to criticism, the administration has touted recent awards of PPP projects. As the Megawide deal showed, however, it’s a long way from the award of a project to its implementation. Megawide says it remains interested in participating in PPP projects, but investors inevitably will consider the fate of its hospital venture. If the government wants to encourage more PPP projects, it must reassure investors that the hospital deal is the exception rather than the rule in doing business in this country.