Government to spend $19.5-B for BOT projects

The government estimates it will spend at least $19.46 billion to pay operators of build-operate-transfer (BOT) projects, between 2002 and 2020.

The amount, however, is a conservative estimate based on a static 3.5-percent risk ratio that does not consider the variations depending on the phases of the projects covered by government guarantees.

Documents obtained from the Department of Finance (DoF) indicated that the National Government would pay an average of $1.82 billion from 2002 to 2010 alone, representing the guarantee extended to BOT operators.

The government routinely extends guarantees to private companies participating in various BOT projects, as an incentive for mobilizing private investments to fund public infrastructure projects that the government cannot otherwise afford.

The document showed that the amount was estimated from at least 11 different projects that would be implemented this year until 2010. Government risk is estimated at 3.5 percent of the total project cost.

However, a source explained that the government could end up paying more than its estimated risk ratio depending on the capability of the private BOT operators to pay back their own loans.

In 2001, the source said the government paid much more than it originally calculated because it did not foresee the risks it had to assume in the controversial Metro Rail Transit (MRT) project.

The original estimate was that government would spend $1.82 billion or P3.25 billion in payments to BOT operators but it actually paid P12 billion due to the MRT project alone.

The source explained that the risks were usually higher at the beginning of the projects but the government had no empirical information to draw from and the projections needed to be calibrated based on the variations in risk ratios at different phases of the projects.

"If you are a good government, you should assign contingencies ahead of time," the source said. "We want someone to study this so we can make more realistic and reliable projections."

The projects covered by the projections were nine power generation projects: Pagbilao, Subic Bay, Sual Coal, Malibutog, Mahanagdong, Upper Mahiao, Batangas Bunker, Mindanao Geothermal and Leyte Geothermal.

The projection also included Phase 3 of the Light Rail Transit (LRT) project and the Casecnan Irrigation project.