Government urged to ease ownership structure for infra projects to draw more foreigners

The Foreign Chambers of the Philippines (FCP) is urging the government to relax the ownership structure for critical infrastructure projects to attract more foreign proponents.

Members of the FCP recently submitted their inputs on the guidelines currently being drawn up by the government for private sector participation in public infrastructure projects.

Aside from relaxed foreign equity limits, the FCP is also suggesting that government should provide some subsidy or credit enhancement for build-operate-transfer (BOT) projects, especially if the revenue stream for the project will not support the rate of return required by the private sector to participate in the projects.

The drafting of the guidelines was prompted by a World Bank policy review which showed the need for further reforms if the Philippines is to catch up with middle-income Asian countries in terms of attracting investors to participate in infrastructure development.

Based on the World Bank study, the Philippines needs from $35 billion to $45 billion in fresh investments from the private sector to improve infrastructure in the next 10 years.

The FCP is also suggesting that the government produce a draft concession agreement for each project as part of the invitation to bid documents.

The FCP explained that having such a document would make the proponents’ task easier in knowing the rules of engagement.

"The BOT/concession agreement should have mechanisms to adjust the price," the FCP said.

These mechanisms, commonly referred to as the parametric formula, are designed to keep the BOT proponent intact during the life of the concession agreement.

Furthermore, the FCP is urging the government to be more proactive in resolving local third party impediments to a project such as removal of squatters, local government interference and definition of title and right to have access to the land without delaying a project.

The FCP suggested that a Government Infrastructure Council should be created to determine whether there is a violation of the concession agreement that merits that a case be brought to court.