MANILA, Philippines - The Aquino administration said yesterday that government contracts for infrastructure projects under the proposed Public-Private Partnership (PPP) scheme would not mean additional burden on state coffers.
Finance Secretary Cesar Purisima gave this assurance amid fears that the PPP scheme would burden the government financially because of guarantees.
Purisima, who hailed the two-day PPP conference as a success, said the government would not provide similar guarantees provided in the past such as the take-or-pay provisions in the contracts of independent power producers (IPPs). These take-or-pay provisions resulted in huge losses for the government because the contracts stipulated that payments be made even if these IPPs were unable to deliver on their commitments.
Under the proposed PPP scheme of the Aquino administration, Purisima said there would be no additional burden for the government as all the contracts would be studied carefully.
“Whatever are in the terms of the contract are respected. If we bid this out properly, the chances that it will end up in court will be much less than in the past,” the Finance chief said.
He also said the guarantees wouldn’t mean risks for the government.
“If the terms of the contract say that rates should be increased by this time and it’s not allowed, we step in. There’s less market risk.”
Critics have warned that the government would only incur financial burden because of the guarantees it would be providing to investors in PPP projects.
During the opening of the PPP conference on Thursday, President Aquino said the government would provide investors with protection against regulatory risk.
“Infrastructure can only be paid for from user fees or taxes. When government commits to allow investors to earn their return from user fees, it is important that that commitment be reliable and enforceable. And if private investors are impeded from collecting contractually agreed fees - by regulators, courts, or the legislature - then our government will use its own resources to ensure that they are kept whole,” Aquino said.
He stressed that the protection will be limited to regulatory risk. He said commercial or market risk will be borne by investors.