Forensic Solutions proposes national policy, framework for PPP

Manila, Philippines - A private think-tank has proposed a national policy and framework for Public-Private Partnerships (PPP) that it hopes the Aquino administration would consider to help ensure the success of PPP projects by way of delivering more, better and affordable services to the Filipino people.

The comprehensive proposal, which Forensic Law and Policy Strategies Inc. (Forensic Solutions) submitted to the Department of Finance (DOF) and the National Economic and Development Authority (NEDA), provides the Aquino administration with an all-encompassing guide to its flagship program - from defining PPP and outlining the modes of how PPP initiatives should be carried out and financed to a checklist of 50 risks that government has to consider to make sure these projects do not end up saddling the public with exorbitant tariffs and user fees.

Forensic Solution’s founder and former Justice Secretary Alberto Agra said their proposal was culled not just from their previous policy papers on PPP but also from materials released by the Institute of Public-Private Partnerships (IP3) based in Arlington, Virginia, along with existing PPP policies in five countries Australia, Singapore, Kenya, Tanzania and Pakistan.

Aware that Malacañang is now in the process of drafting and formulating its PPP policy, Agra said the think-tank wants to help speed up this crucial process by submitting a draft for the Palace’s study, saying the need to have such a policy cannot be overemphasized considering that the first five PPPs will soon be subjected to bidding.

“At present, we have no national PPP policy and framework,” said Agra. “Without a national policy, the government is left with only a piecemeal approach to PPP.”

“So far, the government has no definition of PPP; our PPP modes not clear; and we have no policy on when PPP viable and when PPP not suitable. The objectives, benefits, requirements of PPP and PPP procedures are not clear,” he further noted.

In its proposed PPP policy and framework, Forensic Solutions said that to ensure the success of the PPP projects, these should be promoted to provide more, better, affordable and timely services to the public.

“By definition, PPPs should provide more affordable tariffs, ensure delivery of better quality of service and better value for money for government. Thus, a successful PPP may be measured by the affordability of the tariffs or direct user fees. A PPP which yields a high, unreasonable or excessive tariff may be classified as a failed one,” it said.

It pointed out in the draft framework that the success parameters of the government’s PPP policy should: increase the level of participation of private sector in the PPP program to a certain percent of the gross domestic product or GDP by year 2016; build the capacity of public sector entities to properly develop, prioritize, prepare for tender, negotiate and monitor PPP projects; enhance the quality of life for all Filipino citizens by improving access to basic services; and improve the capacity of the country as an investment destination by enhancing the stock, diversity and competitiveness of Philippine core infrastructure.

Forensic Solutions’ proposal lists down 37 sectors and projects that could be covered by PPPs, running a wide gamut from airports, highways, irrigation or health facilities and public markets to telecommunications, information technology, energy and tourism projects.

Its proposed PPP framework contains 10 policy choices that the government could consider to guarantee affordable or low tariffs for completed PPP projects.

These are: long-term as against short-term project life; long-term repayment schemes; low-interest financing; proper allocation of risk; cap on rate-of-return or profits; provision for government guarantees, subsidies or financing; government incentives; fiscal incentives or tax exemptions from local government units or LGUs; more components for the private sector such as build-operate-transfer or BOT schemes, joint ventures and concessions; and allowing private sector innovations to prune the cost of every project.

The framework also contains a checklist of 50 PPP-related risks, ranging from political risks like official corruption and policy changes by succeeding administrations; economic risks like possible default or pull-out of financiers and foreign exchange fluctuations; and legal risks like new tax rules or new laws passed by Congress that affect particular projects.