Gov’t to establish fund for unforeseen PPP debts

CLARK, Pampanga, Philippines – The government is planning to establish a fund to ensure unforeseen state liabilities arising from public-private partnership (PPP) projects are taken care of, a senior official said.

“We are going to set up a fund to take care of the contingent liabilities for the PPP projects,” National Treasurer Rosalia de Leon told reporters on the sidelines of the journalism seminar of the Economic Journalists Association of the Philippines.

“Our proposal was around P30 billion,” she added.

The “contingent liability fund” will not be part of the national outlay, instead it will be included in the unprogrammed fund and be tapped only if needed. The plan is already with the Budget department for consideration.

The PPP is the centerpiece economic program of the Aquino administration, which aims to tap private sector expertise in infrastructure projects, while government settles regulatory hindrances.

Since its launch in November 2010, a total of three projects worth roughly P28 billion have already been awarded with more on the pipeline.

The fund, De Leon said, is a “precautionary measure” should there be “breaches” or “delays” in the projects under contract with the private sector.

For instance, if the winning bidder fails to meet its commitments, the government may use the fund to buy the project and take over its operations. A “risk assessment” is being conducted on every PPP project.

At present, the government merely segregates funding in its annual budget for its portion on every PPP undertaking such as payment for right-of-way. This, De Leon said, will be different.

For one, since the fund will not be part of general appropriations, it may only be tapped if windfall revenues are recorded or borrowings are made. 

“This will only be used if needed. If there will be a trigger, that will be the time that we will use it,” De Leon said.

“It is one way again of managing our contingent liabilities. What we are saying is that we are prepared and that there is readiness on our part should there be risks,” she pointed out.

She noted that even credit rating agencies had qualms on the lack of back-up for the country’s PPP scheme and that this should address that concern.

“This is really more of a contingent measure, just in case, standby fund for all those contingent liabilities,” De Leon said.