Government hopeful of attracting more investors in PPP program

MANILA, Philippines – Even as there are challenges faced by some public -private partnership (PPP) projects this year, the government remains hopeful it can continue to attract investors in the program and make gains in addressing the country’s infrastructure gaps.

PPP Center executive director Cosette Canilao is satisfied with the achievements made by the program so far, even as some issues have been raised on certain projects.

Among the projects facing challenges is the P8.69 billion modernization of the Philippine Orthopedic Center (POC) as private partner Megawide World Citi Consortium Inc. (MWCCI) has decided to terminate the contract for the deal.

The project involves the construction of a 700-bed capacity orthopedic hospital within the National Kidney and Transplant Institute (NKTI) Compound in Quezon City.

Under the deal, MWCCI, a subsidiary of Megawide Construction Corp., was supposed to be responsible for designing, building, financing as well as operating and maintaining the facility for the 25-year concession period and then transfer the hospital to the Department of Health (DOH).

MWCCI said the decision to terminate the contract was due to the two-year delay in the awarding of the Certificate of Possession by the DOH for the land owned by the NKTI.

There were also other issues affecting the implementation of the project which contributed to the decision to terminate the contract such as the displacement of current POC employees; the new case rates policy of the Philippine Health Insurance Corp. and difficulty in appointing an independent consultant.

 “For the Orthopedic Project, it is really sad that it won’t happen anymore,” Canilao said.

She noted proper study and evaluation was undertaken to see the viability of the project.

 “I am saddened our people, the masses, they will be stuck with the idea that since it’s free, it is fine to have lousy service in public hospitals. It would have been a great template on how to deliver public service especially in the health sector,” she said.

On the bright side, MWCCI’s move to terminate the deal shows the provisions in the contract between the government and the private partner work.

“As what we have been telling people, this is a contract between the government and the private sector. If either one of the parties cannot fulfill its obligation under the contract, then there is a fair exit mechanism, either for the government or the private party...That’s the silver lining of the project,” Canilao said.

Megawide, however, remains open to other PPP projects to be offered as it noted the POC is an isolated case.

“Megawide looks forward to other PPP agreements that the DOH will offer,” the company said.

Aside from the POC, the P18.99 billion Davao Sasa Port modernization project is also facing some hurdles as the city council and business community of Davao City oppose the undertaking.

The project, which involves the development of the existing Davao Sasa Port into a modern international-standard container terminal for improved trade access to Mindanao and the Philippines, is under procurement with five pre-qualified firms such as Asian Terminals Inc. - DP World FZE Consortium; Bollore Africa Logistics; International Container Terminal Services Inc.; Portek International Pte. Ltd. - National Marine Corp. Consortium with contractor Toyo Construction Co. Ltd.; and San Miguel Holdings Corp. - APM Terminals Management (Singapore) Pte Ltd. Consortium with contractors Hyundai Development Co. and Hanjin Heavy Industries & Construction Co. Ltd.

The Sangguniang Panlungsod of Davao recently approved a resolution to block the bidding for the PPP project, claiming the local government and other stakeholders were not consulted for the deal.

The move of the Sangguniang Panlungsod is supported by the business community of Davao City.

 “This unnecessary project was being forced upon Davao without the proper consultation. This resolution will now enable Davaoeños to contribute meaningfully toward defining the correct need and use of Sasa Port,” Alexander Valoria, president of the Anflocor Management and Investment Corp. and a member of the Davao City Chamber of Commerce and Industries, Inc. said.

Apart from the lack of consultation, other concerns were also raised on the PPP deal such as the possible worsening of traffic congestion in Davao City as there are existing private ports in the area, and absence of a plan for cruise vessels given the area’s potential for cruise tourism.

Even Sen. Sergio Osmeña III has questioned the cost of the PPP deal and has asked the Department of Transportation and Communications and PPP Center to come up with a cheaper option amid complaints from the business community of Davao City.

Canilao said there are existing rules on how to address the issues raised on the project.

 “I think it is very clear in the existing Build-Operate-Transfer Law, it’s very clear in the implementing rules and regulations how National Government interacts with local government especially for national projects. Again, we just have to follow the rule of law for that one,” she said.

Even as the project is being questioned, the government remains hopeful the stakeholders would see the benefits of the deal.

“Although there are already very good ports in that area, competition is always good for the users,” Canilao said.

While there are challenges faced by some projects, Canilao said the government has still made strides in addressing the country’s infrastructure needs.

“I am very happy despite the challenges,” she said.

Since the PPP program’s launch in 2010, the government has awarded 12 projects valued at a total of P217.42 billion.

These are the Daang Hari - South Luzon Expressway Link Road (Muntinlupa-Cavite Expressway) Project; PPP for School Infrastructure Project (PSIP) Phase I; Ninoy Aquino International Airport Expressway Phase II; PSIP Phase II; MPOC Project; Automatic Fare Collection System Project; Mactan-Cebu International Airport Passenger Terminal Building Project; Light Rail Transit Line 1 Cavite Extension and Operations and Maintenance Project; Southwest Integrated Transport System Project; Cavite Laguna Expressway Project; South Integrated Transport System Project; and Bulacan Bulk Water Supply Project.

Canilao said the government has successfully bid out and issued the notice of award to the winning private partners of the 12 PPP deals following efforts to streamline the approval process and evaluation of the projects.

The PPP Center has also been recognized for its efforts in promoting the PPP program by various organizations, with the most recent award given by financial magazine The Asset.

The PPP Center was named The Asset’s Agency of the Year during the magazine’s Triple A Asia Infrastructure Awards 2015 for advancing the implementation of the PPP program.

Prior to that, the PPP Center bagged the Gold Award for the Best Central Government PPP Promoter during the annual Partnerships Awards of the Partnerships Bulletin of the United Kingdom, and garnered the IJ Global Asia-Pacific Grantor of the Year award in Singapore.

Canilao said the PPP Center has likewise received requests for assistance from countries such as Indonesia, Cambodia, Lao, Tonga, Nepal and Bhutan to provide information and direction on how to get the private sector on board projects being pushed by the government.

Still, she acknowledged there is room for improvement in the program during the remaining months of President Aquino’s leadership.

“There is still a lot to improve on especially the coordination framework for the government agencies in terms of coordination of delivery of obligations under the PPP contract so once the project is awarded, the post award activities prior to construction would be faster and smoother for the private partner as well as the government and the public would be able to realize the benefits of the project,” Canilao said.

Philippine Chamber of Commerce and Industry president George Barcelon said the business community is hopeful the government can enhance the implementation of the PPP projects.

In particular, he said it is important for government to not just plan ahead and conduct thorough study of the projects but also ensure agencies in-charge can do their part.

“We hope the projects would be completed on time so the public will get the benefits,” he said.

As the private sector has a vital role in bringing in infrastructure to support economic growth, the business community is also of the view the PPP program should be pursued by the next administration.

 “I think the next administration should follow through with the program because the government needs a partner to come in for projects crucial to the country,” Barcelon said.