Infrastructure projects waiting in the wings

Philippine infrastructure projects with public-private (or private-public) partnerships, as differentiated from those with full government funding, are creeping back into the system – and this is a good thing.

Even if they are in hybrid form, which the government had initially accepted as an alternative to projects financed through full official development assistance (ODA), we are happy as long as the job is done faster, under full transparency, and with the least corruption.

With the current government’s term almost nearing mid-life, there is palpable impatience felt in President Duterte’s demeanor whenever updates to the P8-trillion Build Build Build (BBB) program are brought up.

Understandably, about a third only of the flagship projects under BBB have actually broken ground, and the current predicament faced by a weaker Chinese economy as a result of uncertainties arising from its trade war with the US casts a shadow on promises of funding for projects.

Delays have also been caused by a variety of reasons including endless reviews of technical and financial studies by international lenders. This has made ODA projects progress at even slower rates than PPPs, and this is perhaps one big reason why hybrids and full PPPs have become acceptable.

ODAs vs PPPs

Many ODAs, especially those from the World Bank and the Japan International Cooperation Agency (JICA), carry attractive terms at very low interest rates and over long periods. These makes them attractive even if, ethically, it would seem unfair to future generations who will have to pay for the borrowings.

ODA loans that finance infrastructure projects like a Metro Manila subway system, for example, will be paid for by taxes that every working Filipino is assessed, regardless of whether he will get to use the subway or not in his entire life.

The guilt is even bigger if we factor in fact that Chinese ODAs have far higher interest rates, and oftentimes, more onerous conditions that carry prerequisites to the hiring of more of their nationals and use of Chinese equipment and machineries.

On the other hand, PPP projects are amortized directly by those who use the projects, and are usually completed faster assuming government commitments like right of way access are delivered as promised. The private sector partner most often has the technical expertise that allows for projects to function without problems for the duration of the contract.

Unlike PPPs that are premised on build, operate, and transfer (BOT) arrangements, hybrid PPPs allow the private sector to participate only in the operations and maintenance stage, leaving project financing to government through ODAs and state funding.

Hybrids carry the advantages and disadvantages of both systems, and in certain circumstances, will be able to deliver projects to completion, which the country needs badly. More importantly, with so many projects that need to be undertaken, all the kinds of project implementation schemes are welcome as long as they are done with integrity.

Flagship of all flagship projects

One of the BBB projects that bears watching is the 25-kilometer fully underground subway train system that finally is scheduled to break ground in the first quarter this year. This full ODA-funded JICA project can be considered the flagship of all BBB flagship projects.

The trains will run from Quezon City to the Manila International Airport, and is expected to greatly ease commuter traffic running through Metro Manila’s EDSA when completed in 2025.

On the hybrid PPP side, the operations and maintenance component of the Clark International Airport has also been awarded to a private sector consortium composed of notables like the Changi Airport of Singapore, Filinvest Corp., JG Summit, and Philippine Airport Ground Support Solutions.

The International Finance Corporation, alongside the World Bank’s Global Infrastructure Facility, is quite proud of having concluded this 25-year concession contract that will manage the expanded Clark International Airport in Pampanga.

Currently, the first phase of the airport modernization and expansion is proceeding on schedule, and will be completed by 2020. With an increased capacity of 8 million people, the bigger airport would help decongest the Ninoy Aquino International Airport terminals in Metro Manila.

Outside the BBB list

Hopefully, there will be more projects in the BBB list that will start soon now that the Duterte administration has hurdled the “prototyping” stages of getting key projects off the ground through ODA and hybrid PPP formats.

For other projects outside the BBB list, such as the San Miguel Corp.’s New Manila International Airport in Bulacan, the Makati City Subway, and the Metro Cebu Expressway, private business’ commitment is crucial, but government resolve to give the green light is even more important.

Support for the PPP Center needs to be strengthened to provide an efficient machinery to churn out equally big projects not covered in the BBB list.

Project development support had recently been approved for the Cultural Center of the Philippines (CCP) Asset Development Project, the Davao Sasa Port Modernization Project, and the development, operation, and maintenance of the General Santos Port.

With the Philippine economy showing continued resilience in spite of all the uncertainties brought about by global trade concerns, Brexit, and the economic slowdown in other parts of Europe and China, the private sector – both local and foreign – are bullish about investing in our infrastructure projects.

Our PPP system has matured and has earned a good reputation for having an established framework in preparing, procuring, and contract management. It currently is swamped with proposals, many of them forwarded by companies waiting in the wings, eager to invest.

Let’s not lose this momentum.

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