PPPs backed amid tight fiscal position

MANILA, Philippines — A more involved private sector to finance infrastructure projects will be an effective strategy for the Marcos administration amid a challenging fiscal position.

Finance chief Benjamin Diokno earlier said the new government would maintain the current infrastructure spending, as he vouched for the return of public-private partnership (PPP) to finance projects.

In an email to The STAR, Oxford assistant economist Makoto Tsuchiya said infrastructure is seen to play a crucial role in accelerating post-pandemic recovery.

This, as infrastructure has a high multiplier effect and is a good source of job creation.

Tsuchiya noted that the new government’s investment on infrastructure would still hover above five percent of gross domestic product (GDP) in the coming years.

This year, infrastructure spending is set at 5.8 percent of GDP or P1.12 trillion.

However, Tsuchiya warned that the elevated government debt level, which is estimated to reach 64.6 percent of GDP by year end, would leave the Marcos administration with limited fiscal space.

Apart from bloated debt, the pandemic also pushed the deficit deeper into the red to 7.6 percent of GDP in 2020, and widened further to 8.6 percent last year as revenue collections remained meagre amid lower corporate tax rates.

“Given this limited fiscal room, President Marcos and his economic team will need to follow efficient public spending and focus its gunpower on where it’s needed the most,” Tsuchiya said.

“Private sector participation through PPP will also be effective in times of high fiscal constraint, such as the current one, and we think the move toward PPP is welcome for the economy,” he said.

Former Socioeconomic Planning Secretary Karl Chua said PPPs are welcome provided that they are well-structured and protect and improve the quality of lives of the people.

At the same time, Chua said PPPs should protect the government.

Data showed that there has been a decline in the number of PPP projects during the Duterte administration.

President Duterte only signed six PPP projects during his term, as against the 17 PPP projects approved by the late Benigno Aquino III.

Chua said the government actually received a lot of PPP proposals, both solicited and unsolicited, in the past six years.

“It is our job to make sure that all submissions are complete and compliant and that they really serve to deliver better services to the people without risking the government,” Chua said.

“This is a very difficult balancing act and I’m sure the next administration will have that at the heart of PPP projects,” he said.