A much-needed change

Last Dec. 5, President Marcos signed into law Republic Act 11966 or the Public-Private Partnership (PPP) Code of the Philippines, clarifying the ambiguities in the existing Build-Operate-Transfer (BOT) Law with the end-view of creating more jobs through increased investments and improved infrastructure in the country.

RA 11966 will consolidate all legal frameworks and create a unified system for investors to refer to when engaging in PPP projects and will establish a stable and predictable environment for public and private sector collaboration, not to mention address the gaps in infrastructure financing, the Department of Finance said.

Under the Build Better More (BBM) program, the government has committed to invest in 197 infrastructure flagship projects amounting to about P8.7 trillion, of which 41 projects will be financed through PPP.

The new law streamlines the project implementation process, updates approval thresholds for national PPP projects, promotes autonomy in implementing local PPP projects, improves the framework for unsolicited proposals, and establishes a predictable tariff regime to protect public interests.

A policy paper prepared by the Senate economic planning office noted that from 2015 to 2021, out of the P6.4 trillion in total infrastructure investments, P5.6 trillion was from actual government disbursements through the national budget while the balance came from the private sector, with PPPs being the preferred mode of participation. For the same period, disbursements from official development assistance (ODA) loans for infrastructure projects amounted to P241.2 billion.

It pointed out that given the narrower fiscal space in the aftermath of the pandemic, the Marcos administration has repeatedly emphasized that the PPP procurement mode will have a larger role in its BBM infrastructure program.

It however stressed that a successful PPP program requires a clear legal and regulatory framework, strong governance arrangements, and institutional readiness.

The paper revealed that stakeholders have been lamenting about ambiguities in the existing BOT Law, including the unclear allocation of risks and responsibilities among PPP players that cannot be remedied through amendments in the law’s implementing rules. It added that other critical challenges such as the bureaucratic and time-consuming process of project approval, procurement and implementation, inadequate government capacity to manage PPPs, political and policy risks,transparency issues, among others, needed to be addressed since these contribute to significant delays and inefficiencies in executing PPP projects.

It was also pointed out that while the Philippines was one of the first among developing countries in Asia to use BOT or PPP schemes for infrastructure development, it is increasingly being eclipsed by its ASEAN neighbors in attracting PPP investments.

From 2018 to 2022, total PPP investments in the Philippines amounted to $7.09 billion compared to Indonesia’s $14.10 billion and Vietnam’s $21.25 billion.

The paper noted that a further cause of concern for the Philippines was the percentage of cancelled/distressed projects which reached almost 12 percent of total investments as compared to 1.58 percent and 0.59 percent in Thailand and Vietnam, respectively.

Some of the issues and challenges on the PPP framework and implementation in the Philippines include investor confusion considering that the BOT Law is not the only legal framework for PPPs, limited flexibility in approval thresholds, inconsistent policy and limited competition on unsolicited proposals, consistency in honoring PPP contracts, addressing right of way delays, challenges in foreign participation in PPP projects, among others.

The new PPP Code now prohibits all courts other than the Supreme Court from issuing TROs, injunctions, temporary environmental protection orders, and other similar provisional and temporary reliefs or remedies against biddings of PPP projects, awarding of any PPP contract, acquisition of ROW, commencement of PPP contracts, among others, except if the matter is of extreme urgency involving a constitutional issue.

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This new law and the Trabaho Para sa Bayan Act signed into law last September are just some of the ways by which the current administration is seeking to further reduce the unemployment rate in the country and to create more job opportunities.

Latest data from the Philippine Statistics Authority show that the number of jobless Filipinos has gone down, apparently due to increased economic activities and jobs as the holiday season nears.

This is also due to the strong GDP growth and decelerating inflation. The Philippines posted a higher 5.9 percent growth in the third quarter, the strongest among major Asian economies, while inflation has also cooled down to 4.1 percent.

The Social Weather Station has also said that the rate of overall hunger fell among the self-rated poor from 10.8 percent in June 2023 to 7.7 percent in September 2023.

PSA’s latest labor force survey likewise revealed that the number of jobless Filipinos 15 years old and above decreased to 2.09 million from 2.26 million in September.

Accelerated government spending would not only create jobs and stimulate the local economies of areas where these infrastructure projects are located, it would also attract investments and increase productivity that will generate employment and tax revenue, which in turn can fund more infrastructure construction. This is the virtuous cycle in fiscal management the government has been practicing, public officials have emphasized.

In education and manpower, the government is investing more in developing human capital that will supply the intellectual backbone of the country’s economic resurgence. It is also investing huge amounts to upskill, reskill and rightly skill the workforce so that they can adapt to the changing contours of the economic landscape brought about by technological disruptions like the surge of AI applications.

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