Friday, 19 November 2010

Gov’t dangles PPP promises


GUARANTEES, easier access to bank loans and speedier processing were dangled by the government at yesterday’s rollout of key infrastructure projects that include $3.3 billion worth of rail, road and airport ventures up for bidding next year.

Even as officials admitted that funding to support the promised facilitation still had to be approved by Congress, a number of business leaders nevertheless expressed interest in the undertakings on offer.

Multilateral organizations also promised to help get the public-private partnership (PPP) program off the ground.

President Benigno S. C. Aquino III laid down the first pledge of the day, promising to compensate contractors should legal challenges prevent them from collecting agreed rates.
"If for some reason a court decision threatens [rate] adjustments, the government will compensate the private concessionaire for the difference between what the tariff should have been under the formula and the tariff which it is actually able to collect," he said at the opening of the two-day Infrastructure Philippines 2010 conference.

"If we are truly interested in a square deal for all, then what we shake hands on should be what endures," Mr. Aquino added.

The president’s economic team went on to bare plans for state agencies to speed up project processing by helping out with feasibility studies and right-of-way acquisition. These two objectives are to be funded by a P12.5-billion allocation specifically for projects up for bidding next year, Budget Secretary Florencio B. Abad said in a speech.

This is on top of the P300 million programmed for the Project Development and Monitoring Facility that is under the National Economic and Development Authority (NEDA), Socioeconomic Planning Secretary Cayetano W. Paderanga, Jr. said.

The NEDA will be charged with assisting other agencies in packaging their projects for auctions, he added.

Mr. Abad, however, admitted that funds to support the president’s promise of compensating investors had not been allocated.

"We still have to figure it out," he told BusinessWorld.

"We can reflect that to some degree in the contracts," he added without elaborating.
Mr. Abad also conceded that Congress had yet to approve the budget for right-of-way acquisition and feasibility study drafting.

"But after this conference, there will be a stronger urgency to keep that allocation intact," he said.

House of Representatives Speaker Feliciano R. Belmonte hinted that legislators would favor the infrastructure initiative.

"We are supportive of the President’s programs, particularly the PPP," Mr. Belmonte said at the event.

If realized, the support measures could lure private investment into 11 rail, road and airport projects up for bidding next year.

The government will be wholly responsible for the civil works of at least five of these projects, which will be turned over to a private sector concessionaire for operation and maintenance (O&M).

The five are:

  • the $170-million expansion of the Light Rail Transit (LRT) Line 1, to be turned over to a concessionaire at market prices;
  • the $140-million expansion and privatization of the Metro Rail Transit-3 under a scheme similar to the LRT-1 deal;
  • the $700-million LRT-1 South extension, where O&M will be worth $800 million;
  • the $120-million LRT Line 2 East extension with O&M worth $100 million; and
  • the privatization of the $28-million Laguindingan airport in Misamis Oriental with O&M at $5 million.

Meanwhile, in addition to O&M, private sector investors will have to partly fund the construction of the remaining six projects:

  • the 27.6-kilometer Cavite-Laguna Expressway worth $262 million;
  • an elevated 4.9-kilometer expressway worth $235.33 million that will link the Skyway and Manila-Cavite Coastal expressway to the Ninoy Aquino International Airport terminals;
  • the North Luzon Expressway-South Luzon Expressway link worth $467 million;
  • a new $120-million airport in Panglao, Bohol;
  • the $97-million rehabilitation of the airport in Puerto Princesa, Palawan; and
  • a new $71-million airport in Daraga, Albay.

The private sector will be tasked to put up and operate the terminals for all the proposed airports, save for the one in Laguindingan, with the government taking care of the "airside" development such as runway construction, Transportation and Communications Secretary Jose P. De Jesus said.

Public Works Secretary Rogelio L. Singson said feasibility studies for the three proposed roads had been completed.

Other minor projects, spearheaded by the Agriculture and Health departments and some local government units are also ready for bidding next year, officials said.

Already, several large corporations said they would be studying the project lineup.

"We’re very interested in all the projects... Our priority is tollways but we are interested in tourism, power and infrastructure [too]," San Miguel Corp. President Ramon S. Ang said at the sidelines.

Metro Pacific Investments Corp. Chairman Manuel V. Pangilinan similarly told reporters he was interested in the tollway projects, adding that "The government is setting the right tone."
Ayala Corp. Chairman and CEO Jaime Augusto Zobel de Ayala said his company had been "interested for a long time" and would study its options "more carefully."

The conference, SM Investments Corp. Vice-Chairman Teresita Sy-Coson, said was "a good start."
Officials of foreign business groups also weighed in, expressing optimism over what has been described as the Aquino government’s centerpiece program.

"It’s a strong stand. It’s the same feeling I had under the Ramos administration," European Chamber of Commerce of the Philippines President Hubert d’Aboville told BusinessWorld.

"I believe we’ve just passed a curve and now have a clear highway ahead," he added.

John D. Forbes, senior adviser at the American Chamber of Commerce of the Philippines, called the PPP initiative ‘a sea change."

"The government has made a strategic choice with limited funds to work on," he said.

"But the challenge is still there," Mr. d’Aboville said, noting that more meetings with the private sector and the final packaging of the projects should be next on the agenda. -- with reports from Emilia Narni J. David and Louella D. Desiderio

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