Friday, 30 September 2011

Govt to ditch PPP, resort to ODA


Darwin G Amojelar
Manila Times
http://www.manilatimes.net/index.php/business/top-business-news/8322-govt-to-ditch-ppp-resort-to-oda

THE Aquino administration may ditch its stalled public-private partnership (PPP) scheme and instead go it alone in pursuing key infrastructure projects, according to the Department of Transportation and Communications (DOTC).

On the sidelines of a forum on Thursday, DOTC Secretary Manuel Roxas said the government is tweaking the PPP policy in funding the agency’s “unviable” infrastructure projects to avoid having to issue state guarantees and subsidies to the private sector.

“We are reconfiguring the financing of many projects so that we can avail of the long-term low-interest capital that is available to the government. As originally conceived, several of these projects could have been concession agreements with the private sector. We have reconfigured the projects so that the large basic hard infrastructure will be undertaken by the government availing of low-interest 30-year money that is in official development assistance,” Roxas told reporters.

He said the government would still bid out the actual construction of the infrastructure, after which the operation and maintenance of these projects would be transferred to the private sector. “In short, the area where the private sector is good, which is in operations, maintenance, disciplines, timetables and so and so forth, we will avail of that by having them operate it through the concession agreements,” the DOTC chief said.

President Benigno Aquino 3rd last year launched the PPP scheme, a revival of a program first implemented by his late mother, then President Corazon Cojuangco-Aquino. The PPP involves pursuing big infrastructure projects by tapping private-sector funds because of the government’s fiscal straits.

Many of the projects lined up for PPP fall under the DOTC.

“We expect more reasonable user fees” if the government funds the construction using ODA, Roxas said, as this would no longer involve the private sector recovering its capital expenditure.

“We also expect not to be able to have to guarantee as previous governments did. In MRT 3, they had to guarantee ridership and returns regardless of what would actually happen,” he said, referring to the Metro Rail Transit Line 3, which the government had to take over to trim its financial hemorrhage.

“So in this way, the government knows exactly what it will pay and what it is going to get for the
resource and the private sector then bears the market risks for undertaking the O&M,” he said.

Roxas said ODA is a good complement to the PPP program in fast-tracking projects lined up by the government.

“The ODA loans would benefit the consumers as well since there is no rush in recovering costs. It is a cheaper yet effective option because of the sovereignty of the partnership since governments of foreign donors are involved,” the DOTC chief said.

With ODA, the government would pay low interest rates spread over 30 years. In contrast, the private sector is subject to commercial rates of 7 percent to 8 percent for the same period. The existing Light Rail Transit Lines 1 and 2 were funded by ODA.

Roxas said the Japan International Cooperation Agency is keen on participating in the government’s PPP scheme using such a hybrid model. With the hybrid model, foreign donors can come in and fund heavy infrastructure projects such as airport and railroad developments, he said, adding that counterpart funding will be provided by a private sector consortium once operations commence.

Among the infrastructure projects that will be funded using ODA are the 11.7-kilometer railway project that will expand the length of LRT 1 from Baclaran to Bacoor, Cavite, as well as the development of new airports in Misamis Oriental, Bohol and Puerto Princesa.

Besides JICA, the Korea International Cooperation Agency and the government of China are interested in the LRT Line 1 Extension, Roxas said.

Both JICA and Koica are also interested in the extension of LRT 2.

The terms of reference for the privatization of the O&M of LRT 1 will be issued next month, whereas the O&M of MRT 3 would remain in government hands, he said.

In a telephone interview, Cosette Canilao, deputy executive director of the PPP Center said the DOTC’s hybrid model is still aligned with the government’s PPP initiative.

Canilao said the ODA funding is meant to make mega-infrastructure projects financially viable.

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