ADB, DBP to advise gov’t on PPP deal

MANILA, MANILA, Philippines – The Asian Development Bank (ADB) and the Development Bank of the Philippines (DBP) will help the Philippine government prepare the contract terms of the largest public-private partnership (PPP) project thus far: the P170.7-billion ($3.8-billion) South Line of North-South Railway Project.

Although he did not disclose how much the government is paying ADB for its consultancy services, Ryuichi Kaga, head of ADB’s PPP Office, said: “[I]t’s a very reasonable price for the country.”

The South Line of North-South Railway involves the construction of a 653-kilometer rail line from Tutuban, Manila, to the southern peripheries of Metro Manila and a long-haul network to the Bicol provinces. It will also include an initial terminus in Legazpi City and a branch line eventually connecting Matnog in Sorsogon.

“The North-South Railway is the backbone of transport in the Philippines and swifter links between the southern provinces and the capital city will mean more people can reap the rewards of the country’s strong economic growth,” Kaga told a media briefing on Friday, May 15.

Considered as one of the 15 key projects for Association of the Southeast Asian Nations (ASEAN) connectivity, Kaga said: “PPP project will also improve long-haul and commuter stations, repair bridges, and modernize signaling and fare collection systems.”

The agreement signed by the ADB and DBP to provide joint advice to the Department of Transportation and Communications on the PPP structure and bidding process, marks ADB’s first transaction advisory service in the Philippines and its first in the transport sector.

Kaga, however, clarified that “just because we’re advising the government, doesn’t mean we’re also financing the project.”

“As transaction advisors, we ensure the terms of the projects are bankable and that risk sharing is appropriate for both public and private sectors,” Pratish Halady, PPP specialist at ADB’s PPP Office, said during the briefing.

This PPP project was approved by the National Economic and Development Authority (NEDA) Board in February. It is also part of the Japan International Cooperation Agency’s (JICA) Road Map for Transport Infrastructure Development for Metro Manila and its Surrounding Areas, known also as the “Dream Plan.”

The transportation department, which is its implementing agency, said that it will start looking for a private partner for the South Line of North-South Railway starting this month.

The agency said it hopes to award the project during the first quarter of 2016, and start the construction by 2017.

“We then hope to start operations of North-South Railway by 2021,” transportation spokesperson Michael Arthur Sagcal said in a text message.

In addition to designing and building the railway, the winners of the PPP concession will also maintain and operate the line for 30 years.

The ADB chief said that many Asian governments have “been actively looking to use PPPs to bring private sector financing and operations into the needed infrastructure projects but “have struggled to structure transactions in a way that attracts private companies.”

“The Philippine government’s PPP Center has been working hard to overcome that and has identified 56 potential PPPs with nine of them – valued at nearly P133.42 billion ($3 billion), or 1% of gross domestic product – already awarded,” Kaga added.

In September last year, ADB formally established the Office of the PPP to “provide independent transaction advice on deals as well as develop broader PPP knowledge in the region.”

Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. In 2014, ADB assistance totaled (P1.02 trillion) $22.9 billion, including co-financing of (P409.11 billion) $9.2 billion.

Meanwhile, the North Line of the railway or the Malolos-Tutuban line is “targeted to be operational in the first quarter of 2020.”

This line will “involve the construction of a 36.7-kilometer elevated commuter railway from Malolos, Bulacan up to Tutuban, Manila. The project cost of the North-South Railway is P117 billion ($2.63 billion).

The government said it plans to start the construction of the project “in the first quarter of 2017 and end in the third quarter of 2020.”

The North Line is being studied as an official development assistance (ODA)-funded project, though financing through the national budget is also an option. – Rappler.com

$1 = P44.46