Big role for private firms in gov’t infra push – Cabinet

MANILA, Philippines – The private sector still has a big role to play in the administration’s infrastructure push despite the billions of dollars China and Japan are putting up to finance the headline projects, according to the Philippines’ economic managers.

Both Northern Asian giants have promised almost P10 billion each in Official Development Assistance (ODA) to the country following official state visits from President Rodrigo Duterte. This in turn has led to the administration calling off some big planned public private partnership bids.

“There’s [still] a lot of opportunities for the private sector. Take the hybrid model, that means that government will choose the project and look for financing and then let private sector build the project, since the government does not have capacity,” said Finance Secretary Carlos Dominguez on Tuesday, April 25.

“Once done, private sector will run the project similar to the model used for the development of SCTEX. We also entertain unsolicited proposals,” he added.

The finance secretary was speaking at the second in a series of Dutertenomics forums which provided members of the private sector with details on the administration’s infrastructure push.

Some of the big ticket infrastructure projects that the government initially planned to bid out as public private partnerships (PPP) that are now planned to be financed on an ODA platform include:

• The P270 billion PNR South Railway connecting Manila to Bicol
• The P250 billion PNR North Railway connecting Clark to Manila
• The P227 billion Mega Manila subway

 The private sector also has virtually the entire power industry as an investment opportunity, according to energy secretary Alfonso Cusi.

“From 2016 to 2030, we need something like 17,300 Megawatts (MW). To support Ambisyon Natin 2040, we will need 26,000 MW, so that’s a total of 43,000 MW from 2016-2040 in support of all the infrastructure projects,” he said.

“Roughly, all of these new power plants will come from the private sector,” he added.

The energy secretary further estimated that the investment for the initial 17,300 MW will total $50 billion to $55 billion, while the next 26,000 MW will require another $70 billio to $80 billion.

Reversing the Aquino admin blueprint

Dominguez also shed some light on why the Duterte administration has decided to make extensive use of ODA at the beginning of its term.

“The reason we are reversing the process…is because when we examined the length of time it took to negotiate the PPP projects, the average was 29 months before project start,” he said.

“What we are saying is, we can do it a bit faster, and secondly we can borrow the money faster. We can do PPP at any stage, in the middle or end,” he added.

Dominguez also pointed out that the government has been in discussions with large foreign retirement funds that typically don’t invest early because they don’t want to take on the construction risks.

“In that way we think we can even attract more funds. Or the private sector can attract more investors if we do a PPP project towards the end [of the planned projects],” he explained.

“So we can borrow money cheaper, save time in the negotiations, but eventually we will either sell the project or go into an O&M method [operations & maintenance],” Dominguez added. – Rappler.com