Bulk of Duterte’s massive infra plan to be funded via local financing

MANILA, Philippines – Bulk of the P7.1-trillion total infrastructure investment requirement under the 2017-2022 Public Investment Program will be implemented through local financing, according to the National Economic and Development Authority (NEDA).

NEDA Deputy Director General Rolando Tungpalan said during the general membership meeting of the Management Association of the Philippines on Tuesday, May 30, that of the total investment requirement during the entire term of President Rodrigo Duterte, P4.7 trillion or about 66% will be done through local financing.

About P1.3 trillion or 18% will be accounted for through public-private partnership (PPP) projects. (READ: Addressing myths of PPPs)

The Duterte administration is pushing for a hybrid PPP mode, where the government will build the infrastructure projects and later bid out the operations and maintenance to the private sector.

This system, Finance Secretary Carlos Dominguez III said, will speed up the implementation of projects, as a traditional PPP project usually takes an average of 29 months before it can take off. 

“We have considered all the factors involved in this PPP [scheme] and we recognized that spending your own funds will speed up the projects,” Dominguez said.

“Our goal is not so much to reduce the debt but to speed up the projects so that people can benefit right away, and the experience of the past administrations is that PPP projects take almost 3 years to start,” he added.

“So we are willing to take initial steps and spend the funds available to the government both through loans as well as through tax collections.”

Meanwhile, P1.1 trillion or 15% of the investment requirements will be in the form of Official Development Assistance (ODA).

Tapping private firms

NEDA clarified, however, that PPPs are not entirely out of the picture. (READ: 5 regional airports removed from PPP pipeline)

“Noting the delays that have been encountered in the actual mobilization of PPP projects does not mean that infrastructure spending through PPP will not be promoted,” Tungpalan said.

“Rather, greater focus is now given to addressing the bottlenecks in PPP planning and implementation, so as to fully realize and take advantage of the benefits of PPP in terms of tapping the private sector’s efficiency and innovativeness,” he added.

Meanwhile, Tungpalan pointed out that many large infrastructure projects will require long-term financing, especially if these have a long gestation period. 

“ODA accessed by government has favorable financing terms that match the needs of such infrastructure projects better than commercial sources of our grants,” he said.

Tungpalan is confident the programmed financing and implementation arrangement of the Medium-Term Infrastructure Program will be realized, consistent with sound macroeconomic fundamentals.

“In closing, and this is really to say it’s not whether it’s ODA or PPP: good quality at entry, implementation, and operations and maintenance should be matched with good governance to produce good sustainable results,” he said. – Rappler.com