PPPs are complicated — Abaya

MANILA, Philippines – Despite delays in infrastructure projects, the public-private partnership (PPP) scheme remains a viable solution to address the growing need for more structures in the country.

This was the conclusion of officials from both public and private sectors at the recent economic briefing.

READ: Live blog of the Economic Forum

Under the PPP scheme, private companies partner with the government to design, finance and operate capital-intensive and job-generating infrastructure projects to address the lack of expertise and resources of the state.

The current administration is still on the right track in infrastructure development with  the PPP scheme, according to Macquarie Infrastructure and Real Assets Managing Director Michael Rodriguez.

“Let government continue what it’s doing. (PPP) is a very welcome development for investors, “ Rodriguez stressed.

READ: Private firms on PPP: Nice but slow

Delayed projects

The Aquino administration made a big splash with its announcement of big-ticket infrastructure projects to be built under the PPP scheme in November  2010.

The government, however, had difficulties bidding out projects.

READ: Aquino highlights PPP woes

In recent months, project proponents kept postponing the biddings.

Projects that suffered a delay in recent weeks include:

• LRT 1 Cavite extension project – the biggest project under the PPP costing P59.20 billion. The August 15 bidding was declared as a failure after its lone bidder failed to meet the bidding requirements. The re-auction of the project was also moved from end of this year to early 2014.

• Mactan Cebu International Airport – the bidding originally scheduled August 28 was moved to November 15 following a major overhaul of the concession agreement.

• Cavite-Laguna Expressway – Submission of pre-bidding documents was moved from September 23 to October 23 upon the request of  bidders.

For his part, Transportation Secretary Joseph Emilio Abaya said these delays are due to the “complicated and sophisticated” process of partnering with the private sector.

“It’s not as straightforward as buying bond paper. It’s a sophisticated negotiation process with the private sector. Of course from their end they want reasonable return. From our end, we gotta make sure that fares, fees that people will pay will be reasonable, affordable, “ Abaya emphasized.

It’s always a slow start

Amid criticisms and growing impatience on the various delays in the PPP projects,  the government and private sector officials said the initial phase of the PPP process is always difficult.

In an interview with Rappler, National Competitiveness Council Chairman Guillermo Luz who also sits in the PPP governing board, said that a slow start of PPP projects is not a unique problem of the country.

He stressed other countries that have suceeded in building structures under the PPP scheme also suffered the same delays.

“(Most countries) got off to a difficult slow start. The pattern is they’ve been off to a slow start. Once the experience is there, the roll out starts to become faster. It’s just the begining is a tough situation. It has a lot of birth pains, “ Luz noted.

According to data from the PPP center, the Philippines is so far spending 14 to 18 months in the procurement process, which spans the issuance of invitation to bid up to the issuance of Notice to Proceed or start of construction.

The PPP Center noted that other countries using the PPP scheme, like the United Kingdom, Canada, Australia, India, Europe and South Africa had spent 22-35 months, 16-18 months, 14-18 months, 24 months, 22.3 months and 35 months, respectively, in the procurement process.

Echoing the sentiment of Luz, Macquarie’s Rodriguez emphasized that the government’s struggles in bidding out infrastructure projects is only temporary.

“It’s just difficult now. But once it gets going, you will see that it’s a powerful tool,” Rodriguez noted.

Viable and powerful

Aside from expressing confidence in the success of the PPP scheme, private firms also highlighted the “non-economic” gains of the scheme.

Rodriguez said PPPs will not only help in building the much-needed infrastructure, but will also enhance the capability of the government in partnering with the private firms.

“PPP is not a fad. It is a powerful procurement methodology. It allows procurement of infrastructure, of power. It’s capability building. It attempts to find the risks, role-sharing and other externalities, “ he stressed.

For his part, Jaime Augusto Zobel de Ayala, Chairman and CEO of  Ayala Corporation, stressed that the entire PPP process defines and widens the role of the business sector in helping the government achieve its goals.

READ: Filipinos need to be bolder

Zobel de Ayala stressed that the success of the PPPs is not limited to the revenues that firms will make nor to the infrastructure that will be built.

“Let’s take into consideration the positive externalties of the project. Sometimes we just focus on the returns of one project in a specific place. This level of sophistication is needed, “ he added.

Given the economic and non-economic gains of PPPS, Rodriguez urged the government to ensure that PPP projects are continued even after the end of President Aquino’s term in 2016.

“We hope to see this continue even after this current administration, “ Rodriguez said. – Rappler.com