Gaining Perspective From P3s in the Philippines
Source: P3 World on December 8, 2017
With Trump’s visit to Manila in November, the future of infrastructure in the Philippines has been in the spotlight.
Since 2010, the Philippines national government has tried to address the country’s chronic infrastructure challenges, while maintaining strict fiscal discipline. The focus has been on initiating a series of reforms that some think has revived the country's P3 program. These reforms have resulted in the awarding of nine projects (with a total investment of US$3 billion). This P3 program's roll-out aims to support the government's intention to raise private investment in infrastructure from 0.4 percent of GDP in 2013 to 1.1 percent of GDP. Spending in infrastructure is expected to grow at around 10% a year during the next decade, reaching a total of US$27 billion per year by 2025.
Improvements to the P3s enabling environment have been slow. In 2013, the government successfully addressed the first set of issues constraining the revival of a well-governed national level P3 program such as the absence of a public office for PPP program facilitation, absence of credible project pipeline, and inadequate implementing rules and regulations of the Build-Operate-Transfer (BOT) law.
What are the new challenges in the country s P3 reform program? How will they address emerging needs identified during the implementation of those reforms? There are three areas of concern which are widely recognized — and which the central government is starting to tackle:
- Strengthening implementing units for PPPs.
- Sustaining institutional reforms for PPPs.
- Tapping alternative sources of financing for PPP projects.
- Improving project implementation
Historically, spending on infrastructure in the Philippines has been low: approximately three per cent of gross domestic product (GDP) over the past decade in comparison to a five per cent average for other South-East Asian nations. However, infrastructure has been highlighted by the administration of President Rodrigo Duterte has a key priority and 5.4 per cent of GDP has earmarked for public investments (PHP860.7 billion) in the proposed 2017 budget (Source: ANZ Research, October 2016). Greater private sector participation is encouraged in order to implement this ambitious infrastructure development plan. The President announced a review of the national P3 mechanism, particularly focused on three elements: Policy Enhancements, Process Improvements, and Development of a Policy Framework.
The PPP Centre is the Philippine Government agency responsible for facilitating, coordinating and monitoring the P3 program. As of September 2016, about 53 projects were in the pipeline worth over PHP5934.85 billion. Fifteen projects have now been awarded, eleven are under procurement, one is due to be rolled out, and a further 25 are at different stages of development. The projects cover the spectrum of public infrastructure needs, from roads and rail to hospitals, airports and water (A detailed list of the status of some of the best P3 projects can be accessed through the PPP Center’s own website). The estimated investment cost of the first 30 of those projects is about US$23.42 billion, implying that approximately US$15 billion of debt financing for these projects will need to be leveraged.
The PPP Centre has oversight of the national government’s Project Development and Monitoring Facility (PDMF). A revolving fund amounting to US$69.47 million supports pre-feasibility studies, feasibility studies and other specialized transaction advisory services to improve the bankability of P3 projects. The fund is supported by the Australian Government and by the Asian Development Bank. A panel of transaction advisers from 22 international consulting firms provides the necessary advisory services to implementing agencies to ensure the viability and bankability of projects.