Gov’t open to more solicited PPPs

By Beatrice M. Laforga
Reporter

THE government is open to more public-private partnerships (PPPs) in infrastructure, as state resources are stretched by the ongoing coronavirus disease 2019 (COVID-19) response.

National Economic and Development Authority (NEDA) Acting Secretary Karl Kendrick T. Chua told BusinessWorld that the government “welcomes” solicited PPPs in the revised list of flagship infrastructure projects.

“We are open to solicited PPPs in the infrastructure flagship program,” he said via Viber on Tuesday.

Mr. Chua stressed the government will consider “solicited” PPPs because these are “better,” but did not elaborate.

PPPs have been touted as the answer to the government’s lack of capacity and funds to develop massive infrastructure projects.

“PPPs always have the potential in advancing critically needed projects in the face of a very dire budget picture. Even before the COVID-19 situation, the government has utilized PPPs as one of the options to finance national and local infrastructure projects,” the PPP Center said in an e-mailed reply to questions sent by BusinessWorld.

The PPP Center said the government will still have to “carefully” assess where the private sector can contribute and deliver services more effectively than the state, while balancing the risks that the private can absorb, especially now that businesses are reeling from the coronavirus fallout.

The government will also have to “solicit private sector interest to participate in carefully structured PPP projects” that have a clear definition of risks and mitigation measures to ensure sustainability.

“We are hoping that there will still be a strong interest from the private sector to participate in PPP projects, especially that we need to address our infrastructure needs amidst the current limited government budget,” the PPP Center said.

In a text message, American Chamber of Commerce of the Philippines, Inc. Senior Adviser John D. Forbes said PPP projects became “more important” now for the country after the government’s national budget and official development assistance (ODA) “are diverted to new and urgent relief and stimulus expenditures” amid the coronavirus pandemic.

Earlier this month, Mr. Chua had said the administration’s flagship infrastructure program is being reviewed anew by the Development Budget Coordination Committee (DBCC) to “reprioritize” the projects and “give more space” to health and digital infrastructure ones.

However, the state budget planners on May 12 slashed infrastructure spending this year to P725.1 billion or 2.8% of gross domestic product (GDP) from the earlier projection of P800.6 billion or 4.1% of GDP, documents showed.

If realized, the infrastructure spending this year will be lower than the actual P1.05 trillion spent in 2019, which was equivalent to 5.4% of GDP.

Finance Undersecretary Gil S. Beltran explained that the reduced infrastructure budget was “temporarily realigned,” until the Budget department is able to generate more savings from other budget items.

Budget data showed the country’s two major infrastructure implementing agencies had their budgets slashed as the government realigned spending priorities for COVID-19 response. The Department of Public Works and Highways (DPWH) saw its budget cut by P121.94 billion, while the Department of Transportation’s (DoTr) was lowered by P8.82 billion.

The economic team is banking on the infrastructure program to help the economy recover in the second half, after the lockdown that started in mid-March halted all construction activity.

“Build, Build, Build, is part of the bounce back strategy, that’s why we need the budget for it,” Mr. Beltran said.

The national government released a revised list of infrastructure flagship projects late last year increasing the number of projects to 100 from the previous 75 items, and including more PPPs.

With a total cost of over P4 trillion, the infrastructure flagship programs around 26 projects will be funded via PPPs, higher than the eight projects included in the initial list with 75 projects.