Right of way woes unsolved will hurt Build Better More

March 27, 2024 | 12:03 am

aerial-view-highways — CHUTTERSNAP-FREEPIK

Infrastructure is the way to go. This is evident in the emphasis given to infrastructure building by the administration of President Ferdinand Marcos, Jr. saying it is a cornerstone and a priority of his term.

The Build Better More program, for instance, is composed of 197 projects ranging from physical connectivity, water resources, agriculture, health, digital connectivity, power and energy, and other infrastructure.

The aggressive pursuit of infrastructure is backed by action in terms of budget allocation. From the years 2017 to 2021, annual public infrastructure spending ranged between 4.2% to 5.8% of Gross Domestic Product (GDP). During this administration, until 2028, spending will grow to 5% to 6% of GDP.

Supporting this articulated priority of the government is the Philippine Development Plan (PDP), which covers the years 2023 to 2028. The PDP acknowledges the need not just for infrastructure but for sustainable infrastructure. It lays down the path for promoting the inclusivity and seamless connectivity of road, maritime, air, and railway transportation facilities.

In ensuring the long-term resilience and sustainability of structures, the PDP acknowledges the crucial role played by the private sector in infrastructure development. After all, such projects cannot be delivered to the people solely by the government — it is simply not the core competence of government to build and operate infrastructure projects. Its human and financial resources, no matter how carefully planned, will also always be insufficient for undertaking these capital-intensive projects.

Thus, it needs to team up with private corporations for the financing, design, and construction of infrastructure projects. This is only possible through meaningful public-private partnerships (PPP). The private sector, for its part, has thus been invited to participate more fully in revitalizing the economy through increased partnerships.

Unfortunately, while partnerships between the government and the private sector are ideal in principle, there remain operational and practical hurdles like right of way (ROW) issues that need to be overcome as these, for many administrations, have caused delays in the completion of the projects, and hence in the people’s enjoyment of the benefits of these projects. These ROW issues could sometimes drag on for years, casting uncertainty in the future of what was once thought to be a viable and necessary undertaking. Costs increase, much to the dismay of the private partners that invested huge resources at the invitation of the government.

As a result of such roadblocks, not only will the project not be completed, but the national reputation of the country is also damaged, becoming viewed as an investment risk. The investors we need will instead go to where they are confident their investments will prosper.

Thus, if ROW and other similar hurdles are not properly addressed, all the lofty pronouncements extolling the partnership between the public and private sectors will amount to nothing.

STREAMLINING
A recent forum held in Makati attempted to shed light on the matter. During the event, it was highlighted that streamlining the acquisition process for ROW can reduce, significantly, project delays. If ROW issues are addressed and resolved right away, then the private sector will meet their project timelines on time and avoid costly disruptions. The right policies and institutional frameworks and regulations are needed for this. Specifically, the objectives of Republic Act 10752 or the Right of Way Act must be defined clearly and unequivocally.

The Public-Private Partnership Code of the Philippines, passed just in December 2023, focuses on establishing a transparent, rules-based, and efficient PPP framework aiming to address the Philippines’ P23-trillion investment gap. The Code also underscores the need to address ROW issues to fast-track the implementation of PPP projects.

The government must do all it can to help solve the ROW problem. Specifically, the government should take the initiative to expropriate for ROW before project implementation. There should be a clear separation between building infrastructure and ROW matters. Introducing a separate contract for ROW before project identification should be done.

ROW issues can frustrate the vision that our nation has set especially in terms of economic advancement. To prevent ROW from causing delays, additional costs, frustration to affected property owners and inhabitants, and disenfranchisement among private investors, the government must ensure that these operational details are taken care of for the expeditious implementation of all national infrastructure projects.

Victor Andres “Dindo” C. Manhit is the president of the Stratbase ADR Institute.

Breaking the glass canvas

March 27, 2024 | 12:03 am

1 of 2

LARA LATOSA knew that women artists deserved to have a platform to tell their stories, even now when representation has improved.

In 2023, she submitted a proposal to Conrad Manila hotel for a show that mixed the perspectives of female veteran and upcoming artists. It would allow these women to express their thoughts, experiences, and wisdoms.

“I wanted to create a special show that highlights the beauty, creativity, and talent of female artists in a male-dominated industry,” Ms. Latosa told BusinessWorld.

As both co-curator and featured artist in the latest installment of Conrad Manila’s “Of Art and Wine” series, Ms. Latosa found it more pressing to put up the exhibit when she realized most of the artists she knew were men.

“Over the years, every time it’s International Women’s Month, there are definitely more women-led shows all over, and just more women overall who are becoming known in the arts scene. But I still find it important to provide a platform for individual female voices to be heard,” she added.

“Breaking the Glass Canvas,” an aptly titled collection of 28 works, was launched at Conrad Manila’s Gallery C on March 19.

Co-curated by Nestor Jardin, it features works by painter Lydia Velasco, mother-of-pearl sculptor Anita Del Rosario, painter Addie Cukingnan, comic surrealist Flor Baradi, abstract artist Meneline Wong, realist painter Celeste Lecaroz, jewelry artist Helena, surrealist Irish Galon, and environmental artist Lara Latosa.

Each of the nine artists were told to choose works that depict their “message to the younger generation, namely women who will see their works.”

“Others offer their perspectives as mothers or as women pursuing their passions,” Ms. Latosa told members of press during the launch. “My three works are each dedicated to myself, to my mom, and to my sister.”

She shows this through the use of abstract waves, each with their own character. They are also a tribute to the natural state of water, tying into her advocacy as an environmentalist.

For mother-of-pearl sculptor Anita Del Rosario, inspiration can be found everywhere. “Everything I create is from the heart,” she said. Her Inang Perlas sculpture, for example, summons feminine strength and grace in each curve.

Flor Baradi takes a different approach. The surrealist’s work Jupiter’s Muse Io in the Celestial Future and Audrey depicts renowned figures of beauty in a whimsical, playful manner.

“My ‘grotesque’ series is about women empowerment, being true to yourself and embracing your uniqueness. They’re a bit ugly for some but they just show that you are your own self, your own beauty,” she said.

The exhibit is on view until May at Conrad Manila’s Gallery C.

For inquiries about the paintings and exhibit, contact (8833-9999) or visit conradmanila.com. — Brontë H. Lacsamana

BSP coin machine collections hit P577 million

March 27, 2024 | 12:02 am

THE VALUE of coins collected through the Bangko Sentral ng Pilipinas’ (BSP) coin deposit machines (CoDMs) reached P577.42 million as of March 15, central bank data showed.

This was 17.2% higher than the P492.58-million coins seen a month prior.

A total of 162.31 million pieces of coins were deposited in the machines, up by 15% from the 141.07 million coins recorded a month before.

The machines also saw a total of 147,517 transactions, the BSP said.

The central bank began deploying the deposit machines in June last year to promote coin recirculation in the country.

The CoDM project aims to address the artificial coin shortage in the financial system and help ensure that only fit and legal tender currency is available for public use.

All denominations of the BSP Coin Series and New Generation Currency Coins Series are accepted by the CoDMs. Unfit and demonetized coins, foreign currency, and foreign objects are rejected by the machines.

The value of coins deposited in CoDMs may be credited to an individual’s e-wallet account or converted into shopping vouchers.

In February, BSP Deputy Governor Bernadette Romulo-Puyat said the central bank wants to roll out more deposit machines this year.

There are 25 coin deposit machines available in select retail establishments of the SM Store, Robinsons Supermarket and Festival Mall.

The BSP is also looking to partner with lenders to allow consumers to credit their deposited coins into their bank accounts, Ms. Romulo-Puyat added. — Luisa Maria Jacinta C. Jocson

PHL coffee shops face cost, supply challenges

March 27, 2024 | 12:02 am

PHILIPPINE micro, small and medium enterprises including coffee shops face challenges in keeping prices low amid high inflation, supply disruptions and impending wage increases, according to a startup owner.

“The challenge is [not] increasing prices because we are aiming to be affordable,” Anna Isabelle Magalona-Co, founder and chief executive officer at But First, Coffee, Inc. said in an interview. “Sometimes, it’s challenging to balance our costs and pricing.”

But First, Coffee sells coffee products and coffee drinks made from beans bought from local farmers.

The company often tests suppliers to ensure prices remain affordable, Ms. Co said. “We check for options and if a supplier increases prices, we look for other items we can decrease to compensate for the increase and retain value,” she added.

The Filipino entrepreneur said local coffee supply still can’t keep up with demand amid the growing number of coffee shops.

“There is really higher demand than supply here in the Philippines,” Ms. Co said. “That is why we cannot avoid increasing prices. But our local farmers and producers are catching up based on talks with some suppliers.”

The Philippine Coffee Board, Inc. estimates local coffee production at 30,000 to 33,000 metric tons (MT) a year, which falls short of the 150,000–200,000 MT yearly demand.

Business groups have raised concerns about a proposed legislated wage increase, which they said could hit small businesses. Ms. Co said the increase, though financially challenging for the company, is needed to support their workers.

“It’s challenging financially,” she said. “But at the same time, the wage hike will enable our employees to have more access to their basic needs and support their families.”

“As a business owner, I’m not only focused on revenues,” the entrepreneur said. “I’m also focused on giving back to our people, especially those who are helping us along the way. So while I know it’s quite challenging financially, if that’s the requirement of the government later on, we will comply.”

Meanwhile, But First, Coffee plans to open 150 stores this year, 100 of which will be franchises. It has 150 stores now.

But First, Coffee also expects to double the number of workers from 200 now. The brand as a whole generates 500 to 700 jobs, Ms. Co said. — Justine Irish D. Tabile

Altus Property income up 29% on higher rental revenue

March 27, 2024 | 12:02 am

RP-ILOCOS_1 — ALTUSPROPERTYVENTURES.COM.PH

THE real estate firm Altus Property Ventures Inc. (APVI) announced on Tuesday a 29% increase in its 2023 net income, driven by higher rental revenue.

APVI’s net income reached P139.13 million in 2023 from P107.96 million a year ago, a sustained growth from P64.85 million in 2021.

This is mainly attributed to a 4.4% rise of rental revenues to P203.1 million from P194.4 million in 2022.

“The sustained healthy spending behavior of Filipino consumers in essential and discretionary purchases including in food, fashion, leisure, services, and entertainment significantly contributed to the upsurge in foot traffic and revenues,” Altus said in a stock exchange disclosure on Tuesday.

APVI owes all its revenue from the North Wing of Robinsons Place Ilocos, a two-storey mall located at San Nicolas, Ilocos Norte.

The cost of rental services fell 7.5% to P16.1 million in 2023 due to lower levels of repairs and maintenance expenses.

Its general and administrative expenses went down by 13% to P40.1 million from P46.1 million, due to a decrease in the billing of utilities.

Billing of utilities reached P24.78 million, 18.42% lower than last year, attributed to lowered power costs from coal and decreased fuel prices.

In 2023, the company’s total assets rose 16.48% to P1.06 billion from P911.43 million a year ago.

Its liabilities recorded P142.2 million, 8.4% higher than last year.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) improved 10.2% to P157.2 million, while earnings before interest and taxes also rose to 11.7% to P146.6 million.

The EBITDA margin improved to 77% in 2023.

Meanwhile, total equity expanded by 17.8% to P919.4 million in 2023 from last year’s P780.3 million

Altus Property Ventures Inc. (APVI), formerly Altus San Nicolas Corp. is a subsidiary of Gokongwei-led Robinsons Land Corp. — Aubrey Rose A. Inosante

Investors can’t always trust the data, and that’s OK

March 27, 2024 | 12:02 am

office-workers-using-finance-graphs — FREEPIK

I WAS ATTRACTED to finance because it promised some order amid chaos. Here was this market, with billions of transactions a day — and yet it managed to set a price for each asset, a price that put a literal number on the value of future risks, or more precisely how much people value those risks in the present day. The world is inundated with information — about individual companies, about the macro economy, about geopolitical risk, about (not to get too meta) prices themselves — and this price incorporated all that, almost instantaneously. This is the definition of market efficiency.

Except for one small thing: This number, this price, has always been a little wrong. Data, as it turns out, has issues.

A roiling controversy in finance is a reminder that any certainty anyone ever had was an illusion. It concerns an academic paper that questions the benefits of factor investing, in which investors make decisions based on “factors” such as a company’s size or how its share price compares to the value of its assets. The theory is that such investments can deliver better returns than the market as a whole.

The paper argues that the data collected and made public by the fathers of factor investing, Kenneth French and Eugene Fama, changed over time — and when the numbers changed, so did the estimates of the factors and their value to your portfolio. True, both the new and old data suggest there are benefits to factor investing, but how much depends on which data are used.

This is not just an academic argument. The factor model is taught in business schools and often used to assess market performance and the price of capital. Fama and French are also affiliated with Dimensional Fund Advisors (DFA), a mutual fund company which offers funds that over-weight the factors. DFA staff assist with the Fama/French data in a non-transparent way to outsiders.

Full disclosure: I worked at DFA more than 10 years ago with Fama and French on another, unrelated data project. One lesson that has stuck with me is that all financial data, no matter the source, is very noisy. And by noisy, I mean unreliable. Most estimates made from financial data are extremely sensitive to the time frame that is selected and any assumptions that are made (and assumptions must always be made). No one should ever take an estimate of a financial variable as an actual fact.

Constructing a data set requires making many judgments, and data are often revised as more becomes available, either through changes in regulations or measurement practices. And factor data are especially noisy because they require making assumptions about which calculations should be made to define “value stocks” or small companies. It’s a process that is very much open to interpretation.

Noise is not only a fact of life for financial data, it is present in economic data, health data, even data about Reddit comments. As the great Fischer Black said in his prescient article on data noise, published almost 40 years ago: “I think almost all markets are efficient almost all of the time. ‘Almost all’ means at least 90%.”

Even 90% makes for a lot of noise.

Data not only paints a murky picture of the past, it also clouds our vision of the future. The data can’t hide the fact that value investing has had a bad few years, or that the outlook for small firms may not be much better as large technology firms continue to dominate the market.

It could be that these factors are just going through a rough patch, as they do from time to time. Or it could indicate deeper changes. A market that values intangible capital — intellectual property instead of machines — could mean value stocks will have lower returns. An economy in which the ability to scale and dominate markets is more important could mean small companies will be less valuable. A changing world means less reliable and more volatile estimates.

As the replication crisis in the social sciences continues, it’s important to note that few academics have been found to be dishonest. Many of the discrepancies simply reflect the arbitrariness of working with data, and whatever assumptions the researcher had to make. The age of big data should make for more consistent and reliable work — but a lot of data can also include a lot of noise.

This controversy in finance is instructive. The amount of data is just staggering, not only about market transactions but also about such things as medical interventions. It’s often noisy, and not even the latest tools — I’m talking about you, AI — can make it completely reliable. As we move into a world in which data is far more accessible, we should be far more aware of its limitations.

I am not being post-modern here. Data is still an incredibly valuable tool that helps people make more rational and informed choices. Black’s 90% estimate is about right — and 90% is much better than nothing. Even with all the noise, the data still show factor investing can be a sound strategy and good way of understanding the market. But in a world of Big Data, we all need to be prepared for some Big Noise. That means never assuming precision, and tempering what the data tells us with our own good old-fashioned human judgment.

BLOOMBERG OPINION

Pompeii building site reveals ancient Roman construction methods

March 27, 2024 | 12:02 am

ROME — Archaeologists in Pompeii have unearthed an ancient building site that sheds light on construction techniques used by the Romans to make iconic structures such as the Colosseum and the Pantheon, Italy’s culture ministry said on Monday.

The site was probably active until the volcanic Mount Vesuvius erupted in 79 AD, destroying Pompeii in southern Italy, the ministry said in a statement.

The archaeologists found working tools, stacked roof tiles, tuff bricks, and heaps of lime and stones used to create walls.

The Romans had an original technique for making cement, the ministry said, citing findings by the archaeologists who worked with researchers from the Massachusetts Institute of Technology.

The Pompeii site, rediscovered only in the 16^th century, has seen a burst of recent archaeological activity aimed at halting years of decay and neglect.

Concrete appeared to have been made through “hot mixing,” whereby quicklime was initially mixed with dry pozzolana, or pozzolanic ash, with water added only shortly before walls were erected.

This meant that during wall construction, the mixture of lime, pozzolana, and stones was still hot due to a thermal reaction. That helped it dry more quickly, shortening the construction time of the structure.

Normally, quicklime is slaked in water long before use in construction.

Gabriel Zuchtriegel, director of the Pompeii site, said the latest finding “helps us understand many aspects of the great Roman Empire, not least the use of concrete.”

“Without concrete, we would have neither the Colosseum, nor the Pantheon, nor the Baths of Caracalla,” he said.

Archaeologists also found amphorae storage jars which were used to “quench” the lime used for plastering as well as to store other tools, from lead weights used to erect a perfectly vertical wall, to iron hoes to prepare mortar and work lime. — Reuters

Ukrainian women’s startups drive tech sector resilience, offer economic recovery hope

March 27, 2024 | 12:01 am

PRAGUE — War in Ukraine has pushed women into more leadership roles in its growing tech sector, where they are gaining experience and contacts abroad that could help rebuild the economy when the conflict ends, some entrepreneurs, companies and investors say.

With most men unable to leave Ukraine, women tech entrepreneurs like Anna Lissova, 30, who runs mental health startup Pleso Therapy, have taken charge of raising funds, finding new clients abroad and embracing other key roles.

Before the war she focused on recruiting therapists in Ukraine. Now she travels abroad to pitch the company at conferences and has led product launches in Poland and Romania.

“I had to suddenly change my role and take over the public representation of the company. The war led to women taking more senior positions and power in startups,” she said.

Martial law prohibits most men of military age from leaving the country, creating a need and space for female tech entrepreneurs at home and abroad. They can build on a stronger representation by women in leadership positions in Ukraine than in the European Union (EU) and globally.

Some say they still face prejudice in the traditionally male-dominated tech industry however, or describe their struggles to run a business while adapting to life as a refugee and having to raise families alone with fathers still in Ukraine.

Over the past decade, Ukraine has boasted one of eastern Europe’s fastest growing tech hubs with startups attracting funding and clients from a large domestic market.

Women were underrepresented however, making up only around 30% of managers in the professional, scientific and technical sector, whereas they occupied 40% of leadership positions in Ukraine overall in 2017-2022, according to a study by the United Nations Development Programme.

The study highlighted that the proportion of Ukrainian women leaders nonetheless outstripped a figure of 35% for the European Union and 29% globally.

Separate figures by Eurostat show around 17% of major tech jobs are held by women in the European Union.

Reuters spoke to nearly a dozen venture capitalists, tech founders and industry officials to document the critical — and often new — roles women have played in driving a sector seen as key to Ukraine’s economic prospects when the war ends.

“Women’s leadership within the tech sector has become more pronounced after the full-scale invasion,” said Pavlo Kartashov, director of the Ukrainian Startup Fund, a government-backed body that seeds startups.

“We have witnessed a surge of female entrepreneurs who have stepped up to lead their companies and are driving growth.”

This rings especially true for ambitious startups looking to grow abroad, as many that have stayed in Ukraine focus on military or war-related technology such as drones, he added.

TECH RESILIENCE
The tech sector has proved resilient. While Ukraine’s gross domestic product (GDP) plummeted nearly 30% in 2022, tech sector revenue rose nearly 1% to $7.97 billion and was forecast to increase to $8 billion in 2023, according to state statistics compiled by the Lviv Tech Cluster.

The industry also accounts for nearly 5% of Ukraine’s GDP with the number of tech specialists inside and outside Ukraine rising to 307,000 in 2023 from 285,000 in 2022. These numbers include the Lisbon-based founder of digital currency payment platform GeekPay.

Veronica Korzh, who founded the startup three months after leaving Ukraine in February 2022, has witnessed a leap in female founders, due in part to increased access to investors outside Ukraine and accelerator programs targeting women funded by the EU, international bodies and tech multinationals.

Many global bodies are out to boost women’s representation in tech across the board, amid research showing firms with a higher proportion of women are more profitable, spend more on research and development and are more environmentally minded, according to a report by the World Economic Forum.

“I’ve seen more women starting companies after the war and taking on bigger positions because they can talk to investors and help develop brands to new customers,” Ms. Korzh said.

“This is also helping keep attention on Ukraine and spreading the word about the potential of its tech sector.”

For many tech workers, Poland is a first stop as it borders Ukraine, and the countries have long business and cultural ties.

Mykhailo Khaletskyi of the Polish-Ukrainian Startup Bridge — a group that provides grants, co-working space and other assistance said: “We see women driving new funding rounds and gaining experience that will help to establish new companies and attract international talent and funding,” he said.

Anastasiia Smyk, 27, an aeronautical engineer, launched her aviation operations management software company Input Soft outside Ukraine in Warsaw, where she tapped a burgeoning refugee tech community. Her product is now used in the United States, Latin America and Southeast Asia.

“When talking to male investors, there were questions like ‘Why were you appointed CEO of this company?’ or ‘Please share if you have any male business partners,’” she said. But she fought against the prejudice.

“My job was to find investments, recognition in the global market, and international clients who would become our early adopters, which was not easy for a no-name startup company from Ukraine,” Ms. Smyk said.

Looking at the startups founded by Ukrainian refugees she predicts many will return to the country when the war ends and give a huge boost.

“I want to return to Ukraine to be part of the rebuilding and revitalization of our country… We are even open to working pro-bono just to see the first civil aircraft in Ukrainian skies as soon as possible,” she said. — Reuters

Malayan sees slower premium growth

March 27, 2024 | 12:01 am

MALAYAN INSURANCE Co. expects slower premium growth this year as it may have to increase rates after reinsurance costs spiked in 2023, its top official said.

“This year, we’re not expecting [premiums] to go up since reinsurance costs have skyrocketed, so we have to increase our rates. The whole industry is affected by it. There might be a slowdown,” Malayan Insurance President and Chief Executive Officer Paolo Y. Abaya told BusinessWorld last week.

He said their premiums might grow by single digits or be flat from the previous year.

Malayan Insurance saw a slight growth in premiums in 2023 despite struggling due to higher reinsurance costs, Mr. Abaya said.

Malayan Insurance booked a net premium income of P4.72 billion in 2023. Its net income stood at P600.77 million in 2023.

Mr. Abaya added that any big catastrophe could also impact the company’s performance.

“Our biggest risk in the Philippines is catastrophe. If another [Typhoon] Odette happens, it’s going to be very terrible. A lot of us suffered during Odette… Even the Philippines is ripe for a big earthquake one of these days, so I hope it doesn’t happen,” he said.

Meanwhile, Mr. Abaya said the nonlife insurance industry could still grow as the economy remains robust.

“I think the whole industry in general will continue to grow because the economy’s doing very well. So, as long as businesses are doing well, most of us will continue to grow,” he said.

The nonlife insurance industry saw its net premium income grow by 12.9% year on year to P64.24 billion in 2023 from P56.9 billion. Its net income rose by 30.07% to P9.11 billion from P7 billion.

Malayan Insurance on Friday also announced its partnership with Atradius to launch its own trade credit insurance product.

While the product is not seen boosting its premiums and income significantly, Mr. Abaya said he hopes to increase insurance penetration as the company offers it to businesses.

“It’s a very niche product in the market. Not many people are offering it — that’s why we partnered with Atradius. So, hopefully, we can start to grow,” he said. — Aaron Michael C. Sy

Aboitiz Construction secures Davao bulk water maintenance contract

March 27, 2024 | 12:01 am

ABOITIZ Construction on Tuesday announced it will oversee maintenance activities for the Davao City bulk water supply project led by Apo Agua Infrastructura, Inc.

The 12-billion water supply project has a capacity of 300 million liters per day and is set for completion within three years.

“It is with great honor to partner again with Apo Agua as they pursue delivering safe and sustainable water to communities,” Aboitiz Construction’s Vice-President for Operations Maintenance Alex P. Garciano said in a press statement.

Aboitiz Construction and Apo Agua signed the contract last month in Davao City.

The maintenance activities cover comprehensive services aimed at ensuring uninterrupted water supply, optimizing operations, and strategically mitigating risks.

Started in December 2023, the bulk water project is under the public-private partnership of Davao City Water District and Apo Agua.

“This collaboration epitomizes the synergy within the Aboitiz Group, showcasing our shared commitment to sustainable water management solutions for the communities we serve,” Apo Agua President Eduardo Aboitiz said.

Aboitiz Construction and Apo Agua, the water unit of Aboitiz InfraCapital, are all under the Aboitiz Group.

In 2023, the two partnered in its first project for the 45 kilometers of a treated water pipeline network, and eight off-take points, citing yard piping, valves, and appurtenances.

The firm recently completed its waterproofing works for Mactan Cebu International Airport Terminal 1 and the repair of the sootblower lance tube for GNPower Dinginin in Mariveles, Bataan.

In addition, it secured a new five-year contract with Taganito HPAL Nickel Corporation, and a three-year scaffolding contract with Aboitiz Power Corporation’s Therma Visayas, Inc. and Therma South, Inc. — Aubrey Rose A. Inosante

Philippine Savings Bank (PSBank) to hold 2024 Annual Meeting of Stockholders on April 25

March 27, 2024 | 12:01 am

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Establishment of joint ventures for undertaking PPP projects

March 27, 2024 | 12:01 am

The significant and indispensable role of the private sector in the delivery of high-quality infrastructure and basic services to the public has long been recognized. Pursuant to its Build-Better-More Program, the Philippine government aims to focus on developing infrastructure projects which are critical to the country’s development.

Republic Act No. 11966, or the Public-Private Partnership (PPP) Code of the Philippines, was signed into law on Dec. 5, 2023, providing for a unified and comprehensive legal framework which investors can refer to in establishing PPP projects at both national and local levels. The approval of the IRR (implementing rules and regulations) on March 21, 2024, further streamlines the approval process of PPP projects which would attract foreign investments and promote sustainable economic growth.

With the passage of the PPP Code, inconsistencies and ambiguities in previous laws seek to be addressed. The PPP Code and its IRR expressly repeals, among others, Republic Act No. 6957, as amended by Republic Act No. 7718, more popularly known as the “Build Operate and Transfer Law,” Local PPP Codes and Joint Venture (JV) Ordinances, and the 2023 Revised Guidelines and Procedures for Entering into Joint Venture Agreements between Government and Private Entities.

One of the salient features of the PPP Code is the express inclusion of JVs in its coverage. Under this law, a JV refers to a national or local PPP contractual arrangement, whether solicited or unsolicited, where resources are pooled to jointly undertake a specific investment activity within a specific period of cooperation to deliver an infrastructure or development project typically provided by the public sector.

The PPP Code does not cover JVs involving purely commercial arrangements that neither provide nor include public infrastructure or development services, and which do not satisfy the elements of a PPP. In such cases, these JVs shall be implemented in accordance with their relevant governing laws. To clearly determine whether a project falls within the coverage of the PPP Code, a request for a non-policy matter opinion may be submitted to the PPP Center for clarification.

For PPP projects, a JV may be undertaken through a contractual JV or by creating a JV company. However, in the case of a contractual JV, the government’s contribution shall not exceed 50% of the project cost or 50% of the outstanding capital stock of the JV company. All equity contributions shall be subject to fair valuation by a third-party appraiser.

The formation of the JV shall not prevent the parties from entering other JV PPP contracts or from profitably entering other business ventures or markets; provided, that such other ventures shall not compete with the first JV for the same product and geographic market.

The shares of the Implementing Agency* and the private partner in the profits, losses, assets, and other interests derived from the JV shall be proportionate to their respective contributions, unless a higher return for the government or more favorable terms may be agreed upon in the JV PPP contract.

Upon termination of the JV PPP contract, all properties covered by such an agreement shall be transferred to the Implementing Agency. In cases where the government deems that divestment from the JV is in the best interest of the public, JV PPP contracts may allow the private sector to take over the project in its entirety. Such a takeover shall be in accordance with the rules and regulations governing privatization. The PPP Center shall be informed in writing of such takeover.

Under the IRR, a penalty of imprisonment of three to six years and a fine ranging from P1 million to P5 million shall be imposed on a private individual or a public officer who commits any of the following: fails to observe the threshold requirements on equity contribution of JVs; creates a JV which competes for the same products and geographic market of any existing JV between the Implementing Agency and the private partner; or, creates a JV which alters the mandate of the Implementing Agency entering into such JV.

At present, investors must note that the rules and restrictions imposed in connection with the formulation and implementation of JVs for PPP projects are limited to those provided under the PPP Code and its IRR. In view of the express repeal of the above-mentioned national and local issuances, it has yet to be seen whether the National Economic and Development Authority or the PPP Governing Board will enact guidelines which specifically cater to JVs in accordance with the passage of the PPP Code and its IRR.

* Implementing Agency refers to a department, bureau, office, instrumentality, commission, authority of the National Government, state university and college, local university and college, local government unit or government-owned or -controlled corporation.

Emma Rose R. Tomaneng is an associate of ACCRALAW’s Corporate and Special Projects Department.