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PSEi inches lower as investors wait for catalysts

BW FILE PHOTO

PHILIPPINE shares went down slightly on Wednesday as investors looked for new catalysts that would nudge the main index above the 6,500 level.

The benchmark Philippine Stock Exchange index (PSEi) shed 0.52 points or a minute percentage to end at 6,520.75 on Wednesday, while the broader all shares index climbed by 1.70 points or 0.05% to close at 3,343.41.

“The local bourse saw a marginal decline… as more investors booked gains following the market’s rise in the past few days. Investors were also finding new catalysts to drive the market upwards,” Philstocks Financial, Inc. Research Analyst Claire T. Alviar said in a Viber message.

Regina Capital Development Corp. Head of Sales Luis A. Limli-ngan said in a Viber message that the market declined as investors waited for more cues on interest rates from the US Federal Reserve.

“Philippine shares took a breather from the recent rally as investors look forward to more cues on the rate cuts from the Fed in the new year,” Mr. Limlingan said.

On its Dec. 13 meeting, the US central bank kept interest rates unchanged within the 5.25%-5.5% range, Reuters reported.

“On the data front, consumer confidence for December and existing home sales for November are due out on Dec. 20,” he added.

Sectoral indices were split on Wednesday. Financials dropped by 12.02 points or 0.69% to close at 1,726.21; industrials decreased by 38.32 points or 0.43% to 8,845.07; property declined by 4.10 points or 0.14% to 2,882.22.

Meanwhile, mining and oil climbed by 74.61 points or 0.78% to 9,568.89; holdings firms increased by 41.21 points or 0.64% to 6,394.13; and services rose by 4.89 points or 0.30%.

Value turnover went up to P6.32 billion on Wednesday with 1.15 billion issues changing hands from the P4.37 billion with 748.67 million shares on Tuesday.

advancers outnumbered decliners, 96 against 89, while 42 names ended unchanged.

Net foreign buying declined to P166.8 million on Wednesday from P394.99 million on Tuesday. — Sheldeen Joy Talavera

Peso recovers on mixed US housing data

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THE PESO bounced back against the dollar on Wednesday due to mixed US housing and construction data, and after the Bank of Japan kept its policy rate unchanged.

The local unit closed at P55.75 per dollar on Wednesday, strengthening by 20 centavos from P55.95 on Tuesday, based on Bankers Association of the Philippines data.

The peso opened Wednesday’s session at P55.85 against the dollar. Its intraday best was at P55.73, while its weakest showing was at P55.90 versus the greenback.

Dollars exchanged rose to $1.59 billion on Wednesday from $1.31 billion on Tuesday.

The peso was supported by mixed US housing and construction data recently, Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

US single-family homebuilding surged to more than a 1-1/2-year high in November and could gain further momentum, with declining mortgage rates and incentives from builders likely to draw potential buyers back into the housing market, Reuters reported.

Single-family housing starts, which account for the bulk of homebuilding, jumped 18% to a seasonally adjusted annual rate of 1.143 million units last month, the Commerce Department’s Census Bureau said. That was the highest level since April 2022.

“With these the USD softened, and we saw movement support recovery of the PHP,” Mr. Roces said.

The dollar index inched up 0.13% to 102.25, after sliding more than 0.3% the previous day and touching a four-month low of 101.76 last week, Reuters reported.

“The peso recovered after the Bank of Japan (BoJ) maintained dovish policy guidance and kept its policy rate unchanged at -0.10%,” a trader added in an e-mail.

At the two-day meeting that ended on Tuesday, the BoJ kept its short-term rate target at -0.1% and that for the 10-year government bond yield around 0%. It also left unchanged a pledge to ramp up stimulus “without hesitation” if needed. 

For Thursday, the trader said the peso could depreciate against the dollar ahead of the release of the third quarter US gross domestic product report.

The trader sees the peso moving between P55.65 and P55.90 per dollar on Thursday, while Mr. Roces sees it ranging from P55.50 to P55.80. — Aaron Michael C. Sy with Reuters

Price hike applications to be decided next year, DTI says

PHOTO BY BERNARD HERMANT

By Justine Irish D. Tabile, Reporter

THE Department of Trade and Industry (DTI) said it will start processing next year the applications to raise prices of 63 stock-keeping units of basic necessities and prime commodities (BNPCs).

“We are processing 63 requests. These are 63 items from 18 manufacturers. These are for various products like bread, sardines, and coffee so it is hard to specify one,” Assistant Secretary for Consumer Protection Group Amanda F. Nograles told BusinessWorld by phone.

“We will start to release the approvals in January next year. The price increases will be effective immediately,” she said.

Ms. Nograles said manufacturers are citing increased production costs, materials shortages, labor, and distribution costs as the trigger for their price hike applications.

“That is why we try to understand how we can help in lowering production costs. One of our initiatives is implementing Executive Order 41 or the suspension of the collection of pass-through fees by local government units,” she said.

“Another initiative is lowering the cost of raw materials. For example, in trying to lower the price of sugar, we are closely coordinating with the Sugar Regulatory Administration and Department of Agriculture,” she added.

“I think another thing that can be a huge help for our consumers is our plan to approve price increases on a staggered basis,” she said.

Ms. Nograles said that the DTI will be implementing a ‘first in, first out’ system for approving requests for price increases.

“Many have filed for price increase as early as the first quarter of 2023, so we will first process and approve the requests of whoever submitted first,” she added.

The DTI had been due to meet manufacturers and retailers on Monday to discuss updates on the prices of Christmas-feast items and price adjustments for BNPCs.

However, Ms. Nograles said that the meeting was rescheduled for January due to the unavailability of participants.

The DTI last approved price increases when it published a suggested retail price bulletin on Feb. 17, she said.

“We will publish a bulletin again next year. We do not have an exact date to give right now, but it will definitely be in the first quarter,” she said.

Economic managers at risk of being bypassed by Palace advisor

FREDERICK D. GO —PHILSTAR FILE PHOTO

By Kyle Aristophere T. Atienza, Reporter

ECONOMISTS have expressed concern over the creation of a new special-advisor office whose head will hold Cabinet rank, citing the possible sidelining of other economic managers.

The new office is a “redundancy” and “smothers the leading roles” of the Department of Finance (DoF), National Economic and Development Authority (NEDA), and the Trade department, according to Filomeno Sta. Ana, coordinator at Action for Economic Reforms.

“The executive order (EO) is a public humiliation of our economic managers and our institutions,” he said via Messenger chat.

Frederick D. Go, the former president and chief executive officer of Robinsons Land Corp. (RLC), has been named to head the Office of the Special Assistant to the President for Investment and Economic Affairs (OSAPIEA), which was created via an Executive Order issued Dec. 15.

RLC on Wednesday formally announced the acceptance of Mr. Go’s resignation from his executive and board posts.

In his EO, Mr. Marcos cited the need to establish “a robust monitoring system to ensure a holistic and cohesive approach to addressing the diverse economic challenges currently confronting the nation.”

Mr. Go is tasked with advising the President on economic matters and concerns, including, among others, the increasing prices of key commodities.

OSAPIEA will also be responsible for following up on investment pledges obtained during overseas missions.

Prior to becoming Special Assistant to the President, Mr. Go held the title of Presidential Adviser on Investment and Economic Affairs.

The Secretary of Finance formerly oversaw the Economic Development Group, but following EO No. 49, Finance Secretary Benjamin E. Diokno has been relegated to vice chair, serving alongside NEDA Secretary Arsenio M. Balisacan.

“The creation of this office is unnecessary; it is a clear political accommodation at the behest of the President,” Gary Ador Dionisio, dean of the De La Salle – College of Saint Benilde School of Diplomacy and Governance said.

“The appointment also somehow weakens the trust and confidence of the President in his alter egos in the various departments,” he said via Messenger chat.

As chairman of the EDG, Mr. Go will have the authority to coordinate the activities of the NEDA, the DoF, the DTI, and the Department of Budget and Management, as well as of economic agencies attached to these departments such as the Board of Investments, Philippine Economic Zone Authority, and Securities and Exchange Commission.

“The said agencies are required to regularly report and coordinate with the SAPIEA on priority initiatives and programs, activities, and projects,” the Presidential Communications Office said on Monday.

In his new position, Mr. Go will also sit as a member of the NEDA Board, Investment Coordination Committee, Social Development Committee, Committee on Infrastructure, and Development Budget Coordination Committee.

Randy P. Tuaño, dean of the Ateneo School of Government, said such an appointment is not unprecedented, with several former chief executives appointing coordinating secretaries to supervise specific Cabinet departments.

During the administration of the late Corazon C. Aquino, coordinating secretaries oversaw economic policy, political affairs and social policy, he added.

While noting that the new office might duplicate some of the functions of NEDA, which is itself a coordinating agency, Mr. Tuaño said some countries have made it a practice to appoint coordinating secretaries.

He cited the Indonesian cabinet system, which features ministries like the coordinating ministry for economic affairs.

“But if the role mainly is to represent the President, given that the function is a public/governmental function, then clearly that person should not have overt private interests,” he said.

Leonardo A. Lanzona, who teaches economics at the Ateneo de Manila, expressed concern that the new office was created via EO and not legislation.

Legislation would have been the better route “given that (the new office) has broad coverage encompassing several departments and agencies,” he said via Messenger chat.

Going through Congress would have ensured that its functions are “defined and authorized by law,” he said. “Legislative creation often involves a more comprehensive and deliberative process, with inputs from lawmakers and public scrutiny.”

Mr. Lanzona said unlike the NEDA, which deals with both the productivity and equity goals of society, the new investment office is “all about money.”

“Hence, it makes it rational to appoint a CEO from the private sector to head it, but the outcomes are not necessarily socially optimal.”

Terry L. Ridon, a public investment analyst and convenor of InfraWatch PH, believes the new post will not overlap with the functions of major economic agencies.

“The agencies will still implement their respective programs and activities but will now require the strategic direction and guidance of Secretary Go on the most important economic and investment concerns,” he said via Messenger chat.

“Essentially, Mr. Go now heads President Marcos’ economic team,” he added.

Mr. Ridon cited parallels with the Private Sector Advisory Council, whose members do not work full-time and retain their high-level executive positions in the private sector.

“Given Secretary Go’s reputation for integrity, we are confident that he will immediately recuse himself on matters with clear conflicts of interest,” Mr. Ridon said.

Last week, Mr. Go said the Philippines is working to secure a “respectable” share of firms moving out of China, particularly in the semiconductor industry, noting that the government’s “catch-up plan” seeks to realize the Philippines’ “untapped” export potential of $49 billion.

Mr. Go said he will pay special attention to the electronics industry, which accounts for 60% of exports.

“There is a pivot now away from China by a lot of the Western as well as the Asian countries and a lot of the attention is now going to our neighbors such as Thailand, Indonesia, and Vietnam,” he was quoted as saying in a statement issued after a general meeting of the Philippine Exporters Confederation, Inc.

Mr. Go said the Philippines is also seeking to benefit from the expansion of nickel processing market amid a shift to electronic vehicles.

The Philippines needs to capture more of the nickel value chain by processing the ore domestically rather than exporting ore.

PPP Center to promote LGU infra projects

PPP.GOV.PH

THE Public-Private Partnership (PPP) Center and the Union of Local Authorities in the Philippines (ULAP) have entered into a partnership to support local government units (LGUs) pursuing infrastructure projects.

In a statement, the PPP Center said it signed a memorandum of agreement (MoA) with ULAP on Dec. 5 to “forge a stronger collaboration in promoting well-structured and financially viable infrastructure projects through PPPs.” 

“The signed MoA aims to provide a framework for cooperation and coordination, with the goal of developing a robust pipeline of PPP projects for the member-LGUs of ULAP,” it added.

To boost economic development in the regions, the PPP Center said it will help local governments develop bankable and economically viable projects.

“The Center will continue to assist ULAP’s constituent members in building their capacity to develop and implement PPP projects,” it added.

The recently signed PPP Code is also expected to help bring in more “high-impact” PPPs to the regions, it added.

Earlier this month, President Ferdinand R. Marcos, Jr. signed the measure, which streamlines the framework for PPPs.

The PPP Code amends the Build-Operate-Transfer Law and creates a unified legal framework for all PPPs at both national and local levels. — Luisa Maria Jacinta C. Jocson

NDC in tech assistance tie-up to support startup ‘greening’

THE National Development Co. (NDC), a government investment arm, said it has signed an agreement with the Global Green Growth Institute (GGGI) to support the green transition of small businesses.

Under the memorandum of understanding (MoU), GGGI — a treaty-based international, inter-governmental organization — will provide technical vocational education training, technical assistance, and advice to Philippine micro, small- and medium-sized enterprises (MSMEs), particularly startups in the NDC investment pipeline.

“We want to support the Philippine government to identify the priorities,” GGGI Country Representative Marcel Silvius said at the signing ceremony on Wednesday.

He added that the GGGI is also aware that Philippine companies need to be given latitude and time to become more environmentally compliant.

The GGGI aims to foster sustainable economic growth in developing nations and emerging economies. It offers non-financial grants and provides technical and expert financial advice in waste management, recycling, and achieving circular-economy norms.

Under the MoU, once the trained startups mature to commercial viability and qualify for scaling and expansion, they will be endorsed to the NDC for possible equity investment.

NDC General Manager Antonilo D.C. Mauricio said that the partnership aims to help with environmental, social, and governance (ESG) compliance efforts.

“The environment is part of the priority investment areas of NDC, along with health, technology and construction … We are looking at GGGI to explore synergies with us for the pipeline of companies in the green sector (that could) be funded in the earlier stages,” Mr. Mauricio said.

According to Mr. Mauricio, the NDC and GGGI are aiming to build potential parallel ESG funding for early-stage companies, help MSMEs and startups in the calculation of their carbon offset, and establishing a carbon-credit trading mechanism.

“The MoU signing marked a key opportunity for NDC to tap into the technical expertise and assistance that could be offered by GGGI — with an overall thrust for signing — on more green-based startups,” the NDC said. — Justine Irish D. Tabile

Supermarket industry sees dev’t of industry as key to stable prices

A supermarket is seen in Quezon City, March 4 2022. — PHILIPPINE STAR/MICHAEL VARCAS

A SUPERMARKET industry association said the National Government must develop the industrial sector to address unstable food prices.

In a statement, Steven L. Cua, president of the Philippine Amalgamated Supermarkets Association, said the growth of domestic industry will head off unemployment, ensure stable prices, and keep goods affordable.

With rising prices, “the nation is now facing ‘shrinkflation’ (as) retailers cater to the smaller budgets of consumers (by offering products with reduced content),” Mr. Cua said.

In a survey presented by Capstone-Intel Corp. at a media forum, six out of 10 respondents expect to be food-secure over the next six months.

The survey also concluded that 46% of households spend P1,001-P2,500 on food weekly, and that rising food costs could put more households in financial distress.

“Stability in food costs is critical for family budgeting nationwide. Persistently elevated food inflation could rapidly push more households into financial distress without mechanisms to offset price pressures on key dietary necessities,” Capstone-Intel Research and Publications Director Ella Kristina Domingo-Coronel said.

Mr. Cua said unemployment will rise if the National Government fails to address pressing food insecurity by supporting domestic industry.

“Either we have to come up with new brands or a lot of foreigners come in with their brands. That will lead to another surge of unemployment,” he said.

“We have to think of our own. We have to develop our industries if 20 years from now we want to see a brighter future,” he added.

Mr. Cua wants to see a drop in inflation consistent with falling food prices.

Capstone-Intel said its survey indicates that 59% of its respondents describe themselves as “very secure” or “secure” in terms of food for the next six months.

Meanwhile, 42% said that they have some concerns with 34% saying they are neither secure or insecure and 8% “insecure” or “very insecure.” — Justine Irish D. Tabile

PHL 2024 growth forecast maintained at 5.6% — ANZ Research

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ANZ RESEARCH maintained its 5.6% gross domestic product growth forecast for the Philippines, citing the dampening effects of slowing bank lending and manufacturing sales.

“High-frequency data, such as waning credit growth and manufacturing sales, weaker consumer confidence and limited capacity expansion plans validate our view,” it said in its Asia Economic Outlook.

In November, manufacturing output, as measured by the volume of production index (VoPI), rose 1.7% year on year in October, according to preliminary results of the Monthly Integrated Survey of Selected Industries.

This was much weaker than the 6.7% increase in October 2022 and the 9.9% logged in September. It also marked the weakest reading for manufacturing’ growth since the 0.04% decline in June 2022.

On a month-on-month basis, the manufacturing sector’s VoPI contracted 4.1%, a reversal of the 1.5% posted in the previous month.

Year to date, average factory output growth stood at 5.6%, slower than 17.5% in the same period in 2022.

Meanwhile, the S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) rose to 52.7 in November from 52.4 in October, indicating an improvement in forward orders for materials to be processed later, the strongest reading since February.

A PMI reading above the 50 mark denotes greater anticipated business activity, while a reading below 50 signals deterioration.

Outstanding loans by big banks rose 7.1% year on year to $11.3 trillion in October.

October credit growth was stronger than the 6.5% expansion seen in September, marking the fastest rise in bank lending since the 7.2% seen in August.

On a month-on-month basis, outstanding universal and commercial bank loans rose 1.4%.

The Philippine growth forecast for 2023 had been raised to 5.2% from 5% in September. However, ANZ Research lowered its forecast for 2025 to 5.9% from 6%.

ANZ Research’s forecasts for 2023, 2024, and 2025 are all below the government’s recently adjusted forecasts of 6-7%, 6.5-7.5%, and 6.5-8%, respectively.

ANZ Research also maintained its 6% and 3.5% outlook for 2023 and 2024 inflation, respectively, despite recent easing in the indicator in the last two months.

“The moderation in October and November headline inflation brought about some relief after two months of renewed price pressures. We expect consumer prices to fall back below 4% year on year by early Q1,” it said.

In November, headline inflation slowed to 4.1% from 4.9% in October, the 20th straight breach of the BSP’s 2-4% target. Year to date, inflation averaged 6.2%.

“However, sustaining it below 4% could be a challenge as dry weather conditions could push food prices higher. Food constitutes 34.8% of the CPI (consumer price index) basket. The double-digit rise in rice prices in September, despite the implementation of price ceilings, highlights the need for more effective domestic price control measures,” ANZ Research noted. — Aaron Michael C. Sy

Further energy-conservation calls go out as El Niño sets in

PHILSTAR FILE PHOTO

THE Department of Energy (DoE) said households and the business sector need to do their part in conserving energy and accelerating their energy efficiency in response to El Niño.

“We need the support of everyone, and must therefore be conscious in our use of electricity,” Energy Secretary Raphael P.M. Lotilla said in a statement on Wednesday.

President Ferdinand R. Marcos, Jr. has asked the public to create a culture of responsible usage of electricity “as power supply projections may still change, even if we have adequate projections” due to the dry spells expected at the height of El Niño.

PAGASA (Philippine Atmospheric, Geophysical and Astronomical Services Administration), the government weather service, forecasts a moderate El Niño, possibly intensifying in the coming months.

Mr. Lotilla said that the DoE’s executive committee and agencies agreed to map out vital infrastructure that could be affected by the shortage of electricity.

These include hospitals, blood banks, banks, and water pumping stations.

“In the case of the health sector, while the Department of Health will be providing generator sets for government hospitals, there are also hospitals maintained by provinces and local government units. The local governments could help us identify these critical facilities for efficient intervention,” Mr. Lotilla said.

Separately, Mr. Lotilla said the action taken by the Bangko Sentral ng Pilipinas (BSP) allowing banks to expand financing for sustainable energy projects will attract investment.

“These would entail big investments where private sector funds, including equity investments, green bonds or loans will be needed. We are therefore pleased with this development noting that clean energy investments over the next decade will be carried out by the private developers,” he said.

In a statement over the weekend, the BSP said it approved a 15% increase in the single-borrower limit on loans for eligible green or sustainable projects.

The central bank noted the projects should be compliant with environmental laws.

Meanwhile, Mr. Lotilla also welcomed a Board of Investments decision to offer income tax holidays for own-use renewable energy and energy efficiency projects, as well as duty exemptions on imports of capital equipment, raw materials, spare parts, or accessories.

“This would certainly aid energy efficient projects which will ultimately redound to the benefit of consumers. The tax incentives will result in increased economic activity and the potential to generate more jobs,” Mr. Lotilla said. — Sheldeen Joy Talavera

4 new Maharlika directors sworn in

FOUR new directors of the Maharlika Investment Corp. (MIC) were sworn in at Malacañang on Wednesday, the Presidential Communications Office said.

In a statement, the Palace said the new directors are Vicky Castillo L. Tan, a former Asian Development Bank director; Andrew Jerome T. Gan, Singapore advisor for Picfel & Cle, Banquiers and a former Globe Land Development Corp. managing director; German Q. Lichauco of Orca Energy, Inc., a lawyer, and Roman Felipe S. Reyes, Radio Philippines Network, Inc. (RPN-9) and Converge ICT Solutions, Inc. director.

Last month, President Ferdinand R. Marcos, Jr. appointed Rafael D. Consing, Jr., chief executive officer and president of the MIC.

The government is counting on the MIC to be fully operational by the end of the year. — John Victor D. Ordoñez

Congressional think tank questions need for carbon tax, citing low PHL emission levels

THE PHILIPPINES may not need to impose a carbon tax due to its low emission levels, a policy think tank attached to the House of Representatives said.

“The Philippines produces relatively little carbon dioxide — whether it is compared to developed countries or its ASEAN (Association of Southeast Asian) neighbors. This, in turn, puts into question the supposed necessity and urgency of instituting a carbon tax in the Philippines,” the Congressional Policy and Budget Research Department (CPBRD) said in a report. 

Philippine carbon dioxide emissions are significantly lower compared to other Southeast Asian countries, the CPBRD said, citing data from the Emissions Database for Global Atmospheric Research.

It emitted 148 million metric tons (MT) of carbon dioxide in 2021, compared to Malaysia (251.55 million MT) and Indonesia (602.59 million MT).

The CPBRD noted, however, that Indonesia’s population is twice that of the Philippines.

It also said that Malaysia, which has a population of 34 million, produces thrice the carbon dioxide on a per-capita basis. “This, in turn, underlines the energy poverty of Filipinos — even in comparison to their ASEAN neighbors,” the CPBRD said.

The think tank added that a 5% loss from imposing a carbon tax on electricity as well as land, air and water transport would mean a total economic loss of P236.7 billion, or roughly 1.1% of gross domestic product.

“If a carbon tax is intended to be the primary regulatory strategy to prevent further increases in overall carbon emissions, then its rate has to be sufficiently large to reduce demand for carbon-emitting activities by the aforementioned amount,” the CPBRD said.

It also said that the Philippine economy is still “wholly incapable of efficiently and painlessly transitioning to a low-carbon trajectory,” given its heavily reliance on fossil fuels and slow transition to renewables.

“Solar and wind resources account for a tiny fraction of electricity supply — despite billions spent in subsidies. The aggressive expansion of renewable assets also demands the conversion of agricultural land into solar and/or wind farms, further aggravating existing agricultural productivity woes,” the CPBRD said in its report. 

It also said that an “energy-poor” country like the Philippines would struggle to develop its industries if a carbon tax is imposed.

“The modernization of flagging agricultural and manufacturing sectors, in particular, demand the widespread adoption of energy-intensive production processes,” the CPBRD said. 

Carbon taxes in the Philippines could generate revenue of up to $7 billion by 2030, according to a study by the International Monetary Fund.

The Philippines emitted about 146.5 million tons of carbon dioxide from energy consumption in 2022, the Energy Development Corp. has estimated.

The Philippines has committed to reduce its greenhouse gas emissions by 75% by 2030.

Climate change could cut Philippine economic output by 13.6% by 2040, the World Bank said in a report last year. — Beatriz Marie D. Cruz

Unified PPP Framework

In 1990, Republic Act (RA) No. 6957 or the Build-Operate-and-Transfer (BOT) Law institutionalized the private sector’s participation in financing and developing government infrastructure projects. For the last decade, the BOT Law and its Implementing Rules and Regulations (IRR), the National Economic and Development Authority (NEDA) Joint Venture (JV) Guidelines, PPP Codes of Local Government Units (LGUs), and issuances from the PPP Governing Board made up the overall regulatory framework for PPP. The constantly evolving infrastructure sector called for amendments to the BOT IRR in 2006 and in 2012, and then twice in 2022. On April 25, the 2023 NEDA JV Guidelines were released a decade after its previous version took effect. On the local level, LGUs are championing their own PPP/JV Codes.

This momentum pushed our legislators to consolidate all the rules into one law. And so on Dec. 5, the Public-Private Partnership Code of the Philippines (RA 11966) was signed into law and took effect yesterday, Dec. 20.

PPP DEFINED
PPP, while inferred from the modalities in the BOT Law, was never specifically defined. Finally, Section 3 (cc) of the PPP Code defined PPP as any public infrastructure or development project and service implemented under the law. This must be read in conjunction with Section 4 which expounds on the covered projects of the law, namely: “contractual arrangements between an Implementing Agency and a Private Partner to finance, design, construct, operate, and maintain, or any combination or variation thereof, infrastructure or development projects and services which are typically provided by the public sector, where each party shares in the associated risks.”

Aside from the straightforward definition, the law enumerates arrangements which qualify as PPP: (a) JVs; (b) toll operation agreements; (c) lease agreements involving participation of a private partner in an existing land or facility owned by the government; (d) lease agreements as components of a PPP project; and (e) all other arrangements akin to PPP.

Clearly, it is a one-stop shop for all your PPP needs.

THRESHOLDS AND APPROVERS
The law updated the approval thresholds for national and local PPP projects.

For projects costing at least P15 billion, the NEDA Board is now the designated approver, on the recommendation of the NEDA Board-Investment Coordination Committee (NEDA ICC). For projects below P15 billion, the head of the Implementing Agency or the NEDA Board-ICC may approve depending on the circumstances.

Meanwhile, LGUs are given authority to approve local PPP projects within their jurisdiction, as such projects only require approval of the legislative bodies of LGUs to proceed to tender, unless such projects require financial undertakings by the National Government or they physically overlap with another approved government project. Thus, this eliminates the need for LGUs to structure projects as JVs just to avoid the tedious approval process of the NEDA ICC.

BEST MANDATES, ONE LAW
Years of experience paved the way for best practices to ripen into law. The PPP Code takes the best provisions from the BOT Law, NEDA JV Guidelines, and further assimilates them, namely, (a) risk management fund (RMF); (b) alternative dispute resolution; (c) contract management and risk mitigation; (d) procurement of independent consultants; and (d) public disclosure of tender documents and PPP contracts.

Zeroing in on RMF, the law distinguishes between the National PPP RMF and the Local PPP RMF. While both serve as payment for contingent liabilities arising from PPPs in accordance with its terms, the National PPP RMF is to be managed by the PPPC while the Local PPP RMF is subject to the guidelines of the PPP Governing Board of the LGU.

The PPP Center (PPPC), which is the government agency tasked with facilitating the growth of PPPs, can now draft policy opinions and issue non-policy opinions on PPP matters. This is especially beneficial as key players often seek clarification on PPPs from the agency.

The law also adopted new concepts such as the claw-back provision on excessive returns, streamlined processes for unsolicited proposals, green financing, and land value capture strategies, among others.

EFFECT ON THE STATUS QUO
What happens now to the existing contracts or upcoming PPP projects?

• Existing contracts will be governed by their respective agreements. The PPP law applies in a suppletorily manner only if no rights are infringed upon.

• PPP projects with notices of award but with no executed contracts on or before Dec. 20 will be governed by the new law only if no rights are infringed upon.

• Solicited PPP Projects which have commenced bidding or Unsolicited Proposals which have commenced with the Swiss Challenge stage (also known as the comparative bidding process) will be governed by the Act only if no rights are infringed upon; otherwise, the rules in effect at the commencement apply.

• Proposed PPP projects which are either pending approval or approved but have not undergone bidding or Swiss challenge will be governed by the Act except for the project approval provisions.

Several provisions of the law are not self-executing and will require an IRR before they become implementable. Under the law, the IRR will be promulgated within 90 calendar days from the effectivity of the Code. The IRR will further expedite procedures for PPP project approval, processing of unsolicited proposals, bid evaluations, protests, supervision and monitoring of PPP projects, and setting the reasonable rate of return. The IRR will also provide a list of government undertakings that may be granted to a PPP project.

With the administration’s focus on building more (and better) infrastructure, the PPP Code must embody practices that fulfill the demands of this fast-moving sector. Indeed, the new law will balance all interests with the welfare of the people (the ultimate end-users) as a compass.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

 

Joelle Mae Garcia is a senior associate at the Tax Services group of Isla Lipana & Co., the Philippine member firm of the PwC network.

joelle.mae.garcia@pwc.com

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