Duterte administration to fast-track infra projects through ‘hybrid’ PPP formula

Duterte administration to fast-track infra projects through ‘hybrid’ PPP formula

- in Economy, News

Finance Secretary Carlos Dominguez III has reiterated the government’s preference for “hybrid” public-private partnership (PPP) deals in which the government would build the infrastructure projects and later bid out the operation and maintenance (O&M) to the private sector.

Dominguez said unsolicited proposals are also welcome from the private sector, which would have a better grasp at identifying potential problems and offering better solutions to prospective PPP projects.

“There are several approaches to that. The first approach—and which we are most likely going to do—is we will do [the projects] ourselves first, and then most likely auction out or bid out the O&M. But that is the fastest way to do it. At least we get something going,” Dominguez said at a recent business forum.

He pointed out that a traditional PPP project usually takes an average of 29 months before it takes off, while unsolicited proposals would at least require a 20-month lead time.

“But if we do our projects right away and then bid out the O&M later, I think that’s the quickest way to do it,” Dominguez said.

Undertaking the construction of PPP projects would prove cheaper in the long run, he said, considering that the government can borrow at lower rates through grants and concessional loans and later on harness the private sector’s expertise in managing, operating and maintaining such infrastructure projects.

Dominguez said the 18 projects approved last year by the National Economic Development Authority (NEDA) Board are ongoing various stages of project development.

“We are not stopping any of those. But opening up to unsolicited proposals is actually very good because we don’t know all the problems, and we maybe have not identified all of them. So we are inviting the public to help us do it,” Dominguez said.

“Dutertenomics,” is President Duterte’s economic strategy to dramatically raise funds–in large part through his proposed tax reform program–and spend big on infrastructure, human capital formation and social protection to sustain the growth momentum, attract investments and create jobs, achieve economic inclusion and transform the Philippines into a high middle-income country by 2022, by which time poverty incidence will have been reduced to 14 percent.

If “DuterteNomics” is sustained over the medium term, the government envisions the Philippines to be a high-income economy in one generation or by 2040.

The DuterteNomics forum, which was so far held twice by Malacanang, presented to the public the government’s “Build, Build, Build” program.

Some of the Philippines’ biggest names in the business sector attended the forum’s second series at the Hotel Conrad in Manila. Among them were Jaime Zobel de Ayala of the Ayala Group, Tessie Sy-Coson of SM Investments Corp., Danel and Sandro Aboitiz of Aboitiz Equity Ventures, Edgar Injap Sia II of Double Dragon Properties Corp.; Kevin Tan of Megaworld Corp.; and Michael Tan of the LT Group Inc.

Dominguez earlier said that the Duterte administration is looking into four other measures, including the monitoring of projects in real time through the use of drones, to place its infrastructure buildup strategy on track and keep such public works free from graft and corruption.

One is for the government to break up certain major projects into smaller ones to fast-track their completion and attract relatively smaller investors or bidders.

Dominguez said the government might also require doing the construction work on a 24-hour basis whenever possible.

For better project monitoring, Dominguez said he has discussed with officials of the Department of Public Works and Highways (DPWH) and the NEDA the possibility of using drones to check on whether construction works are being implemented on schedule and whether specifications are being met for particular projects.

As another measure, the government, in step with the Freedom of Information (FOI) order of President Duterte, is also putting up websites for these projects so the public could be better informed about their details and find out for themselves the progress of these undertakings.

According to the finance chief, the Duterte administration needs at least P8 trillion to close the infrastructure gap over the medium term.

“Budget Secretary Ben Diokno estimates that we need to invest about P8 trillion over the next six years in infra to be at par with our neighbors. To put this amount in perspective, the total resources of the Philippine financial system is P16.2 trillion,” Dominguez said.

This is why the Department of Finance (DOF) has submitted to the Congress the first package of its Comprehensive Tax Reform Program that is meant not only to make our tax system simpler and fairer, but also to help Malacanang raise sufficient funds for its infrastructure buildup plan, he said.

Dominguez said an initial list of 18 big-ticket items worth a total of P427.5 billion has already been approved by the NEDA for this unprecedented infrastructure buildup, which “is much more than what the previous administration undertook during its entire tenure in office.”

He said the swift action of the government underscores the firm resolve of President Duterte to realize his administration’s goal of accelerating infrastructure spending to help pull down the poverty rate to 14 percent by the time he steps aside in 2022.

As a key factor of inclusive growth, Dominguez said infrastructure has the highest multiplier effect on the economy and is also indispensable to transforming the nature of growth from consumption- to investment-led, which, in turn, will create a lot more jobs.

Dominguez said the government is financing its unparalleled infra program through a mixture of soft loans, grants, official development assistance (ODA) and the PPP.

The “Build, Build, Build” agenda consists of big-ticket infra projects, among them the NLEX-SLEX Connector Road, the Bonifacio-Ortigas Road Link, Mindanao Railway, New Clark City, and the Mega Manila Subway.

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