Calls for PPP financing for BBB projects renewed

Published May 31, 2020, 12:00 AM

by manilabulletin_admin

By Bernie Cahiles-Magkilat

Clamor the adoption of public private partnership (PPP) mode of financing for the government’s “Build, Build, Build” (BBB) projects has been renewed as government resources are more needed for COVID-19 responses.

In a webinar on “Addressing the COVID-19 Economic Impact through Public Private Partnership” organized by policy advocacy group Stratbase, leaders from the legislative branch and the private sector have called for the revival of the PPP.

Senator Grace Poe, chairperson of the Senate committee on public services cited as a sound idea that a large part of our government’s rescue plan consists of accelerating its long-delayed BBB program.

“This I believe brings forth an opportunity to revive a previously discarded concept that potentially reduces the tradeoff between saving the economy and preserving our fiscal health – Public-Private Partnership, or what we have come to know as PPP,” Poe said.

She noted that the Department of Finance has stated that its fiscal response to the COVID pandemic adds up to 9 percent of GDP but said Poe noted of reluctance to spend more, despite the higher incidence of joblessness and hunger and spending to avert a second wave of infections on efforts to preserve credit rating.

With this situation, Poe reminded policy makers of the opportunity of the financial advantages of PPP over government-funded projects – the shifting of project costs from the taxpayer to the user of the project’s services.

For example, she said, in the transport sector not only must do its best to save jobs of transport services providers, but there are also opportunities to build useful and relevant infrastructure projects which will decongest EDSA and provide opportunities for PPPs right here at the heart of the economic crisis.

She said the “Move as One Coalition” proposes engaging 3,000 bus operators and 15,000 other PUVs through service contracts equal to ₱30 billion.

There is also a proposal for ₱10 billion in projects to improve the walking and cycling infrastructure so that we aren’t so dependent on our traffic causing vehicles. Also proposed is a ₱70 billion in infrastructure projects like bus stops, bus only lanes, depots, and terminals. This amounts to P110 billion in costs, but the coalition projects ₱373 billion in returns over three years which includes ₱34 billion in transport jobs retained and 78 billion pesos in avoided job losses for commuters.

But she also said that the government has so far been reluctant to back PPP due to the perception that the private sector has abused the system by corrupting regulators and negotiating for itself terms that are overly favorable to its shareholders and onerous to the consuming public.

“Justified or otherwise, the brouhaha over the water crisis, is but one example of how the pub¬lic will no longer stand for such abuses,” the senator noted.

On this note, Poe appealed to the private sector and asked that should it succeed in persuading government to embrace the PPP mode of financing, to “take on the responsibility of behaving in a socially responsible manner. She stressed that shareholders need to make a return on their investments, but if the consuming public loses out in the end, it will only reinforce the government’s suspicions towards PPP and take back to the default alternative – government-undertaken projects and all the inefficiencies and frustrations that come with the territory.”

She stressed though that that even if PPP is encouraged, there is still one major economic stumbling block. With every sector of the economy needing credit ex¬tensions and even bail-outs, local capital may not be enough. Banks are constrained in lending by many regulations.

“Recovering from this crisis, may require opening up our country to more foreign direct investments,” she added.

These investments will provide the capital infusion needed by several industries including manu-facturing, transportation, logistics, and telecoms, she said.

In the same forum, Rep. Edgar Mary Sarmiento, chairperson of the House Committee on Transportation, said that the government should once again engage in public-private partnerships or PPPs large-scale projects which would develop infrastructure.

Sarmiento cited data which showed that over the past decade, the government spending for transportation and public works increased from ₱143.5 billion or 9.3 percent of the national budget in 2010 to ₱543.6 billion or 16.4 percent of the budget in 2019.

Sarmiento, however, said the COVID-19 pandemic was a setback that the whole world did not expect. “It has created a global recession for economies that have not seen such downturn in years. For the Philippines, this means that lower government spending will be allotted for infrastructure,” he said.

Sarmiento said the government needs to assess the “Build, Build, Build” program and en¬courage support from the private sector given the lack of funds amid the pandemic.

Sarmiento has also filed House Bill No. 90 to ensure continue of large transportation projects whoever is in power.