Since the start of its sovereign independent existence the government of the country has never had resources sufficient to finance all the physical infrastructure required by its development and growth. To cope with that problem the administration of President Fidel V. Ramos (1992-1998) developed and implemented the Public-Private Partnership (PPP) infrastructure development concept, under which government funds and private capital cooperated to build and operate, principally on a BOT (build-operate-transfer) basis, the big-ticket infrastructure projects needed by the Philippine economy.
The PPP concept, which has been designated by the administration of President Duterte as its preferred mode of infrastructure development, is made up of three elements. These are cost, completion time and O&M (operation and maintenance). In a recent meeting with the media, the head of the Duterte administration’s economic team, Secretary of Finance Carlos Dominguez III, discussed the government’s current thinking on these PPP elements.
First, the most important of the three elements, namely, cost. This is what Secretary Dominguez had to say on the matter: “(The government’s) undertaking the construction of PPP project will prove cheaper in the long run as the government can borrow at lower rates through concessional loans and (obtain) grants.”
And when the projects have been constructed?
“Later on the government will harness the private sector’s expertise in managing, operating and maintaining infrastructure projects,” Mr. Dominguez said. “(This) approach – which we are most likely going to do – we will do the projects ourselves first and then auction out or bid out the O&M – is the fastest way to do it. We get something going.”
Mr. Dominguez called this the ‘hybrid’ type of PPP.
Noting that historically PPP projects have taken an average of 29 months to complete, the Department of Finance chief said that the government was looking favorably at unsolicited proposals. These proposals would have a lead time of at least 20 months. “(D)o our projects right away and then bid out the O&M,” he said. “I think that’s the quickest way to do it.”
Mr. Dominguez went on to say: “(O)pening up to unsolicited proposals is actually very good because (we in government) don’t know all the problems and we may not have identified all of them. So we are writing the (private sector) to help us do (the job).”
The government also was examining the idea of breaking up certain major projects into smaller projects, Secretary Dominguez said. Such a change in approach would yield two benefits. “It will fast-track (the projects’) completion and attract relatively smaller investors or bidders,” he said.
The Secretary of Finance has good reason for exploring all approaches to the successful implementation of the Duterte administration’s Build, Build, Build infrastructure program. Of the 18 major projects approved by NEDA (National Economic and Development Authority) in 2017 most are still at various stages of development. A thorough review of all aspects of the program – particularly the financial and the administrative – clearly is in order.
That is what Carlos Dominguez is doing.
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