Issue of November 5, 2017

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Hybrid PPP to match infrastructure buildup
by Press release

The Duterte administration’s “hybrid” Public-Private Partnership (PPP) program will help speed up the roll-out of the government’s big-ticket infrastructure projects under its “Build, Build, Build” program.

The modified strategy will avoid the protracted negotiations and disputes that often delayed the implementation of previous PPP initiatives, according to Finance Sec. Carlos Dominguez III.

Dominguez said the Cavite-Laguna Expressway (Calax) project, which took all of 50 months to conceptualize and begin implementation, is a prime example of why the government decided to modify the traditional PPP formula and fast-track the process.

He said that rather than resort to the traditional PPP mode and encounter the same problems in the private sector, the Duterte administration decided to take the initiative and put in place a hybrid PPP in which the government will build and finance the infra projects and later, auction off the operation and maintenance aspects to the private sector.

“We had one PPP project that from conception to the start of implementation, it took 50 months. And one of the reasons is the private sector had a squabble among themselves. Remember the Calax project?” Dominguez said at a recent investment forum.

“We are not willing to wait for the private sector to settle their differences. While private companies quarrel among themselves as to who will make the profit, the public suffers from lack of infrastructure. The Duterte administration is willing to take the construction risks and spend budgeted funds to start projects early,” added Dominguez.

Under the “Build, Build, Build” program, the government plans to either implement or begin the project preparations for 75 big-ticket projects to realize the Duterte administration’s envisioned “Golden Age of Infrastructure.”

Dominguez said the proposed New Clark City in Pampanga is a concrete proof that the hybrid PPP mode is faster and more efficient considering that it took the government only 18 months to break ground on the project.

“We took over in July of 2016. In December, we will break ground already for the Clark project,” Dominguez said.

The finance chief said that had the project gone through the traditional PPP scheme, “the (private sector) lawyers would still have been figuring the liabilities” and other details of the project at this time.

Another example, Dominguez said, is the Plaridel Bypass Road that will link the North Luzon Expressway with the Philippine-Japan Friendship Highway in Bulacan, which was supposed to be implemented via the traditional PPP mode.

“Had we done that with PPP, we’re still negotiating with the private sector now. (Public Works Secretary Mark Villar) has started it, and we’ll finish it by next year,” Dominguez said.

Dominguez earlier said the hybrid PPP mode does not totally shut out private contractors from taking part in the implementation of infra projects as unsolicited proposals are still welcome from the private sector, which, in some instances, would have a better grasp at identifying potential problems and offering better solutions to prospective ventures.

He added that the government undertaking the construction of PPP projects would prove cheaper in the long run because the State 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 likewise noted earlier that the government held discussions with managers of large foreign retirement funds which could possibly take part in the government’s infra program and found out that they typically don’t invest in the early stages of projects because they don’t want to take on the construction risks.

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