What does Public-Private Partnership in Infrastructures Mean?

Cebu Cordova Link Expressway (1)

A government in a sovereign country and its citizens, also known as “taxpayers,” have a mutual give-and-take relationship. Healthcare, safety and security, military, law enforcement, public transportation, and infrastructure are all provided by the state through public services. Furthermore, in order for the government to fund these public services, taxes are levied on citizens. Whether they directly benefit from it or not, they must comply because it is a legal requirement. Unfortunately, taxes collected by the government would not be a sufficient source of fund to meet the country’s infrastructure objectives. Infrastructure projects mostly take up to billions of funds. To provide a solution for the lack of funding, particularly in infrastructure, the government launched the Public-Private Partnerships initiative (PPP).

How does the Philippine Government define PPPs?

Public-private partnership (PPP), as defined by GOVPH, “is a contractual agreement between the government and a private firm to finance, design, implement, and operate infrastructure facilities and services previously provided by the government. It represents optimal risk allocation among the parties, minimizing costs while meeting project development objectives. As a result, the project must be designed so that the private sector receives a reasonable return on investment.” As the name suggests it is a partnership entered into a contract between a private entity with the government for the benefit of the public in infrastructures.

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What are the Forms and Types of PPP’s Contractual Arrangement?

In the Philippines, there are two General types of PPP structures in general: availability and concession-based PPPs. These can be distinguished by depending on whichever the private or authority parties assume within the contract of partnership (such as rights, obligations, and risks).

1. Availability of PPP

For the first type of PPP, the authorized public party contracts with the private entity with the intention to provide a either a public product or service to the designated implementing agency at a constant capacity for a separate charge for use of the public product, or service fee.

2. Concession-based PPP

The second type of public-private partnership occurs when the government contracts a private entity the right to build, operate, and charge public users for a public infrastructure, product, or good, the price of which is set by an independent regulator.

Aside from this, the government and private entities can agree on other contractual arrangements. Again, how each party shares the risks and rewards of the partnership is determined by their respective roles. Following the current Build-operate-and-transfer (BOT) Law, the following are the contractual arrangements to recognize.

  • Build-and-transfer (BT)
  • Build-lease-and-transfer (BLT)
  • Build-operate-and-transfer (BOT)
  • Build-own-and-operate (BOO)
  • Build-transfer-and-operate (BTO)
  • Contract-add-and-operate (CAO)
  • Develop-operate-and-transfer (DOT)
  • Rehabilitate-operate-and-transfer (ROT)
  • Rehabilitate-own-and-operate (ROO)

Furthermore, it is important to note that these are not conclusive; thus, another type of contractual arrangement may be made to qualify for PPP as long as it is approved by the President of the Philippines.

What Projects are Eligible to Qualify as PPP?

The following projects are eligible for PPP under the revised implementing rules and regulations of the current BOT law.

  • Highways, including expressways, roads, bridges, interchanges, tunnels, and related facilities;
  • Railways or rail-based projects that may or may not be packaged with commercial development opportunities;
  • Non-rail based mass transit facilities, navigable inland waterways and related facilities;
  • Port infrastructures like piers, wharves, quays, storage, handling, ferry services and related facilities;
  • Airports, air navigation, and related facilities;
  • Power generation, transmission, sub-transmission, distribution, and related facilities;
  • Telecommunications, backbone network, terrestrial and satellite facilities and related service facilities;
  • Information technology (IT) and data base infrastructure, including modernization of IT, geo-spatial resource mapping and cadastral survey for resource accounting and planning;
  • Irrigation and related facilities;
  • Water supply, sewerage, drainage, and related facilities;
  • Education and health infrastructure;
  • Land reclamation, dredging and other related development facilities;
  • Industrial and tourism estates or townships, including ecotourism projects such as terrestrial and coastal/marine nature parks, among others and related infrastructure facilities and utilities;
  • Government buildings, housing projects;
  • Markets, slaughterhouses, and related facilities;
  • Warehouses and post-harvest facilities;
  • Public fishports and fishponds, including storage and processing facilities;
  • Environmental and solid waste management related facilities such as, but not limited to, collection equipment, composting plants, landfill and tidal barriers, among others; and
  • Climate change mitigation and adaptation infrastructure projects and related facilities.

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What is the History of Public-Private Partnerships (PPP)?

To begin with, President Corazon C. Aquino took on the challenge of establishing the Philippines Constitution in 1986, during the transition from the dictatorship of the Marcos administration, where it defined the private sector’s role in nation-building. According to Section 20, Article II, “the State recognizes the indispensable role of the private sector as the main engine of national growth.” In accordance with this, she relinquished government assets deemed “non-essential” and In addition, in December 1986, she issued Presidential Proclamation No. 50, establishing the Asset Privatization Trust (APT) and the Committee on Privatization (COP) to oversee the transition.

Following that, in 1993, President Fidel V. Ramos issued Memorandum Order No. 166, directing the President’s Office’s Coordinating Council of the Philippine Assistance Program (CCPAP) to establish a BOT Center, with the Chairman of the CCPAP serving as the BOT Action Officer. The BOT Law was revised in 1994 and is now known as RA No. 7718. Section 12 of the BOT Law designated the CCPAP as the agency in charge of project coordination and monitoring.

By virtue of Administrative Order 67 issued during the administration of President Joseph Estrada, the CCPAP BOTC enter was reorganized as the Coordinating Council for Private Sector Participation (CCPSP). This broadened the scope of the BOT Program to include other forms of private sector participation. The CCPSP formalized its provision of technical assistance support through technical assistance agreements (TAAs) with IAs/LGUs during the Estrada administration as well.

In 2002, President Gloria Macapagal-Arroyo issued Executive Order 144 during her presidency. It renamed the CCPSP the BOT Center and placed it under the jurisdiction of the DTI’s Industry and Investment Group (IIG). Its mission was to promote and market not only BOT projects, but also PPPs as the cornerstone of the Philippine national infrastructure development strategy.

In 2010, President Benigno Simeon C. Aquino III signed Executive Order No. 8 titled “Reorganizing and Renaming the Build-Operate-and-Transfer (BOT) Center to the Public-Private Partnership (PPP) Center of the Philippines and Transferring its Attachment from the Department of Trade and Industry to the National Economic and Development Authority and for Other Purposes.” His “social contract” with the Filipino people clearly defines private sector participation in the country’s economic agenda under his administration.

What is the Current State of Public-Private Partnership of Infrastructures in the Philippines?

The Philippines’ Public-Private Partnership Center is in charge of facilitating and coordinating the country’s PPP program. The Project Development and Monitoring Facility is a revolving fund managed by the Center (PDMF). It provides technical advisory support to Implementing Agencies (IAs) in project development and management, as well as monitors the implementation of PPP priority projects. It is also tasked with developing and managing a central database of all PPP programs and projects, as well as formulating policy guidelines for PPP transactions.

The Duterte administration unveiled its 10-point socioeconomic agenda in June 2016. Part of the plan is to increase annual infrastructure spending to 5% of GDP, with Public-Private Partnerships playing a key role. The new government also intends to implement more infrastructure projects across the country in order to create more job opportunities and boost economic activity in order to achieve inclusive growth in all regions.

In accordance with the government’s socioeconomic agenda, the PPP Center, in collaboration with its partners and stakeholders, will continue to strengthen the PPP program through pipeline development, policy reforms, and process improvement to help address the country’s infrastructure development challenges. It also aims to improve PPP processes by learning from previous procurement bottlenecks, implementing established best practices, and standardizing lessons learned. It will continue to collaborate closely with implementing agencies, strengthen its collaboration with development and private partners, and seek additional support for PPPs in the Philippines from local and international organizations.

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