“Investors are very bullish about our PPP projects”-
Public–private partnership (PPP) contracts are an important element of the Philippines government’s quest to bridge the infrastructure gap in the country. Building upon the experience of the country’s long history of PPP initiatives in power, transportation, water, and information and communication technology, along with social infrastructures, the country has now embarked on a new phase of PPPs under the National Development Plan 2011–2016. To realise the goals, the PPP Center has established a transparent business environment in which the PPP programme can thrive. The Center has also rolled out eight projects in 2012 and is gearing up to roll out others in 2013. In an interview with Southeast Asia Infrastructure, Cosette V. Canilao, Executive Director of the PPP Center, offers insights into the plans, priorities, and experiences of the PPP Center.
What have been the key achievements with regard to PPPs in infrastructure development in the Philippines over the past couple of years?
The year 2012 was a big one for the PPP programme. The Philippines government tendered eight projects as committed. The fact that we were able to roll out eight projects in a year is a huge feat and unprecedented in the history of Philippines’ PPP. The eight projects reflect the priorities of the Aquino administration. Our first social infrastructure project on the construction of 9,300 classrooms was awarded in 2012. Our first health infrastructure project, the modernisation of our Philippine Orthopedic Center, was rolled out in December of the same year. We have big-ticket infrastructure projects for rail, roads, and airports that will help ramp up our ongoing campaign to strengthen the Philippines’ tourism.
The year was also spent on laying down the framework for the various initiatives that helped to create a healthy, transparent environment where the PPP programme can thrive. These include improving inter-agency coordination; conducting workshops for government agencies, local government units, and even the private sector; reviewing and drafting of policies to further enhance the PPP framework; promoting the programme to foreign and local investors; and, most importantly, fine-tuning the mechanism for systematised project development and management, especially the implementation of the Project Development and Monitoring Facility (PDMF). We are reaping the rewards of these efforts today as investors continue to show great interest in our PPP programme.
The Philippines’ growth in 2012 was much better than expected. So what is the outlook for 2013? How will the growth outlook impact demand for infrastructure?
The Philippines’ economy had a much stronger performance in 2012. The 7.1 per cent growth in the third quarter of 2012, which ultimately rebounded to a 6.6 per cent GDP for 2012, was testament to the Philippines’ resilience and the effectiveness of the economic reforms that the Aquino administration undertook to spur development.
The government hopes to duplicate this feat in 2013. For the PPP programme, we are constantly working with the implementing agencies to establish a continuing, robust, and well-structured pipeline of PPP projects in 2013. Public construction buoyed the first two quarters of 2012. We hope that it will be complemented this year with the stronger engagement of the private sector, particularly from PPP projects.
There is a growing feeling among international observers that infrastructure is the barrier that is holding back the country’s economic growth. What is your perspective?
ThePhilippinesgovernment recognises that limitation. That is one of the primary reasons why a more dynamic PPP programme is being pursued – to engage the private sector in accelerating the delivery of much-needed infrastructure.
What are the expected rates of returns that investors can expect from the various PPP projects lined up for infrastructure?
[They can expect] market-based returns. We are putting in a lot of effort into developing and properly structuring projects, with the assistance of transaction advisers. A large portion of that is spent in estimating acceptable market-based returns.
What is the expected contribution of PPP in the overall infrastructure development plans for the country? Can you share with us the breakdown of the proposed investments by sector?
Under the current economic agenda of the government, the direction is towards increasing spending in infrastructure. In 2012, investment in construction grew by 13.7 per cent. This was led by public sector investments that produced a 32.4 per cent growth rate with private sector investments trailing at 8.6 per cent. We are hopeful that, with the eight PPP projects rolled out last year, which will be up for tendering this year, that figure will increase significantly.
What have been the key steps taken by the government to expedite PPP projects? How has the industry responded to these steps?
A key step is creating the PPP Center by reorganising and renaming the formerBOTCenter, expanding and clearly defining its coordination and facilitation mandate, and establishing the PDMF. The PDMF is a critical component of the reinvigorated PPP programme. The government is now able to hire independent transaction advisers to assist the implementing agencies in structuring and preparing projects for bidding. We have successfully tendered two projects. We now have seven live projects generating much interest not only among local investors, but also among foreign players. That is a manifestation of the positive response from the market.
We still have a long way to go in terms of cementing the gains of our efforts of creating a conducive environment for private sector participation. However, we have followed through with our initial commitments. With the improved coordination of the government agencies involved in delivering PPPs, we are moving ahead with institutionalising the reforms we started, process- and policy-wise, and in increasing our credibility by strenghtening the legal and regulatory framework.
In your opinion, has the global economic slowdown including Asia impacted the interest of the private sector in participating in the Philippines’ PPP projects?
Based on the participation of private investors in PPP projects that we have rolled out, the country’s PPP programme is enjoying much support and success, despite the worldwide economic slowdown. Our investors are very bullish about our PPP projects and have participated in every bidding exercise that we have conducted. The competition is very tight and the interest of these investors is very encouraging, very solid.
What are the PPP Center’s priorities for 2013? What is the expected pipeline of projects that you hope will achieve financial closure and completion?
We aim to institutionalise the reforms and procedures we initiated to sustain the PPP programme. This is especially true in the areas of pipeline development, selection and prioritisation, and project implementation and monitoring. We intend to achieve significant progress on those fronts this year.
We hope to close the seven projects that are currently up for bidding. We would also like to roll out the majority of the projects in our current pipeline. We are looking forward to assisting implementing agencies in developing more ambitious infrastructure projects.
