9.

3
VOLUME

DELAY AND DISSATISFACTION

IN THE
AQUINO ADMINISTRATION’S
PPP PROGRAM:
RECOMMENDATIONS
FOR FUTURE
PARTNERSHIPS IN
INFRASTRUCTURE

OCCASIONAL
PAPER MARCH 2016
 OCCASIONAL PAPER MARCH 2016

02
DELAY AND DISSATISFACTION
IN THE
AQUINO ADMINISTRATION’S
PPP PROGRAM:
RECOMMENDATIONS
FOR FUTURE PARTNERSHIPS
PPP PROGRAM
IN INFRASTRUCTURE
could have been a good avenue to improve our country's infrastructure industry but
has thus far failed to fully deliver. The Aquino administration can use the
remaining time in office to fast track the PPP scheme without
sacrificing transparency and legitimacy in the process.
Image Credit: apec2015.ph

The Public Private Partnership (PPP) program, claimed as a
pillar of this administration’s economic and infrastructure
development plan, is under greater pressure this 2016
as President Aquino has only three months left in office. The
emphasis President Aquino placed on the importance of
infrastructure development back in 2010 should have been
a good measure of the administration’s consistent
support for the PPP program.
However, delay in the progress of the PPP scheme has been
evident since its launch in 2010. The minimal number of PPP
projects that have been awarded since Aquino assumed of-
fice—12 out of the 53 projects in the pipeline— is
dissatisfying. Moreover, the President must realize that the
number of awarded PPP projects should not be the sole
basis of measuring success; the completion and successful
operation of the infrastructure should also be made the basis.
Nonetheless, the Aquino administration can use the remaining
time in office to fast track the PPP scheme without
sacrificing transparency and legitimacy in the process.
This paper aims to identify the reasons why the PPP program
could have been a good avenue to improve our country’s
infrastructure industry but has thus far failed to fully deliver.
The first part tackles the Philippines’ overall competitiveness
and the importance of infrastructure in this regard,
comparing Philippine performance vis-à-vis neighboring
Southeast Asian countries. It then turns to the chokepoints in the
PPP scheme: the insufficient technical capacity within some
government agencies, the under-empowered PPP center,
an improperly implemented bidding process,
and barriers to foreign capital investment.
In concluding, the paper provides recommendations to be
considered for the next administration. In the time remaining, the
Aquino administration should focus on maintaining the
transparency and legitimacy of the PPP process as it seeks to
fast-track the awarding of projects. Doing so in this manner will
help it leave a legacy of enduring public-private partnerships.

C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved. * The views and opinions expressed in this Paper are those of the author and do not necessarily reflect those of the Institute.
OCCASIONAL PAPER MARCH 2016
03 The Public-Private Partnership Program
PPP was first introduced in the Philippines in 1990,
through the passage of Republic Act (RA) No. 6957,
known as the Build, Operate and Transfer Law (BOT
Law), signed by then President Corazon Aquino. The
BOT Law authorizes private entities to construct, finance,
operate and maintain a public infrastructure facility.
Four years later, RA 6957 was amended by RA 7718 to
provide financial incentives and to minimize government
regulations so that the private sector will be more
encouraged to participate in the PPP program. RA 7718
governs the procurement of infrastructure or development
projects by the private sector. Under this law,
infrastructure or development projects may be
undertaken through any of the contractual arrangements
provided* therein for which pertinent incentives will be
given to stimulate private resources for the purpose of
financing the construction, operation and maintenance of
infrastructure and development projects normally
undertaken by the government.
Recognizing the importance of infrastructure in building
the foundations of a strong economy, past administra-
tions consistently focused on improving infrastructure,
certain that investments in this area would bring benefits
across sectors and create more opportunities for the
fast-growing population. Conversely, poor infrastructure
is widely accepted to be a significant barrier to
trade and discourages investment.
Projects through PPP are expected to boost the country’s
growth rate to 7-8%.1 This means intensified infrastruc-
C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved.
ture spending, increased private investment and
eventually higher tourism receipts, which will only
be possible by increasing investor confidence in the
country’s ability to finance and complete these PPP
projects. The resurgence of the PPP program in
this Aquino administration shows its commitment to
accelerating public infrastructure development that
would likely attract more foreign investment
and boost tourism, thereby increasing
job opportunities for Filipinos.
In 2011, Stratbase Research Institute published
its analysis on PPP through its Occasional Paper
entitled “The PPP Challenge”. The paper sought to
establish the importance of PPP to the country’s
economic growth for the succeeding years and,
further, provided recommendations on how PPP
can be properly implemented by the Aquino
administration so as to make it an effective
tool in national development.
Yet, the promise of growth via PPP has been
weakened by the vulnerability of the scheme to
politics. Had the Aquino administration maximized
the full potential of the PPP scheme, the Philippines
would have reaped the benefits of a growing
economy and a high rate of inclusive growth.
The underlying question arises as to how the
slow progress of the PPP program of the
Philippines has affected its competitiveness.
* Section 1 of R.A. 7718 enumerated/defined the following contractual arrangements: 1. Build-operate-and-transfer; 2. Build-and-transfer; 3. Build-own-
and-operate; 4. Build-lease-and-transfer; 5. Build-transfer-and-operate; 6. Contract-add-and-operate; 7. Develop-operate-and-transfer; 8. Rehabilitate-
operate-and-transfer; 9. Rehabilitate-own-and-operate; and 10. Such other variations as may be approved by the President of the Philippines.
Big ticket projects that investors have been
watching out to fund under the PPP program have
been slow to materialize. To date, out of the fifty
three projects in the PPP pipeline, only twelve
projects have been awarded:
(1) Daang Hari-South Luzon Expressway Link
Road;
(2) First phase of the PPP for School Infrastruc-
ture Project;
(3) Ninoy Aquino International Airport Express-
way;
(4) Second phase of the PPP for School Infra-
structure Project;
(5) Modernization of the Philippine Orthopedic
Center;
(6) Automatic Fare Collection System;
(7) Mactan-Cebu International Airport Project;
(8) LRT Line 1 South Extension;
(9) Integrated Transport System-Southwest
Terminal Project;
(10) Cavite-Laguna Expressway (CALAX);
(11) Integrated Transport System (ITS) – South
Terminal Project; and
(12) Bulacan Bulk Water Supply Project.
Out of these twelve projects, only the Daang
Hari-South Luzon Expressway Link Road, now
called the Muntinlupa Cavite Expressway
(MCX), is operational.2
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OCCASIONAL PAPER MARCH 2016
04
As of February 2016, 10 PPP projects are up for
bidding:
(1) Operation and Maintenance of LRT Line 2;
(2) Regional Prison Facilities;
(3) Laguna Lakeshore Expressway Dike Project;
(4) Davao Sasa Port Modernization Project;
(5) PPP Airport Operations and Maintenance of
the Bacolod (Silay) Airport & Iloilo Airport (bundle
1);
(6) PPP Airport Operations and Maintenance of
the New Bohol (Panglao) Airport, Laguindingan
Airport and Davao Airport (bundle 2);
(7) Road Transport IT Infrastructure Project
(Phase II);
(8) North-South Railway Project (South Line);
(9) Civil Registry System-Information Technology
Project (Phase II); and
(10) LRT Line 6 Project3
Infrastructure Limits Philippine
Competitiveness
The World Economic Forum (WEF)’s Global
Competitiveness Report defines competitiveness
as “the set of institutions, policies, and factors that
determine the level of productivity of a country. The
level of productivity, in turn, sets the level of
prosperity that can be reached by an economy. The
productivity level also determines the rates of return
obtained by investments in an economy, which in
turn are the fundamental drivers of its growth rates.
C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved.
In other words, a more competitive economy is
one that is likely to grow faster over time.”4
Table 1. Global Competitiveness report
(2015-2016)
Infrastructure is one of four pillars in the Global
Competitiveness Report’s index (GCI), alongside
institutions, macroeconomic environment, and
health and primary education. In elevating
infrastructure as a pillar, the Global Competitiveness
Report finds that “[a] well-developed infrastructure
system reduces the effect of distance between
regions, integrating the national market and
connecting it at low cost to markets in other
countries and regions. In addition, the quality and
extensiveness of infrastructure networks
significantly impact economic growth and reduce
income inequalities and poverty in a variety of ways.
A well-developed transport and communications
infrastructure network is a prerequisite for the
access of less-developed communities to core
economic activities and services.”5
Overall, the Philippines has improved its
competitiveness: rising five notches on the Report’s
2015-2016 index to 47th of 140 countries. The
country’s latest performance followed a 7-notch
jump to 52nd in the 2014-2015 report and a
6-notch jump to the 59th spot in 2013-2014. The
Philippines has jumped 33 places in total under the
Aquino administration, showing the ‘largest gain’
among all other countries in the study since 2010.
The Philippines got the highest ranking in terms of
macroeconomic environment followed by market
size and business sophistication (see Table 1). Source: the Global Competitiveness report 2015-2016
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OCCASIONAL PAPER MARCH 2016

05
The same report shows, however, that the
country lags behind in terms of infrastructure,
labor market efficiency and goods market
efficiency. The report lists the Philippines’
infrastructure score as the second most Table 2: Philippines Infrastructure Pillar Sub-index Ranking
problematic factor for doing business in the 2015-2016
Philippines, with the country ranking 91st of
the 140 countries in the study. As the report
illustrates, the country’s poor infrastructure
holds back its total productivity, even given a
permissive macroeconomic environment and
other positive indicators. With infrastructure as
the second pillar of competitiveness, serious
actions must be taken in improving the quality
of the country’s infrastructure. The specific
difficulties in the country’s infrastructure
can be seen in Table 2.

Compared to other Southeast Asian countries,

Philippines is still lagging behind, stuck behind
Singapore, Malaysia, Thailand and Indonesia
at the bottom of the so-called “ASEAN 5”.
Disappointingly, the country did not even show
a close margin among the higher four; Indo-
nesia, the next ranking neighbor placed ten Source: The Global Competitiveness Report 2015-2016
notches away at 37 (see Table 3). With this in
mind, the Philippines must identify
best practices in these four countries to be
able to know what it must follow for the
betterment of the country.

Singapore ranks to be one of the top

competitive countries, not just in Asia, but in

C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved. www.stratbase.com.ph
OCCASIONAL PAPER FEBRUARY 2016

06
the world ranking. It has an outstanding and stable
performance across all pillars. It takes pride in its Table 3: Global Competitiveness Index Ranking 2015-2016 of Southeast Asian Economies
world-class infrastructure such as its roads, ports
and air transport facilities. Malaysia remains to be
highest among the developing Asian economies,
and has been achieving high tourist arrivals.
Thailand, which has been experiencing political
crisis, performs well on macroeconomics pillars. Like
the Philippines, there are barriers challenging market
competition, most especially those that restrict
foreign investment. Aside from these, Thailand faces
challenges such as political instability, excessive red
tape, pervasive corruption, security concerns and
high uncertainty on property rights. Indonesia has Source: The Global Competitiveness Report 2015-2016

prioritized infrastructure: Presidential Special Staffer

for Economic Affairs and Development Prof.
Firmanzah, Ph.D. mentioned that “infrastructure de- Table 4: Global Competitiveness Index Ranking 2015-2016 of Southeast Asian Economies for the Infrastructure Pillar
velopment in the last five years is the Government’s
main priority to strengthen the country’s national
competitiveness”.6 The accelerating infrastructure
development is supported by the Master Plan for
Acceleration and Expansion of Indonesia’s Econo-
mic Development (MP3EI), according to Firmanzah.

With these assessments, the Philippines can learn a

lesson or two from each of the countries mentioned.
First, the country must focus its efforts on invest-
ing on world-class infrastructures, in order to be at
Source: The Global Competitiveness Report 2015-2016
par with or at the least approach Singapore’s rank.
Second, it should find out how Thailand manages to
obtain a high rank despite facing the same challeng- It has been said that the Philippines lacks competitiveness in the level playing field, and consistent government policies are crucial
es similar to the Philippines, especially in the aspect global arena and has an unattractive investment climate. Investors factors that foreign investors are right to expect from the PPP
of market competition. By doing so, the Philippines have been repeatedly affected by the unpredictable policy environ- scheme. Returns on investment should be attractive and, more
may be able to combat these barriers and excel ment; government inefficiency, and a poor regulatory quality and importantly, the investment should be secured from political
in other pillars wherein Thailand stands out. ineffective control of corruption in the Philippines. Transparency, a reprisals. Investors to PPP expect a well-managed process.

C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved. www.stratbase.com.ph
OCCASIONAL PAPER MARCH 2016

07
Critics of the Aquino government’s PPP Policy are tor Cosette Canilao of the PPP Center, the process and Aboitiz Equity Ventues, Inc. and Optimal Infra-
quick to point out that “no capitalist will invest in of conceptualizing the PPP projects and reviewing structure Development Corp., a subsidiary of diversi-
big-ticket projects in a relatively small market like the qualified companies who can participate in the fied conglomerate San Miguel Corp (SMC).
the Philippines without certain guarantees that will bidding takes time. The concerned government
ensure the protection and profitability of his agencies play the bigger role of conceptualizing and The financial proposal of Team Orion consisted of a
investment.” It is unlikely that investors will come in evaluating the projects. Although these government premium/concession payment of P11.659 billion. On
with fewer incentives. More investors will come only agencies are guided by a timeline, these are merely the other hand, the concession payment of Optimal
if given guarantees and protection such as guar- notional and can be adjusted. Thus, no direct was P20.105 billion. Optimal was disqualified to pro-
anteed investment return, access to loans backed accountability can be attributed to the PPP Center. ceed with the bid due to a defect in its bid security.
by government guarantees, and in recent years, In its defense, Optimal submitted that its bid security
protection from risks arising from unfavorable For the implementing agencies, a major cause of is valid until 29 November 2014 and thus was fully
court decisions that affect profitability”7 delay is the prolonged period of consultation bet- compliant with the bid requirements. In consonance
ween the private sector and the concerned with the provisions of the BOT law, Team Orion won
government agency. There is uneven technical cap- the project as the highest bidder.
PPP Program’s Choke Points pacity within the implementing agencies, with many
government officials not equipped with technical Rebidding of CALAX was then approved by the
The majority of the delays occur during the feasibil- training nor exposure to the nitty-gritty of infrastruc- NEDA Board chaired by President Aquino. The Pres-
ity study and prequalification stages. The tendering ture projects. As such, consultants are often hired to ident explained that foregoing the P9-bilion differ-
stage would range anywhere between nine to twelve provide an in-depth understanding of the complexi- ence in premium bid of Optimal could bankroll other
months: “Invitation to Bid (21 days); Response (45 ties involved and a full assessment of the projects. government projects. With the Department of Public
days), Prequalification (60 days), Preparation of Bids Works and Highways as its implementing agency,
(120-150 days), Evaluation & Award (30-60 days). The Premium Bid (aka Concession Payment) it underwent a revamped procurement process in
Next comes contract negotiation and government controversy in the case of CALAX June 2015 after the government learned its lessons
approvals and this takes three months. Then there is from a previous bidding mired in controversies. The
financial closing which takes anywhere from three to The controversial Cavite-Laguna expressway Board also approved a minimum bid price of P20.1
12 months.”8 The target deadlines keep on moving (CALAX), which aims to connect Bacoor and Kawit billion, the same amount submitted by Optimal. The
and moving for months, as seen in all projects. in Cavite and South Luzon Expressway areas, is a supposed winner of the CALAX project, Team Orion
P35.4 billion project under the Build-Operate-and- no longer participated in the rebidding.
The PPP Center coordinates this process, working Transfer structure. CALAX faced an issue on its bid-
to ensure that timelines for proposals and ding done in 2014. Among the bidders were Team Aside from Team Orion’s expression of disappoint-
studies are met. According to then Executive Direc- Orion, the 50-50 joint venture of Ayala Corporation ment towards the government’s decision, other

C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved. www.stratbase.com.ph
OCCASIONAL PAPER MARCH 2016
08
investors have likewise expressed their sentiments
towards the government’s blunders. Speaking on
behalf of local and foreign investors, Peter Angelo B.
Perfecto, Executive Director of the Makati
Business Club (MBC) previously pointed out that
the group’s level of confidence will erode if the
government approves a rebidding of the CALAX
project. Notwithstanding Aquino’s approval of the
rebidding, Perfecto remains firm in his statement but
pointed out that “there remains still a level of
confidence that the government will roll out
more PPPs without such similar issues”9
In the end, rebidding happened between San
Miguel Corporation’s Optimal Infrastructure
Development, Inc. and Metro Pacific Investments
Corporation’s MPCALA Holdings (MPIC). MPIC
won with the highest bid of P27.3 billion.
The President’s decision to order the re-bidding
of said CALAX project instigated the public to review
previous bids for certain PPP awarded projects like
the Mactan-Cebu International Airport
Passenger Terminal Building and Automatic Fare
Collection System. Contracts were awarded to
bidders who submitted the highest present value of
proposed payments to government pursuant
to Section 4.2 (H) of the Revised Implementing
Rules and Regulations of BOT law, in lieu of the
lowest bid and most favorable terms for the
project, as set out in R.A. 7718.
In a statement issued by the PPP Center, Deputy
Executive Director, Ms. Sherry Ann N. Austria, shed
C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved.
light on the nature of premium payments. “The
PPP Center would like to point out that premium
payments for the CALAX Project, just like in any
other PPP contracts previously awarded, will not
be passed on to the public through increased user
charges as these charges are pre-determined prior
to the bidding process and will be subject to the
review and approval by the concerned regulatory
agency (e.g., Toll Regulatory Board). These premium
payments will go straight to the National Treasury
which can then be used to fund other equally
important projects of the national government.”10
Further, it was noted that R.A. 7718 allows as
bid parameter the highest present value of
proposed payments to the government.
R.A. 7718 does not unequivocally provide as a bid
parameter the highest present value of proposed
payments to the government. Verily, Section 5 of
R.A. 7718 only provides that in case of build-
operate-and-transfer arrangement, the contract
shall be awarded to the bidder who, having satisfied
the minimum financial, technical, organizational and
legal standards has submitted the lowest bid and
most favorable terms for the project, based on the
present value of its proposed tolls, fees, rentals and
charges over a fixed term. On the other hand, in the
case of build-and-transfer or build-lease-and-trans-
fer arrangement, the contract shall be awarded to
the lowest complying bidder based on the present
value of its proposed schedule of amortization
payments for the facility to be constructed accord-
ing to the prescribed minimum design and
performance standards, plans and specifications.
Reference must be made to Section 4.2. (h) of the
Revised BOT Law Implementing Rules and Regula-
tions, which sets out the parameters and criteria for
evaluation of financial component of the bids, viz:
i. Lowest proposed toll, fee, rental or charge at
the start of project operation, if a pre-agreed
parametric tariff adjustment formula is
prescribed in the bid document;
ii. Lowest present value of government subsidy
to be provided for the period covered
by the contract;
iii. Highest present value of proposed payments
to Government, such as: concession fees,
lease/rental payments, fixed/guaranteed
payments, and/or variable payments/
percentage shares of revenue for the
period covered by the contract; or
iv. Any other appropriate financial bid parameter
as may be approved by the approving Body.
Except for item iii, the foregoing criteria find sup-
port from R.A. 7718, which for emphasis, provides
that the contract should be awarded to the lowest
complying bidder. On the other hand, the criterion
of highest present value of proposed payments to
government was not contemplated in R.A. 7718.
If at all, the premium/s (to be) paid by winning bid-
ders, which represents the highest present value of
proposed payments to government, are mere ad-
vance payments or prepaid tax to government and/
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OCCASIONAL PAPER MARCH 2016

09
Only Filipinos or corporations
or its share of revenue, to the detriment of the
future users of said infrastructure.

As Henry Schumacher, Executive Vice President of the

European Chamber of Commerce of the Philippines that are AT least
60% owned by Filipinos
(ECCP), stated, “It is also important to understand that
the higher the bidding goes, it only favors government
coffers; Juan de la Cruz will later on have to pay more
for the utilization of CALAX.”11 Business logic dictates
that proponents will seek to recover their investment for
are allowed to own land in the
Philippines, but foreigners are
the said project/s, which necessarily translates
to higher costs to the public. This arrangement
defeats the purpose of a PPP.

This view was supported by Senator Ralph Recto in

his statement on August 10, 2014,12 thus: “If a public
infrastructure or basic service is the one being
auctioned off, logic dictates that the best lowest bid
should win it as it would translate to lower fees to be
paid by the public who will use it. The higher the bid,
the higher the fees that the public will eventually
shoulder. It has a domino effect and the last tile will fall
on the people.” Further, he stated that the govern-
ment’s main consideration in awarding contracts should
be what the public will pay at the minimum, which will
not be achieved if the government will get an advance
payment or a prepaid tax, by way of premium,
for a structure that has yet to be built.
In view of the foregoing, the Senate passed
Resolution No. 810 on August 6, 2014, which
resolution was introduced by Senator Recto, directing
allowed to lease land
for 50 to 75 years
the appropriate Senate Committee to conduct an inquiry, in
aid of legislation, on the bidding process of PPP projects with
the end in view of ensuring that the Filipino will benefit quality
public services at the least possible costs.
The 60/40 Rule Applied to Infrastructure Investments
Easing restrictions on foreign investments will give the
country’s PPP program a shot in the arm. Republic Act No.
7042 or Foreign Investments Act of 1991, the law that governs
the participation of foreign entities in economic and
commercial activities in the Philippines, states that
foreigners may hold interests in corporations, partnerships
and other entities in the Philippines, provided that these are not
engaged in an activity that is reserved by law only to Philippine
citizens or entities that are wholly owned by Philippine
citizens. The maximum amount of foreign equity that is
allowed in a company depends on the type of activity that the
company is engaged in, which is undesirable for the foreign
investors. Only Filipinos or corporations that are at least 60%
owned by Filipinos are allowed to own land in the Philippines,
but foreigners are allowed to lease land for 50 to 75 years
depending on the land’s classification. Private corporations,
whether local or foreign, can only lease up to 1,000 hectares of
alienable public lands. There is no limitation regarding private

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OCCASIONAL PAPER MARCH 2016

10

lands. The difficulty lies when foreign investors try to tap the domestic market and work their way through
complicated bureaucratic procedures, local government corruption, only to find out that they are not
qualified to do business in the Philippines due to the foreign equity restriction. However, foreign
investors could still participate in the public bidding by partnering with a
Philippine national or domestic corporation, provided that.13

“at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least sixty (60%) of the fund will accrue to the
benefit of the Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders
own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent
(60%) of the capital stocks outstanding and entitled to vote of both corporations must be owned and
held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of
Directors of both corporations must be citizens of the Philippines, in order that the
corporations shall be considered a Philippine national”

Notwithstanding the foregoing options, Philippines is still not an attractive place for foreign investments,
whose capital is especially important for infrastructure investment. Big investments in infrastructure
developments are brought in by foreign investors, yet their ownership cannot go beyond 40% of the
equity and their participation in the management therefor is likewise subject to the same limitation. A
minority shareholder is often at risk of losing. Thus, without removal of the foreign equity limitations,
at least in the area of infrastrusture development, the confidence level of foreign investors
in the country will not improve, which is to the Philippines’ detriment.

C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved. Image Credit: corporatelivewire.com www.stratbase.com.ph
OCCASIONAL PAPER MARCH 2016
11
Recommendations and Conclusion
1. President Aquino can hasten the awarding of
more PPP projects, focus on monitoring already
existing PPP projects, or do both. Improved
transportation and infrastructure are needed to fully
harness the country’s economic potential. These
projects are also beneficial in terms of
generating additional employment, investments and
more foreign arrivals. The failure of the
government’s flagship program thrust to take
off has been a source of frustration since
its launch in November 2010.
2. For the progress of the program to accelerate, the
government should be firm on the observance of its
processes and timelines. Stakeholders such
as the bidders, among others, should also do its
part in strictly observing the process. There should
be a strong mechanism for collaboration and
consultation between the public and private
sectors in order to facilitate project development
with minimum legal impediments.
3. The success of a country’s PPP program
depends on the continuity of a government policy,
a perception of minimal political and economic risk
that is instilled in the minds of the investors and
stable macroeconomic management. As reality
checks were made since its ambitious launch, the
PPP Center is still optimistic that at least 80% of the
C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved.
PPP projects in the pipeline will be awarded before the term of President Aquino ends in three months.
4. The proposed amendments to the BOT Law, which is one of the priority bills of President Aquino
would have institutionalized the supposed reforms initiated by his administration and thus would
ensure that said reforms would be continued by the next administration.
In particular, House Bill No. 6331, the House of Representatives version of the proposed amendments
to the BOT Law, features provisions attuned to international standards, where private sector participation is
truly encouraged and the partnership valued. Among the notable clauses of HB 6331 are on the following:
a) Issuance of Administrative Franchise, License or Permit. HB 6331 provides for the automatic
grant of administrative franchise, local or national permits, or any other requirement for the
implementation of the PPP project once the contract is duly executed;
b) Projects of National Significance. Upon classification by the President of energy, toll road, mass
transit, water, sewerage, and such other projects, HB 6331 proposes that said projects deemed
imbued with national significance shall be exempt from the real property taxes levied under the Local
Government Code, and from all local taxes and fees. The project shall also be automatically
issued the necessary business permits, including renewals of such permits; and
c) Recovery of Investment. HB 6331 likewise mandates that PPP contracts include an agreement on
the recovery of the proponent’s investment by collecting of tolls, fees, rentals or charges, engaging in
commercial development, or receiving viability gap funding (VGF), that is financial support from
government to make user fees affordable, or direct payment from government, among others.
The above cited provisions reflect modern governance where there is acknowledgement that
through a robust partnership with the private sector, the government can
better deliver the services our country and our people need.*
* House Bill No. 6331, An Act Institutionalizing and Strengthening Public-Private Partnerships, and Appropriating Funds Therefor,
as part of Committee Report No. 947, submitted by the Committee on Public Works and Highways, the Committee on Appropria-
tions, and the Committee on Ways and Means on December 14, 2015, Sections 13, 20, 28 (c).
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OCCASIONAL PAPER MARCH 2016
12
5. The best lowest bid should always win as it would
translate to lower fees to be paid by the public
who will use it. The higher the bid, the higher the
fees that the public will eventually shoulder.
Inevitably, it will be the public who will suffer from
such arrangement. The government’s main
consideration in awarding contracts should be what
the public will pay at the minimum, which will not be
achieved if the government will get an advance
payment, by way of premium, for a structure that
has yet to be built. Not only is the public required
to pay a fee for a basic service that a government
should have rendered for free, but the public will be
required to pay a higher fee in order to recompense
the bidder for its premium payment to the govern-
ment. Government should see that PPP is not
crafted for the purpose of raising revenues
but rather to be able to provide public services that
the government cannot afford.
6. Finally, more than being just a mere coordina-
ting agency, the PPP Center should be given more
Endnotes:
1
Global Source Partners. (2011). A Bet on PPP. Retrieved from
http://www.globalsourcepartners.com
2
PPP Center. (2016). Pipeline of Projects. Retrieved from http://
ppp.gov.ph/?page_id=26075
3
PPP Center. (2016). Pipeline of Projects. Retrieved from http://
ppp.gov.ph/?page_id=26075
4
World Economic Forum. (September 2014). The Global Com-
petitiveness Report 2014-2015
5
World Economic Forum. (September 2014). The Global Com-
petitiveness Report 2014-2015
C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved.
leeway to act independently on proposals, whether
for solicited or unsolicited projects. The PPP Center
should be able to independently address the whole
process of the PPP scheme. For that purpose,
the PPP Center becomes a one-stop shop for
infrastructure developments which would include
the conceptualization, evaluation and approval of
projects. This concept would eliminate or at the very
least, minimize the bureaucracy problem.
PPP projects should be a reflection of the
Philippines on how modernized and integrated our
facilities will be, a link for an innovative and
competitive environment for the future. Certainly, the
PPP scheme has yet to reach its fullest potential.
6
Sekretariat Kabinet Republika Indonesia. (September 21,
2014). Increase in Indonesia’s Global Competitiveness Index Reflects
10
PPP Center. (September 1, 2014). “PPP Centers reaction
to Calax commentary. Retrieved from http://ppp.gov.ph/?in_the_
Improvements in Its Economic Performance. Retrieved from http:// news=ppp-centers-reaction-to-calax-commentary
setkab.go.id/en/increase-in-indonesias-global-competitiveness-in-
dex-reflects-improvements-in-its-economic-performance/ 11
Amojelar, Darwin. (November 24, 2014). European Chamber of
Commerce of the Philippines. President Aquino orders rebidding of
7
IBON. (November 11, 2010). PPP: More public debt, less gov’t Cavite-Laguna Expressway project. Retrieved from http://www.eccp.
responsibility. Retrieved from http://ibon.org/2010/11/ppp-more-pub- com/articles-page.php?category=2&article_id=1064#details
lic-debt-less-govt-responsibility/
12
Senate of the Philippines. (August 10, 2014). Recto: High PPP
8
Chanco, B. (Feb. 28, 2011). Philippine Star. Stale bureaucratic bids could lead to higher user charges. Retrieved from https://www.
thinking delays PPP Retrieved from http://www.philstar.com/busi- senate.gov.ph/press_release/2014/0810_recto1.asp
ness/661176/stale-bureaucratic-thinking-delays-ppp
13
Republic Act No. 7042 Foreign Investments Act of 1991
9
Business Mirror. (February 17, 2015). ‘Calax should be sole
exception’. Retrieved from http://www.businessmirror.com.ph/calax-
should-be-sole-exception/
www.stratbase.com.ph
9.3
VOLUME

ABOUT
Victor Andres “Dindo” C. Manhit
is the CEO and Managing Director of the Stratbase Group and
President of the ADR Institute. He specializes in Strategic Public
Management, Legislative Research and Governance Reforms. His
research interest and field of specialization had led him to pursue
active involvement in legislation, bureaucratic work
and civil society advocacy.

Maria Claudette L. Guevara is the Chief of Staff of the

Stratbase Group and is a Research Analyst at the ADR Institute.

Stratbase’s Albert Del Rosario Institute

is an independent international and strategic research
organization with the principal goal of addressing the
issues affecting the Philippines and East Asia
9F 6780 Ayala Avenue, Makati City
Philippines 1200
V 8921751
F 8921754
www.stratbase.com.ph

C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved. Image Credit: joc.com