PPP hybrid formula to fast track implementation of road projects in Luzon

LRT Masinag extension line under construction. File Photo

The fiscal administration under President Rodrigo Duterte is boasting of its makeover of the Public-Private Partnership (PPP) program with the adoption of a “new” approach to fast-track the implementation of two road projects in Luzon.

Finance Secretary Carlos Dominguez III said that under the hybrid PPP formula, the government selects, finances and builds big-ticket projects through competitive public bidding and, upon completion, auctions off their operation and maintenance (O&M) to the private sector.

“There were two road expansions that were done in the north of Manila, which we decided that we were going to just do the projects ourselves and by deciding to do that, we have already started it in less than nine months,” Dominguez said at a recent government “DuterteNomics” forum in Manila.

Public Works Secretary Mark Villar identified the two on-going projects as the Plaridel Bypass Road, which will link the North Luzon Expressway (NLEX) in Balagtas, Bulacan with the Maharlika Highway in San Rafael, Bulacan, and the Central Luzon Link Expressway (CLEx), which will connect Cabanatuan City in Nueva Ecija to Tarlac.

Adopting a hybrid formula is the fastest and most cost-effective way of utilizing the PPP mode in partly implementing the Duterte administration’s unmatched infrastructure buildup over the next five years, Dominguez said.

At the forum held at the Conrad Manila Hotel last April 25, Dominguez justified, “The reason we are reversing the process in the past administration — they did the PPP from the beginning. When we examined the length of time it took to negotiate the PPP [projects], the average time was 29 months before you start the project.”

“So we’re saying, you know, we can do it a bit faster, and secondly we can also borrow money cheaper. And we can PPP the project at any stage: we can PPP it in the middle or we can PPP it at the end,” he said.

Dominguez also pointed out that the government has been in discussions with large foreign retirement funds that typically don’t invest early because they don’t want to take on the construction risks

Some of the Philippines’ biggest names in the business sector attended the forum, among them, Jaime Zobel de Ayala of the Ayala Group, Tessie Sy Coson of SM Investments Corp., Danel and Sandro Aboitiz of Aboitiz Equity Ventures, Edgar Injap Sia II of Double Dragon Properties Corp., Kevin Tan of Megaworld Corp., and Michael Tan of the LT Group Inc.

Budget Secretary Benjamin Diokno disclosed the government’s infra buildup will require some P8 trillion over the medium term.

The government will fund this ambitious infra buildup primarily through its proposed comprehensive tax reform program (CTRP) now pending in the Congress, commercial loans and official development assistance from countries such as Japan and China.

Undertaking the construction of PPP projects via the hybrid mode would prove cheaper in the long run, Dominguez said, considering that the government can borrow at lower rates through grants and concessional loans and later bank on the private sector’s expertise in managing, operating and maintaining the projects.

The “DuterteNomics” forum series presents to the public the government’s ambitious “Build, Build, Build” agenda consisting of big-ticket infra projects, among them the NLEX-SLEX Connector Road, the Bonifacio-Ortigas Road Link, Mindanao Railway, New Clark City, and the Mega Manila Subway.

Of course, observers will always have some words on the hybrid approach. May no one enrich himself of these fast tracked transactions. (With DOF briefing)


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