The Congressional Policy and Budget Research Department (CPBRD) has urged lawmakers to amend the 27-year-old Build-Operate-Transfer Law to balance the public need for infrastructure development and the private sector’s return on investment.
In a policy brief, the CPBRD pointed out that in the government’s “Build, Build, Build” (BBB) infrastructure program, 18 out of 30 PPP projects were unsolicited, accounting for P1.3 trillion or more than 75 percent of the total cost.
Solicited PPPs will be more advantageous to the public and reduce the exposure risk to contingent liabilities, which could reach P312 billion under a worst-case scenario of 24 PPP projects failing to generate enough revenues to pay off debt, it said, citing estimates from the interagency Development Budget Coordinating Committee.
“This (solicited PPPs) does not only lessen the government’s exposure to contingent liabilities, it also forces implementing agencies to strengthen their capability in project planning, preparation and development consistent with the overall infrastructure development plan of the government,” it said.
“Since solicitation is done through the publication of an invitation for interested bidders and selection of the private proponents through a public competitive process unlike [unsolicited projects], it is likely that the government gets the best value for its money,” the think-tank said.
While the government has a bias for traditional public procurement through budget appropriations and official development assistance, as well as a “preference” for hybrid PPPs, “it cannot be denied that the success of its massive infrastructure roll-out under the BBB Program also hinges on the establishment of a sound legal and regulatory framework for PPPs,” it said.
The CPBRD called for disclosures of contracts and a level playing field for the private sector, as well as a framework for the management of contingent liabilities to mitigate the government’s fiscal risk exposure from PPP projects.
It also called for “viability gap funding” for projects that are not commercially viable and a ban on conflicts of interest by prohibiting regulatory bodies from entering into PPP contracts.
A joint venture (JV) contract may be acceptable but not as unsolicited proposals, the CPBRD said, as it will give “undue advantage to the implementing agency’s private proponent partner in pursuing a PPP project.”
“This is not aligned with the principle of competitive tendering which should be the norm in PPPs for infrastructure development to get the best value of the government’s scarce resources,” it said.
It warned that the transfer of a joint venture project to a private proponent “under certain conditions may cause security and sovereignty issues especially when the JV project involves the country’s natural resources and critical infrastructure.”
The CPBRD noted that neighboring countries such as Indonesia, Vietnam, and Thailand have either developed new PPP laws or updated existing ones. Isabell Andrea Pine