Which is better PPP or ODA?
The DU30 government's "Build, Build, Build" infrastructure program over the next five years will need P3.6 trillion over the next three years and P5 trillion up to 2022. This a laudable program as the Philippines has been underspending on infrastructure for years due to the lack of funds. Now that our country's credit rating has reached Investment Grade and with liquidity in the world financial system, we can raise the money we need to build roads, bridges, seaports, airports, power, water, communications, and transport systems that we sorely lack in Metro-Manila and all over the country.
In the last 10 years, to bridge the funding gap for infrastructure and also for project management reasons, a lot of infrastructures all over the world were built via a Public-Private Participation (PPP), where the government provides some input like land and the private sector constructs and manages the projects for some years for a fee or a toll on the usage. The alternative was for the government to build the project totally on its own, funding it from the annual budget which requires the government to borrow from domestic or foreign lenders including multilateral institutions and foreign governments, which is why it is usually referred to as Official Development Assistance (ODA) funded projects.
Experience in the Philippines and in other countries show that PPP projects were finished on schedule and at the projected costs. This is due to the condition that the private project proponent will shoulder any cost overrun on the project except on very exceptional circumstances. The other advantage of PPP projects is the availability of engineering and technical expertise from the private sector proponents which already have international experience. The complaints of government side, is that PPP projects tend to be expensive because the private sector proponent have to achieve a return on their investment which is included in the cost of the project. This is a valid argument, if it is our government policy that all infrastructure projects should be provided by the government to the people for free. There is, however, the argument that infrastructures should be paid by the people who use them and not by everybody from the taxes collected by the government. Water systems, transport systems, and ports that are used by people in a certain area should be paid for by the people in that area. Why should someone from the province shoulder the cost of a Manila LRT when he will never use them?
The solution to PPPV cost was actually resolved by the government a few years ago by limiting the projects that will allow unsolicited proposals to projects that are high-risk, uncertain or of low commercial value, and no possible bidders. All other infra-projects for PPP will be bid out and the bidder with the best terms will be awarded the project. These have already been done in some of the projects in the last seven years and it has worked.
The economic and financial officials of the government have assured that the higher borrowing of the government to fund the trillion-peso infra program of DU30 is affordable due to the higher government revenues as the economy keeps on growing at 7 percent per year, and this will only be 5 percent to 6 percent of the annual budget. This is very probable but still needs monitoring in case our economy falters. This makes PPP even more attractive as there will be minimal budgetary support since most of the funding will be the responsibility of the private proponent.
As a final "caveat" on ODA, there are now growing concerns in some Latin American and African countries, that the ODA from China have been disadvantageous to them, affecting their political sovereignty and becoming a burden to their country.
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