Private sector cool to PPP hybrid financing

MANILA, Philippines -  The private sector remains uncomfortable with the government’s hybrid approach for infrastructure projects.

First Metro Investment Corp. (FMIC), the investment arm of the Metrobank Group, for instance, has expressed reservations over the government’s hybrid mode for big-ticket infrastructure projects, saying that it may entail additional cost for the government.

“There is quite a concern on that. Money is one issue. ODA money comes from counterpart and the real problem is technical competence. There is lack of competence on the part of (some) governments,” said FMIC chairman Francisco Sebastian.

Sebastian said the private sector the both the money and the technical competence to implement big ticket infrastructure projects.

FMIC president Rabboni Francis Arjonillo said that for ODA funded projects, these usually require foreign exchange cover and that the government providing the ODA would also require that the equipment be sourced from their country.

He said this could easily multiply the cost by 45 percent.

In the end, Sebastian said it is important for the government to decide fast on the projects in the pipeline so that concerned parties such as the private sector can better prepare and the projects can get going.

“The government needs to decide fast,” Sebastian said.

Justino Ocampo, FMIC head of Investment Banking said companies would be interested on unsolicited projects.

He also said conglomerates interested in vying for the government’s infrastructure projects would now have to do some recalculating because of the new hybrid approach.

Under the Dutertenomics’ hybrid approach, the government will build the projects and later on bid out the operations and maintenance to the private sector.

Funding for the projects to be developed by the government will come from a mix of sources such as bilateral loans, official development assistance and own government funds.

This, however, potentially takes away some business opportunities for Filipino businessmen, some of whom already got all excited with the Duterte administration’s vow to usher in the so-called golden age of infrastructure in the country and its move to welcome unsolicited proposals.

But government officials said this is the fastest approach as the traditional PPP project usually takes 29 months before it takes off while unsolicited proposals require a 20-month lead-time.

Furthermore, officials said the government can borrow at lower rates through grants and concessional loans and later on harness the private sector’s expertise in managing, operating and maintaining such infrastructure projects.

Dutertenomics is an P8 trillion plan focused on improving the infrastructure in the country.

Tycoons have said the hybrid approach may indeed pose problems.

 “The government has decided to adopt the hybrid PPP approach to infrastructure to make it more expeditious. Government will build projects and bid out operations and management. Now, this hybrid approach has started communication within the business community,” Manuel V. Pangilinan has said.

He said the first concern is whether the government has the capacity to execute these large projects.

“The second concern is that a good portion of this spending will be financed by debt. Debt eventually will have to be paid,” Pangilinan said.