PPP still vital in infra push – ADB

MANILA, Philippines -  The size and extent of the government’s infrastructure development program in the medium term will still require the active use of the public-private partnership (PPP) scheme, the Asian Development Bank (ADB) said.

In a recently-published paper titled “Scaling Up Infrastructure Investment In The Philippines: Role of Public-Private Partnership and Issues,” the multilateral development bank said the country already has a developed PPP mechanism that only needs to be in sync with short term and medium term infrastructure investment plans.

The Duterte administration is pursuing an ambitious P8.4-trillion public investment program on infrastructure within its term to reverse decades of underspending on public assets. Alongside a new medium-term development plan, the Three-Year Rolling Infrastructure Program (TRIP) was revived to identify and fund projects that need to be completed within a three-year period. Around 4,895 projects costing P3.6 trillion have so far been identified for completion by 2020 under TRIP.

ADB places the country’s current public capital stock — economic and social infrastructure — at only 35 percent of gross domestic product (GDP), noting this is “less than half” of the average in ASEAN.

 “The size of the infrastructure need requires the expansion of both budget spending and public-private partnerships (PPPs),” the ADB paper said.

To speed up the implementation of big-ticket infrastructure projects, the administration currently prefers to build the hard infrastructure through the use of official development assistance (ODA) funds and loans from multilateral development banks and later on bid out the operations and maintenance to the public sector.

It is, however, promoting the use of PPP in infrastructure development in local government units.

But ADB said the PPP route is still a viable means of pursuing key projects as the Philippine government has been able to steadily strengthen the framework for PPP project preparation and approval.

 “Reforms have focused on building institutional capacity to develop, bid out, and approve solicited proposals — supported by technical assistance grants for transaction advisers via a project development and monitoring facility (PDMF) — in line,” said the paper. “In addition, the PPP Center was reorganized into a more dynamic agency and designated as the central unit for managing PPP projects. This reform strengthened the project selection and approval processes as well as the risk allocation framework.”

The case against PPP has always been the substantial amount of time it entails — an average of 29 months — to move a project from planning to implementation.

ADB said PPP could be effectively used within the medium term public investment framework by prioritizing projects that fit the goals within the time period.

 “Given persistent bottlenecks in various sectors, PPPs will remain an attractive option for meeting the infrastructure requirements of the economy. However, the size of the comprehensive and integrated infrastructure program suggests that prioritization triggers could be strengthened to ensure the infrastructure program remains within the available resource envelope,” ADB said.

 “A critical review of the stock of development projects could be undertaken to identify and remove projects that are no longer government priorities. Moreover it is important to strengthen the gatekeeping role of NEDA (National Economic and Development Authority) and the ICC (Investment Coordination Committee) to improve the ability of individual departments to appraise, prioritize and select projects,” it added.

ADB also said the PPP mode of project procurement could be effectively used in addressing the country’s huge infrastructure gap if links between planning and budgeting within a medium-term resource framework can be strengthened.

Departments and agencies that are on the receiving end of proposals should also have the capacity to identify proposals that fit investment objectives within the medium term.

The bank also urged the amendment of pertinent laws to improve the legal and regulatory environment for PPP and to attract more investments in infrastructure.