Government likely to tap private funds for infra plan

If new tax reform law fails to meet revenue target

MANILA, Philippines — The government will tap private sector financing for its ambitious infrastructure program if revenue collection from the new tax reform law falls short of target, the country’s chief economic planner said. Socioeconomic Planning Secretary Ernesto Pernia said the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law is expected to yield around P90 billion in additional revenues during the first year of implementation, significantly lower than the P134 billion forecast in the original proposal.

He said economic managers have also lowered revenue targets in the medium term, or from 2018 to 2022.

Pernia said the expected lower additional revenue generation from TRAIN will thus require a shift in the financing of infrastructure projects.

He said additional borrowings is also an option, but greater participation by the private sector in the administration’s ambitious Build Build Build program may be considered.

“There may be more private sector (participation),” he said in a recent interview when asked if additional foreign borrowings, especially from China and Japan, are being planned.

Asked if this may mean accepting more unsolicited proposals for evaluations,  he said: “Yes, the President has also said that.” 

He noted, however, that this matter has yet to be discussed with other economic managers.

The National Economic and Development Authority (NEDA) has said that government intends to fund 78 percent of the P9.04 trillion budget for infrastructure in six years through annual appropriations, with the balance to be funded by a mixture of official development assistance (ODA) and foreign borrowings.

President Duterte, however, recently expressed preference for a Swiss Challenge system, which allows the private sector to submit a proposal to the government. Third party players can match or surpass the proposal. The original proponent will also have the option to regain control of the project by in turn surpassing third party offers.

Among the unsolicited proposals making progress in the approval process is San Miguel Corp.’s Bulacan airport project which is now being reviewed by NEDA.

Pernia earlier said the project remains viable but the the agency is still seeking more information on the financial aspect of the project before it advances in the approval process.

The proposed P700-billion international airport project in Bulacan will cover around 2,500 hectares, of which 1,168 hectares will consist of an airport complex while the remaining 1,332 hectares will serve as a city complex. The gateway is expected to be completed in six years upon approval.

The airport proposal, which is under review by the technical board of the NEDA  Investment Coordination Committee (NEDA-ICC) – passes the so-called hurdle rate or the minimum rate of return required to make the investment worthwhile. 

Clarifications, however, are sought on the financial rate of return of the project which would give the government a clearer picture of the project’s profitability.