Build, Build, Build better than PPP?

The administration of President Rodrigo Duterte should take heed of the recent review done by the Commission on Audit (COA) on government projects offered under private-public partnership (PPP) schemes. Doing his own version of PPP, which they call “Build, Build, Build,” President Duterte can draw lessons from the PPP projects that were subsequently left stuck at the pipelines and eventually abandoned.

Although abandoned or scrapped, the national government had already paid huge amounts of taxpayers’ money under the so-called mobilization fund for many, if not all, of these abandoned PPP projects.  

A review completed by COA of PPP projects from 2015 to 2017 showed some P845 million of public funds were disbursed to various national government agencies (NGAs) and government-owned and controlled corporations (GOCCs) for PPP projects which were eventually cancelled. The COA called out, in particular, the Public-Private Partnership Center of the Philippines (PPPCP) to collect from various implementing agencies a total of P845.842 million for the cost of feasibility studies on infrastructure projects that were already terminated.

In an annual audit report posted on its website on June 6, COA noted that as of Dec. 31, 2017 the PPPCP accumulated uncollected project development costs (PDCs) from 2015 to 2017 sourced from its revolving fund dubbed as the Project Development and Monitoring Facility (PDMF) Fund. The PDCs pertain to the costs of pre-feasibility and feasibility studies disbursed by PPPCP to the agencies chosen to implement the projects.

Under the PDMF guidelines, COA pointed out, the implementing agencies (IAs) must reimburse the PPPCP 100 percent of the released PDC in case of the project’s termination. During the period in review, COA cited several NGAs and GOCCs chosen to implement the infrastructure projects had sent letters to the PPPCP informing them of the projects’ termination and yet, “had not reimbursed the PPPCP despite their notifications.”

In its audit report, COA said the PPPCP was only able to collect P23.2 million in reimbursement from the Department of Transportation (DOTr) last year for a cancelled motor vehicle inspection system project. The DOTr still needs to reimburse P205.8 million to PPPCP for the terminated North-South/Integrated Luzon Railway Project. The COA report shows the DOTr’s dues have been for more than five years already.

Other unpaid dues pertain to the P115.18 million in feasibility study cost for the project which aims to extend the Light Rail Transit Line 1 to Dasmariñas City, Cavite; the P5.65-million feasibility cost for the rehabilitation of the Angat Hydroelectric Power Plant turbines; Laguna Lakeshore Expressway Dike Project (P151.84 million in feasibility study cost); the New Centennial Water Source Project (P101.07 million); the Batangas-Manila Natural Gas Pipeline Project (P48.78 million); the Plaridel Bypass Toll Road Project (P43.71 million); and the Puerto Princesa Airport (P38.09 million).

True to his campaign promise during the May 2016 presidential elections, the former Davao City Mayor indeed adopted and sustained projects of his predecessors that are deemed good for the country while setting aside not-so-good ones. The PPP, in particular, was pursued by the previous administration of former President Benigno Simeon Aquino III.

However, the IAs justified the termination of some PPP projects citing, among other reasons, that they were merely complying with the Duterte administration’s policy shift to avail of official development assistance (ODA) and foreign loans in funding infrastructure projects. Some other IAs claimed their projects could not also be implemented through PPP because of security issues cited by the Department of National Defense.

In fact, the economic managers of President Duterte just concluded yet another of their efforts to win over Japanese confidence on the fate of their ODA-financed projects in the Philippines. From Tokyo, Finance Secretary Carlos Dominguez tweeted: “We assure the Japanese business community that the government under President Duterte will continue to further open the economy to investors and improve the ease of doing business, respect the sanctity of contracts, and promote a more conducive climate for investments.”

President Duterte’s economic team conducted their high-level dialogues with the Japanese Ministry of the Economy, Trade and Industry (METI) on the administration’s flagship infrastructure projects under the “Build, Build, Build” program.

In relation to this, the Senate announced its intention to conduct an inquiry into how the Duterte administration is financing its ambitious P8-trillion “Build, Build, Build” infrastructure program over concerns about the country’s growing foreign debts stock. Sen. Sherwin Gatchalian, as the chairman of the Senate committee on economic affairs filed Senate Resolution 759 seeking legislative inquiry into these ambitious infrastructure projects under the Duterte administration.

The Senate will look into the status, sustainability and risks of projects under “Build, Build, Build.” 

Senate president pro tempore Ralph Recto echoed the Senate’s concern on how the massive infrastructure program would be financed since much of the proceeds from the Tax Reform for Acceleration and Inclusion (TRAIN) law have been already earmarked for social projects. The resident economist at the Senate, Recto cautioned the Duterte administration not to rely much on ODAs as it may push our country back into unwieldy indebtedness. 

Forty out of 75 approved infrastructure projects under “Build, Build, Build” as of July 2017 will reportedly be funded through ODAs. As of December 2017, our country’s total outstanding debt stood at P6.65 trillion, while around P329.05 billion was allocated for debt servicing in the 2018 budget.

As I gathered from local and foreign business groups, the investment community is grumbling over the administration’s ODA preferred mode in financing “Build, Build, Build” program. If indeed they offer better terms, why not PPP then?