PPP: Post PNoy projects?

Luis Leoncio

President Aquino’s private-public partnership (PPP) program, once touted as the centerpiece of his administration, appears to have become nothing but a butt of jokes as his administration winds down a little more than a year from today.

The reason: Only 19 percent of the 29 flagship projects that were assigned with costs have been completed during the four years of his six-year term.

And of the 61 PPP projects, only nine, according to observers, have an “even chance” of being completed before Mr. Aquino steps down on June 30, 2016.

Former Budget Secretary Benjamin Diokno coined a new meaning for PPP: Post-PNoy projects.

Some investors who appealed for anonymity for obvious reasons have also started calling the program Power-Point Presentation, an allusion to a software company that offers a program of the same name to clients who want to use it for their presentation

The PPP projects were originally trumpeted to set up the infrastructure that the country sorely needs to attract investments. But the failure of the administration to deliver on this has been the primary concern raised by foreign businesses in pulling back their investments in the country.

The low achievement record for the projects under the PPP scheme was also partly blamed for the low spending clip of the government that, in turn, was considered a drag on economic growth.

In a last-ditch effort to save face, the administration is rushing big-ticket pro-jects like the Mass Transit System Loop that aims to put up the country’s first subway connecting major business centers in Manila at a cost of P370 billion.

But it is not fooling the experts, or critics, as administration men are prone to call them.

“The emerging consensus is that only a handful of PPP projects, mostly of the ‘low-lying fruit’ type, would be completed during Aquino’s six-year term,” Diokno said.

“About half might not even see the light of day.”

Diokno also said, “The lack of public infrastructure has been and will continue to be a major constraint to the development of the Philippines.”

The Philippines has the poorest state of public infrastructure among the major Association of Southeast Asian Nations economies or Asean 5 composed of Singapore, Malaysia, Thailand, the Philippines and Indonesia, especially its port and airport facilities, Diokno noted.

To date, only nine PPP projects have been awarded, including the four-kilometer Daang Hari-Slex Link Road project, the first and smallest of the PPP projects, which is moving at a snail’s pace. It’s a simple project, according to those involved, but after nearly three years, it is is only 34-percent complete.

Three of the six projects awarded—the school infrastructure projects (Phases I and II) and the modernization of the Philippine Orthopedic Center—are what government executives call ‘low lying fruits.’ They pose no serious problems and can be implemented with very little objections from the public.

Also among the awarded projects are the P15.52-billion Ninoy Aquino International Airport (Naia) Expressway (Phase II) project; the P17.52-billion Mactan-Cebu International Airport Passenger Terminal Building; the P64.9-billion light rail transit (LRT) line 1 Cavite Extension and operation and maintenance; and the P2.5-billion Integrated Transport System – Southwest Terminal Project.

“When Mr. Aquino assumed office, the estimated shortage in classroom units nationwide at 66,800 classroom units. These could have been built much more quickly, and in a more labor-intensive way, had the government contracted out the projects to small- and medium-sized contractors in the provinces, rather than contracting them out to three large contractors,” Diokno said.

With many contractors, the job could be done simultaneously in all areas in the country.

The PPP for School Infrastructure Project (PSIP) Phase I involves the design, financing, and construction of about 9,300 one-story and two-story classrooms, including furniture and fixtures, in various sites in Regions I, III and IV-A.

As of January 31, 2014, only 2,404 classrooms have been completed. The construction of 3,532 classrooms has been started and notices to proceed (NTPs) have been issued for 1,971 sub-projects involving 6,945 classrooms. The PSIP Phase I contract was awarded to one large contractor.

Phase II of PSIP involves the design, financing, and building of 4,370 one-story, two-story, three-story, and four-story school buildings, including furniture, fixtures, and toilets in 1,735 public schools in Regions I, II, III, X, Cordillera Autonomous Region and the Caraga Region, which is made up Agusan del Norte, Agusan del Sur, Surigao del Norte, Surigao del Sur and Dinagat Islands .

The PSIP Phase II contract was awarded to two large contractors.

Smaller projects are faster to implement than large PPP projects. As a result, beneficiaries (students, teachers, and patients) will enjoy the benefits much sooner since projects are completed earlier, Diokno said. The bottleneck on the PPP projects is in the bureaucracy, he added.

The Philippines and 20 other members of the Asia-Pacific Economic Cooperation (Apec) were considered to have huge potentials to attract investments in “viable and well-structured” PPP projects, particularly urban infrastructure.

Guillermo Luz, Apec Business Advisory Council alternate member, said the amount of funding for development of infrastructure across the Apec region is getting bigger mainly due to urbanization.

“To the extent that there is some form of predictability behind the projects, predictability, I think, will give investors a sense of the viability of the projects,” he said.

Luz said PPP projects should be also “purposely planned” to attract more private sector investments.

“(For instance,) if people begin to see that housing and commercial developments and others are built, the role of mass-transit infrastructure will be justified… If there is nothing there, no one will invest,” he said.

Asia-Pacific Infrastructure Partnership (APIP) Chairman Mark Johnson said it is imperative that Apec economies create regulatory structures to deal with the issues of pricing and taxes, among other things.

Johnson also underscored the role of infrastructure in facilitating the movement of people through ports, airports and roads; and in achieving inclusive economies.

“If you want a more inclus   ive economy, people have to make use of those (projects) to move around; businesses (also should be) able to have much greater mobility,” he noted.

Despite the setbacks, however, the President continues to be upbeat about the outcome of his pet projects, saying his administration had secured commitments to pursue most of the project in the PPP drawing board.

“Most of these projects aim to have a more reliable and efficient transport infrastructure system. These are consistent with the government’s thrust to increase investment in connective infrastructure,” Economic Planning Secretary Arsenio M. Balisacan said.

Six infrastructure projects recently approved by the National Economic and Development Authority (Neda) include the Panguil Bay Bridge Project, which will connect Tangub, Misamis Occidental, and Tubod, Lanao del Norte; Phase 1 of the North-South Commuter Railway (NSCR) Project, which involves the construction of an elevated commuter railway from Malolos to Tutuban; the North-South Railway Project—South Line, which will connect Metro Manila and Legazpi City, Albay; the Tarlac-Pangasinan-La Union Expressway (TPLex) Project; the NLex-SLex Connector Project; and the Cavite-Laguna Expressway Project. Costing over P370 billion, these projects aim to improve connectivity in the country, consistent with the administration’s goal of boosting the Philippines transportation system.

PPP Center Managing Director Cosette Canilao recognized that protecting investors should be a priority to haul in more foreign investments primarily for the Aquino administration’s flagship projects.

“We give weight to the inputs of the private sector while ensuring that the interest of the public is not compromised,” Canilao said.

On a brighter note, Canilao said the government remains ahead, compared with previous administrations in terms of PPP projects.

She said the nine projects under Aquino were more than the six solicited PPP projects awarded in the past three administrations.

“These numbers represent not only the value of implementing PPP projects for the benefit of the public but they are also an indication of increasing investor confidence in the transparent process,” she said.

Compared with its Asian neighbors, however, the speed in putting up PPP projects is among the slowest in the region.