PPP and the USA

FOR the first time in our recollection, the United States has somewhat officially entered the discussion on the perceived failures of and potential improvements to the administration’s Public- Private Partnership (PPP) Program.

As reported in the BusinessMirror, “’The government needs to structure the country’s key public-private partnership (PPP) deals better to get the interest of American companies,’ Principal Deputy Assistant Secretary Kurt Tong of the US Department of State Bureau of Economic and Business Affairs said.”

Tong went on to say that the “PPP deals” need to be viable on the revenue side of the private investor. The implication of that sentiment is that the projects are not financially viable. That is disturbing. It would appear that the US government through Tong’s office has examined some of the projects in detail and came away with the analysis that the private sector, at least US companies, could not make money should it participate in these deals.

This past October, a roadshow was conducted by the PPP office in the US to present to potential investors 50 PPP projects worth $20.82 billion. That is a substantial amount of investment the Philippines could use for its infrastructure improvement.

But in the words of Tong, the projects need to be “practical,” a word that we do not understand the meaning of in this context. However he also said the rules and plans need to be clearer. That we can agree with.

US companies have extensive global experience in the kinds of PPP projects that are on the books. These include energy, aviation infrastructure, port management and equipment supply. Tong particularly emphasized projects related to energy as the Philippines particularly emphasized the Batangas-Manila Natural Gas Pipeline.

Certainly Tong is not speaking for the US private sector’s intentions, but the thrust of his comments should be listened to by the Philippine government.

It is not that the US is telling us something that we do not already know. Local companies have been frustrated at too many turns in the process for the government not to realize that there is a problem. To date only eight PPP projects worth $2.83 billion have been awarded and that shows the failure of the PPP process even as the idea was originally met with both great enthusiasm and great anticipation.

Tong suggested that the Philippines tap the resources of the US government’s Trade and Development Agency, which can extend grants to help design projects either for public or private financing. In addition, the US Overseas Private Investment Corp. can help mitigate some of the financial risks for US firms engaged in overseas projects.

We should explore this opportunity in greater detail as the clock never stops running and we need both the investment and the projects.

source:  Business Mirror

Megawide bags its fifth PPP deal

MEGAWIDE Construction Corp. has bagged its fifth public-private partnership (PPP) project, as the Transportation department on Friday night said it has awarded to the company's subsidiary the P2.5-billion contract to build, transfer to the government and operate (BTO) an integrated transport hub in southern Metro Manila.

Michael Arthur C. Sagcal, spokesman of the Department of Transportation and Communications (DoTC), said in a text message to reporters that his department has awarded the P2.5-billion Integrated Transport System (ITS)-Southwest Terminal project to MWM Terminals, a consortium of Megawide and WM Property Management, Inc.

“We have awarded the ITS-Southwest PPP to MWM Terminals, which now has until February 12 to complete post-award requirements,” he said.

The listed construction company has already won four other PPP deals. It was one of two groups that bagged the P16.28-billion first phase of PPP School Infrastructure Project (PSIP) in 2012 and PSIP’s P3.86-billion second phase in 2013. Besides those, it also won the contracts for the P5.69-billion Modernization of Philippine Orthopedic Center in 2013 and the P17.52-billion Mactan-Cebu International Airport Passenger Terminal Expansion deal in April last year.

Mr. Sagcal said his department and MWM Terminals hope to sign the concession agreement “by the fourth week of February.”

“MWM will then have eight months from then to begin construction,” he added.

It will have “another 18 months or until the end of April 2017 to start operations,” Mr. Sagcal said.

Sought for comment, Megawide Construction Corp. Chief Marketing Officer Manuel Louie B. Ferrer said via text: “We’re delighted to receive the news that our company was announced as the winner of the first ITS deal and to be part of the progress of the country."

"We’re also bidding for ITS-South,” he added, referring to the other facility planned in southern Metro Manila.

The financial proposal of MWM Terminals included an annual grantor payment (AGP) by the government to the concessionaire of P100 million, much lower than its rival Filinvest Land, Inc.’s P650-million AGP.

In this case, the concessionaire with the lower AGP bags the deal, Mr. Sagcal had earlier said during the opening of financial proposals last Jan. 13.

This is the second time Filinvest Land and Megawide have done battle for a PPP deal. The Filinvest-Changi consortium lost to the GMR-Megawide consortium in the November 2013 auction for the Mactan-Cebu International Airport deal that was awarded to the latter in April 2014.

Megawide and Filinvest have also expressed interest in the first water PPP deal of the government, which is the P24.4-billion Bulacan Bulk Water Supply Project.

Of 16 groups that bought bid documents for the P2.5-billion 35-year ITS-Southwest Terminal project deal, only Filinvest Land and Megawide submitted qualification papers, technical offers and financial bids on Dec. 22 last year.

The ITS-Southwest Terminal Project -- to be built on a 4.59-hectare site near Manila-Cavite Expressway -- is meant to give commuters from the Cavite side access to various transport modes, including the future Light Rail Transit Line 1 South Extension.

The project is the first of its kind to be auctioned off by the government.
Besides the ITS-Southwest Terminal, DoTC is also looking at building similar integrated transport hubs in northern and another part of southern Metro Manila.

In January, four firms qualified to bid for the P4-billion contract to build an integrated transport hub near the Food Terminal, Inc. compound in Taguig City: Filinvest Land, Inc. and MWM Terminals, as well as Ayala Land, Inc. and Datem, Inc.

A pre-bid conference will be held “within the month,” while deadline for technical and financial bids will be in April, Mr. Sagcal had said last week.

The Transportation department is also looking at building a similar integrated transport hub in northern Metro Manila.

Among the locations being considered are the Veterans Memorial Medical Center, the former site of Manila Seedling Bank, the Philippine National Railways terminal in Caloocan City and the University of the Philippines Diliman campus. “The department is still in the process of studying which is more feasible,” Mr. Sagcal said on Friday when asked for updates on ITS-North.

Other than the five projects awarded to Megawide, four other PPP deals have been awarded so far by the Aquino government since the late-2010 launch of this flagship infrastructure program: the P64.9-billion Light Rail Transit Line 1 (LRT-1) Cavite Extension; the P1.72-billion Automatic Fare Collection System; the P2.01-billion Daang Hari-South Luzon Expressway Link Road; and the P15.52-billion Ninoy Aquino International Airport Expressway.

Megawide shares gained four centavos or 0.48% to close P8.40 apiece on Friday.

source:  Businessworld

NEDA Board to evaluate 7 PPP projects, 2 others

THE MOST EXPENSIVE public-private partnership (PPP) deal thus far, along with six other PPP projects, could secure final approval from the National Economic and Development Authority (NEDA) Board in early February, senior officials said on Friday.

Rolando G. Tungpalan, NEDA deputy director general for Investment Programming, said in a text message that the NEDA Board, which is chaired by President Benigno S.C. Aquino III, could approve the “seven PPP projects and other two which were recently approved by ICC in the first or second week of February.”

Tabled for approval, among others, are the P378.33-billion Makati-Pasay-Taguig Mass Transit System Loop; the P179.22-billion North-South Railway Project (South Line); the P13.33-billion Motor Vehicle Inspection System (MVIS) Project; the expansion of the Tarlac-Pangasinan-La Union Expressway (TPLEx), with a project cost still to be determined; the P1.16-billion Civil Registry System (CRS)-Information Technology (IT) Project Phase II; the Swiss challenge mode of implementation of the P18-billion 8-kilometer North Luzon Expressway (NLEx)-South Luzon Expressway (SLEx) Connector Road; and the rebidding of the P35.42-billion Cavite Laguna Expressway (CALAx), PPP Center Executive Director Cosette V. Canilao told reporters on the sidelines of an event in Makati City on Friday.

The rebidding of CALAx and the 8-kilometer NLEx-SLEx Connector Road were approved by the NEDA Investment Coordination Committee (ICC) Technical Board and Cabinet Committee last Dec. 22, while the five remaining PPP deals were approved on Jan. 14.

The P378.33-billion mass transit system loop is the most expensive project currently in the pipeline. Poised to become the country’s first subway system, it will link Bonifacio Global City, the Makati central business district and the SM Mall of Asia area in a bid to ease traffic congestion in the cities of Makati, Pasay and Taguig, according to the PPP Center Web site. The planned 20-kilometer (km) subway will consist of a 16-km tunnel, a 4-km elevated railway and 11 stations.

The P179.22-billion North-South Railway Project, meanwhile, is the second biggest PPP deal in the pipeline. It involves 89.7 kilometers (km) of tracks that will connect to the Philippine National Railways, the state railroad system.

The railway project, according to PPP Center Web site, will have two phases: the Malolos-Tutuban line, which will be funded by the Japan International Cooperation Agency, and the rehabilitation of the Tutuban-Calamba line under the PPP scheme. The second phase will involve an interchange station at Tutuban station.

Outside of the PPP, the Bureau of Fire Protection Capability Building Program Phase II project of the Department of Interior and Local Government and the P13.89-billion LRT Line 2 West Extension the Department of Transportation and Communications could also be approved by the NEDA Board in early February.

These two infrastructure deals were given the green light by the NEDA ICC Technical Board and Cabinet Committee on Jan. 14.

“Should all these projects be approved by the NEDA Board this February, the implementing agencies can start the bidding process, meaning publish the invitation to bid... this normally takes one month after the approval,” Ms. Canilao told reporters.

Eight PPP contracts have been awarded so far by the Aquino government since the late-2010 launch of this flagship infrastructure program: the P17.52-billion Mactan-Cebu International Airport Project; the P64.9-billion Light Rail Transit Line 1 (LRT-1) Cavite Extension; the P1.72-billion Automatic Fare Collection System; the P2.01-billion Daang Hari-South Luzon Expressway Link Road; the P15.52-billion Ninoy Aquino International Airport Expressway; the P16.28-billion first phase of the PPP for School Infrastructure Project (PSIP); the PSIP’s P3.86-billion second phase; and the P5.69-billion Philippine Orthopedic Center modernization project. -- Chrisee Jalyssa V. Dela Paz

source:  Businessworld

PPP should work from a road map, ignore unsolicited projects -- UK Ambassador

TO STREAMLINE the development of the public-private partnership (PPP) program, the government should stop entertaining unsolicited proposals and implement a country-wide infrastructure road map from which investors can bid for specific projects, the British Ambassador to the Philippines said on Friday.

In an event called “Building Bridges: Public-Private Solutions in the UK and in the Philippines” held at the ambassador’s residence in Makati, Ambassador Asif Ahmad told reporters on the sidelines that instead of accepting unsolicited proposals from investors, the government should develop a national infrastructure plan.

“We were right there right at the beginning when PPP Center was set up. From a blank sheet of paper, we were already there guiding them. Along the way, there were stumbles, delays in projects. So I spoke to the DoTC (Department of Transportation and Communications) and Cosette (V. Canilao, executive director of the PPP Center) quite a long time ago telling them that they should look at a broader framework,” he said.

The government, according to Mr. Ahmad, “should pass a blueprint saying this is the national roadway plan, you can come and bid to any section you wish, but you cannot come up with an unsolicited proposal which is not part of the plan...That way you get coherence and avoid challenges that hinder the speediness of the procurement.”

The British government in October 2010 published its National Infrastructure Plan, outlining its vision for the future of UK economic infrastructure. It sets out the challenges facing UK infrastructure and the government’s strategy for meeting the infrastructure needs of its economy.

The plan, according to the UK government’s Web site, contains major commitments for investment in important infrastructure projects and explains how it is attracting new private sector investment.

“We don’t accept unsolicited proposals that’s why projects are constructed fast,” Mr. Ahmad said.

“It’s easy because the rules are already clear, the project is there, the concession agreement is laid out, instead of unsolicited proposals which are very inefficient, because they come up with biddings that are their own idea, and then the government is stuck, does this fit the road or not, is it a priority or not,” he added.

“Then there comes the suspicion of the public, saying why is this company coming up with that proposal now? And so the public will think this company just wants to build a big mall in this area,” Mr. Ahmad said.

He said the Philippine Transportation department “has the habit of pushing unsolicited proposals, building in small sections, and adding on bits and pieces. For example, this expressway starts in Manila then they add a little bit more and then it ends in the middle of nowhere.”

“There were also delays in some projects due to legal hurdles,” Mr. Ahmad said.

From the seven projects expected to be completed before the end of Aquino administration in mid-2016, the PPP Center has trimmed this initial estimate to five due to unforeseen delays in the bidding and awarding of some projects.

The delayed PPP projects include the P5.69-billion contract to modernize the Philippine Orthopedic Center, which hit a road block when activist groups composed of health workers and party-list organizations filed a petition opposing the alleged privatization of the hospital.

The awarding of the P17.5-billion Mactan-Cebu International Airport contract was also pushed back when the losing bidder, the Filinvest-Changi consortium, filed a complaint alleging conflict of interest against the winning bidder GMR-Megawide consortium.

Likewise, the awarding of the P64.9-billion Light Rail Transit Line 1 (LRT-1) Cavite Extension project was postponed for nearly a month due to a pending temporary restraining order on a component of the deal.

The Public Works and Highways department has also halted the awarding of its P35.2-billion Cavite-Laguna Expressway deal after the Office of the President last November decided to rebid the project. Until now the rebidding of the project has not yet been rolled out.

Mr. Ahmad said a road map would be like “taking a photograph of the country from a satellite, then have a mission… by 2030, I want the expressways and other infrastructure to look like this. If some companies want to bid for a project included in the plan and it completes the jigsaw, the government’s answer should be yes.” 

The PPP Center targets the award of 15 PPP projects before President Benigno S.C. Aquino III steps down in mid-2016.

Eight deals have been awarded since the flagship infrastructure program was launched in late-2010: the P17.52-billion Mactan-Cebu International Airport Project; the P64.9-billion Light Rail Transit Line 1 Cavite Extension; the P1.72-billion Automatic Fare Collection System; the P2.01-billion Daang Hari-South Luzon Expressway Link Road; the P15.52-billion Ninoy Aquino International Airport Expressway; the P16.28-billion first phase of the PPP for School Infrastructure Project (PSIP); the PSIP’s P3.86-billion second phase; and the P5.69-billion Philippine Orthopedic Center modernization. -- Chrisee Jalyssa V.

source: Businessworld

PPPs: Manila can learn a lot from London

WHEN A Filipino businessman alights from his plane at London Heathrow in December 2018, he will be able to walk through the bright new corridors of the Queen’s Terminal, past the immigration counters to the shiny underground station beneath, where he will get on the next train to Liverpool Street Station, right to the beating heart of the City of London. Right now, taking the London Underground will keep Mr. Dela Cruz on his feet for another hour. By 2018, the completion of the $22-billion Crossrail project, running over 100km underneath Greater London, will cut that time by half.

The Crossrail project is the largest construction project in Europe. It represents Britain’s biggest contemporary infrastructure investment. Its problems and successes have created a legacy of skills learned and knowledge gained that can lay a firmer foundation for future efforts at public-private cooperation, within the UK and beyond. Now, after sharing these experiences in Thailand and Indonesia, top civil servants from Infrastructure UK (IUK) have come to the Philippines to make the case for streamlining public-private partnership (PPP) development -- not just to build more bridges, but to build them with Britain.

The Philippines presents unique risks and opportunities for infrastructure development. The World Economic Forum ranks Philippine infrastructure second from the bottom in ASEAN, and the Japan International Cooperation Agency (JICA) estimates the annual economic cost of Manila traffic congestion at 11% of GDP.

Short supply has kept electricity prices higher than anywhere else in Asia even as consumption per kilowatt-hour remains dismal. The Philippine government has responded by ramping up infrastructure development and public works spending, but the gap between social necessity and financial ability remains intimidatingly wide. JICA, for one, estimates a total cost of $12 billion for its transportation “dream plan” -- and that is just for Manila. There is much more to be done in the provinces too, and to connect the big towns and cities.

The work of the PPP Centre, under the leadership of Executive Director Cosette Canilao, has mobilised the resources of both the government and business, and projects are starting to get to the bidding process. The first ASEAN PPP Networking Forum was held in Manila in November last year, and the British government, through IUK, contributed to the debate. But every day, British firms like MottMacdonald, PWC and ITPWorld are on the ground in Manila and other developing cities, applying the hard-won skills and expertise developed through trial and error at home to help improve the daily quality of life of people around the world.

Within the country and with global partners, the know-how is there. Success will be driven by political will and better certainty around the legal framework.

This week, IUK landed in Manila to host a training workshop with the PPP Centre. The trip from the Ninoy Aquino International Airport to Quezon City took longer than it does to get from Heathrow to the city using the existing legacy system. The journey was both a learning opportunity as well as an indication of potential.

It is vital that the skills and dedication of experts, both public and private, British and Filipino, are used to build the quality infrastructure Filipinos have been waiting for with patience and fortitude. In time, cities in the Philippines too should see the new terminals and fast trains that are already being delivered in Britain.

I believe that British knowledge -- in planning projects, drafting contracts, designing structures, and then building them -- will be immensely valuable for the future of PPP development in the Philippines. Britain is fully invested in our partnership with the Philippines and in continuing to build bridges -- not just across rivers or over railway lines, but between our peoples as well.

Asif Ahmad is the British Ambassador to the Philippines.

source:  Businessworld

More PPP projects near final approval

THE ADMINISTRATION has entered its penultimate year with the biggest public-private partnership (PPP) project, so far, and six other infrastructure deals hurdling a step shy of final approval, according to a senior official of the National Economic and Development Authority (NEDA) yesterday.

“All seven projects were approved last night, but with some conditions before moving up to next NEDA Board,” Rolando G. Tungpalan, deputy director-general for Investment Programming, said in a text message when asked on results of the NEDA Investment Coordination Committee (ICC) Technical Board and Cabinet Committee meeting on Wednesday night.

The five new PPP projects that were approved were the P374.5-billion Makati-Pasay-Taguig Mass Transit System Loop; P177.22-billion North-South Railway Project (South Line); P19.33-billion Motor Vehicle Inspections System (MVIS) Project; Expansion of Tarlac-Pangasinan-La Union Expressway (TPLEx) whose project cost has yet to be determined; and the P1.16-billion Civil Registry System (CRS)-Information Technology (IT) Project Phase II.

The mass transit system loop -- the country’s first subway system -- will link Bonifacio Global City, Makati central business district and the SM Mall of Asia area in a bid to ease traffic congestion in the cities of Makati, Pasay and Taguig, according to the PPP Center Web site. The planned 20-kilometer (km) system will consist of a 16-km tunnel, a 4-km elevated railway and 11 stations.

Besides the five new PPP projects, the Bureau of Fire Protection Capability Building Program Phase II project of the Department of Interior and Local Government and the P13.89-billion LRT Line 2 West Extension of the Department of Transportation and Communications were also approved by the NEDA-ICC on Wednesday.

Wednesday’s approval brings the seven infrastructure projects to a step away from final approval by the NEDA Board, which is headed by President Benigno S. C. Aquino III. Mr. Tungpalan said the projects “will go up to next NEDA Board meeting [sic] once agencies concerned are able to carry out the conditions recommended by ICC.” Asked on the conditions, Mr. Tungpalan said they include “to check on and assess alternative route or alignment for mass transit loop,” but would not elaborate.

Officials of the Transportation department and PPP Center were not immediately available for comment.

The next board meeting is tentatively set on Jan. 22, Mr. Tungpalan said, adding it could be “within the period of late January to early February.”

In addition to the seven ICC-approved infrastructure projects, “the 8-km North Luzon Expressway (NLEx)-South Luzon Expressway (SLEx) Connector Road and the rebidding of the P35.42-billion Cavite Laguna Expressway (CALAx)” could also be approved in the next NEDA Board meeting, Mr. Tungpalan said via text.

PPP Center Executive Director Cosette V. Canilao said in a briefing in Quezon City last month that her office targets to roll out at least nine PPP projects within the year. These are the Makati-Pasay-Taguig Mass Transit System Loop; North-South Railway Project (South Line); Civil Registry System-IT Project (Phase II); CALAx rebidding; NLEx-SLEx Connector Road; Motor Vehicle Inspection System Project; P50.18-billion Regional Prison Facilities through PPP; P18.99-billion Davao Sasa Port Modernization Project; and P400-million Tanauan City Public Market Redevelopment.

Eight PPP deals have been awarded since the flagship infrastructure program was launched in late-2010: the P17.52-billion Mactan-Cebu International Airport Project; P64.9-billion Light Rail Transit Line 1 Cavite Extension; P1.72-billion Automatic Fare Collection System; P2.01-billion Daang Hari-South Luzon Expressway Link Road; P15.52-billion Ninoy Aquino International Airport Expressway; P16.28-billion first phase of the PPP for School Infrastructure Project (PSIP); PSIP’s P3.86-billion second phase; and P5.69-billion Philippine Orthopedic Center modernization.

source:  Businessworld