Professional Documents
Culture Documents
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VOLUME
IN THE
AQUINO ADMINISTRATIONS
PPP PROGRAM:
RECOMMENDATIONS
FOR FUTURE
PARTNERSHIPS IN
INFRASTRUCTURE
OCCASIONAL
PAPER
MARCH 2016
02
IN THE
AQUINO ADMINISTRATIONS
PPP PROGRAM:
RECOMMENDATIONS
PPP PROGRAM
could have been a good avenue to improve our country's infrastructure industry but
has thus far failed to fully deliver. The Aquino administration can use the
remaining time in office to fast track the PPP scheme without
sacrificing transparency and legitimacy in the process.
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* The views and opinions expressed in this Paper are those of the author and do not necessarily reflect those of the Institute.
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* Section 1 of R.A. 7718 enumerated/defined the following contractual arrangements: 1. Build-operate-and-transfer; 2. Build-and-transfer; 3. Build-ownand-operate; 4. Build-lease-and-transfer; 5. Build-transfer-and-operate; 6. Contract-add-and-operate; 7. Develop-operate-and-transfer; 8. Rehabilitateoperate-and-transfer; 9. Rehabilitate-own-and-operate; and 10. Such other variations as may be approved by the President of the Philippines.
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Table 4: Global Competitiveness Index Ranking 2015-2016 of Southeast Asian Economies for the Infrastructure Pillar
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C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved.
and Aboitiz Equity Ventues, Inc. and Optimal Infrastructure Development Corp., a subsidiary of diversified conglomerate San Miguel Corp (SMC).
The financial proposal of Team Orion consisted of a
premium/concession payment of P11.659 billion. On
the other hand, the concession payment of Optimal
was P20.105 billion. Optimal was disqualified to proceed with the bid due to a defect in its bid security.
In its defense, Optimal submitted that its bid security
is valid until 29 November 2014 and thus was fully
compliant with the bid requirements. In consonance
with the provisions of the BOT law, Team Orion won
the project as the highest bidder.
Rebidding of CALAX was then approved by the
NEDA Board chaired by President Aquino. The President explained that foregoing the P9-bilion difference in premium bid of Optimal could bankroll other
government projects. With the Department of Public
Works and Highways as its implementing agency,
it underwent a revamped procurement process in
June 2015 after the government learned its lessons
from a previous bidding mired in controversies. The
Board also approved a minimum bid price of P20.1
billion, the same amount submitted by Optimal. The
supposed winner of the CALAX project, Team Orion
no longer participated in the rebidding.
Aside from Team Orions expression of disappointment towards the governments decision, other
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lands. The difficulty lies when foreign investors try to tap the domestic market and work their way through
complicated bureaucratic procedures, local government corruption, only to find out that they are not
qualified to do business in the Philippines due to the foreign equity restriction. However, foreign
investors could still participate in the public bidding by partnering with a
Philippine national or domestic corporation, provided that.13
at least sixty percent (60%) of the capital stock outstanding and entitled to vote is owned and held by
citizens of the Philippines; or a trustee of funds for pension or other employee retirement or separation
benefits, where the trustee is a Philippine national and at least sixty (60%) of the fund will accrue to the
benefit of the Philippine nationals: Provided, That where a corporation and its non-Filipino stockholders
own stocks in a Securities and Exchange Commission (SEC) registered enterprise, at least sixty percent
(60%) of the capital stocks outstanding and entitled to vote of both corporations must be owned and
held by citizens of the Philippines and at least sixty percent (60%) of the members of the Board of
Directors of both corporations must be citizens of the Philippines, in order that the
corporations shall be considered a Philippine national
Notwithstanding the foregoing options, Philippines is still not an attractive place for foreign investments,
whose capital is especially important for infrastructure investment. Big investments in infrastructure
developments are brought in by foreign investors, yet their ownership cannot go beyond 40% of the
equity and their participation in the management therefor is likewise subject to the same limitation. A
minority shareholder is often at risk of losing. Thus, without removal of the foreign equity limitations,
at least in the area of infrastrusture development, the confidence level of foreign investors
in the country will not improve, which is to the Philippines detriment.
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C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved.
PPP projects in the pipeline will be awarded before the term of President Aquino ends in three months.
4. The proposed amendments to the BOT Law, which is one of the priority bills of President Aquino
would have institutionalized the supposed reforms initiated by his administration and thus would
ensure that said reforms would be continued by the next administration.
In particular, House Bill No. 6331, the House of Representatives version of the proposed amendments
to the BOT Law, features provisions attuned to international standards, where private sector participation is
truly encouraged and the partnership valued. Among the notable clauses of HB 6331 are on the following:
a) Issuance of Administrative Franchise, License or Permit. HB 6331 provides for the automatic
grant of administrative franchise, local or national permits, or any other requirement for the
implementation of the PPP project once the contract is duly executed;
b) Projects of National Significance. Upon classification by the President of energy, toll road, mass
transit, water, sewerage, and such other projects, HB 6331 proposes that said projects deemed
imbued with national significance shall be exempt from the real property taxes levied under the Local
Government Code, and from all local taxes and fees. The project shall also be automatically
issued the necessary business permits, including renewals of such permits; and
c) Recovery of Investment. HB 6331 likewise mandates that PPP contracts include an agreement on
the recovery of the proponents investment by collecting of tolls, fees, rentals or charges, engaging in
commercial development, or receiving viability gap funding (VGF), that is financial support from
government to make user fees affordable, or direct payment from government, among others.
The above cited provisions reflect modern governance where there is acknowledgement that
through a robust partnership with the private sector, the government can
better deliver the services our country and our people need.*
* House Bill No. 6331, An Act Institutionalizing and Strengthening Public-Private Partnerships, and Appropriating Funds Therefor,
as part of Committee Report No. 947, submitted by the Committee on Public Works and Highways, the Committee on Appropriations, and the Committee on Ways and Means on December 14, 2015, Sections 13, 20, 28 (c).
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6. Finally, more than being just a mere coordinating agency, the PPP Center should be given more
Endnotes:
Global Source Partners. (2011). A Bet on PPP. Retrieved from
http://www.globalsourcepartners.com
World Economic Forum. (September 2014). The Global Competitiveness Report 2014-2015
World Economic Forum. (September 2014). The Global Competitiveness Report 2014-2015
C 2016 ADRiNSTITUTE for Strategic and International Studies. All rights reserved.
IBON. (November 11, 2010). PPP: More public debt, less govt
responsibility. Retrieved from http://ibon.org/2010/11/ppp-more-public-debt-less-govt-responsibility/
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9.3
VOLUME
ABOUT
Victor Andres Dindo C. Manhit