Philippines PPP now “self-sustaining” with lower budget

The PPP Centre of the Philippines saw its budget reduced by almost 8x after having built up a $62 million augmentation fund over the past two years.

The Aquino administration has cut the overall Public-Private Partnership Centre budget for the Philippines by about eight times, now that larger budgets over the past three years have given the Centre a large enough fund that it no longer needs to rely on government funding for its projects.

As compared to the PHP224 million (€3.7 million; $5 million) and PHP689 million budgets for 2012 and 2013 respectively, the Philippines has only allocated PHP86 million to the PPP Centre for 2014. It expects the Centre to use PHP31 million of that for project-related advisory, management and monitoring, according to the official budget.

However, director Rina Alzate of the Project Development and Monitoring Facility (PDMF) Service at the PPP Centre explained that PHP631 million of 2013’s budget was actually an augmentation for its Project Development and Monitoring Facility fund, which is used to fund project research before putting them out for private sector bidding. As of now, the fund has a total of $62 million in capital.

PDMF employs a panel of consulting firms for the research, and its original capital came from both the Philippine government and the Asian Development Bank. The idea behind the PDMF fund is that the private sector winner will pay back the fund for its research services in setting up the project, and it has already begun to receive back reimbursements from awarded projects.

“We now know this fund can be self-sustaining, so that we are not relying on annual allocations from the government or donations,” Alzate told Infrastructure Investor. “We hope that last year will be the last contribution from the government.”

The government has also approved a PHP30 billion “contingency fund” for PPP projects to draw on in the case of a contract breach, according to a PPP Centre spokesman. The fund is intended to “cover commitments made and obligations of the national government in the concession agreements for PPP projects,” Budget Secretary Florencio Abad said in a report.

Although the Philippine congress questioned the need for it, economic officials are said to have explained that the contingency fund was primarily intended to boost investor confidence, and is not expected to be actually used.

In the past few weeks, the PPP Centre and government Department of Transportation and Communications have also been challenged on the bidding process of two major projects: the PHP1.72 billion Automatic Fare Collection System (AFCS) and the PHP17.5 billion Mactan-Cebu International Airport Passenger Terminal (MCIA).

The losing bidder of the AFCS project alleges the project went through an unfair bidding process – a claim the government has denied, saying that the bidding was done in a transparent manner. “The entire process was done in accordance with the BOT (Build-Transfer-Operate) Law, its IRR (implementing rules and regulations) and the bid rules, which were made available to all interested parties during pre-qualification, and to all pre-qualified bidders post pre-qualification,” a government spokesman told Infrastructure Investor.

One of the losing bidders of the MCIA project is calling for the disqualification of the winning bidder on conflict of interest grounds. The government is currently carrying out due diligence to establish the solidity of the claim.

The respective notices of award for AFCS and MCIA are expected to go to the AF Consortium and the GMR Infrastructure & Megawide Consortium soon.