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The Philippines is being hailed as one of the fastest growing economies in Asia. The steady, upward climb of our global competitiveness ranking since 2010i is often met with enthusiasm and optimism, a sign that the country is on its way to becoming a productive member of the global economy, more so with the approaching ASEAN integration.
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21 October 2014
Foundation for Economic Freedom, Inc.
BOARD OF ADVISERS:
Gerardo Sicat
Cesar A. Virata
BOARD OF TRUSTEES:
Roberto De Ocampo Chairman Romeo Bernardo Vice-Chairman Calix to Chikiamco President Ernest Leung Treasurer Atty . Ricardo Balatbat III Corporate Secretary Anthony Abad Art Corpuz Eduardo Gana Felipe Medalla Vaughn Montes Simon Paterno Gloria Tan-Climaco Francis Varela Atty . Ricardo Balatbat III Executive Director
105 Philippine Social Science Center (PSSC) Commonwealth Ave., Diliman, Quezon City
Telefax: (632) 4532375 (Main Office) Website: www.fef.org.ph Email: [email protected] / [email protected]
Statement of the Foundation for Economic Freedom
on the Role of Public-Private Partnerships in Infrastructure Development
Inf rast ruc ture Inadequacies
The Philippines is being hailed as one of the fastest growing economies in Asia. The
steady, upward climb of our global competitiveness ranking since 2010 i is often met with
enthusiasm and optimism, a sign that the country is on its way to becoming a productive
member of the global economy, more so with the approaching ASEAN integration.
The potential is undeniable. But we must address the fundamental problems that are
holding us back today, in order to realize our capacity for growth tomorrow. In this
regard, the resounding advice to government authorities during the World Economic
Forum is: infrastructure, infrastructure, infrastructure. ii
The fact is, our country’s infrastructure remains poor, and we have been saddled with this
dilemma for decades. Government infrastructure spending targets, set at 5% of GDP, are
in place. But year after year we fall short, under-budgeting and under-spending, while
neighboring ASEAN economies have done significantly better in utilizing their resources.
Consequently, we are ranked 91st out of 144 countries in infrastructure development, a
far cry from Malaysia (25th), Indonesia (56th), Singapore (2nd), and Thailand (48th).iii
It is no surprise then that the 2nd most problematic factor for doing business in the
Philippines is inadequacy of infrastructure. iv It is a problem not only in the global
marketplace, but more so domestically, where the public must live with the effects of
insufficient and inefficient interconnection on a daily basis.
Harnessing the Potent ia l of Publ ic -Priva te Partnerships
While the Philippine government, with some help from official development assistance of
foreign governments, must take primary responsibility for investing in public
infrastructure, public-private partnerships (PPP) are an important part of the solution.
Government can tap the financial resources and operational expertise of the private
sector to develop infrastructure that can increase efficiency in the transport of passengers,
goods, and services, and reduce the effect of distance by either integrating less developed
regions into the core economic market, or developing those regions themselves.
Therefore, the Foundation for Economic Freedom strongly supports the government’s PPP program. Data
since 2010 shows that the government has a robust pipeline of 57 PPP projects, 8 of which have been
awarded and were solicited projects originating from the government’s national or local priority list. v Funds
allocated for monitoring and supporting the financial and technical capacity of agencies for project
development activities are administered efficiently, with 93% of such funds allocated to support the project
pipeline.vi This improvement in PPP may be attributed to:
1. Institutional strengthening and leadership;
2. Effective administration of financial and technical support to agency -level units; and
3. Increased preference for transparency and accountability through solicited proposals.
Investors are taking notice. Philippine banks have signified their readiness to fund PPP projects. vii In
assessing the global PPP landscape, Moody’s Investor’s Service took note of our expanding PPP market and
accelerated deal flow under the current administration and the Public -Private Partnership Center.viii There is
an opportunity to engage investors in Mindanao through PPP, since international missions have been visit ing
the region to explore potential investments. ix
Chal lenge: Susta ining the Momentum
The challenge lies in sustaining the momentum. F i rst , this requires writing into law the successful
mechanisms put in place in the last 4 years. This includes the insti tutional reforms put in place by Executive
Order Nos. 8 and 136, such as the inter-relationship between NEDA, the PPP Center, the PPP Governing
Board, and the Project Development Monitoring Facility (PDMF) Committee, as well as the administration of
agency-level support received through the PDMF.
Second, we must build on these mechanisms and improve the implementation of public -private partnerships
by:
1. Developing the competitive selection process by allowing unsolicited proposals to be subjected to
public bidding and lengthening the period for the Swiss challenge;
2. Subjecting the Joint Venture arrangement, or any other future PPP arrangements, to the uniform
application of the law;
3. Standardizing basic PPP terms and conditions; and
4. Balancing the interests of government, the private investors, and the consuming public.
By giving the private sector a stake in nation building, we believe the country can move that much closer to
meeting its infrastructure needs.
________________________ i “The [Philippines’] gain of 33 places since 2010 is the largest over that period among all countries studied. The results suggest that the refo rms of thepast four years have bolstered the country’s economic fundamentals.” - World Economic
Forum, The Global Competitiveness Report 2014-2015. Edited by Klaus Schwab. Geneva: World Economic Forum, 2014. ii Romeo Bernardo, “Growth and Infrastructure Imperatives” Business World Online, May 25, 2014, accessed September 25, 2014, http://www.bworldonline.com/content.php/content.php?section=Opinion&title=Growth-and-infrastructure-imperatives&id=87953. iii World Economic Forum, The Global, 16-7. iv Ibid, 308. v These are the Daang Hari-SLEX Link, PPP for School Infrastructure Project (Phase I), NAIA Expressway Phase II, PPP for School Infrastructure Project (Phase 2), Philippine Orthopedic Center, Aut omatic Fare Collection System, Mactan-Cebu
International Airport Passenger Terminal Building, LRT Line 1 extension. vi 38 out of the 57 projects (67%) in the pipeline are supported by funds from the project development and monitoring facility (PDMF). vii Neil Jerome C. Morales, “Banks Ready to fund PPP projects” The Philippine Star, April 14, 2014, accessed September 25, 2014, http://www.philstar.com/business/2014/04/14/1312264/banks -ready-fund-ppp-projects. viii Moody’s Investor Service, Special Comment: Public-Private Partnership –Global P3 Landscape. New York: Moody’s, 2014. ix Jennifer Ambanta, “Neda: Wealth sharing to lift Mindanao growth” Manila Standard Today, July 29, 2013, accessed September 25, 2014, http://manilastandardtoday.com/2013/07/29/neda -wealth-sharing-to-lift-mindanao-growth/.
For more information, please check our website: www.fef.org.ph, or contact the following: Angela Arnante, Program Assistant – [email protected] /+63 2 453 2375
Foundation for Economic Freedom, Inc.
