Funding for Philippine infrastructure projects will shift away increasingly from public-private partnerships (PPP) to official development assistance (ODA) amid a lack of support from the private sector, Fitch Group’s think tank BMI Research said in an analysis released Thursday.
Official development assistance comes in the form of international government aid designed to promote the economic development and welfare of developing countries. The Philippines normally receives funding assistance from the Asian Development Bank, the World Bank, the United Nations, Japan, the United States, Australia, France, the United Kingdom (especially in the aftermath of SuperTyphoon Yolanda), the European Union, and lately China.
“We have already seen the shift away from PPPs with recent examples, including the government’s decision to revive the P227-billion Mega Manila subway as an ODA project and to withdraw five airport projects from the PPP program,” BMI said in its paper.
Recently for instance, the Department of Transportation announced that it has terminated its bid-out plans for five regional airports through PPP and decided to fund the development, operation and maintenance of these airports through the General Appropriations Act (GAA) and ODA.
“Doing the airports on GAA makes the project cheaper as the cost of money is lower, thus, more beneficial to the public; project completion is more efficient and faster and helps avoid legal surprises that may cause regrettable delays,” DoTr Secretary Arthur Tugade explained earlier.
BMI expects more PPP projects will be withdrawn in the coming months.
“We believe (President Rodrigo) Duterte is comfortable shifting away from the PPP model and private-sector financing help, given the support for infrastructure development the Philippines receives from China and Japan,” BMI said.
China has committed $24 billion for developmental assistance to the Philippines, while Japan has pledged $8.7 billion, which the government said will be mostly used to bring forward the Duterte administration’s vision of a Golden Age of Infrastructure during his term.
“In the short term, ongoing revisions and modifications of proposed PPP projects will result in increased uncertainty into the Philippines’ infrastructure market, as projects previously launched under the PPP program are withdrawn and switched to other procurement modes,” the BMI study said.
“This could deter investors and contractors from actively pursuing opportunities in the sector out of concern that the projects might not materialize,” it said.