The proposed Public-Private Partnership (PPP) Law which seeks to update the Build Operate Transfer (BOT) Law is imperative to create a favorable investment environment.
With the PPP Law in place, it would encourage the use of the Philippine capital market to fund infrastructure projects.
“The passage [PPP Law] is crucial for the further development of Philippine capital market to fund PPP projects,” PPP Center chief Andre “Raj” Palacios told reporters at the sidelines of the PPP Forum on Accessing the Philippine Capital Markets for PPPs in Makati City on Friday.
Although the PPP Center proposal to tap the capital market in funding infrastructure projects is more a policy change within the oversight committee, Palacios said amendments to the existing law will harness a healthy investment climate necessary to open the capital market to fund infrastructure development.
Making the capital market a source of funds for PPP projects can make financing easier for private partners because the technology and infrastructure are in place, Alexander Tiu, senior equity analyst at AB Capital Securities told The Manila Times.
Amendments to the BOT Law seek to institutionalize existing best practices of the PPP Center to keep regulatory risks, which determines the profitability of the new funding scheme, at a minimum.
Under the proposed PPP Law, a governing board will draft a policy to cut across projects. It also seeks to allow the use of international consultants for feasibility studies. Another proposed change in the existing law is the full mandate of the PPP Center in providing technical assistance to the private partners.
These, Palacios noted, reinforce the PPP Center and create a better environment that is attractive to local and international investors.
“The passage of the PPP act will improve the capital market. It will create a better environment. Infrastructure projects are high risk by themselves. And the PPP Act will de-risk them,” he said.
Palacios said that most of the provisions in the PPP Act will help develop the Philippine market. It will also ease the problem of getting the private sector to invest in the risky infrastructure projects.
Metro Pacific Investment Corp. (MPIC) Chief Financial Officer David Nicol told reporters at the sidelines of the PPP Forum Friday said that the conglomerate is open to tapping the capital market.
“Yes [we are open to tapping the capital market], at the right time and at the right price for the equity,” Nicol said.
The PPP Center is still in talks with the private sector and Congress on opening the capital market.
The proposed PPP Law will complement the policy change the PPP Center is mulling over that will open the capital markets to funding and making infrastructure projects more attractive to investors.
PPP infrastructure projects are funded by equity and bank loans. The PPP Center is looking to tweak its policy to so that capital markets may be tapped for funding.
“We are looking for more investors outside the equity and bank loans. So we are hoping to attract more private investments through the capital markets,” Palacios said.
The PPP Center is currently working with the Philippine Stock Exchange (PSE) and Securities Exchange Commission (SEC) on the matter. Palacios said.