• FITCH’S BMI RESEARCH:

    PPP outlook positive but delays a concern

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    The pace of public-private partnership (PPP) project rollouts is not expected to slacken but implementation delays are likely, given institutional capacity issues, a Fitch Group firm said.

    “The outlook for the Philippine’s public-private partnership program remains positive as we believe that momentum in the approval of PPP projects will persist in 2016,” Business Monitor International Ltd. (BMI Research) said in a study.

    It noted that 37 projects are currently in the PPP pipeline and are essential for the construction sector, which is expected to grow at an annual average rate of 8.28 percent between 2016 and 2019.

    BMI Research, however, pointed to significant scope for project delays, citing recurring bid submission deadline extensions in particular.

    A case in point, it said, is the P122.8-billion ($2.7 billion) Laguna Lakeshore Expressway and Dike Project that is being offered under a build-operate-transfer scheme. It noted that the deadline for the submission of bid proposals was originally set for July last year and then extended several times, most recently to March 2016, at the request of bidders.

    “This indicates a lack of institutional capacity to set submission deadlines efficiently and to conduct pre-construction activities, leading to delays and likely investor frustration,” BMI Research said.

    With this, the think tank stressed that risks of further delays were likely if the lack of institutional capacity was not addressed. It also pointed out that despite efforts by the Philippines to promote PPPs as a means to boost infrastructure investments, local companies continued to dominate contract awards and foreign companies were struggling to compete.

    Still, BMI Research highlighted the North-South Railway (South Line) project, launched in July 2015 and which drew 30 local and foreign investors, as a positive step that was likely to contribute to creating an increasingly competitive environment.

    With this, BMI expects momentum to be sustained this year as measures have been taken or are planned in order to improve project continuity.

    It noted that in January 2016, 13 PPP projects were exempted from the ban on public works and infrastructure ahead of the presidential, congressional, and local government elections this May. The combined total investment of the 13 mostly transport-focused projects was said to be P514 billion ($10.7 billion).

    The projects are the Laguna Lakeshore Expressway Dike; North-South Railway project (South Line); Davao Sasa Port Modernization; New Centennial Water Source- Kaliwa Dam; the airport operations, maintenance and development contracts for the Bohol, Laguindingan, Davao, Bacolod and Iloilo gateways; Light Rail Transit Line 2, a egional prison facility in Nueva Ecija; Road Transport Information IT project; and the Bulacan Bulk Water Supply.

    “Their exclusion by the Commission on Elections is intended to ensure that the bidding process will not be disrupted once the elections begin. This demonstrates the government’s commitment to lowering the risk of future delays and efforts to bring in foreign capital participation,” BMI Research said.

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