The Philippine government should start developing policies for public-private partnerships (PPPs) outside the energy sector to attract more investors, according to an Asian Development Bank (ADB) specialist.
ADB PPP Specialist Alexander Jett said in a chance interview on Thursday that “defining some other risks—example, the transport sector, outside energy—would attract more investment.”
“The regulation is more developed in the energy sector” than in others, he added.
Jett said PPP projects should start at the local level, where local government units (LGUs) should be able to clarify policies for such projects.
“The LGUs are very important… If the LGU is not rated, the investor may not be interested,” he said. He noted, however, that the future of PPP in the country is “fairly positive,” as both the previous Aquino administration and the Duterte administration are using it.
ADB revealed in its PPP Monitor, launched at the bank’s headquarters in Mandaluyong City, that the Philippines, Thailand and India have the most developed financial markets that can provide longer-ternor loans (above 10 years) in local currency to support infrastructure.
Challenges facing the PPP include the enhanced development of financial facilities, further diversification of the investor base, managing the risk of fluctuating traffic in transportation projects, developing a credible pipeline of PPP projects, and expanding toward sectors beyond energy.
“Among the solutions are greater use of credit enhancement to attract better financing terms; reducing restrictions on foreign ownership in PPP contracts; and introducing annuity payment systems that are based on performance, instead of traffic volume, to mitigate traffic risk,” Jett said.
“Strengthening the institutional capacity to screen and prioritize projects can also help countries develop a credible pipeline of PPPs, while the development of sector-specific regulation for non-energy sectors would address concerns about key bankability issues, such as foreign-exchange risk,” he added.
Earlier, Fitch-owned think tank BMI Research said the Philippines will continue to shift from PPP to official development assistance programs because of lack of private-sector support.
“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uncertainty into the Philippines’ infrastructure market, as projects previously launched under the PPP program are withdrawn and switched to other procurement modes,” BMI said.
“This could deter investors and contractors from actively pursuing opportunities in the sector out of concern that the projects might not materialize,” it added.