Projects under the public-private partnership (PPP) program is at risk amid the improving relations between the Philippines and China, Fitch-owned BMI Research said.
This is so since the Duterte administration has a tendency to favor government-centered projects, BMI said in a report released last week.
BMI earlier said that “In the short-term, we expect that that this could be beneficial for the Philippine economy, which will stand to gain from an increase in infrastructure investment.”
BMI noted that the previous government highly favored PPPs as a method for meeting the country’s infrastructure needs, and have implemented a number of favorable policies–including, most recently, allowing PPPs to be listed on the Philippine Stock Exchange.
“Although President Duterte is continuing public-private partnerships initiated by the previous government, we expect him to shift in favor of a government-centered investment approach, which he regards as more efficient and cost-effective,” it warned.
This is because only three of the 53 PPP projects launched since 2010 have been completed and only around four are under construction, it added.
“Duterte’s Finance Minister Carlos Dominguez [3rd] attributed the delays to a lengthy review and approval process under the previous government and has expressed doubts about the efficacy of PPPs for shorter-term projects,” it also noted.
As a result, BMI said it expects a reduction in the proportion of projects open to private bidders and subsequently a greater demand for government budgets to fund infrastructure developments.
“Increased Chinese involvement may have the dual effect of both reducing the number of PPPs in the pipeline, as well as increase competition in the market,” it said.
“China-backed bids will likely be able to undercut competitive private bids and companies which have positioned themselves to expand in the Philippine PPP sector may lose out,” it added.
President Rodrigo Duterte’s four-day state visit to China last week yielded $24 billion worth of loans and investment pledges.