DOF: Public-private partnerships should not burden gov’t with unwarranted obligations

Dear Mr. Peter Wallace:

This refers to your article, “Revive PPP” (9/19/19), where you recommended that “[public-private partnerships] should be revived to ensure that all 75 programmed projects actually get started before President Duterte bows out,” and outsourcing of expertise needed.

The goal of the Build, build, build (BBB) program is to deliver basic services in order to improve Filipino lives. This administration is not against PPPs, provided certain issues are addressed. Like projects implemented through the official development assistance, PPPs also suffer bottlenecks. For example, the four-kilometer project of the Aquino administration (Muntinlupa-Cavite Expressway) took six years, from 2009-2015, to be implemented as a PPP.

The BBB program is not only about delivery of services, but also ensuring the Filipino people and government are not burdened with unwarranted obligations imposed in PPP contracts. In previous PPPs, external consultants recommended the following provisions which are detrimental to regulators, and more importantly, a disservice to the Filipino people:

1) Automatic rate increases, where government is forced to approve concessionaire-proposed, parametric formula-based rate increases without the regulator determining whether the increase is just and proper.

2) Commitments of noninterference, where government adopts and promises not to interfere with contract terms for any reason, even when public convenience is at stake.

3) Noncompete clauses, where government allows concessionaires to maintain monopolies even in a scenario where more than one player can realize profit beyond target returns.

These provisions, among others, encapsulate “regulation by contract,” where government is stripped of its regulatory authority and ability to demand that concessionaires improve services rendered to consumers. These terms have also increased contingent liabilities, currently estimated at P309 billion, which will be paid from taxpayer money—money of the Filipino people.

Concessionaires must agree to risk transfer, commensurate with the returns they have enjoyed. We will not subsidize private sector interests to the detriment of serving the public. It’s not enough to roll out PPPs—PPPs must be PPPs FOR the people.

PPPs should not restrict government in addressing the needs of the people quickly and efficiently. Public infrastructure cannot be left to the unregulated control of companies fueled primarily by profit motives. Likewise, consultants engaged to get a deal done, “experts” with no liability and fiduciary duty to serve the interests of the people, should not influence the creation of these contracts.

We will ensure that PPPs do not expose the government to unnecessary financial burden, and will require PPPs to conform to standards that better serve commuters. The Duterte administration remains steadfast in its commitment to fulfill its responsibility to the Filipino people.

The full statement can be accessed at the DOF’s website.

KAREN G. SINGSON
Undersecretary
Privatization Group and Office of Special Concerns
Department of Finance