Big boost to PPP program

A development seen crucial in attracting private investors to help finance the Marcos administration’s major push to implement vital infrastructure projects transpired without much fanfare last week. On March 21, the implementing rules and regulations (IRR) of Republic Act No. 11966, or the Public-Private Partnership Code, was finally signed, addressing the various concerns about the previous PPP scheme.

Finance Secretary Ralph Recto noted that with the IRR taking effect this month, the PPP Code will directly support the government’s objective of closing the huge infrastructure funding gap. Under the administration’s Build Better More program, the government plans to invest in 185 infrastructure flagship projects worth P9.14 trillion, 45 of which will be financed through PPP.

Prior to the PPP Code, the private sector’s participation in government infrastructure projects was guided by RA 6957, or the build-operate-transfer (BOT) law, which was signed in 1990.

P15-billion threshold

But aside from this and its IRR, the regulatory structure for PPPs also included the joint venture guidelines of the National Economic and Development Authority (Neda) as well as the local governments’ own PPP strategies. On Dec. 5, 2023, President Marcos signed RA 11966 which consolidated all these rules. It took effect on Dec. 23, 2023, and updated the BOT law after nearly 30 years. In short, it unified the system to guide investors seeking to engage in PPP projects at both the national and local government levels.

RA 11966 clearly defined what a PPP is, clarifying ambiguities that had impacted several BOT projects in the past, examples of which were the controversial Ninoy Aquino International Airport Terminal 3 venture and the dispute in the contracts for the concessions privatized by the Metropolitan Waterworks and Sewerage System.

It also streamlined processes for unsolicited proposals from the private sector and provided provisions for the resolution of persistent issues on disputes, risks, and public disclosure of contracts. A salient feature of the PPP Code, as noted by Neda Secretary Arsenio Balisacan, is that some projects may no longer require the approval of the Neda Board, a time-consuming process, if these do not reach the P15-billion threshold.

Open the floodgates

However, an IRR is needed for RA 11966 to further clarify procedures for PPP project approval, the processing of unsolicited proposals, bid evaluations, protests, supervision, and monitoring of projects, as well as setting reasonable rates of return for private investors. The PPP Governing Board, acting as the PPP Code IRR committee, was mandated to draw up and promulgate the IRR within 90 days from the effectivity of the law, or by March 23, 2024. The committee did a rare feat of beating this deadline. Recto said he believed that the signing of the IRR “will open the floodgates for a non-stop influx of strategic and high-quality investments that will benefit all Filipinos.”

The new PPP structure will actually be put to a test soon. According to Ma. Cynthia C. Hernandez, executive director of the PPP Center, there are around 45 PPPs that are part of the government’s 185 infrastructure flagship projects and that around 20 of them would be submitted to the Neda Investment Coordination Committee within the year.

She added that the PPP Center expects to receive many unsolicited proposals since the IRR now provides a clear process for handling such offers, noting that there were pending unsolicited proposals that have been in limbo for years.

Policy and regulatory barriers

There is increased optimism about this improved PPP structure being able to attract private investors as misgivings about the previous setup appear to have been settled. Since January this year, the IRR committee said it held 23 extensive consultations with public, private, and development sectors making Hernandez feel confident enough that the PPP Code IRR reflected the needs and perspectives of all stakeholders and “is [now] efficient, fair, and promote[s] stronger collaboration between the public and private sectors.”However, as Recto emphasized, the PPP Code is only one aspect of government efforts “to address policy and regulatory barriers, expedite investment approvals, and proactively identify creative solutions and opportunities to foster a more favorable business environment in the country.”

The government still needs to focus on complementary measures such as relaxing the foreign ownership restrictions on certain sectors in the 1987 Constitution. It also needs to push the Anti-Red Tape Authority to work on improving the ease of doing business in the country, and for local governments to remove bottlenecks in their project approval processes. It is hoped that private sector proponents of both solicited and unsolicited proposals will no longer find any problem with the new rules governing PPPs, given that they were consulted in the drafting of the IRR.