What is significant about the Subic-Clark-Tarlac expressway development is not so much that the government has been relieved of the debt burden of the SCTex, because it had transferred the debt servicing obligations entirely to the private sector through revenue-sharing and advances during shortfalls.
When we consider that, traditionally, it is government’s responsibility to spend for infrastructure needed by the public, the agreement we concluded with the Manila North Tollways Corp. (MNTC) created a model for building infrastructure like SCTex at no cost to government. Not only will the Bases Conversion and Development Authority (BCDA) not spend for the expressway, it will still earn from the project since the total revenue share of
BCDA (P64 billion) during the operating period will roughly be double that of the debt service (P34 billion). Plus it will get back the expressway, with its potential for another round of revenues.
MNTC, on the other hand, will only have to contend with commercial risks associated with unmet traffic volume projections. There are no longer any construction risks as the project has been completed. It is a win-win situation.
The BCDA-MNTC model also shows the way for constructing what initially are non-viable projects but with high economic benefits. The SCTex project would not have been financially viable because it was an east-west missionary road, and private sector proponents could only get at most a seven- to 15-year loan. What made it viable was the 40-year ODA (Official Development Assistance) loan which has a 10-year grace period at concessionary interest. MNTC, a private company, in effect was able to avail itself of a long-term loan at concessionary terms, for the public good.
This is the reverse of a number of BOT (build-operate-transfer, now called public-private partnership or PPP) projects that started out as private sector undertakings but with government guaranteeing against commercial risks (e.g., take or pay provisions) or guaranteeing a minimum return on investments (e.g., MRT).
—FELICITO C. PAYUMO, chairman, Bases Conversion Development Authority