Philippines_-Launch-of-new-PPP-infrastructure-programme-November-20101

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Philippines:Launch of NewPPPInfrastructure

Programme

British Embassy Manila

November 2010

The purpose of the FCO Country Update(s) for Business (the Report) prepared by UK Trade & Investment (UKTI) isto provide information and related comment to help recipients form their own judgments about making businessdecisions as to whether to invest or operate in a particular country. The Reports contents were believed (at the time

that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made orgiven by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department forBusiness, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for anypurpose. In particular, none of the Reports contents should be construed as advice or solicitation to purchase or sellsecurities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS forany loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.


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Summary

1.Philippine Government launches new PPP programme in bid to developthe country's infrastructure. Strong political commitments to improvegovernance of such projects and underwrite regulatory risk. A work inprogress - but the potential is there for this to be a very important partof our commercial agenda in the Philippines. Opportunities for the UKfrom the projects themselves, and to shape further thinking and policyon PPP development.

Detail

2.Poor infrastructure has long been recognized as a major obstacle to thePhilippines' economic development - but tackling the problem has beenheld back by the budget deficit and regulatory problems. The Aquinoadministration has identified public private partnerships (PPP) as theway forward. It launched its PPP programme on 19 November at aninternational conference in Manila, addressed by the President andsponsored by a number of international banks, including HSBC andStandard Chartered.

3.Ten infrastructure projects with total investments of over $3.1 billionhave been prioritised by the Government to be tendered in 2011. Theseinclude four light rail transit (LRT) projects for Metro Manila ($2.18

billion), two expressway projects in Luzon ($497 million), and fourairport projects around the country ($442.22 million). The projectsinvolve a mixture of new construction opportunities and of operationconcessions. A wide range of additional projects are still being finalized,for rolling out next year. As well as more road and mass transportprojects, they are expected to cover agriculture, fisheries, foodprocessing, health, education, water supply, tourism, business parksand commercial complexes.

4.The Philippines is not new to PPP. From 1990 to 2008, the Philippinesranked 10th in the PPP top ten developing countries by investment, with$45.1 billion invested for the period. But a lot of these projects endedup mired in allegations of corruption, or bogged down by regulatory andlegal problems, especially over rights of way. The new administration ispledging to improve performance through more transparent processesand effective project implementation and monitoring. It has promised tolevel the playing field through open tendering and competition andwants to discourage the traditional Philippine practice of developersputting forward their own "unsolicited" projects for government support.

5.President Aquino's most important announcement at last week'sconference was a commitment to protect investors from "regulatoryrisk". There would be no political guarantees against commercial or


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economic risks (as had been given by the previous administration), butAquino pledged to protect private-sector investors against eg courtorders or decisions by regulatory agencies which would prevent thecollection of fees or tariffs at contractually agreed levels. The specifics ofthe type of protection to be offered and its mechanism will be part of

the contract terms for each project. Only solicited projects whichundergo competitive bidding will be provided with such protection.

6.Other key elements of the new PPP drive include the establishment of anew "PPP Center" (already done) to oversee the programme, and acommitment to complete project approvals within 6 months. Secretaryfor Budget Management Butch Abad told the conference that thegovernment will "establish a predictable and sustainable budgeting andpayment system for PPPs": the 2011 Budget (currently in the Senate)contains provisions to support pre-development activities and right-of-

way acquisitions. Meanwhile, the government together with the WorldBank and other IFIs are working to establish a Philippine InfrastructureDevelopment Fund to provide a long-term fund structure to sustain andfurther promote PPP projects.

Comment

7.Despite the fanfare last week, the programme at this stage is still fairlymodest. The administration's undoubted commitment to ushering in anew age of transparency and good governance still has to be tested, as

does its ability to resolve long-standing practical obstacles. In particular,disputes over right of way and land title have been notoriously difficultto resolve here. But if they can deliver then there will be significantopportunities for UK companies - whether to tender bids for projectswith local partners, or supply products or technical expertise. Given theUK's experience in PPP projects, involvement could also be at the pre-development stage with technical, financial and legal advisory services.

8.There is also room to develop and refine Philippine government thinkingand further shape their PPP model through UK support and cooperation.Some of this can come direct from the private sector But the Philippinegovernment is also very interested in the UK's regulatory and policyexpertise. Finance Secretary Cesar Purisima visited London inSeptember, and came back enthused from his meeting withInfrastructure UK at HM Treasury - he remains keen to develop adialogue with Treasury on PPP issues.

9.Our strong relationships with the key Government Ministries here andthe Philippines' big private infrastructure investors (Metro Pacific andSan Miguel Corporation etc) mean we are well placed to support UKcompanies seeking assistance in tapping these PPP opportunities. We

are drawing companies' attention to the opportunities via the UKTIPortal, and as part of the UKTI exercise on major commercial


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opportunities. Once a bigger pipeline of projects is opened, and moredirect opportunities are published, we should be in a better position toundertake more aggressive promotional activities.

Contact your regional trade team for more information on doing business in Philippineshttp://www.ukti.gov.uk/export/unitedkingdom/contactus.htmlAlternatively, find out more about this market here:www.ukti.gov.uk/export/countries/asiapacific/southeastasia/philippines.html
http://www.ukti.gov.uk/export/unitedkingdom/contactus.htmlhttp://www.ukti.gov.uk/export/countries/asiapacific/southeastasia/philippines.htmlhttp://www.ukti.gov.uk/export/countries/asiapacific/southeastasia/philippines.htmlhttp://www.ukti.gov.uk/export/unitedkingdom/contactus.html

Documents

Philippines_-Launch-of-new-PPP-infrastructure-programme-November-20101