Public Private Partnership in the Philippines

Some Q and A

What is Public-Private Partnership (PPP)

PPP can be broadly defined as contractual agreement between the Government and a private firm to:

• Finance• Design • Implement and • Operate

Infrastructure facilities and services that were traditionally provided by the public sector.

Public + Private

= Infrastructure facilities and services

What is unique with PPP

• Balancing act: Embodies optimal risk allocation between the parties – minimizing cost while realizing project developmental objectives.

• Needs to structure a project in such a way that the private sector gets a reasonable rate of return on its investment

Elements of PPP

• A contractual agreement between the public sector and the private sector

• Strategic mode of procurement• Shared risks and resources• Value for Money• Outcome orientation• Acceleration of infrastructure provision

and faster implementation

The Philippines is one of the first

Asian country to implement PPP

July 1990 – Republic Act No. 6957, also called the BOT Law. It  presented two project schemes: build-operate-and-transfer (BOT) and build-and- transfer (BT).  

1994 – Amends Republic Act. No. 6957 to allow more contractual agreements

9 Contractual agreements under the BOT Law as amended

• Build-operate-and-transfer (BOT)  • Build-and-transfer (BT)• Build-lease-and-transfer (BLT)  • Build-own-and-operate (BOO)  • Build-transfer-and-operate (BTO)  • Contract-add-and-operate (CAO)  • Develop-operate-and-transfer (DOT)  • Rehabilitate-operate-and-transfer (ROT)  • Rehabilitate-own-and-operate (ROO) 

2010 – President Aquino reorganizes the BOT Center and renames it as the Public-Private Partnership of the Philippines and transfers it from the Department of Trade and Industry to the National Economic Development Authority

What has been accomplished?

The story so far

• 34 completed PPP projects with a total cost of P3.9B

• 38 operational projects with a total cost of P16.6B

• 28 just awarded projects for around P10B.

The story so far

• 34 completed PPP projects with a total cost of P3.9B

• 38 operational projects with a total cost of P16.6B

• 28 just awarded projects for around P10B.

What about issues and problems?

• Complicated process, delay in government review and approval,

• Bidding failure, no bidders• Issue on direct guarantees and sharing

of risks • How to strike a balance between

commercial viability and public interest• Improving the quality of project pipelines with sufficient

project preparation, including economic, financial, technical

and environmental feasibility studies, is critical to clearing

the way for private sector participation. Limited flow of bankable projects because of underinvestment in project preparation represents a major obstacle to public-private partnerships for infrastructure.

Innovative approach to bridge the viability gap

What is blended finance?

Blended finance is combining the public sector’s social return objectives and private sector’s financial return objectives through risk mitigation by the public sector in a manner that induces the private sector to participate.

Notes on blended finance• Blended finance is defined as the complementary use of grants (or

grant-equivalent instruments) and non-grant financing from private and/or public sources to provide financing on terms that would make projects financially viable and/or financially sustainable.

• Given that certain infrastructure investments may not be commercially viable, innovative instruments have been sought to close this ‘viability gap’ and make a larger number of projects bankable.

• By blending grants with loans, this innovative approach to development finance aims to achieve a number of objectives – from increasing the volume of development finance in a context of constrained resources, to increasing the viability of investments, to enhancing the overall effectiveness of aid.

Hope in blended finance