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PPP Center urges LGUs to be self-sufficient in project planning

PPP.GOV.PH

By Luisa Maria Jacinta C. Jocson, Reporter

LOCAL GOVERNMENT units (LGUs) must develop the capacity to implement their own public-private partnerships (PPP), the head of the government’s PPP agency said.

“LGUs are empowered to do PPPs but a lot are asking for help from our center, and we really want to rise to the challenge, but of course we have constraints. Looking at the trend, we may have difficulty meeting demand from LGUs,” PPP Center of the Philippines Executive Director Cynthia C. Hernandez said in an interview on Oct. 27.

“What they need to have is the capacity to be able to (complete) the entire process of identifying, planning, and contracting PPP projects by themselves,” she added.

Ms. Hernandez said LGUs mainly need to be able to plan projects and manage resources internally.

“The intent is that one day they can manage everything themselves. Their constraints are, for example, their planning horizon is only three years,” she said, referring to the terms of municipal officials.

“If a project is good or financially viable, there’s no reason why they couldn’t (pursue it). If you have a good PPP project the private sector wants to take on, what’s stopping you from pursuing the project?” she added.

There are currently 74 PPP projects in the pipeline worth P2.2 trillion, according to the PPP Center.

“In the first few years we should deploy those; any additions should also be well underway. That is the minimum,” Ms. Hernandez added. 

The PPP Center is also looking for ways to attract more institutional investors.

“We are looking for a means for institutional investors to be sort of asked to join the government equity end, maybe in partnership with the Government Service Insurance System or some government fund or even the implementing agency. We’re looking at whether this is something we can do,” Ms. Hernandez added.

Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said that inflationary pressures are another challenge for PPP projects.

“Whether funded through development loans or private financing, the current economic headwinds, particularly rising interest rates, will make government and private investors reconsider whether it will make sense to proceed with PPPs today,” he said in an email.

“More importantly, proceeding with PPPs under a high-interest rate environment will also impact the actual rates and fees imposed on consumers in the medium- and long-term,” he added.

Mr. Ridon said that the government should also prioritize PPPs in areas with a need for immediate investment, such as airports, trains and busway systems while ensuring fair and reasonable rates to commuters and end-users.

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