The administration of President Rodrigo Duterte has shown a clear preference for using a mix of public funds and official development assistance (ODA) to finance its Build, Build, Build infrastructure programme. While the government has a list of projects in mind to better connect and modernise the country, the area of transport infrastructure is seeing a growing number of unsolicited private sector proposals. Significant progress has been made on a number of fronts, but questions remain about the effective execution of state-proposed public-private partnerships (PPPs). This has driven some players to approach the government with their own projects and budgets.
New Methods
The government has shown an increasing acceptance of unsolicited proposals in recent years, provided that contractors guarantee to break ground on their projects within 18 months of approval from the National Economic Development Authority (NEDA). Since assuming office President Duterte has publicly announced the government’s intent to carefully consider unsolicited private sector proposals and hybrid PPP projects in pursuit of greater efficiency in constructing necessary infrastructure. Under hybrid PPPs development projects are generally financed by either the government or ODA partners before the operations and maintenance contracts are tendered to the private sector, negating the risk that winning bidders fail to secure the finance required for the costly development phase.
Increased demand for project finance is a direct result of the government’s infrastructure development push. As a result, policymakers have become open to hybrid PPPs in cases where a project is suitable for private sector involvement. To assist these efforts, the government reviews unsolicited proposals according to the revised guidelines that were issued in early 2017 by the PPP Centre, a public agency headquartered in Quezon City that provides technical assistance to government institutions for the implementation of PPPs.
Makati City Subway
One particular project that is set to boost connectivity in the country’s central business district is the unsolicited proposal for a subway in Makati City, part of the Metro Manila region. Preparatory work began in December 2018 for the $3.7bn project, which will see a 10-km intracity line move up to 700,000 passengers per day through the affluent commercial hub. The subway is envisioned to connect to Line 3 of the Manila Metro Rail Transit System, the Pasig River ferry and the Metro Manila Subway. The Makati City project will be under a 30-year concession that is expected to be signed before the end of 2019. The subway is being built by a consortium spearheaded by local Philippine Infradev Holdings and Chinese firm Greenland Holdings Group.
While a tentative route for the line has been planned, the stations are yet to be finalised. A Makati City government spokesperson told local media in December 2018 that a feasibility study will be carried out as part of pre-digging works to identify appropriate locations for the stops. Due to become fully operational by 2025, the line is envisioned to begin at Ayala Avenue and end near Ospital ng Makati, with a travel time of about 15 minutes between the two points. If completed as planned, the project would provide a successful example of how the public and private sectors can collaborate on infrastructure development beyond conventional PPPs.
“In my experience, PPPs with local governments can be faster than those with the national government,” Antonio Tiu, president and CEO of Philippine Infradev Holdings, told OBG. He added that after a $350m bond was submitted to the Makati City government, a joint venture agreement was officially signed towards the end of July 2019. “Both the local and national governments are extremely open and helpful towards our project. We are already planning connection to the national mass transport network and extensions through to a number of nearby cities,” he said.
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