DOF welcomes Senate approval of PPP Act on 2nd reading

The Department of Finance (DOF) welcomes the passage of Senate Bill No. 2233 or the Public-Private Partnership (PPP) Act on second reading on September 20, 2023.

“I thank our good sponsor Senator Joseph Ejercito, as well as Senate President Juan Miguel Zubiri and Senate Majority Leader Joel Villanueva, for working to pass this critical piece of legislation. The Department of Finance, together with the National Economic and Development Authority and the PPP Center, will continue to work with Congress to establish a stable and predictable PPP policy environment to pave the way for high-quality and cost-effective infrastructure in the country,” Finance Secretary Benjamin E. Diokno said.

The PPP Act is a priority measure of President Ferdinand R. Marcos, Jr.’s administration. It supports the 8-Point Socioeconomic Agenda, which prioritizes job creation through the promotion of trade and investments and improving infrastructure.

The proposed measure will consolidate all legal frameworks and create a unified system for investors to refer to when engaging in PPP projects.

To facilitate a more effective and streamlined PPP approval process, the PPP Act will increase the approval threshold for projects that need the National Economic and Development Authority (NEDA) Board’s approval to PHP 15 billion.

Furthermore, it removes the limiting provision of the ‘first-in-time’ approach of unsolicited proposals. This will allow the government to review proposals for the same project simultaneously and choose the best candidate to be awarded the project.

The Act also provides for safeguards such as the creation of a Risk Management Fund for Contingent Liabilities, as well as the mandatory inclusion of dispute avoidance and alternative dispute resolution (ADR) mechanisms for quicker and more efficient rulings.

There is also a penal provision that is applicable to both private individuals or public employees to ensure accountability.

When undertaking PPP projects, the private proponent shares in associated risks for reasonable return on investment while contributing to the effort of nation building. The PPP Act provides investors with Certainty of Tariff Regulation to reduce the investment risk of private proponents.

Transparency is also a key aspect of the measure as it provides for the public disclosure of tender documents and PPP contracts.

PPPs are contractual arrangements between the implementing agency and the private proponent for the financing, designing, constructing, operating and maintaining, or any combination thereof, of public infrastructure or development projects. These projects may be undertaken through various modes, such as Build-Operate-and-Transfer (BOT) and Joint Ventures (JVs).

Within the first year of the administration, the government has enhanced guidelines and procedures governing various modes of PPP to allow for the speedy approval of projects, uphold high standards of transparency and accountability, enhance the bankability of PPP projects for private partners, and ensure efficient risk allocation between the government and the private sector.

These include the revised implementing rules and regulations (IRR) of the BOT Law, revised Investment Coordination Committee (ICC) guidelines on PPP approvals, and enhanced NEDA JV guidelines.

As a result of these reforms, Secretary Diokno said that four PPP proposals with a total project cost of PHP 212.8 billion (around US$ 3.8 billion) have already been approved since the beginning of the President’s term.

“Two of these proposals were evaluated in record time,” Secretary Diokno said in reference to the solicited proposal for the rehabilitation of the Ninoy Aquino International Airport (NAIA) and the unsolicited proposal for the Tarlac-Pangasinan-La Union Expressway (TPLEX) Extension Project which were evaluated and approved in around six and eleven weeks, respectively.

The passage of the PPP Act will institutionalize timelines, revolutionizing the evaluation and approval processes of PPP proposals.

The government engages in PPPs to accelerate the country’s economic growth as it provides for alternative funding sources, thereby alleviating fiscal strain on the national budget and allowing public funds to be allocated for other priority projects.

The government has identified 197 priority Infrastructure Flagship Projects (IFPs) amounting to approximately US$ 155 billion, at least 39 of which shall be financed through PPPs.