Saturday, January 06, 2018

BWorld 176, Road trips and PPP projects

* This is my column in BusinessWorld last December 28, 2017.

For the third straight year, I drove my family from Makati City to Iloilo City via roll-on roll-off (RoRo) vessels during the holidays.

The road trip came with its own set of inconveniences that were nevertheless offset by several benefits: It allowed my family to carry more cargo (compared to flying) and also allowed my two daughters to enjoy boat rides.

In December 2015 and 2016, I drove days before Christmas, to avoid the long queues of vehicles at the ports of Batangas and Roxas or Bulalacao, Oriental Mindoro. This year, I drove early morning of Dec. 25 and I noticed two improvements.

First, toll fees were no longer collected that day (or at least in early morning) in the three tollways — South Luzon Expressway (SLEx), the SLEx extension, and the Southern Tagalog Arterial Road (STAR) and I wish to thank the tollway operators for that Christmas gift.

As expected, travel was smooth and safe on these tollways, indicating once more the beauty of privately operated infrastructure and user-pay principle.

Last but not the least, only a few cars queued at the Batangas and Roxas ports although there were also fewer boats that day.

Roads from Calapan to Roxas in Oriental Mindoro are generally good although motorcycles and tricycles — especially in big municipalities like Calapan, Naujan, and Pinamalayan — delayed travel.

Likewise, the highways in Aklan province were smooth. In Capiz, roads have generally improved but several portions have remained bumpy. Motorcycles and tricycles on these roads have also increased significantly, extending travel time.

These bring up two important subjects.

First, the need to expand and modernize our roads via tollways, constructed and operated by the private sector through the public-private partnership (PPP) scheme.

Existing roads will remain and will be maintained by the DPWH and local governments but there should be an alternative thoroughfares for motorists who are willing to pay for faster and safer travel.

Here is a list of potential new tollways that currently have big vehicle traffic volume. I am not sure if there are already unsolicited proposals for these tollways.

1. Calapan-Roxas, Oriental Mindoro. This covers 126 kilometers with additional entry/exit in larger municipalities such as Naujan and Pinamalayan. Vehicle volume has practically exploded with the 24/7 operations of RoRo boats between Batangas-Calapan and Roxas-Caticlan. Many tourists and visitors from Metro Manila and nearby provinces are travelling to the islands of Mindoro (Oriental and Occidental provinces) and Panay (Aklan, Capiz, Antique, Iloilo provinces).

2. Caticlan or Kalibo, Aklan-Iloilo City. Caticlan hosts the main seaport and airport for hundreds of thousands of yearly visitors who go to Boracay. Panay island has many tourist attractions besides its already substantial population.

3. Escalante-Bacolod-Dumaguete, Negros island. The Escalante-Bacolod route connects the two provincial capitals of Negros Occidental and Cebu while the Bacolod-Dumaguete route connects the two provinces’ capitals. There are four sea connections from Negros to Cebu with rising commerce and investments between the two islands. Escalante-Tabuelan, San Carlos-Toledo, Guihulngan-Tangil, and Dumaguete-Bogo or Oslob.

Second, the Duterte government shouldn’t have reversed the previous policy of integrated PPP (building/construction + operation and maintenance, O&M are under a single entity) and change to hybrid PPP (building/construction and O&M done by two separate entities, the former usually China-owned firms via China ODA).

Many Philippine-based construction companies need more experience and infrastructure portfolio that further strengthen their technical and financial capability to do more PPP nationwide and regionwide. Our emerging economic neighbors Indonesia, Vietnam, Cambodia, Laos, and Myanmar have started some large projects in the past and will soon undertake even bigger developments — provincial tollways, city skyways, big airports, and seaports, water, and power projects, school buildings and other civil structures.

ASEAN-based infrastructure and construction firms will have the advantage compared to those outside the region.

And pretty soon, fast-developing countries outside the region like India, Bangladesh, and Pakistan will also embark on large-scale infrastructure development via PPP as the scheme will significantly free their fiscal resources while having big, capital-intensive projects at the same time.

Philippine-based construction firms with large portfolio of finished and on-going projects in the Philippines and ASEAN neighbors will have some advantage because of evolving trade and investment partnerships among Asian countries.

It may have been wrong for the Duterte government to reverse previously planned integrated PPP and change to hybrid PPP just to accommodate China ODA and firms.

After all, there should be less government intervention in sectors and activities where market competition and innovation is present and can be further strengthened. Bigger government is reserved for promoting the rule of law and respecting and enforcing contracts and obligations between and among competing and regulated entities.

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