Saturday, November 11, 2023

BWorld 653, Financing growth via more PPP funding

Financing growth via more PPP funding
November 2, 2023 | 12:02 am

My Cup Of Liberty
By Bienvenido S. Oplas, Jr.

(Part 7)

While the global and regional economic environment this year is worse than last year, there are some emerging opportunities for the Philippines. Among these are rich sovereign wealth funds (SWFs) abroad in search of new investments here because their domestic economies are either crawling or contracting.

Public-private partnership (PPP) investing in the Philippines is one area that many SWFs and big investors abroad find enticing. The Philippine economic team composed of Finance Secretary Benjamin Diokno, Budget Secretary Amenah Pangandaman, National Economic and Development Authority Secretary Arsenio Balisacan and Bangko Sentral officials met with SWFs of Qatar and the United Arab Emirates on Sept. 10-12. President Ferdinand Marcos, Jr. and Diokno met with the SWF of Saudi Arabia plus other investors on Oct. 19.

Last week, Secretary Diokno met with officials of the Federal Holding and Investment Co. (La Société Fédérale de Participations et d’Investissement), Belgium’s SWF on Oct. 28 and he explained the PPP scheme here and co-investment opportunities with the Maharlika Fund in infrastructure and energy. See this BusinessWorld report written by Luisa Jocson, “DoF’s Diokno discusses possible collaboration with Belgian wealth fund” (Oct. 29).

The European Investment Bank (EIB) has also expressed interest to invest in the country’s infrastructure projects when Secretary Diokno visited their headquarters in Luxembourg on Oct. 24. On the same day, the Royal Government of Cambodia-Ministry of Economy and Finance visited the Budget department and Secretary Pangandaman as the Cambodian officials exchanged notes on public financial management.

I checked PPP investments by country using the World Bank database. I notice that many countries have zero or small amount of investment, even among the rich and industrial countries. Perhaps they do not call it PPP and just outright private investment with no bidding for solicited projects or “Swiss challenge” for unsolicited projects.

In Asia, the Philippines is among the big recipients of PPP investments in transportation and energy after China, India and Vietnam. In the Americas, Brazil, Mexico, Colombia and Peru lead. In Europe, it is Turkey and in Africa, it is South Africa.

The PPP Code of 2023 (House Bill 6527 and Senate Bill 2233) bicameral committee report was ratified by the Senate on Sept. 27. When this becomes a law, it will help expand infrastructure funding and implementation, update the approval thresholds for PPP projects while offering a consistent legal framework for PPP at the national and local (provincial, city, municipal) levels. There will be clear delineation of risk- and reward-sharing between government agencies and private sector proponents.

The economic and infrastructure teams have identified 197 huge infrastructure flagship projects costing about P8.74 trillion. Forty-nine of those 197 projects will be funded through PPP, and the Maharlika Fund plus partner SWFs from abroad will play an important role in their financing and implementation.

The PPP Center headed by Executive Secretary Cynthia Hernandez has identified 181 PPP projects (121 national plus 60 local) under implementation with an estimated project cost of P2.66 trillion. It is good that more local government units (LGUs) turn to PPP funding for their local projects and not rely on national funding. This will help foster LGU competition to optimize the full implementation of expanded devolution under the Mandanas ruling.

Meanwhile, the Investment Coordination Committee — Cabinet Committee met on Oct. 27 and the economic team approved social infrastructure projects that cover improving agricultural productivity and maritime safety, among other things.

On enhancing agricultural productivity, the Agriculture and Energy departments must compare notes and goals because many ricelands, cornlands, sugarlands and other crops are converted into solar farms. While this will expand renewable energy to “save the planet,” this will also have adverse effects on food production and will not “save the poor and hungry.”

See related “Financing growth” series in this column: Part 6, “Financing growth: Maharlika Fund and SWFs from abroad” (Oct. 24); Part 5, “Financing growth: Reducing interest payments and spending control” (Oct. 5); Part 4, “Financing growth: A rice tariff cut, an MUP pension cut and reforms in excise tax in mining, oil and coal” (Sept. 26).

See also:
BWorld 650, Financing growth: Maharlika Fund and SWFs from abroad, Novermber 03, 2023
BWorld 651, Coal and nuclear power as growth drivers, November 05, 2023 
BWorld 652, The legal case of the late Doc Iggy, November 10, 2023.

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