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SOLUTION FOR GOVERNMENT STABILITY

PUBLIC-PRIVATE PARTNERSHIP Objectives: An act to promote and facilitate the implementation of privately financed infrastructure projects and effective delivery of social services by enhancing transparency, fairness and long term sustainability and removing undesirable restrictions on private sector participation in the provision of social sector services and the development and operation of public infrastructure Establish a Public-Private Partnership Unit and provide for its functions: Provide for public-private partnerships for the construction facilities and systems and maintenance, rehabilitation, modernisation, expansion and operation of existing infrastructure facilities and systems and the provision of social sector services Establish a Public-Private Partnership Unit and provide for its functions: develop general principles of transparency, economy and fairness in the award of contracts by public authorities through the establishment of specific procedures for the award of infrastructure projects and facilities and provisions of social sector services and rules governing public-private inception, procurement, contracting and management of public-private partnership agreements between contracting authorities and concessionaires. DEFINITION / RATIONALE Contractual arrangement between government and private sector to deliver public infrastructure and/o Private sector offers efficiency gains Private sector participation can accelerate the provision of public services Governments role can be rationalized r public services

RA 6957 AN ACT AUTHORIZING THE FINANCING, CONSTRUCTION, OPERATION AND MAINTENANCE OF INFRSTRUCTURE PROJECT BY THE PRIVATE SECTOR, AND FOR THE OTHER PURPOSES DECLARATION OF POLICY: it is the declared policy of the State to recognize the indispensable role of the private sector as the main engine for national growth and development and provide the most appropriate incentives to mobilize private resources for the purpose. IMPLEMENTING RULES AND REGULATIONS A committee composed from: DPWH, Department of Finance, NEDA, DILG, Insurance Commission Shall formulate and prescribe the implementing rules and regulations, the criteria and guidelines for evaluation and bid proposals, to subject the facility collections to audit by the Commission on Audit, conditions for the cancellation of contracts.

PRIVAT INITIATIVE IN INFRASTRUCTURE All government infrastructure agencies, including government-owned and controlled corporations and government units, are hereby authorized to enter into contract with any duly prequalified private contractor for the financing, construction, operation and maintenance of any financially viable infrastructure facilities through the build-operate-and transfer / build-and-transfer scheme BUILD-OPERATE-AND TRANSFER SCHEME A contractual arrangement whereby the contractor undertakes the construction, including financing, of a given infrastructure facility, and the operation and maintenance. The contractor operates the facility which shall not exceed (50) years during which it is allowed to charge facility users appropriate tolls, fees, rentals and charges sufficient to enable the contractor rate of return.

The contractor transfers the facility to the government agency / LGU concerned at the end of the fixed term. For the construction stage, the contractor may obtain financing from foreign / domestic sources and or engage the services of a foreign/Filipino contractor: provided that the ownership structure whose operation requires a public utility must be in accordance with the Constitution For corporate investors, citizenship of each stockholder shall be the basis for the computation of Filipino equity For foreign contractors, Filipino labor shall be employed or hired in the different phases of the construction where Filipino skills are available The financing institutions shall not exceed 20% of the total cost of the infrastructure facility of project Financing from foreign sources shall not require a guarantee by the Government /GOCC supply-and-operate - is a contractual arrangement whereby the supplier of equipment and machinery for a given infrastructure facility, if the interest of the Government so requires, operates the facility providing in the process technology transfer and training of Filipino nationals.

BUILD-AND-TRANSFER SCHEME A contractual arrangement whereby the contractor undertakes the construction, including financing, of a given infrastructure facility, and its turnover after completion to the government agency / LGU concerned which shall pay the contractor its total investment expended on the project, plus a reasonable rate of return. This arrangement may be employed in the construction of any infrastructure project including critical facilities which, for security or strategic reasons, must be operated directly by the Government

PRIORITY PROJECTS That may be financed, constructed, operated and maintained by the private sector. National project must be approved by Congress Local projects shall be submitted to the local development councils for confirmation and approval. PUBLIC BIDDING OF PROJECTS In Build-operate-and-transfer arrangement, the contractor shall be awarded to the lowest complying bidder based on the present value of its proposed tolls, fees, rentals, and charges over a fixed term or the performance standards, plans, and specification. Winning contractor shall be awarded with the franchise to operate and maintain the facility. In build-and-transfer arrangement, the contract shall be awarded to the lowest complying bidder based on the present value of its proposed schedule of amortization payment for the facility to be constructed according to the prescribed minimum design and performance standards, plans, and specification: . In build-and-transfer arrangement, the contract shall be awarded to the lowest complying bidder based on the present value of its proposed schedule of amortization payment for the facility to be constructed according to the prescribed minimum design and performance standards, plans, and specification. A Filipino contractor who submits an equally advantageous bid shall be given preference For the financing, construction, operation, and maintenance of any infrastructure project undertaken, the contractor shall be entitled to a reasonable return of its investment and operating and maintenance costs in accordance with its bid proposal and accepted by the concerned contracting infrastructure agency/ LGU

REPAYMENT SCHEME For build-operate-and-transfer arrangement, repayment scheme is effected by authorizing the contractor to charge and collect reasonable tolls, fees, rentals and charges for the use of the project facility not exceeding those proposed in the bid and incorporated in the contract provided that during the lifetime of the franchise the contractor shall undertake the necessary maintenance andn repair of the facility in accrodance with standards prescribed. For build-operate-and-transfer arrangement, repayment scheme is effected by authorizing the contractor to charge and collect reasonable tolls, fees, rentals and charges for the use of the project facility not exceeding those proposed in the bid and incorporated in the contract provided that during the lifetime of the franchise the contractor shall undertake the necessary maintenance andn repair of the facility in accrodance with standards prescribed. CONTRACT TERMINATION AND ADJUSTMENT If project is revoked, cancelled or terminated by the Government through no fault of the contractor / by mutual agreement, the Government shall compensate the contractor for its actual expenses incurred in the project plus a reasonable rate of return. The interest of the Government shall be duly insured with the GSIS or the Insurance Commission PUBLIC PRIVATE PARTNERSHI PROJECTS AS OF 2012 LRT LINE 1 South Extension Operation & Maintenance ( Baclaran to Cavite) LRT LINE 2 East Extension Operation & Maintenance (Doroteo Jose to Masinag Operation & Maintenance of the International standard Laguindingan Airport (Misamis Oriental) International-standard New Bohol (Panglao) Airport Development World-class Cebu international Airport Passenger Terminal Building Operation & Maintenance of the International Gateway of Puerto Princesa Airport meeting the International Civil Aviation Organization

Automatic Fair Collection System: decommissioning of magnetic-based ticketing system with contactless-based smart card technology, with the introduction of a centralized back office that will perform apportionment of revenues Integrated Transport System (ITS) Project: terminals will connect passengers from the provinces to other urban transport systems-railway, city bus, taxi and PUV-serving inner Metro Manila Cebu Rapid Transit Demonstration Project: restructure of main urban transport corridor from Bulacao to Ayala Cebu City. NLEX-SLEX Connector Road: elevated expressway which starts in Caloocan City and ends in Buendia, Makati and connects NLEX and SLEX to decongest traffic in Metro Manila NAIA Expressway Project (Phase II): the project provides access to NAIA Terminals I,II and III and links two existing expressway namely the Skyway and the Manila Cavite Expressway CALA Expressway (Cavite & Laguna Side): involves the construction of two expressway Cavite & Laguna Side connected to SLEX near Sta. Rosa Laguna Improvement/Rehabilitation of the Quirino Highway: that traverses three (3) provinces, Quezon, Camarines Norte, Camarines Sur New Centennial Water Supply source Project: construction of a dam, a water treatment plant, and an associated main pipeline that will provide water supply security to Metropolis Operation & Maintenance of Angat Hydro-electric Power Plant: MWSSowned auxilliary turbines 4 & 5 installed in Angat Hydro-Electric Power Plant Balara Water Hub: Construction of operationalization of an international center for water excellence located within the MWSS Balara Compound UP Diliman Campus Vaccine Self-Sufficiency Project (Phase II) Envisioned to accelerate progress in vaccine production and ensure vaccine sufficiency, thru local formulation, filling, labeling, packaging.

Grains Central Project, The project will establish grains bulk handling systems with corn grains processing centers and transshipment stations in major corn producing areas and selected sea ports by upgrading, expanding and enhancing the existing operations in at least 15 corn postharvest processing and trading centers. Establishment of Cold Chain Systems Covering Strategic Areas in the Philippines, The project will involve the construction and operationalization of Cold Chain Centers to be located in major Production and consolidation areas of agri-fishery products. The Centers will be equipped with the required facilities and machineries for minimal processing of livestock, fisheries and high value crops. REFERENCES: REPUBLIC ACT NO. 6957 Public Private Brochure, 2012

ANALYSIS: The latest GDP figures reveal the same growth patterns, suggesting little structural change in the Philippine economy. On the demand-side, growth remains largely consumption-driven, fuelled by remittances. On the supply-side, growth has increasingly relied on the services sector, which largely involves low-productivity activities. The result is a state of low-capital-stock equilibrium -- an economy that delivers growth but creates few jobs. The countrys growth potential can be more effectively realized by private and public investments aimed at addressing gaps in infrastructure which could, in turn, support the development of high-productivity sectors. To give the needed boost to the countrys investment level and to build up infrastructure necessary to accelerate economic growth, public-private partnerships (PPP) have been made a flagship program by the Aquino administration. The PPP program taps into the financial resources of the private sector, which is presumably more efficient in funding, constructing, operating, and maintaining major infrastructure projects that the government would otherwise usually undertake alone. Governments partnership with the private sector in carrying out public projects can be traced as far back as the passage of the first Build-Operate and Transfer (BOT) Law in 1990 as a response to chronic fiscal strain. In 1994, the Ramos administration amended the BOT Law as it authorized various types of public-private financing schemes. The NAIA 3 Terminal, a public-private-partnership initiative, was conceived during this time. From 1994 to the 2000s, the Philippines managed to reel in sizeable investments from domestic and foreign firms through PPPs as a key policy in promoting

growth. Additionally, PPPs have expanded their roles and found their way into local government projects, potentially providing the needed infrastructure in local economies. Executive Order No. 8, otherwise known as the PPP Center Act, transferred the jurisdiction of the PPP Center from the Department of Trade and Industry to the National Economic Development Authority. The PPP Center is mandated to recommend plans, policies, and implementing guidelines. It is also tasked to provide technical assistance and advisories to the parties involved and facilitate access to information regarding PPP Projects.

While the intention behind PPPs is laudable, areas for improvement are worth examining. In an analysis the policy design of the PPP has been found wanting in review and improvement. The recommendation that clear guidelines should be in place particularly in the bidding process -- i.e. in the identification of prospective projects for partnership and approval -- should complement the good governance and transparency theme endorsed by the Aquino administration. Furthermore, she suggests that the rules should also be flexible in responding to the needs of different economic sectors, citing the agricultural sector as having different capital requirements than the operationally large-scale transportation sector. While PPPs hold much promise, it is worth noting that they will ultimately have a limited role in the governments Public Investment Program (PIP). While substantial, the projected contribution of the private sector to total sources of financing in the PIP amounts to only Php613.19 billion or 12 percent of the Php3.117 trillion total. Nevertheless, the delays in the rollout of PPP projects entail substantial economic costs and foregone opportunities. According to Finance Undersecretary Gil Beltran, economic growth would have increased by an additional two percentage points last year had all the scheduled projects been bid out. If the plan was for PPPs to boost growth, the private sectors clamor for faster and more efficient approval and implementation of projects is justified. Despite the drawbacks, nevertheless, the PPP program remains to be a step in the right direction in the administrations goal of promoting investment. While the direct contribution of PPPs to economic growth is small compared to public infrastructure projects, the increased economic activity has multiplier effects on the rest of the economy given considerable unemployed resources at present. Moreover, PPPs free up a part of government resources that could be spent on equally important sectors such as education, health and social welfare. But the strength of the PPP program lies in its signaling effect -- done properly, PPPs send an effective signal to the private sector that the government is serious in taking them in as partners in addressing investment bottlenecks, not only in

infrastructure but even in broader initiatives such as institutional reforms. In other words, more than a purely economic endeavor, the PPP program is also a confidence-building initiative by the government with the private sector, allowing and encouraging them to actively participate in nation-building. Needless to say, however, these signals would be made clearer if they come sooner rather than later. While we ponder the daang matuwid advocated by the administration, wouldnt it be better if we could see actual roads being built as a resul t of this governance philosophy? There is reason to be hopeful, but the nation can wait on the sidelines for only so long. Given the Aquino administration's focus on inclusive growth, many of the PPP projects are in areas where the local government units may not have the appreciation, much less the expertise, for long-term gestating ventures. Power plants are a case in point, as many LGUs toe the line of very vocal interest groups in their localities that subscribe to the not-in-my-backyard syndrome for a host of reasons ranging from potential pollution to displacement of whole communities. In Mindanao, which is suffering from recurring brownouts, many communities are opposed to coal-fed power plants proposed by groups like AP. In fact, groups opposed to such big-ticket projects funded by agencies like the ADB made their presence felt on Friday, holding a rally a stone's throw away from the regional lender's annual meeting. The agency, which President Benigno Aquino III chairs, approves big-ticket ventures that require government counterpart funding or foreign financing, and so would have an impact on the country's fiscal and monetary position. Projects to be rolled out include the Modernization of the Philippine Orthopedic Center; New Bohol (Panglao) Airport; Automatic Fare Collection System; Light Rail Transit Line 1 (LRT 1) Extension; Ninoy Aquino International Airport Expressway; the Vaccine Self-Sufficiency Program of the Department of Health, among others. At present, the PPP Center is bidding out a P10.4-billion Department of Education project aimed at building 9,500 classrooms. A second project, the southbound extension of LRT 1, is next on the auction block. The Philippine government is aiming for five to six percent economic growth this year. It has ramped up public spending in the first quarter for the purpose, but not enough it seems, as the amount disbursed so far has fallen short of target.