Gov’t to fund 66% of infra program with own funds

NATIONAL Economic and Development Authority Undersecretary Rolando G. Tungpalan said that about two-thirds of the government’s medium-term infrastructure spending will be sourced from government funds, with the remainder split between overseas long-term loans and public-private concessions.

In his presentation, Mr. Tungpalan noted that about 66% of the P8.4 trillion infrastructure spending program under the 2017- 2022 Public Investment Program, will be implemented with funding from the general appropriations act.

“The remaining projects will be carried out through PPP (publicprivate partnership) at 18% and ODA ( official development assistance) at 15%,” he said.

“These are the numbers that are contained in the Public Investment Program in the medium term,” he said in a speech during the Management Association of the Philippines membership meeting yesterday.

Mr. Tungpalan however declined to disclose the list of new projects by mode of funding, saying that the list has yet to be finalized.

In terms of deciding whether the government pursues either ODA or PPP, Mr. Tungpalan said that much depends on the government’s priorities.

“The process should be first, what are the priority infrastructure projects, next which is best carried out as PPP or other nonPPP modes. Whatever criteria we chose, the comfort of the public is that there is a real economic rate of return that we vet on every project,” he said.

He said that projects that needs to be started immediately should be funded by the government, while those projects with a potentially high return may be attractive to private concessionaires, making a PPP more likely.

In the case of the Mindanao railway project, Mr. Tungpalan said: “Depending on the demand, it is more advantageous for government with access to longterm ODA financing to build the railway. Eventually as demand catches up, you can see whether it becomes attractive for PPP to enter.”

Mr. Tungpalan noted that ODA funds offer longer-term maturities and favorable terms, and access to the aid- giving country’s knowledge, experience, and technology.

“Japanese untied loans have a standard interest rate of 0.65% to 1.4%, with a maturity period of 30-40 years, inclusive of a 10-year grace period. For its tied loan, its terms and conditions include a 0.2% standard interest rate, with a maturity period of 40 years, inclusive of a 10-year grace period. These are highly concessional as compared to commercial lending,” he said.

The county’s economic managers said earlier that the administration will pursue a “hybrid PPP,” under which some infrastructure projects will be funded by the government to facilitate the immediate start of construction, and partly funded by ODA loans. The PPP component will come later when the operations and maintenance of the project are contracted out.

In a separate interview with reporters yesterday at the Treasury bureau in Intramuros, Finance Secretary Carlos G. Dominguez III said: “Our priority is not to keep debt down but to start the project immediately.”

“We don’t want to wait for the public to benefit from new projects, so we’re willing to take the initial steps and spend the funds available to the government both through loans and tax collections,” he added.

Mr. Dominguez noted that negotiations with private concessionaires take about 30 months, before a project breaks ground.

Recently, the government terminated the public- private partnership ( PPP) mode of procurement for the regional Bacolod- Silay, Davao, Iloilo, Laguindingan and New Bohol ( Panglao) airport projects, and will instead pursue other modes.

Nevertheless, Mr. Tungpalan said that the government should exercise good governance whatever funding mode it takes, to ensure good project quality.

“Good quality at entry, implementation, and operations and maintenance should be matched with good governance to produce good sustainable results,” he added.

“Given the experience and challenges we face with our PPPs, we need to revisit many of our assumptions and extent to which due diligence on the part of the government in investment decisionmaking have indeed been carried out,” he said.

The government is looking to increase public infrastructure spending to the equivalent of 7.1% of gross domestic product by 2022, from 5.4% currently.

This is intended to help grow the economy by 7-8% annually starting next year until 2022 from 6.9% in 2016, and slash poverty incidence to 13-15% from 21.6% in 2015. —