A setback for the PPP program

PHILIPPINES - In Brief 28 Mar 2016 by Romeo Bernardo

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Just weeks after announcing that it will “gift wrap” $6.64 billion worth of infrastructure projects for the next administration by bidding out 10 to 11 public private partnership (PPP) projects before end-June, government suffered a major setback today as no bidders showed up for the auction of the Laguna Lakeshore Expressway Dike Project. An ambitious undertaking estimated to cost $2.73 billion, the project involves the construction of three components: about 47 kilometers expressway dike, a flood control system, and reclamation of 700 hectares. We have earlier identified this project as particularly challenging given its complexity. (See “Challenging Partnerships,” 16 October 2014) Three of the largest conglomerates in the country, Ayala, SM and Aboitiz, formed a consortium specifically to bid for this project and jointly manage the complex set of risks. Reports indicate that they decided not to submit a bid, partly due to political risk, as President Aquino is set to step down in three months’ time. Two other bidders who had expressed interest, San Miguel Corp and a Malaysian-Korean-Villar consortium, also did not participate in today’s auction. We gather from knowledgeable sources that most of the other 9 to 10 projects will likely face delays as well, starting with the projects of the Department of Transportation and Communication – 5 regional airports (costing a total of $2.4 billion), which will likely await new leadership, and the $422 million Davao Sasa port modernization project, which has to hurdle a legal case seeking to stop the bid on environmental grounds. We are not very optimistic either about the $1.1 billion Regional Prison Facilities project, which ...