PH 'ideal' site for PPPs

MANILA, Philippines - The Philippines, among member-countries of the Association of Southeast Asian Nations (Asean), offers the most ideal environment for public-private partnerships (PPPs).

The verdict was handed down recently by Asian Development Bank (ADB) in its 2011 Infrascope.

In the Asia-Pacific region, ADB ranked the Philippines eighth in PPP-readiness.

It said on a scale of 0 to 100, with 100 representing the perfect environment for PPP projects, the country scored 47.1 out of 100 on its way to the No.1 spot in Asean.

In the Asia-Pacific region, other Asean member-countries that scored high in PPP-readiness are Indonesia, with a score of 46.1 out of 100, to land ninth; Thailand, 45.3, 10th; and Vietnam, 26.3, 14th.

Asean also groups Brunei Darussalam, Cambodia, Laos, Malaysia, Myanmar and Singapore.

The index was topped by Australia, with a score of 92.3.

“[The] Philippines [has] updated, or in the process of updating, regulations and [has] restructured existing institutional frameworks in the hope of improving the processes around PPP selection and oversight, and to develop specialist capacity in the public sector,” ADB said.

Results of the assessment suggest that each country can be grouped into four: mature, developed, emerging and nascent. These groups categorize the environment for sustainable and long-term PPP projects. The Philippines was classified as an emerging country.

A country’s overall score comes from their weighted category scores. The six categories given by the 2011 Infrascope are: legal and regulatory framework, institutional framework, operational maturity, investment climate, financial facilities and subnational adjustment factor.

Legal and regulatory framework, wherein quality of PPP regulations and openness of bids and contract changes are measured, was weighted 25 percent. Institutional framework, which is measured by the quality of institutional designs, was weighted 20 percent.

Regulators measure operational maturity, which was weighted at 15 percent, in terms of PPP-readiness and risk-allocation. Investment climate received a weight of 15 percent.

Financial facilities, wherein government payment risk and government support are measured, was weighted at 15 percent. Subnational adjustment factor, in which infrastructure concessions are evaluated, was weighted 10 percent.

The Philippines placed 7th with a score of 43.8 in legal and regulatory framework, 8th with 41.7 in institutional framework, 10th with 44.8 in operational maturity and 13th with 46.3 in investment climate.

Despite the long history of PPP projects in the Philippines, ADB said, limitations on resolving rows and financing hinder the projects from reaching their full potential. Even when the bidding process is well-structured, it added, debates and disputes are left to the parties to resolve and occasionally are brought to the courts.

ADB cited the Philippine government for its interest in attracting foreign PPP partners. It said state support remains limited due to the government’s “poor fiscal position.” ADB, however, added that this shortcoming remains a threat, too, to fostering sustainable and efficient PPP infrastructure projects not just in the Philippines but also in the Asia-Pacific region.

“In order to leverage the $8 trillion required over the next decade for physical infrastructure in Asia, public financiers like ADB must undergo a complete change of mindset and shift their focus from sovereign projects to [PPP projects],” ADB Regional and Sustainable Development Department Deputy Director General Woochong Um said. “Studies such as this one [on PPP readiness] will help our developing member-countries address the areas of [PPPs] that need to be strengthened.”

The 2011 Infrascope said South Korea, India and Japan are the top performing countries in the Asia-Pacific region. The feat, it added, reflects the three countries’ robust institutional and regulatory frameworks. Two benchmark countries, Australia shared overall top scores with the United Kingdom.

ADB said India came in slightly ahead of Japan, which reflects strong political will and rising capacity for PPPs, despite implementation remaining a challenge. China also performed well with 614 PPP projects reaching financial closure between 2000 and 2009.

The ADB report said Vietnam, Mongolia and Papua New Guinea were at the lower end of the index, due to a lack of experience with PPPs and underdeveloped institutions and regulatory frameworks.

It added that the Philippines and other emerging economies such as Pakistan, Bangladesh, Kazakhstan, Thailand and Indonesia are moving swiftly to put in place necessary laws and structures to attract more private investments.

The 2011 Infrascope, conducted by ADB’s Economist Intelligence Unit, uses a benchmark index system to rank the readiness and capacity of a country to carry out sustainable, long-term PPPs.

Itt was carried out in 11 developing economies in the Asia-Pacific region, along with four benchmark countries and one state, Gujarat state of India. -ABS-CBN News (May 31, 2012)