Philippines:

Launch of New
PPP
Infrastructure
Programme
British Embassy Manila

November 2010

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Summary
1. Philippine Government launches new PPP programme in bid to develop
the country's infrastructure. Strong political commitments to improve
governance of such projects and underwrite regulatory risk. A work in
progress - but the potential is there for this to be a very important part
of our commercial agenda in the Philippines. Opportunities for the UK
from the projects themselves, and to shape further thinking and policy
on PPP development.

Detail
2. Poor infrastructure has long been recognized as a major obstacle to the
Philippines' economic development - but tackling the problem has been
held back by the budget deficit and regulatory problems. The Aquino
administration has identified public private partnerships (PPP) as the
way forward. It launched its PPP programme on 19 November at an
international conference in Manila, addressed by the President and
sponsored by a number of international banks, including HSBC and
Standard Chartered.

3. Ten infrastructure projects with total investments of over $3.1 billion

have been prioritised by the Government to be tendered in 2011. These
include four light rail transit (LRT) projects for Metro Manila ($2.18
billion), two expressway projects in Luzon ($497 million), and four
airport projects around the country ($442.22 million). The projects
involve a mixture of new construction opportunities and of operation
concessions. A wide range of additional projects are still being finalized,
for rolling out next year. As well as more road and mass transport
projects, they are expected to cover agriculture, fisheries, food
processing, health, education, water supply, tourism, business parks
and commercial complexes.

4. The Philippines is not new to PPP. From 1990 to 2008, the Philippines
ranked 10th in the PPP top ten developing countries by investment, with
$45.1 billion invested for the period. But a lot of these projects ended
up mired in allegations of corruption, or bogged down by regulatory and
legal problems, especially over rights of way. The new administration is
pledging to improve performance through more transparent processes
and effective project implementation and monitoring. It has promised to
level the playing field through open tendering and competition and
wants to discourage the traditional Philippine practice of developers
putting forward their own "unsolicited" projects for government support.

5. President Aquino's most important announcement at last week's

conference was a commitment to protect investors from "regulatory
risk". There would be no political guarantees against commercial or
 economic risks (as had been given by the previous administration), but
Aquino pledged to protect private-sector investors against eg court
orders or decisions by regulatory agencies which would prevent the
collection of fees or tariffs at contractually agreed levels. The specifics of
the type of protection to be offered and its mechanism will be part of
the contract terms for each project. Only solicited projects which
undergo competitive bidding will be provided with such protection.

6. Other key elements of the new PPP drive include the establishment of a
new "PPP Center" (already done) to oversee the programme, and a
commitment to complete project approvals within 6 months. Secretary
for Budget Management Butch Abad told the conference that the
government will "establish a predictable and sustainable budgeting and
payment system for PPPs": the 2011 Budget (currently in the Senate)
contains provisions to support pre-development activities and right-of-
way acquisitions. Meanwhile, the government together with the World
Bank and other IFIs are working to establish a Philippine Infrastructure
Development Fund to provide a long-term fund structure to sustain and
further promote PPP projects.

Comment
7. Despite the fanfare last week, the programme at this stage is still fairly
modest. The administration's undoubted commitment to ushering in a
new age of transparency and good governance still has to be tested, as
does its ability to resolve long-standing practical obstacles. In particular,
disputes over right of way and land title have been notoriously difficult
to resolve here. But if they can deliver then there will be significant
opportunities for UK companies - whether to tender bids for projects
with local partners, or supply products or technical expertise. Given the
UK's experience in PPP projects, involvement could also be at the pre-
development stage with technical, financial and legal advisory services.

8. There is also room to develop and refine Philippine government thinking

and further shape their PPP model through UK support and cooperation.
Some of this can come direct from the private sector But the Philippine
government is also very interested in the UK's regulatory and policy
expertise. Finance Secretary Cesar Purisima visited London in
September, and came back enthused from his meeting with
Infrastructure UK at HM Treasury - he remains keen to develop a
dialogue with Treasury on PPP issues.

9. Our strong relationships with the key Government Ministries here and
the Philippines' big private infrastructure investors (Metro Pacific and
San Miguel Corporation etc) mean we are well placed to support UK
companies seeking assistance in tapping these PPP opportunities. We
are drawing companies' attention to the opportunities via the UKTI
Portal, and as part of the UKTI exercise on major commercial
 opportunities. Once a bigger pipeline of projects is opened, and more
direct opportunities are published, we should be in a better position to
undertake more aggressive promotional activities.

Contact your regional trade team for more information on doing business in Philippines
http://www.ukti.gov.uk/export/unitedkingdom/contactus.html

Alternatively, find out more about this market here:

www.ukti.gov.uk/export/countries/asiapacific/southeastasia/philippines.html