The Philippines: 1. General Overview

PPP Country Profile
The Philippines
1. General Overview
The Philippine economy has been growing steadily since President Benigno Aquino, Jr. was
elected in 2010. The economy was one of the top performing economies in ASEAN in 2012, with a
GDP growth rate of 6.6%. The countrys strong economic performance is reflected in high growth,
low and stable inflation, sustainable fiscal and external positions, and a strong financial sector 1. The
Philippines continues to work in a favorable investment climate and a stable political environment
which give rise to abundant economic opportunities that have attracted major investors.
International credit rating agency Moody's Investors Services upgrade of the country's
foreign and local bond ratings from Ba2 to Ba1 was seen as a vote of confidence in the Philippine
economy's performance under the Aquino administration. All three international credit rating
agencies, namely, Moody's, Standard & Poor's (S&P) and Fitch have upgraded their rating of
Philippine sovereign debt to just one level below investment grade, a vast improvement over the
ratings given a few years ago 2. Indeed good governance, accountability, and transparency, which
have defined the framework of government policies and programs under this administration, have
served to bolster economic performance.
The Aquino administration has identified public-private partnership (PPP) as a key
component of its overall strategy for inclusive growth. In the words of Executive Order No. 8 (2010)
the Philippine PPP program is a cornerstone strategy to accelerate the infrastructure development
of the country. Using the countrys long experience with partnership arrangements with the private
sector in the provision of infrastructure, the Aquino administration is utilizing the PPP Program more
vigorously to improve the countrys infrastructure through more transparent and competitive
processes, efficient project implementation, monitoring and evaluation.
2. Institutional and Regulatory Framework

The basic legal framework for the PPP Program is the Build-Operate-Transfer Law, Republic
Act No.6957 (1990) as amended by Republic Act No.7718 (1994). The Philippines Congress enacted
the first Build-Operate-Transfer (BOT) law in Asia in 1990 that institutionalized private sector
participation in infrastructure and development projects.
Other pertinent laws and regulations that strengthen the policy and institutional
environment for PPP projects are as follows.
Republic Act No. 7160 (1991) / Local Government Code of 1991 describes the powers and
authority of local government units to promote local development, among other functions;
the Department of the Interior and Local Government (DILG) Memorandum Circular No.
2010-16, provides for the creation of PPP Units/sub-committees at the local development
1
2
Statement of Economic Planning Secretary A. Balisacan at the Philippine Development Forum, Davao City, February 4, 2013.
http://www.rappler.com/business/15059-moody-s-upgrades-ph-ratings (date accessed 21 January 2013).
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councils to assist in the formulation of action plans and strategies for PPP projects at the
local level;
Republic Act No.8974 (2000) facilitates the acquisition of right-of-way, site or location for
national government infrastructure projects 3.
Republic Act No.8975 (2000) prohibits lower courts from issuing temporary restraining
orders, preliminary injunctions, or preliminary mandatory injunctions, so as to ensure
expeditious completion of government infrastructure projects.
Executive Order No. 423 (2005) prescribes the rules and procedures for the review and
approval of government contracts to conform to Republic Act No. 9184 (the Government
Procurement Act). Section 8 of Executive Order 423 mandated National Economic and
Development Authority (NEDA) to issue guidelines regarding joint venture agreements with
private entities. NEDA released the guidelines in 2008, which provides the framework for
PPPs that are pursued through the joint venture mode. NEDA is currently reviewing those
guidelines with a view to improving them.
Executive Order No.8 (2010) reorganized and renamed the Build-Operate and Transfer (BOT)
Center to the Public-Private Partnership (PPP) Center of the Philippines and transferred its
attachment from the Department of Trade and Industry to the National Economic and
Development Authority to improve the institutional framework for PPP.
Executive Order No. 78 (2012) mandated the inclusion of provisions on the use of alternative
dispute resolution mechanisms in all contracts involving PPP, BOT and joint venture
agreements between government and private entities, and those entered into by local
government units.
The 1987 Constitution describes the nationality limitations on land ownership. Corporations
at least 60% of whose capital is owned by Filipino citizens may acquire private lands. Such
corporations cannot own public land and can only hold the same by way of lease. However, these
apparent limitations have not discouraged PPPs in transportation and road networks.
The Public-Private-Partnership (PPP) Center, an agency attached to the National Economic
and Development Authority (NEDA) is the main government coordinating and monitoring agency for
the PPP Program. It also manages the Project Development and Monitoring Facility (PDMF), a
revolving fund established under Executive Order No.8 (2010) that provides advisory services and
technical assistance in project preparation and development, and capacity building for implementing
agencies and local government units in all areas of the project development cycle.
Government support for PPPs is provided via two funds: first, the Project Development and
Monitoring Facility, and second, the Strategic Support Fund. The government received assistance
from development partners such as The Australian Agency for International Development (AusAID)
3
Road right-of-way is a legally described area within which facilities such as roads, sidewalks and associated features may be constructed
and maintained for public travel (Road Board, Department of Public Works and Highways Operating Procedures Manual, August 2001).
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and The Asian Development Bank (ADB) in establishing the PDMF. Currently PDMF Funds amount to
about US$41 million composed of about US$18 million from AusAID through ADB, and about US$23
million from the Philippine Government. The PDMF is used to develop a robust pipeline of properly
prepared and well-structured PPP projects. It can be tapped to finance pre-investment studies,
including pre-feasibility studies, feasibility studies, preparation of tender documents and draft
contracts, bidding processes and contract negotiations to bid award stage, and transaction advisory
services. Project development services may be outsourced to external advisors or consultants.
External advisors may assist in the structuring of PPP projects, conducting business case or prefeasibility studies or feasibility studies for PPPs, and preparing detailed engineering.
Under the Strategic Support Fund the government provides a lump sum appropriation in the
annual budgets of implementing agencies engaged in PPP to fund the governments share for PPP
project components. The budget will be used for right-of-way acquisition, resettlement,
governments counterpart fund for the construction and other related costs for actual and potential
PPP projects identified by the implementing agency, provided that these do not exceed 50% of total
project costs 4. In 2012, the government allocated a lump-sum amount of about US$47.50 million to
the Strategic Support Fund.
Under the BOT Law, as amended, the implementing agency/local government units can
implement their PPP/BOT projects through any of the following implementation modes: Public
Bidding (Solicited Mode) or Unsolicited Mode. Private investors/proponents engaged in PPP projects
under the solicited mode may receive fiscal incentives, e.g., tax exemptions, tax reliefs, government
undertakings such as credit enhancements, and other incentives. Upon registration with the Board
of Investments of the Department of Trade and Industry and compliance with existing rules, such
private proponents may also benefit from incentives provided under certain laws, e.g., the Omnibus
Investment Code as amended by Republic Act 7918; the Investment Incentives Act; the Tourism
Incentives Program of 1974; Mini-Hydroelectric Power Incentives Act.
Under the solicited mode, the implementing agency or local government unit chooses to
procure priority infrastructure and development projects through transparent and competitive
public bidding processes. Under the unsolicited mode the implementing agency or local government
unit may accept proposals from project proponents to undertake projects on a negotiated basis
provided that: 1) the project involves a new concept or technology and/or is not part of the list of
priority projects; 2) no direct government guarantee, subsidy or equity is required; and 3) the
implementing agency or local government unit has invited by publication, for three (3) consecutive
weeks, in a newspaper of general circulation, comparative or competitive proposals. The unsolicited
proposal will be subjected to challenge and may be awarded to a competitor who submits a lower
price than the original proponent. The original proponent has the right to match the better price
proposal submitted by a comparable proponent.
Source: DBM National Budget Circular No. 538, March 22, 2012
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3. Recent Developments in PPP

The PPP policy initiatives listed by the PPP Center are the following 5:
Amendments to the BOT Law-Implementing Rules and Regulations (IRR)
The purpose is to have clearer and more streamlined processes for PPP. The revised IRR
promotes an accelerated processing of PPP projects, with clearer transparency measures in the
bidding for, and award of projects. It also puts in place various improvements in governance and
accountability mechanisms. Guidelines on unsolicited proposals have also been improved.
Executive Order No. 78: Rules in Arbitration and Dispute Resolution
Executive Order No. 78 promotes alternative dispute resolution as an efficient tool and an
alternative procedure in achieving speedy and impartial justice and de-clogging court dockets. It
provides a more inviting climate for private investments by making the resolution of disputes arising
out of a contract less expensive, tedious, complex, and time-consuming.
The PPP Center is currently involved in the following Policy Advocacies to improve the PPP
Program:
Proposed amendments to the BOT Law seek to expand the coverage of RA 7718 (BOT Law)
into a Public-Private Partnership Act, which includes Joint Ventures as an additional form of
PPP scheme. The Law also aims to provide improved guidelines on handling unsolicited
proposals from interested private proponents, and on facilitating their competitive challenge.
Proposed amendments to Executive Order No. 8 aim to clearly spell out the roles of the PPP
Center. They should also strengthen the legal basis of the Project Development and
Monitoring Facility (PDMF) as a revolving fund. The projected amendment proposes the
official establishment of the PDMF Board as an expediting mechanism in the utilization of
the PDMF funds.
The proposed joint venture guidelines for government-owned-and-controlled corporations
prescribe the rules, guidelines and procedures for Joint Venture Agreements between
government corporations. This initiative aims to encourage the pooling of resources and
expertise between government and private sector entities.
As of January 2013, the total indicative cost of infrastructure investments in transportation
under the PPP Program is estimated at about US$2.15 billion. These include the following: Light Rail
Transit (LRT) Line 1 Cavite extension, operation and maintenance; automatic fare collection system
to replace the old magnetic-based ticketing system; Mactan-Cebu International Airport passenger
terminal building; operation and maintenance of the new Bohol Panglao Airport and the
Laguindingan Airport. Road network projects estimated at US$1.53 billion include the Ninoy Aquino
International Airport (NAIA) Expressway Phase II project; North Luzon Expressway-South Luzon
Expressway connector road project; and Cavite-Laguna expressway project. Other projects to be
implemented under PPP are infrastructure projects in the water and power, and agriculture sectors,
and those proposed by several local government units, among others 6.
5
6
Source: PPP Center

Source of data: PPP Center web site.
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PPP Country Profile

2. Institutional and Regulatory Framework

3. Recent Developments in PPP

Source: PPP Center

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