NY-based think tank rains on PPP parade

NY-based think tank rains on PPP parade
BY DENNIS GADIL

The government risks piling up more contingent liabilities instead of tapping more private funds from an "ill-conceived" public partnership program (PPP), a New York based economic think-tank said.
In its quarterly report on the country, Global Source said most of the projects initially identified under the PPP program either lacked "quality" or "skillful" preparation.

"We remain unconvinced results will be seen in this area (PPPs) in the near term even assuming that paperwork and physical execution can be fast-tracked," it said.

Global Source said the problem appears not to be funding but the failure to do a thorough homework on the projects’ feasibility.

"For instance, government’s current PPP wish list of infrastructure that can be immediately financed looks thin and, except for one or two mass transport projects, not fully prepared at this time," it said.
Global Source added that the presence of regulatory risks also poses complications on the success of every PPP project.

"But the major constraint as we see it is not a lack of funding but rather a lack of quality and skillfully prepared projects to fund," the US-based economic think tank said in a report written by Filipino economists Romeo L. Bernardo and Margarita Gonzales.

Global Source said implementation of half-baked PPPs would lead to more contingent liabilities for the government in the long run if it would provide counterpart funding for a doomed-to-fail project.
Government proponents of the PPP project have said some guarantee cover and tax holidays will be extended to PPP investors to ensure decent returns on their multi-billion investment.

"In that case, PPP projects may just lead to higher fiscal risks and hard-to-manage contingent liabilities down the road," it said.

Global Source likewise belittled the move of government to charge Pilipinas Shell Petroleum Corp. with technical smuggling for alleged non-payment of P24.5 billion in excise taxes for its oil imports from 2005 to 2009.

The New York-based think tank said it was "surprised" by the filing of criminal case against Shell.
"This trumpeted ‘big smuggling case’ however may not be the airtight case government needs to show its no-new taxes strategy can really work given the complexity of the legal issues involved," it said.
"And may even signal that fiscal managers have run out of options in terms of hiking collections, resorting to past practice of ‘hunting in the zoo’ and squeezing those already within the tax net."
Global Source also said such development is "possibly counterproductive to government’s efforts to attract more FDI (foreign direct investment)."

The government is looking at an initial of P180 billion to P200 billion in private funds that would be generated from its list of 10 to 13 projects that would be unveiled during the PPP summit slated this month.
Among the projects included in the PPP short list from a bigger list of 70 projects are airports on Panglao Island off Bohol and another in Daraga, Albay.

The list also includes the improvement of the Laguindingan airport in Misamis Oriental as well as an irrigation facility in Sultan Kudarat and additional lines of the Light Rail Transit system.
Economic managers met Wednesday at the finance department building to discuss preparations for the November PPP summit.