PPP Conversations #12 with MMDA Chairman Lim

PPP Conversations #12 with MMDA Chairman Lim

The MMDA (Metropolitan Manila Development Authority) has a lot on its plate. Its vision statement captures the challenges it faces day in and day out—traffic congestion, climate change, waste management and disaster prevention. The MMDA cannot assume a business-as-usual attitude. Together with and through the 17 political units in Metro Manila, 16 cities and one municipality—they have to think and decide together, and collectively act out-of-the-box.

The MMDA is a public corporation and government instrumentality with corporate powers governed by the Metro Manila Council (MMC). It has broad and integrative powers with the power to issue rules and regulations pursuant to its mandate.

To be responsive and to achieve “decent quality of life for Metro Manilans,” the MMDA has to be proactive, dynamic and not be risk averse. Aside from partnering with the 17, it also has to work with private sector proponents (PSPs) in order to fulfill its “I will Act” rallying slogan. The MMC answered this call for public-private partnership (PPP) when it approved unanimously on August 7 the MMDA Alternative PPP Guidelines presented by the MMDA’s tireless and driven chairman, Hon. Danny D. Lim. The Guidelines offer four additional modalities—lease, lease-to-own, real-property swap and design-finance-build—whereby the PSPs shall be selected either through open bidding or unsolicited proposals. Chairman Lim in this PPP Conversation shares with us his views on MMDA’s PPP and his call for all of us to be part of the solution.

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How about giving tax incentives to local PPPs?

How about giving tax incentives to local PPPs?

Today’s topic is about an LGU’s authority to give “tax incentives or tax holidays” for its PPP project or a project by another government agency. The build-operate-transfer law (BOT law) also allows this form of direct government subsidy. This can be a form of support or contribution to a joint venture, lease or concession PPP.

  • Local taxes. Under the 1991 LGC, Congress allocated the taxes provinces, cities, municipalities and barangays can levy. Provinces and cities can, among others, impose real property, franchise, and sand and gravel taxes, while cities and municipalities can impose business taxes.
  • Tax privileges. Under Section 192 of the same law, there are three forms of local tax privileges. LGUs may grant tax exemptions, incentives or reliefs. Local tax imposed can be withdrawn. The private sector proponent for a water distribution, septage, monorail, expressway, reclamation or fiber optic PPP project can enjoy these contractually and by virtue of an ordinance.
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Expropriations in local PPPs

Expropriations in local PPPs

CAN a local government unit (LGU) expropriate private property and contribute the use of that property in a public-private partnership (PPP)? Yes!

Eminent domain defined. This power, also referred to as the power to expropriate, is delegated to all LGUs. Under the 1991 Local Government Code, an LGU may, through its local chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose or welfare for the benefit of the poor and the landless, upon payment of just compensation to be determined by the courts.

Same purpose as PPPs. Eminent domain and PPPs share the same objective, i.e., the public good, purpose and welfare. All local PPP projects, which are projects undertaken through the collaboration between an LGU and a PSP, must redound to benefit of the public.

Possible objects of expropriation for PPPs. An LGU monorail, socialized housing, bridge, road, expressway, fiber optic, realty redevelopment or expansion, power plant or sewerage project, may require the use of land which neither the LGU nor the PSP owns or has beneficial use over.

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Certified PPP Advocate

Certified PPP Advocate

You could be one if you attend three two-day or three-day modules organized by an accredited entity and pass an examination administered by this columnist. He owns the trademark in the Philippines.

Three modules. As designed, the first module is about the policy and legal aspects of public-private partnerships. The topics include the definitions, laws, regulations, value drivers, projects, modalities and procedures on PPP. The second touches on the technical, financial and environmental dimensions of PPP projects. At the third tier, the participants shall learn about PPP risks, and how to prepare terms of reference (TOR) and to draft PPP contracts.

THE five takeaways. At the end of the course, all participants shall have drafted five documents accomplished during the workshops, i.e., a term sheet for a PPP project and draft PPP policy or framework; an outline of a pre-feasibility for a PPP project; and an outline of a TOR and PPP contract term sheet.

Finals. The test shall cover all topics, be in objective and/or essay formats, and will either be administered online or held in a designated venue. Only those who will pass shall be given the title.

Participants. Anyone who wants to learn and be conferred the title can go through the ladderized program. Others may just want to attend the modules and not take the examination. The course is open to government officials and employees, lawyers, representatives of private sector proponents, planners, engineers, accountants and students.

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83 Percent Part 2

83 Percent Part 2

 

This average grade of the Philippine public-private partnership (PPP) regulatory framework per the recently published report of the World Bank titled Procuring Infrastructure PPP 2018 (2018 PPP Report), hit it on the mark. Having a clear policy and framework ensures stability, consistency, transparency, integrity, accountability, reliability and enforceability.

This columnist would even give our PPP framework a higher mark, anywhere from 85 percent to 90 percent. He particularly commends the maturity of our unsolicited proposal approach. Our laws and regulations, including jurisprudence, categorically permit this. Other countries, as shown in the 2018 PPP Report, either do not have this or are not as developed.

He notes with agreement that the country should make available online tender documents and publish PPP contracts. These two identified gaps are actually transparency gaps. By the way, (the World Bank may not be aware of this) the template PPP ordinance annexed to Memorandum Circular 120-2016 (Section 37) of the Department of the Interior and Local Government requires the posting of the PPP contract, feasibility or project studies, bidding documents, terms of reference and results of the PSP selection process.

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83 Percent Part 1

83 percent

Part One

Is an 83-percent rating good? If the passing grade is 75, yes, of course. For those who pursue excellence, it could be better. What is this 83 percent? This is the average mark of the Philippine public-private partnership regulatory framework per the recently published report of the World Bank. The Procuring Infrastructure PPP 2018 (2018 PPP Report) “assesses the regulatory frameworks and recognized good practices that govern PPP procurement across 135 economies.” The “aim of this publication is to help countries improve the governance and quality of PPP projects.”

According to the 2018 PPP Report, “Higher scores signify that an economy’s regulatory framework is in greater compliance with internationally recognized good practices in an area. Lower scores indicate that there is considerable room for improvement because of less adherence to international good practices measured” under said report.

The 83 percent is an average of four scores, i.e., Preparation of PPPs, 85 percent; Procurement of PPPs, 76 percent; PPP Contract Management, 88 percent; and Unsolicited proposals (UPs) for PPPs, 83 percent. The Philippines bested all the countries in Southeast Asia. Singapore was the closest with 66 percent (but with no UPs), followed by Indonesia at 63 percent. The others are Vietnam with 60 percent; Timor Leste, 48 percent; Thailand 43 percent (no UPs); Malaysia, 41 percent; Cambodia, 31 percent; Laos, 29 percent (no UPs); and Myanmar, 21 percent. There was no rating for Brunei Darussalam.

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10 what ifs

10 what ifs

 

One way of highlighting the importance and relevance of public-private partnerships (PPPs) is to imagine scenarios. Here are 10 what ifs and what if nots.

So, what if…

  1. There is no PPP. Then the government will implement, fund, construct, design and operate projects on its own. While government agencies can collaborate with each other, the benefits of having the private sector as partner will be absent. The private sector, under this scenario, would not have the contractual opportunity to introduce its technology, apply its management systems and utilize its resources.
  2. There is no single PPP law. Actually, this is the case. We have PPP laws and regulations, national and local, and special guidelines issued by government agencies pertaining to different PPP modalities and arrangements. This promotes decentralization among agencies at the same level (vertical) and at lower levels (horizontal). However, several policies could lead to confusion.
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