PPP conversations #2 with Ayala Group
The Ayala Group is one of the leading proponents and believers of the Philippine Public-Private Partnership (PPP) Program. Since 1996, it has been engaged in a water concession and, in the recent past, has been awarded the Muntinlupa-Cavite Expressway tollway, automated fare-collection system, extension of Light Rail Transit 1 system and integrated terminal system under the build-operate-transfer law.
Lawyer Solomon M. Hermosura, managing director, group head of corporate governance, general counsel, compliance officer and corporate secretary of Ayala Corp.,tells us Ayala’s PPP journey in this second edition of PPP conversations.
The Ayala Group has been an active participant in PPP projects. Why?
The Ayala Group’s commitment to PPP goes beyond any single project or legal framework. Whether the project involves hard infrastructure or investments in health and education, we see PPP as an avenue to be the government’s partner in effectively and efficiently delivering on the needs of the public.
What are the essential elements and ingredients for success in PPP projects?
We have been most successful in our PPP projects when stakeholders are committed to the desired outcome and cooperate toward getting the project done. We need to work closely with communities, similar to Manila Water’s previous experience in its “Tubig Para sa Barangay” program, which connected unserved and vulnerable communities to a safe and cheaper water supply. Our current work in the human infrastructure sector—health and education—is a response to glaring gaps that require complementary solutions.
What has been the greatest challenge that you have encountered in your PPP projects?
These partnerships are not without their own challenges. One of the most important considerations, moving forward, is the stability and predictability of our agreements. In his inaugural address, President Duterte emphatically stated that “changing the rules when the game is ongoing is wrong”, and he ordered his department secretaries and heads of agencies “to refrain from changing and bending the rules of government contracts, transactions and projects already approved and awaiting implementation”. Upholding the sanctity of contracts allows us to work in a predictable environment.
How can PPP be further enhanced as a tool for development?
Another area that can be further explored is local PPP arrangements. The power of local government units (LGUs) to enter into PPPs is largely unutilized, even though the Local Government Code empowers LGUs to enter into their own PPPs and joint ventures. This may facilitate private-sector investments in local projects that are more targeted, focused and tailor-fit for each LGU’s needs.
Last, your message to the PPP public?
There has been much debate around the viability of PPP as a legal framework. There have been calls to amend the PPP law. More recently, we understand that the government’s preference has shifted toward unsolicited proposals and operations and maintenance arrangements. We will continue to watch these spaces, participate in discussions when we have opportunity to do so, and seek to contribute toward national goals in areas in which we have relevant experience and expertise.
We hope to see more Ayalas in the PPP landscape. Thank you, Ayala.