NOY TO INVESTORS: NO MORE BACKROOM DEALS
[PHOTO - President Aquino chats with members of Infrastructure Philippines 2010 during the launching of the public-private partnerships at the Marriott Hotel in Pasay City yesterday. |MANILA, Philippines]
MANILA, NOVEMBER 19, 2010 (STAR) By Delon Porcalla - To attract investors who were turned off by inconsistent government policies, President Aquino yesterday assured businessmen that under his administration there will be no backroom deals and the rules will be fair.
He assured both foreign and local investors that there would be no extortion or midnight contracts in the current government, unlike in previous administrations.
"It was a time of backroom deals made with no clear criteria or direction. The darkness is dissipating and what has brought all of us together is a palpable sense of optimism in the country's future and the affirmation that the Philippines is open for business," Aquino said.
He said that under his administration, which will be in office until 2016, the rules will be fair, clear, and equally applied to all, making sure that solicited projects will enjoy business at minimum risk and in a "meaningful and fair manner."
He said that policy will not be changed in mid-stream, and investments will definitely be recouped.
"You cannot deal with a government where the right hand is offering a handshake while the left hand is trying to pick your pocket," Aquino said during the launching of his pet project – the public-private partnerships (PPP) that he called the "Daylight Summit" at Marriott Hotel in Pasay City, attended by at least 500 local and foreign businessmen.
"The way forward is to move, together, in the broad light of day, where everything we do and how we do it is clear, honest and transparent. We call it daylight," said Aquino, who also pledged that investments would definitely be "beyond the moment of handshake."
"Where things are not done in the dark, but rather, where our formula for success is integrated into the procedures we are all obligated to follow. The problem is that for the longest time, rules have been less than fair, far from clear, and not always applicable to all.
"Daylight is not what we hope to achieve – we have a social contract that is our blueprint for success – but rather, how we will do things," the President said, adding that the government will constantly improve the partnership and cooperation every step of the way.
"We are at the threshold of being able to say to our respective stakeholders, here is a Philippines that has the clarity of vision and firmness of mission to accomplish what we all desire," he stressed.
The President volunteered to provide a measure to minimize the risk of not having to recover their investments and maximize profit.
Aquino said the government will provide investors with protection against regulatory risk, but the risk would not extend to "commercial or market risk," which will be borne by investors.
"If private investors are impeded from collecting contractually agreed fees by regulators, courts, or the legislature, then our government will use its own resources to ensure that they are kept whole," Aquino said.
He said details of such protection will be explained by his economic managers who will be there for the two-day event, where the regulatory risk assurance "will be part of the contracts to be entered into between government and winning bidders of PPP projects."
"Each project will be looked at differently, and the government will use independent financial advisors to study each project carefully before the bidding, to determine what protection is necessary," Aquino explained.
"It is important to note that this protection will be limited to regulatory risk. Commercial or market risk, which you are in the business of determining, will be borne by investors, as it should be," he said.
"If, for some reason, a court decision threatens the adjustment, the government will compensate the private concessionaire for the difference between what the tariff should have been under the formula, and the tariff which it is actually able to collect," he added.
• P-Noy seeks investments in infrastructure
President Aquino urged investors to participate in projects involving $3.4 billion to upgrade roads, railways and airports.
Most of the 10 contracts are designed to ease fearsome traffic jams in and around Manila, while giving much-needed momentum to Aquino's economic strategy of improving the country's creaky infrastructure.
Aquino sought to reassure potential investors concerned about the Philippines' notoriously poor business environment, which has seen government not honor contracts and investors lose millions.
"The government will provide investors with protection against regulatory risk," Aquino told an investor conference held near Manila's $640-million airport terminal 3, which was expropriated from a private consortium in 2004.
The 10 projects unveiled by Aquino's cash-strapped government are worth a combined $3.414 billion, and will be formally offered at the end of next year under so-called "build-operate-transfer" terms.
They include four rail upgrade and extension projects and three toll roads in and around Manila.
Investors would also be asked to build airports in two tourist destinations, while another contract is to run a passenger terminal now being built in a key business destination in the southern Philippines.
Aquino pledged to help local businessmen compete in the big-ticket tenders, saying the central bank will, over the next three years, relax caps on the amount a single bank can lend for a single project.
• State financial firms pledge P200 billion
Development Bank of the Philippines (DBP) president and chief executive officer Francisco del Rosario disclosed yesterday that four government financial institutions have committed P200 billion to jump-start the government's public-private partnership initiatives (PPP).
The Department of Finance (DOF), the DBP, Government Service Insurance System (GSIS), the Land Bank of the Philippines and the Social Security System have established the Philippine Infrastructure Development Fund, Del Rosario said during the opening of the PPP conference for infrastructure.
He said the P200 billion would complement the P12.5-billion budget allocation being proposed to Congress for 2011.
The initial P200-billion fund would eventually be complemented by funds and technical expertise coming from official development assistance (ODA) and foreign agencies, including the Asian Development Bank (ADB), the World Bank (WB), and the Japan International Cooperation Agency (JICA).
"The finance department and DBP are working with ADB, WB and other multilateral organizations on mapping out the final fund structure most fitting to the Philippine setting," Del Rosario said.
The ODA funds are long-term in nature with tenors ranging from 10 to 15 years depending on the project cash flows, thus matching the usual lengthy maturity profile required for the financing of these types of projects.
The funding shall be made available throughout the government's envisioned timeframe of rolling out these infrastructure projects, he added.
The project aims to accelerate infrastructure development in the country, promote public-private partnership in financing qualified infrastructure projects and to provide long-term fund sources in local currency to the project partners.
Del Rosario said that the initial funding support may entail the purchase of Philippine Infrastructure Development Fund (PIDF) Bonds that would be issued by the National Development Co. (NDC), the investment arm of the government.
"One of the financing options we are currently evaluating is for NDC or another GOCC (government-owned and controlled corporation) that may be designated by the DOF to issue the PIDF bonds," he said.
The government would guarantee the bonds that would have varying tenors ranging from 5 to 25 years, depending on the amount of financing required.
Proceeds of the bonds would be used to finance land acquisition for right-of-way costs and other pre-development costs as the government's counterpart to the infrastructure initiatives.
The conference aims to provide funding for infrastructure projects to give the government fiscal space for other necessary expenditures such as public health and education.
The projects include the P70-billion Light Railway Transit 1 Extension to Bacoor, Cavite; the P21-billion expressway linking the North Luzon Expressway (NLEX) with the South Luzon Expressway (SLEX); Ninoy Aquino International Airport (NAIA) Expressway; P14-billion Kabulnan multipurpose irrigation and power project; P11.3-billion LRT 2 extension to Antipolo; P10.5-billion Cavite-Laguna Expressway; P7.5-billion new Bohol airport; and the city terminal for Diosdado Macapagal International Airport in Pampanga.
World Bank country director Bert Hofman said that its support for the PPP comes in two ways: first, policy advice, technical assistance, and program lending to foster changes in the enabling environment needed to foster private sector growth and robust partnerships in the various infrastructure sectors; and second, credit enhancement instruments through the Bank's partial risk and partial credit guarantees to strengthen the World Bank's catalytic role for mobilizing private capital financing to the infrastructure sectors.
The World Bank offers 30-year loans to middle-income countries with repayment schedules that address specific needs of projects. Such loans can also be blended with private finance to cut amortization costs and ease pressures to shore up tariffs to make projects viable.
"The use of such hybrid schemes is becoming more and more common in an effort to reduce the total cost of financing for poor communities," Hofman said.
He added that the World Bank could also help mobilize long-term peso financing through currency swap facility for financing projects that do not have the capacity to earn foreign exchange and as such are exposed to currency risks.
Public Works Secretary Rogelio Singson said the Philippines urgently needed to upgrade and add to its narrow, crumbling and insufficient roads to boost the lagging tourism sector and lower the cost of doing business.
"We are choking to almost a standstill. Most of our circumferential and radial roads (in Manila) were proposed in the late 1960s and they are not even complete as we speak," he said.
Singson said the PPP program would include three major road projects worth P43.4 billion next year.
He said the projects that would be implemented next year are the Cavite-Laguna Expressway (Cavite side), Ninoy Aquino International Airport (NAIA) Expressway, Phase 2; and the NLEX-SLEX Link Expressway.
The Cavite-Laguna Expressway project, which is 27.5 kilometers, is expected to be worth P11.79 billion or $262 million with a right of way (ROW) acquisition of P96 million.
The six-lane at grade expressway with a total length of 27.5 kilometers would serve as a vital access between economic zones in Cavite province and NAIA, Metro Manila ports, Batangas Port and decongest traffic in Cavite roads, particularly Aguinaldo Highway.
The total investment requirement for the NAIA Expressway, Phase 2 is P10.59 billion or $235.33 million. The ROW acquisition is P1.02 billion.
This 4-lane elevated expressway, with a total length of 5.19 kilometers, aims to link the Skyway and the Manila-Cavite Coastal Expressway. It would provide vital access to NAIA Terminals 1, 2, and 3.
The third project is the NLEX-SLEX Link Expressway that is estimated to cost P21 billion or $467 million. It starts from Caloocan City and ends in Makati City.
It is an elevated expressway over the Philippine National Railway (PNR) right-of-way. It intends to close the gap and complete the north-south Luzon industrial beltway transport axis by connecting NLEX and SLEX.
This project has already been endorsed to the National Economic and Development Authority (NEDA) for evaluation and approval.
Singson said that they have more than three projects in their master plan, totaling 322 kilometers in length, but they have yet to finish the feasibility studies on these projects which they hope would be ready to be offered to the private sector by year 2012.
"Our country needs very badly high standard highways or expressways for us to sustain a high economic growth and be more globally competitive. There is a very strong demand, there is a need for these highways but there is even greater investment opportunity in growth development in the country. Under the Aquino government's PPP program we want to do the right road projects, at the right price and at the right quality," said Singson. With Iris Gonzales, Evelyn Macairan, Ted Torres
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