PHILIPPINES Trends and Developments Contributed by: Francis L. Fragante, Jennifer Marie G. Castro and Carriz Andrea F. Nana, Cruz Marcelo & Tenefrancia
vice infrastructure have constrained both economic expansion and poverty reduction. At the same time, the country’s widening budget deficit of PHP250 billion (around USD4.4 billion as of September 2023), makes public financing for large infrastructure upgrades even more challenging. Against this backdrop, the private sector’s participa - tion has shifted from being a strategic complement to becoming a practical necessity. The Public-Private Partnership (PPP) model remains one of the gov - ernment’s most important mechanisms for securing private financing, technical expertise and long-term operational capability for infrastructure development. The Build-Operate-Transfer Law (the “BOT Law”), enacted in 1990, played a pivotal role in opening infrastructure development to private proponents. It authorised government infrastructure agencies, sub - ject to meeting statutory requirements, to contract prequalified private partners for the financing, con - struction, operation and maintenance of financially viable public infrastructure projects. However, despite its early successes, stakeholders have long pointed to structural weaknesses in the BOT Law, particularly ambiguities that left risk and responsibility allocation unclear; issues that could not be fully resolved by updating its implementing rules alone. To address these gaps, Republic Act No 11966 or the Public-Private Partnership (PPP) Code of the Phil - ippines (the “PPP Code”) was signed into law on 5 December 2023 and became effective on 23 Decem - ber 2023. The PPP Code covers all contractual arrangements between an Implementing Agency (IA) and a private partner to finance, design, construct, operate and maintain development projects ordinarily provided by the public sector. The PPP Code expanded its cover - age to include not only BOT projects, but all contrac - tual arrangements which possess characteristics or elements of a PPP, including joint venture agreements which were previously outside the BOT Law’s scope.
It also introduced clearer approval pathways for PPP projects. National PPP projects costing PHP15 bil - lion and above now require approval from the NEDA Board, based on a positive recommendation from its Investment Coordination Committee (NEDA Board- ICC). Meanwhile, national PPP projects below PHP15 billion are approved by the head of the IA. On the other hand, the approval of local PPP projects shall be undertaken by the respective local legisla - tive councils in the case of Local Government Units (LGUs), or by the boards in the case of local universi - ties and colleges. Prior to their approval, local PPP projects being implemented by the LGUs should be confirmed by the respective local development coun - cils. One of the most consequential additions under the PPP Code is the 120-day decision rule, which requires approving bodies to act on a complete submission within 120 calendar days. If no decision is issued with - in this period, the project shall be “deemed approved”, allowing the IA to proceed with procurement. To ensure the financial and economic viability of the PPP project, the PPP Code specifically provides that when the IA fails to implement the initial tolls, fees and other charges, and any agreed adjustments, the private sector shall be allowed to recover the differ - ence. This is a major win for the private sector as there have been many instances where the IA, due to politi - cal or other reasons, are not able to or are hesitant to approve any toll or fee increases, which have thereby economically prejudiced the private sector partner. PPP projects must now specify a Reasonable Rate of Return (RROR), expressed as an annualised per - centage in the contract. If actual returns exceed the RROR, the excess is remitted to the National Treasury. The unification of the formerly disintegrated PPP legal frameworks, organisation of the evaluation and approval process for PPP projects alike, and the intro - duction of predictable tariff regimes to protect public interest and protocols to fortify PPP institutions, are evident testament to the country’s unremitting resolve to develop a more sustainable PPP programme.
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