PUBLIC PRIVATE PARTNERSHIPS IN THE

PHILIPPINES
 PUBLIC – PRIVATE PARTNERSHIP IN THE PHILIPPINES

TABLE OF CONTENTS

I. Introduction

 Definition and content of PPP

 Importance and benefits of PPP in the Philippines

II. PPP Framework and Legal Basis

 PPP legal framework and policies in the Philippines

 Implementing rules and regulations of PPP projects in the Philippines

III. PPP Project Cycle

 Project identification and selection

 Feasibility study and project development
 Procurement and bidding process
 Contract negotiation and award
 Implementation and monitoring
 Operation and maintenance

IV. PPP Models and Structures

 Build-Operate-Transfer (BOT)
 Build-Lease-Transfer (BLT)
 Build-Transfer-Operate (BTO)
 Build-Own-Operate (BOO)
 Concession

V. PPP Sectors and Projects in the Philippines

 Transportation (roads, railways, airports, seaports, etc.)

 Water supply and sanitation
 Energy and power generation
 Health and education infrastructure
 Tourism and leisure

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VI. PPP Advantages and Disadvantages

VII. PPP Challenges and Risks in the Philippines

 Political and regulatory risks

 Financial and economic risks
 Technical and operational risks
 Environmental and social risks

VIII. PPP Best Practices and Lessons Learned in the Philippines

 Successful PPP projects and their impact

 Key factors for PPP success in the Philippines
 Lessons learned from PPP experiences in the Philippines

IX. Conclusion and Recommendations

 Summary of findings and conclusions

 Policy recommendations for enhancing PPP in the Philippines

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I. INTRODUCTION

Definition of PPP

PPP stands for Public-Private Partnership, which refers to a contractual arrangement between a
government agency and a private sector company, where the private sector company provides
infrastructure services or facilities that are traditionally provided by the public sector. In a PPP
project, the private sector company is responsible for financing, designing, building, and/or
operating the facility or service, while the government retains some degree of control and
oversight.

PPP is a way for the government to leverage private sector expertise, financing, and efficiency
to provide public services and infrastructure that are of high-quality, cost-effective, and
sustainable. PPP can take various forms, such as build-operate-transfer (BOT), build-own-
operate-transfer (BOOT), build-lease-transfer (BLT), or concession.

Importance and Benefits of PPP in the Philippines:

PPP is considered an important strategy for the Philippine government to address the country’s
infrastructure gaps and to achieve its development goals. Some of the key benefits of PPP in the
Philippines include:

1. Financing: PPP allows the government to tap into private sector financing, which can
supplement limited public funds and help bridge the country’s infrastructure financing
gap. This can also free up public funds for other priority areas such as social services.
2. Efficiency: PPP brings private sector efficiency, innovation, and expertise to the
provision of public infrastructure and services. The private sector can introduce new
technologies and methods that can improve project quality, speed up implementation,
and reduce costs.
3. Quality: PPP can lead to a higher quality infrastructure and services that meet
international standards. PPP projects are usually designed, built, operated by the private
sector according to performance standards that are agreed upon in the contract.
4. Maintenance: PPP also ensures that the infrastructure or service provided is maintained
over the long term, as the private sector is responsible for the maintenance of the
facility during the contract period.
5. Job creation: PPP projects can create employment opportunities, especially during the
construction phase. This can help boost local economies and reduce poverty.
6. Revenue generation: PPP projects can also generate revenue for the government
through user fees, royalties, or profit sharing arrangements.

Overall, PPP has the potential to improve the quality and quantity of infrastructure and services
in the Philippines, and to create sustainable partnerships between the public and private
sectors. However, PPP also poses some challenges and risks that need to be managed
effectively to ensure successful outcomes.

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II. PPP LEGAL FRAMEWORK AND POLICIES IN THE PHILIPPINES

Legal Framework

The legal framework for PPP in the Philippines is primarily governed by the Built-Operate-
Transfer (BOT) Law, also known as Republic Act (RA) No.7718, which was enacted in 1994. The
BOT Law provides the legal basis for private sector participation in the financing, construction,
and operation of infrastructure and development projects in the country.

In addition to the BOT Law, there are other laws and regulations that govern PPP projects in
specific sectors, such as the Philippine Concession Act (RA No. 8424) for water supply and
sanitation projects, and the Electrical Power Industry Reform Act (RA No. 9136) for power
generation and distribution projects.

The Philippine government also has a number of policies and guidelines related to PPP, such as
the National Economic and Development Authority (NEDA) Investment Coordination
Committee (ICC) Guidelines, which provide the framework for the identification, evaluation,
and approval of PPP project in the country.

Implementing Rules and Regulations of PPP Projects in the Philippines:

The implementing rules and regulations (IRR) of PPP Projects in the Philippines are issued by
various government agencies, such as the Department of Finance (DOF), the Department of
Public Works and Highways (DPWH), and the Department of Transportation (DOTr).

The IRRs provide detailed guidance on the procedures, requirements, and standards for the
identification, selection, development, and implementation of PPP projects in the country.
These include guidelines on project feasibility studies, procurement processes, contract
negotiation and award. monitoring and evaluation, and dispute resolution mechanisms.

Some examples of the IRRs for PPP projects in the Philippines include the Joint Venture
Guidelines issued by the DOF, the Build-Operate-Transfer (BOT) Law Implementing Rules and
Regulations issued by the DPWH, and the Concession Agreement Guidelines issued by the
DOTr.

The IRRs aim to provide clear and transparent regulatory framework for PPP projects in the
Philippines, and to ensure that the interest of both the public and private sectors are protected.
They are regularly reviewed and updated to address emerging issues and challenges in PPP
project implementation.

Overall, the PPP legal framework and implementing rules and regulations in the Philippines
provide the foundation for the successful implementation of PPP projects in the country.
However, effective implementation also requires coordination and collaboration among
government agencies, private sector partners, and other stakeholders.

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III. PPP PROJECT CYCLE

The PPP Project Cycle refers to the process of developing and implementing a PPP project, from
the initial identification of the project to the eventual transfer of the facility or service to the
government. The cycle typically consists of the following stages:

1. Identification and Screening: In this stage, potential PPP projects are identified and
evaluated based on their feasibility, alignment with national development priorities, and
potential economic and social benefits. This involves conducting a preliminary
assessment of the project’s technical, financial, legal, environmental, and social aspects.
2. Pre-feasibility and Feasibility Studies: This stage involves conducting more detailed
technical, financial, and legal studies to determine the project’s feasibility and viability.
This includes assessing the project’s market demand, revenue potential, costs, risks, and
socio-economic impacts. The studies should also consider the project’s environmental
and social sustainability and compliance with applicable laws and regulations.
3. Approval and Procurement: This stage involves obtaining necessary approvals and
clearances from relevant government agencies, and conducting a transparent and
competitive procurement process to select a qualifies private sector partner. This
includes preparing and issuing a Request for Proposals (RFP) or Invitation to Bid (ITB),
and evaluating and selecting the winning bidder based on pre-defined criteria.
4. Contract Negotiation and Financial Close: Once the winning bidder is selected, the
government and private sector partner will negotiate and finalize the PPP contract,
which outlines the respective roles and responsibilities, performance standards,
payment mechanisms, and dispute resolution mechanisms. The parties will also agree
on the financing structure, including any debt or equity financing, and secure the
necessary funding for the project.
5. Construction and Implementation: This stage involves the construction, installation,
and commissioning of the facility or service by the private sector partner. The
government will oversee the implementation and ensure compliance with the contract
terms and applicable laws and regulations. The private sector partner will also operate
and maintain the facility or service during the contract period.
6. Operations and Monitoring: During the contract period, the government will monitor
the private sector partner’s performance and ensure compliance with the contract
terms and applicable laws and regulations. The private sector partner will also report
om project progress and performance, and make any necessary adjustments to ensure
project success.
7. Contract Expiration and Transfer: At the end of the contract period, the private sector
partner will transfer the facility or service to the government, which will assume
responsibility for its operation and maintenance. The government may also choose to
renew or extend the PPP contract, or initiate a new PPP project cycle for a different
facility or service.

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Overall, the PPP Project Cycle is a structures and iterative process that requires careful
planning, stakeholder engagement, and coordination among government agencies and private
sector partners. Effective implementation of the PPP Project Cycle can lead to the successful
delivery of high-quality infrastructure and service that meet the needs of the public, promote
economic growth, and contribute to sustainable development.

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IV. PPP MODELS AND STRUCTURES

1. Build-Operate-Transfer (BOT): This model involves a private sector entity that finances,
designs, constructs, operates and maintains a public infrastructure or service for a specified
period of time. The private sector partner recovers its investment and earns profit through
user fees and other revenue streams, and at the end of the contract period, transfers the
asset to the government. The BOT model is widely used for large-scale infrastructure
projects, such as airports, highways, power plants, and water treatment facilities.

Sample Projects:

a. NAIA Expressway Phase 2 (Build-Operate-Transfer or BOT): This project involved the

construction of a 4-lane, 7.75 km elevated toll expressway that connects the existing
NAIA Expressway Phase 1 to the South Luzon Expressway. The project was awarded to
San Miguel Corporation (SMC) in 2015, and the construction was completed in 2019.
Under the BOT model, SMC is responsible for financing, designing, constructing,
operating, maintaining the expressway for a period of 30 years. After the contract
period, the asset will be transferred to the government.

b. Integrated Transport System – Taguig Integrated Terminal Exchange (Build-Operate-

Transfer or BOT): This project involves the construction of a transportation hub in
Taguig City that will serve as a transfer point for provincial buses, city buses, jeepneys,
and other modes of transportation. The project was awarded to Ayala-AC Infrastructure
consortium in 2016, and the construction was completed in 2020. Under the BOT model,
the consortium is responsible for financing, designing, constructing, and operating the
terminal for a period of 35 years. After the contract period, the terminal will be
transferred to the government.

c. Boracay Island Tourism Infrastructure and Enterprise Zone (Build-Operate-Transfer or

BOT): This project involves the rehabilitation and upgrading of tourism infrastructure in
Boracay Island, such as roads, drainage systems, and public facilities. The project was
awarded to the Boracay Island Water Company and Boracay Island Power Corporation in
2019, and the construction is ongoing. Under the BOT Model, the companies are
responsible for financing, designing constructing, and operating the infrastructure for a
period of 25 years. After the contract period, the assets will be transferred to the
government.

d. Okada Manila Resort and Casino (Build-Operate-Transfer or BOT): This project involves
the development and operation of a luxury resort and casino in Entertainment City,
Parañaque City. The project was awarded to the Tiger Resort, Leisure and
Entertainment, Inc. in 2014, and the resort was opened in 2017. Under the BOT Model,
the company is responsible for financing, designing, constructing, and operating the

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 resort and casino for a period of 25 years. After the contract period, the asset will be
transferred to the government.
2. Build-Lease-Transfer (BLT): This model is similar to BOT, except that the private sector
partner leases the asset to the government instead of transferring ownership at the end of
the contract period. The government pays the private sector partner a lease fee for the use
of the asset, and at the end of the contract period, the asset reverts back to the
government.

Sample Projects:

a. LRT Line 1 Cavite Extension (Build-Transfer-Operate or BTO): This project involves the
extension of the existing LRT Line 1 from Baclaran to Bacoor, Cavite. The project was
awarded to the Light Rail Manila Consortium (LRMC) in 2014, and the construction is
expected to be completed in 2023. Under the BTO Model, LRMC is responsible for
financing, designing, and constructing the extension, and will operate it for a period of
32 years. After the contract period, the asset will be transferred to the government.

b. Iloilo Convention Center (Build-Operate-Transfer or BOT): This project involves the

construction of a convention center in Iloilo City that can accommodate up to 3,700
people. The project was awarded to the Hilmarc’s Construction Corporation in 2014,
and the convention center was opened in 2015. Under the BOT Model, the company is
responsible for financing, designing, constructing, and operating the convention center
for a period of 20 years. After the contract period, the asset will be transferred to the
government.

c. Cebu International Convention Center (Build-Operate-Transfer or BOT): This project

involves the construction of a convention center in Cebu City that can accommodate up
to 3,500 people. The project was awarded to the SM Prime Holdings Inc. in 2006, and
the convention center was opened in 2017. Under the BOT model, the company is
responsible for financing, designing, constructing, and operating the convention center
for a period of 25 years. After the contract period, the asset will be transferred to the
government.

d. Mactan-Cebu International Airport Terminal 2 (Build-Operate-Transfer or BOT): This

project involves the construction and operation of a new passenger terminal for the
Mactan-Cebu International Airport. The project was awarded to the GMR-Megawide
Cebu Airport Corporation in 2014, and the terminal was opened in 2018. Under the BOT
Model, the company is responsible for financing, designing constructing, and operating
the terminal for 25 years. After the contract period, the asses will be transferred to the
government.

3. Build-Transfer-Operate (BTO): This model involves the private sector partner financing,
designing, and constructing a public infrastructure or service, and then transferring

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 ownership and operation to the government at the end of contract period. The private
sector partner earns a profit through the construction and operation phase, and the
government assumes responsibility for the asset’s long-term operation and maintenance.

Sample Projects:

a. Bulacan Bulk Water Supply Project (Build-Operate-Transfer or BOT): This project

involves the construction of a water treatment plant and distribution system that will
supply up to 600 million liters of water per day to 24 cities and municipalities in Bulacan.
The project was awarded to Prime Water Infrastructure Corporation in 2019, and the
construction is expected to be completed in 2022. Under the BOT Model, Prime Water is
responsible for financing, designing, constructing, operating, and maintaining the water
supply system for a period of 25 years. After the contract period, the asset will be
transferred to the government.

b. Davao City Bulk Water Supply Project (Build-Operate-Transfer or BOT): This project
involves the construction of a water treatment plant and distribution system that will
supply up to 300 million liters of water per day to Davao City and neighboring areas. The
project was awarded to Aboitiz-led consortium in 2013, and the construction was
completed in 2019. Under the BOT model, the consortium is responsible for the
financing, designing, constructing, operating, and maintaining the water supply system
for a period of 30 years. After the contract period, the asset will be transferred to the
government.

c. Puerto Princesa Underground River (Concession): This project involves the operation
and management of the Puerto Princesa Underground River, a UNESCO World Heritage
Site in Palawan. The project was awarded to the City Government od Puerto Princesa
and the Puerto Princesa Underground River Management Inc. in 2012, and the
concession agreement is valid for 25 years. Under the concession model, the
government retains ownership of the asset, but the private company is responsible for
the management, operation, and maintenance of the site, as well as the development of
tourism activities and services.

d. Ayala Malls Feliz (Build-Operate-Transfer or BOT): This project involves the

development and operation of a shopping mall and entertainment center in Pasig City,
the project was awarded to the Ayala Land Inc. in 2015, and the mall was opened in
2017. Under the BOT model, the company is responsible for financing, designing,
constructing, and operating the mall for a period of 25 years. After the contract period,
the asset will be transferred to the government.

4. Build-Own-Operate (BOO): This model involves the private sector partner financing,
designing, constructing, and operating a public infrastructure service, and retaining
ownership throughout the contract period. The private sector partner earns a profit

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 through user fees and other revenue streams, and assumes responsibility for the asset’s
operation and maintenance. At the end of the contract period, the asset may be transferred
to the government, or the contract may be extended or renewed.

Sample Projects:

a. Integrated Transport System – Southwest Terminal (Build-Lease-Transfer or BLT): This

project involves the construction of a transportation hub in Parañaque City that will
serve as a transfer point for provincial buses, city buses, jeepneys, and other modes of
transportation. The project was awarded to the Southwest Terminal Consortium in
2018, and the construction was completed in 2020. Under the BLT model, the
consortium is responsible for financing, designing, constructing, and leasing the terminal
to the government for a period of 35 years. After the contract period, the terminal will
be transferred to the government.

b. Puerto Princesa International Airport (Build-Operate-Transfer or BOT): This project

involves the construction of a new terminal building and other facilities at the Puerto
Princesa International Airport in Palawan. The project was awarded to the consortium of
MacroAsia Corporation and China Communications Construction Company Ltd. in 2013,
and the terminal was opened in 2017. Under the BOT model, the consortium is
responsible for financing, designing constructing, and operating the new terminal, and
will retain ownership throughout the contract period. The consortium earns a profit
through user fees and other revenue streams. The contract period is for 25 years, with
an option to extend for another 15 years.

c. Siargao Island Tourism Development Project (Joint Venture): This project involves the
development of tourism infrastructure and facilities in Siargao Island, such as hotels,
resorts, and recreational areas. The project was initiated by the local government unit of
Surigao del Norte in partnership with Ayala Land Inc. and the Rustan’s Group of
Companies in 2019. Under the joint venture model, the partners share the investment
and risks of the project, as well as the profits generated from the tourism activities.

d. Fort Bonifacio Development Project (Joint Venture): This project involves the
development of a mixed-use complex in Fort Bonifacio, Taguig City, which includes
commercial, residential, and leisure components. The project was initiated by the Bases
Conversion and Development Authority in partnership with Ayala Land Inc. and
Evergreen Holdings Inc. in 2017. Under the joint venture model, the partners share the
investment and risks of the project, as well as the profits generated from the
development.

5. Concession: This model involves the government granting a concession to a private sector
entity to operate a public infrastructure or service for a specified period of time. The private

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 sector partner assumes responsibility for financing, designing, constructing, and operating
the asset, and earns a profit through user fees or other revenue streams. The government
retains ownership of the asset, but may provide incentives or regulatory support to the
private sector partner to ensure performance and quality standards are met.

Sample Projects:

a. Mactan-Cebu International Airport Terminal 2 (Build-Own-Operate or BOO): This

project involved the construction of a new passenger terminal building at the Mactan-
Cebu International Airport. The project was awarded to the GMR-Megawide Cebu
Airport Corporation in 2014, and the terminal was opened in 2018. Under the BOO
model, the consortium is responsible for financing, designing, constructing, and
operating the new terminal, and will retain ownership throughout the contract period.
The consortium earns a profit through user fees and other revenue streams. The
contract period is for 25 years. with an option to extend for another 15 years.

b. Cagayan de Oro City Hospital (Build-Operate-Transfer or BOT): This project involves the
construction of a tertiary-level hospital in Cagayan de Oro City. The project was awarded
to the Cagayan de Oro Gateway Corp. in 2017, and the construction is ongoing. Under
the BOT model, the company is responsible for financing, designing, constructing, and
operating the hospital for a period of 25 years. After the contract period, the asset will
be transferred to the government.

c. Bohol-Panglao International Airport (Build-Operate-Transfer or BOT): This project

involves the construction of a new airport in Panglao Island, Bohol that can
accommodate up to two million passengers per year. The project was awarded to the
Panglao International Airport Corporation in 2015, the airport was opened in 2018.
Under the BOT model, the company is responsible for financing, designing, constructing,
and operating the airport for a period of 25 years. After the contract period, the asset
will be transferred to the government.

d. Clark Green City (Build-Operate-Transfer or BOT): This project involves the

development of a sustainable and smart city in Clark Freeport Zone, Pampanga, which
includes residential, commercial, and leisure components. The project was awarded to
the BCDA-Clark Green City Corporation in 2016, and the development is ongoing. Under
the BOT model, the company is responsible for financing, designing, constructing, and
operating the city for a period of 50 years. After the contract period, the asset will be
transferred to the government.

PPP PROJECTS IN ORIENTAL MINDORO

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 1. Tabinay Port (Build-Operate-Transfer or BOT): This project involves the rehabilitation,
expansion, and operation of the Tabinay Port in Puerto Galera. The project was awarded
to the Archipelago Philippine Ferries Corporation in 2013, and the prot was opened in
2014. Under the BOT model, the company is responsible for financing, designing,
constructing, and operating the port for a period of 25 years. After the contract period,
the asset will be transferred to the government.

2. Calapan City Airport (Build-Operate-Transfer or BOT): This project involves the

development and operation of the Calapan City Airport in Calapan City. The project was
awarded to the San Miguel Corporation in 2015, and the airport was opened in 2017.
Under the BOT model, the company is responsible for financing, designing, constructing,
and operating the airport for a period of 25 years. After the contract period, the asset
will be transferred to the government.

3. Mindoro Biodiversity Conservation Center (Joint Venture): This project involves the
development and operation of a biodiversity conservation center in Naujan. The project
is a joint venture between the local government unit of Naujan and a private investor,
and the development is ongoing. Under the joint venture model, the partners share the
investment and risks of the project, as well as profits generated from the development.

4. Puerto Galera Coastal and Marine Ecotourism Zone (Concession): This project involves
the development and operation of an ecotourism zone in Puerto Galera, which includes
beach resorts, recreational facilities, and marine conservation activities. The project was
awarded to the Puerto Galera Coastal Resources Management Foundation Inc. in 2018.
and the development is ongoing. Under the concession model, the government grants
the use of a public asset to a private entity for a certain period, subject to certain
conditions and performance standards.

The choice of PPP model and structure depends on the nature of the project, the level of risk
transfer desired by the government, and the availability of financing and technical expertise in
the private sector. It is important to note that each PPP model and structure has its own
advantages and disadvantages, and careful consideration should be given to the specific
circumstances of each project.

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V. SECTORS AND PROJECT IN THE PHILIPPINES

Public-Private Partnership (PPP) projects in the Philippines pan various sectors, ranging from
transportation, energy, water supply, and sanitation to health, education, and tourism. Here
are some examples of PPP projects in each sector:

1. Transportation
- Light Rail Transit Line 1 (LRT-1) Cavite Extension : A 12.4-kilometer extension of the LRT-1
line from Baclaran, Parañaque to Bacoor, Cavite, including the construction of a new
station and acquisition of new trains.
- Metro Manila Skyway Stage 3: A 17.54-kilometer elevated expressway connecting the
North Luzon Expressway (NLEX) and South Luzon Expressway (SLEX) in Metro Manila.
- Mactan-Cebu International Airport Passenger Terminal Building : A new passenger
terminal building in Mactan-Cebu International Airport, which increased the airport’s
capacity to 12.5 million passengers per year.

2. Energy
- Masinloc Coal-Fired Thermal Power Plant : A 600-megawatt power plant in Zambales,
which was privatized and awarded to AES Philippines in 2016.
- Batangas Energy Storage System (BESS): A 20-megawatt battery energy storage system
in Batangas, which was awarded to Fluence Energy in 2019.
- Solar Power Projects: Several solar power projects have been implemented in the
Philippines through PPP arrangements, such as the Cadiz Solar Power Plant, which has a
capacity of 132.5 megawatts, and the Tarlac Solar Power Project, which has a capacity of
50 megawatts.

3. Water Supply and Sanitation

- New Centennial Water Source-Kaliwa Dam Project : A new water soure project in
Quezon Province, which involves the construction of a dam, reservoir, and transmission
pipeline to supply water to Metro Manila and nearby provinces.
- Angat Water Transmission Improvement Project : A project that involves the
rehabilitation and upgrading of the Angat Water Transmission System, which supplies
water to Metro Manila.
- Bulacan Bulk Water Supply Project: A project that involves the design, construction, and
operation of a bulk water supply system in Bulacan Province.

4. Health

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 - Modernization of the Philippine Orthopedic Center : A project that involves the design,
construction, and operation of a new hospital facility for the Philippine Orthopedic
Center in Quezon City.
- PPP for Health Facilities: Several health facilities in different regions of the Philippines
have been developed through PPP arrangements, such as the Southern Philippines
Medical Center in Davao City and the Cagayan de Oro City Hospital.

5. Education
- School Infrastructure Project Phase II: A project that involves the design, construction,
and rehabilitation of classrooms, libraries, and other school facilities in various parts of
the Philippines.
- Ladderized Education Program Support Project : A project that aims to expand access to
technical-vocational education and training (TVET) programs in the country through the
development of new TVET centers and upgrading of existing ones.
- Developmetn of State Universities and Colleges : Several state universities and colleges
in the Philippines have partnered with private entities to improve their facilities and
services, such as the University of Southeastern Philippines and the University of
Southern Mindanao.

6. Tourism
- Sangley Point International Airport Development Project : A project that involves the
construction of a new international airport in Cavite Province to support the growing
tourism industry in the Philippines.
- Boracay Island Tourism Infrastructure and Enterprise Zone Authority (Boracay TIEZA) : A
project that involves the development and maintenance of tourism infrastructure in
Boracay Island, including beachfront facilities, walkways, and water supply systems.
- Puerto Princesa International Airport: A project that involves the construction of a new
terminal building and other facilities at the Puerto Princesa International Airport in
Palawan.

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VI. PPP ADVANTAGES AND DISADVANTAGES

Advantages of PPP:

1. Access to private sector expertise: PPPs enable governments to leverage the expertise
and resources of the private sector to design, build, and operate public infrastructure
projects. This can help to ensure that projects are delivered more efficiently than
traditional public procurement methods.
2. Improved project financing: PPPs can provide alternative financing options for public
infrastructure projects, reducing the burden on government budgets and enabling
projects to be implemented more quickly. Private sector financing can also help to
mitigate financial risks associated with large-scale projects.
3. Risk sharing: PPPs enable risks to be shared between the public and private sectors,
reducing the financial burden on governments and ensuring that private sector partners
have a vested interest in project success.
4. Innovation: PPPs can promote innovation in the design, construction, and operation of
public infrastructure projects, enabling new technologies and processes to be applied to
public services.
5. Increased accountability: PPPs typically include performance metrics and contractual
obligations that help to ensure that private sector partners are accountable for project
outcomes.

Disadvantages of PPP:

1. Higher costs: PPPs can be more expensive than traditional public procurement methods
due to the inclusion of private sector profit margins and the higher cost of private sector
financing.
2. Complexity: PPPs are often complex and require extensive expertise to design and
implement, which can increase project costs and timelines.
3. Limited public control: PPPs involve transferring some level of control over public
infrastructure to private sector partners, which can limit the ability of governments to
make changes to public services in response to changing needs.
4. Limited transparency: PPP contracts can be complex and difficult to understand, which
can limit public transparency and accountability.
5. Contractual issues: PPP contracts can be difficult to negotiate and enforce, and disputes
between public and private sector partners can lead to project delays and additional
costs.

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Overall, PPPs can provide significant benefits for public infrastructure development, but they
also involve risks and challenges that must be carefully managed to ensure project success.

HOW CAN THESE DISADVANTAGES BE MINIMIZED?

To minimize the disadvantages of PPP, the following steps can be taken:

1. Careful project selection: PPP projects should be selected based on an analysis of the
project’s feasibility, risks, and potential benefits. Projects that are well-suited to the PPP
model, such as those with long-term revenue streams, should be prioritized.
2. Clear contract negotiation and enforcement: PPP contracts should be clear and
unambiguous, with performance metrics and contractual obligations that help to ensure
that private sector partners are accountable for project outcomes. Contractual disputes
should be resolved quickly and effectively to minimize project delays and additional
costs.
3. Effective risk management: PPP projects should be carefully structures to allocate risks
appropriately between the public and private sectors, and risks should be identified,
assessed, and mitigated throughout the project lifecycle.
4. Transparent and inclusive processes: PPP projects should be subject to transparent and
inclusive procurement processes, with clear guidelines for the selection of private sector
partners. Public participation and engagement should be encouraged to promote
accountability and public trust.
5. Proper regulatory framework: The regulatory framework governing PPPs should be
clear and well-defined, with effective oversight and monitoring mechanisms to ensure
compliance with contractual obligations and performance standards.
6. Effective project governance: PPP projects should be subject to effective governance
mechanisms, with clear lined of accountability and decision-making authority.
Appropriate project management and oversight structures should be established to
ensure that the project is delivered efficiently and effectively.

By taking these steps, the disadvantaged of PPP can be minimized, and the potential benefits of
this model can be realized.

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VII. PPP CHALLENGES AND RISKS IN THE PHILIPPINES

Public-Private Partnership (PPP) has emerged as a key policy tool for infrastructure
development in the Philippines. The government has implemented several PPP projects to
address the country’s infrastructure gaps, attract private sector investments, and promote
economic growth. However, PPP projects in the Philippines are not without challenges and
risks. This report aims to provide an overview of PPP challenges and risks in the Philippines,
focusing on political and regulatory risks, financial and economic risks, and technical and
operational risks.

Political and Regulatory Risks:

Political and regulatory risks are among the most significant challenges faced by PPP
projects in the Philippines. The country’s political and regulatory environment is characterized
by a high degree of bureaucracy, corruption, and legal uncertainty. This can pose significant
challenges to private sector investors, who may face delays, cost overruns, and other obstacles
that can undermine the viability of PPP projects.

One of the main political risks is the risk of policy reversals. Changes in government or
changes in policy can lead to delays, renegotiations, or cancellations of PPP projects. This can
create uncertainty for private sector investors, who may be reluctant to invest in PPP projects if
they perceive a high degree of political risk.

Another regulatory risk is the complex and lengthy process of obtaining permits and
licenses. The process can be time-consuming, expensive, and subject to corruption. This can
increase project costs and delays, making it difficult for private sector investors to achieve a
reasonable return on their investment.

Financial and Economic Risks:

PPP projects in the Philippines are also exposed to financial and economic risks. These
risks can arise from a variety of sources, including currency fluctuations, interest rate volatility,
and changes in market conditions.

One of the primary financial risks associated with PPP projects in the Philippines is the
risk of financing. Private sector investors may find it challenging to secure financing for PPP

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projects, particularly in an environment characterized by high borrowing costs and currency
volatility. This can increase project costs, reduce returns, and undermine the viability of PPP
projects.

Economic risks also exist in the form of demand risk. PPP projects rely in user fees or
revenues generated from the use of the asset. If demand for the asset is lower than anticipated,
revenues may not be sufficient to cover project costs, leading to financial losses for private
sector investors.

Technical and Operational Risks:

PPP projects in the Philippines are also exposed to technical and operational risks. These
risk can arise from a variety of factors, including inadequate planning, poor project
management, and inadequate maintenance.

One of the primary technical risks associated with PPP projects is construction risk.
Construction risks can arise from delays, cost overruns, and design flaws. These risks can
increase project costs, reduce returns, and undermine the viability of PPP projects.

Operational risks can also arise from inadequate maintenance of the asset. Poor
maintenance can lead to reduced asset life, increased repair costs, and reduced user
satisfaction. This can undermine the viability of PPP projects by reducing revenues and
increasing costs.

PPP projects in the Philippines face a range of challenges and risks that can undermine
their viability. Political and regulatory risks, financial and economic risks, and technical and
operational risks are among the most significant challenges faced by PPP projects in the
Philippines. To address these risks, policymakers need to adopt a comprehensive approach that
includes measures to reduce bureaucratic red tape, improve the investment climate,
strengthen project management and maintenance. By addressing these challenges and risks,
policymakers can create an environment that us more conducive to PPP investments and help
unlock the potential of PPP projects to promote economic growth and development in the
Philippines.

HOW CAN THESE CHALLENGES AND RISKS BE ADDRESSED?

To address the risks and challenges faced by PPP projects in the Philippines, policymakers can
consider the following strategies”

1. Enhancing the regulatory environment: Policymakers can adopt measures to reduce

bureaucratic red tape and improve the investment climate. This can include

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 streamlining the approval process for PPP projects, reducing the number of permits and
licenses required, and improving transparency in the procurement process.
2. Establishing clear and stable policies: Policymakers can establish clear and stable
policies to reduce the risk of policy reversals. This can include providing long-term policy
and regulatory stability, adopting standardized project contracts, and creating a stable
legal and regulatory framework for PPP projects.
3. Improving project management: Policymakers can adopt measures to improve project
management, including developing effective risk management plans, establishing clear
project objectives and timelines, and ensuring effective communication between all
stakeholders.
4. Conducting feasibility studies: Policies can conduct comprehensive feasibility studies to
assess the viability of PPP projects. These studies can help to identify and mitigate
potential risks and challenges, and ensure that projects are viable and sustainable in the
long-term.
5. Engaging with stakeholders: Policymakers can engage with all stakeholders, including
private sector investors, civil society groups, and local communities, to build support for
PPP projects and ensure that they meet the needs of all stakeholders. This can include
establishing effective communication channels, developing stakeholder engagement
plans, and conducting public consultations.
6. Providing financial incentives: Policymakers can provide financial incentives to
encourage private sector investment in PPP projects. This can include providing tax
breaks, offering loan guarantees, and providing other financial incentives to reduce the
financial risks associated with PPP projects.
7. Strengthening project oversight: Policymakers can strengthen project oversight by
establishing effective monitoring and evaluation mechanisms to ensure that PPP
projects are being implemented effectively and efficiently. This can include regular
project audits, performance assessments, and public reporting on project outcomes.

By adopting these strategies, policymakers can address the risks and challenges faced by PPP
projects in the Philippines, and create an environment that is more conducive to private sector
investment in infrastructure development.

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VIII. PPP BEST PRACTICES AND LESSONS LEARNED IN THE PHILIPPINES

Public-Private Partnerships (PPP) have become an important means for governments to

leverage private sector resources and expertise in the delivery of public services and
infrastructure. In the Philippines, the PPP model has been gaining traction over the past
decade, with the successful implementation of several major projects in various sectors. This
report examines the best practices and lessons learned from PPP experiences in the Philippines,
including successful projects and their impact, key factors for PPP success, and lessons from
previous projects.

Successful PPP projects and their Impact

Several PPP projects in the Philippines have been successful in achieving their objectives and
delivering significant benefits to the public. Some of the most notable examples include:

1. Mactan-Cebu International Airport (MCIA) Terminal 2 – The MCIA Terminal 2 project

was a PPP project that involved the construction and operation of a new passenger
terminal building at the Mactan-Cebu International Airport. The project was completed
in 2018 and has since been recognized as one of the world’s best airports. The project
has contributed to the growth of tourism in the region and has generated significant
economic benefits for the local economy.
2. Ninoy Aquino International Airport (NAIA) Expressway Phase 2 – The NAIA Expressway
Phase 2 project involved the construction of a 4-kilometer elevated expressway that
connects the NAIA terminals to the Skyway and the South Luzon Expressway. The
project was completed in 2017 and has reduced travel time and traffic congestion in the
area.
3. LRT Line 1 Cavite Extension – The LRT Line 1 Cavite Extension project involved the
extension of the existing LRT Line 1 from Baclaran to Cavite. The project was completed
in 2020 and has improved transport connectivity and reduce travel time for residents in
the area.

Key Factors for PPP Success in the Philippines

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Several key factors contribute to the success of PPP projects in the Philippines. These include:

1. Strong political will – The political will of the government is critical in ensuring the
success of PPP projects. A supportive policy environment and commitment to
transparency and accountability are essential for attracting private sector investment
and ensuring the timely implementation of projects.
2. Clear legal and regulatory framework – A clear legal and regulatory framework is
essential for creating a conducive environment for PPP projects. This includes clear
guidelines for project selection, procurement, and contract negotiation, as well as
effective mechanisms for dispute resolution and contract enforcement.
3. Adequate project preparation – Adequate project preparation is critical in ensuring the
success of PPP projects. This includes thorough feasibility studies, risk assessments, and
stakeholder consultations to ensure that the project is well-designed, feasible, and
aligned with the needs of the community.
4. Well-structured procurement process – An effective and transparent procurement
process is necessary to ensure that the most suitable private sector partner is selected
for the project.
5. Effective risk allocation – Effective risk allocation is critical in ensuring that the project
risks are appropriately allocated between the public and private sectors. This includes
identifying and mitigating project risks, and establishing clear contractual obligations
and performance standards for private sector partners.
6. Strong project governance – Strong project governance is essential for ensuring the
timely and effective implementation of PPP projects. This includes establishing effective
project management structures, clear lines of accountability, and decision-making
authority, and effective monitoring and evaluation mechanisms to ensure compliance
with contractual obligations and performance standards.
7. Adequate funding – Adequate funding is crucial to ensure that the PPP project is
properly financed and implemented.

Lessons Learned from PPP Experiences in the Philippines

There have been several lessons learned from PPP experiences in the Philippines. These
include:

1. Importance of stakeholder engagement: The involvement of all stakeholders, including

local communities and civil society organizations, is crucial to the success of PPP
projects. It is essential to engage with stakeholders early in the project cycle to ensure
that their concerns and needs are addressed.
2. Effective risk management: Proper risk management is essential to minimize risks
associated with PPP projects. Risks must be identified, assessed, and mitigated
effectively to ensure project success.
3. Transparent procurement process: A transparent procurement process is critical to
ensure that the most suitable private sector partner is selected for the project.

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 Transparency in the procurement process can also help to build public trust and
confidence in PPP projects.
4. Ongoing monitoring and evaluation: Ongoing monitoring and evaluation of PPP
projects are necessary to ensure that the project objectives are being met and that any
issues are identified and addressed in a timely manner.
5. Robust legal and regulatory framework: A robust legal and regulatory framework is
essential to ensure that PPP projects are implemented effectively and that the rights of
all parties involved are protected.

IX. CONCLUSION AND RECOMMENDATIONS

Based on the analysis of PPP in the Philippines, it can be concluded that PPP is an effective
approach for providing infrastructure and services in the country. Several successful PPP
projects have been implemented in the Philippines, particularly in the transport, energy, and
water sectors. PPP has helped in mobilizing private sector investments, increasing efficiency,
and improving service delivery. However, there are still challenges and risks that need to be
addressed to ensure the sustainability of PPP projects in the country. These challenges include
political and regulatory risks, financial and economic risks, and technical and operational risks.
To address these challenges, it is recommended to strengthen the legal and regulatory
framework, enhance capacity building and institutional arrangements, and improve risk
allocation mechanisms.

Policy Recommendations for Enhancing PPP in the Philippines

Based on the findings and conclusions, the following policy recommendations are
recommended to enhance PPP in the Philippines:

1. Strengthen the Legal and Regulatory Framework: To attract more private sector
participation, it is recommended to enhance the legal and regulatory framework for
PPP. This includes streamlining the approval process, providing more transparent and
predictable procedures, and clarifying the roles and responsibilities of the public and
private sectors.
2. Enhance Capacity Building and Institutional Arrangements: Capacity building and
institutional arrangements are essential for the success of PPP projects. It is
recommended to enhance the capacity of government agencies and local government
units to implement and manage PPP projects effectively. This includes improving the
procurement process, financial management, project monitoring, and evaluation.
3. Improve Risk Allocation Mechanisms: PPP projects involve a certain degree of risk, and
it is essential to allocate risks appropriately between the public and private sectors. It is

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 recommended to develop risk allocation mechanisms that consider the specific
characteristics of each project. This includes identifying and mitigating risks, developing
contingency plans, and allocating risks to the party that is best able to manage them.
4. Foster Public-Private Dialogue: Public-private dialogue is essential to ensure that PPP
projects are aligned with the needs and priorities of both the public and private sectors.
It is recommended to foster a more open and constructive dialogue between the public
and private sectors to promote mutual understanding and cooperation.
5. Promote Sustainable PPP Projects: Sustainability is essential for the long-term success
of PPP projects. It is recommended to promote sustainable PPP projects that consider
the environmental, social, and economic impacts of the project. This includes
incorporating sustainability criteria in the project design, procurement, and monitoring.
6. Encourage Innovation in PPP: Innovation is essential for improving the efficiency and
effectiveness of PPP projects. It is recommended to encourage innovation in PPP
projects, particularly in the use of technology and new business models. This includes
providing incentives for innovation and promoting the adoption of best practices.

Overall, PPP can play a significant role in addressing the infrastructure and service delivery gaps
in the Philippines. However, there is a need for a more enabling environment and institutional
arrangements to ensure the sustainability of PPP projects. By implementing the above policy
recommendations, the Philippines can enhance PPP and achieve more sustainable and inclusive
development.

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FREQUENTLY ASKED QUESTIONS

How are PPP projects beneficial to the Private Investors?

1. Revenue generation: PPP projects offer private companies opportunities to generate

revenue through long-term contracts with the government. This provides a stable and
predictable income stream for the private sector.
2. Risk sharing: In a PPP, risks are shared between the government and private sector,
allowing private companies to take on projects that they might not be able to finance
their own.
3. Access to expertise: The private sector often has expertise in specific areas, such as
engineering, construction, or operations. Through PPPs, the government can access this
expertise to deliver high-quality services.
4. Asset ownership: PPPs can allow private companies to own and operate public assets,
such as toll roads or water treatment plants, for a specified period of time. This provides
opportunities for long-term investment and returns.
5. Improved efficiency: The private sector can bring in efficiency gains and innovation to
public services delivery through its management and operations.

Overall, PPPs provide private sector entities with opportunities to participate in the
development of infrastructure and public services, which not only results in revenue generation
but also helps improve the quality of life of citizens through better public service delivery.

Who funds the projects under PPP?

Funding for PPP Projects can come from various sources, including:

1. Private sector investors: Private sector investors, such as banks, pension funds, and
other institutional investors, may provide financing for PPP projects. They may provide
debt, equity, or a combination of both.

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 2. Multilateral organizations: Multilateral organization such as the World Bank or the
Asian Development Bank, may provide financing for PPP projects in the form of loans,
guarantees, or other financial instruments.
3. Government: The government may provide financing through grants, subsidies, or other
forms of financial support, particularly in cases where the PPP projects serves a public
purpose that may not be commercially viable.
4. Bond markets: PPP projects may also be financed through bond markets, where
investors purchase bonds issued by the project company to provide financing.
5. Public-private partnership: In some cases, public-private partnerships may be
established to provide financing for PPP projects. These partnerships may involve
multiple private sector investors, government entities, or a combination of both.

Ultimately, the specific funding sources for a PPP project will depend on various factors,
including the nature of the project, its size and scope, and the local financial market conditions.

What is a PPP project, and how does it differ from a traditional procurement process?

A PPP project is contractual arrangement between the public and private sectors for the
delivery of public infrastructure or services. Unlike a traditional procurement process, a PPP
project involves the private sector taking on a significant share of the risks and responsibilities
of the project, including financing, design, construction, operations, and maintenance.

How can private sector companies identify PPP opportunities in the Philippines?

Private sector companies can identify PPP opportunities in the Philippines by monitoring
government announcements, attending industry conferences and event, networking with key
stakeholders, and working with local partners who have experience in PPP projects.

What are the eligibility requirements for private sector companies to participate in a PPP
project in the Philippines?

The eligibility requirements for private sector companies to participate in a PPP project
in the Philippines vary depending on the specific project and sector. Generally, companies must
have a strong track record of relevant experience, financial stability, and technical expertise.

What are the advantages of participating in a PPP project for private sector companies?

The advantages of participating in a PPP project for private sector companies include
access to new markets, revenue streams, and partnerships; reduced financial risks through
shared responsibilities with the public sector; and the opportunity to contribute to the
development of essential public infrastructure or services.

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What are the key risks associated with participating in a PPP project for private sector
companies?

The key risks associated with participating in a PPP project for private sector companies
include political and regulatory risks, financial and economic risks, technical and operational
risks, and legal and contractual risks.

How can private sector companies mitigate the risks associated with participating in a PPP
project?

Private sector companies can mitigate the risks associated with participating in a PPP
project by conducting thorough due diligence, identifying and managing risks throughout the
project lifecycle, and maintaining open and transparent communication with the public sector
partner.

What is the expected return on investment for private sector companies in a PPP project?

The expected return on investment for private sector companies in a PPP project varies
depending on the specific project and sector, as well as the risks and rewards associated with
the project. Generally, private sector companies expect to earn a reasonable profit over the
project lifecycle.

How are PPP project financed, and what are the financing options available to private sector
companies?

PPP projects are typically financed through a combination of public and private sector
funding sources, including equity, debt, and other financial instruments. Private sector
companies can access financing through banks, capital markets, and other sources.

What is the role of the private sector in a PPP project, how is it different from the role of the
public sector?

The role of the private sector in a PPP project is to provide financing, design,
construction, operations, and maintenance services for public infrastructure or services. The
public sector is responsible for providing policy direction, regulatory oversight, and funding
support for the project.

How can private sector companies ensure that their interests are protected in a PPP project?

Private sector companies can ensure that their interests are protected in a PPP project
by negotiating a comprehensive and transparent contractual agreement with the public sector
partner, conducting thorough due diligence, and maintaining open and honest communication
throughout the project lifecycle.

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What are the qualifications for participating in PPP projects?

Qualifications may vary depending on the specific project, but generally, private sector
entities that are financially and technically capable of executing the project are considered. The
government may also require certain certifications, licenses, or prior experience in similar
projects.

How are the terms and conditions of PPP projects negotiated?

The terms and conditions of PPP projects are usually negotiated through a competitive
bidding process. Private sector entities submit proposals containing their terms and conditions,
which are evaluated by the government based on a predetermined set of criteria.

Can foreign companies participate in PPP projects?

Yes, foreign companies are allowed to participate in PPP projects in the Philippines.
However, they may be subject to certain restrictions, such as foreign ownership limits in certain
industries.

What types of contract are used in PPP projects?

The most common types of contracts used in PPP projects are concession agreements
and joint venture agreements. These contracts outline the rights and responsibilities of both
the government and the private sector entity in the project.

What is the difference between a PPP and a traditional government procurement project?

In a traditional government procurement project, the government owns and operates

the project, while in a PPP project, the private sector entity owns and operates the project for a
certain period of time. PPPs also involve a higher degree of risk sharing between the
government and the private sector.

What is the role of the government in PPP projects?

The government is responsible for providing the legal and regulatory framework for PPP
projects, as well as identifying and developing potential projects. The government also provides
support throughout the project cycle, from procurement to construction to operation.

What is the role of the private sector in PPP projects?

The private sector is responsible for providing the financing, technical expertise, and
operational management of the project. The private sector also takes on a certain degree of risk
in the project, which is shared with the government?

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How are PPP projects financed?

PPP projects are typically financed through a combination of private sector funding,
such as bank loans and equity investments, and government funding, such as grants and
subsidies. The specific financing structure may vary depending on the project and the
availability of financing sources.

What are the common challenges faced in implementing PPP projects?

Some common challenges include political and regulatory risks, financial and economic
risks, technical and operational risks, and stakeholder management. These challenges can lead
to delays in project implementation or even project failure.

How can these challenges be mitigated?

Challenges can be mitigated through careful project planning and risk management. The
government can also provide support through policies and regulations that promote a favorable
environment for PPPs, as well as capacity building programs for government agencies and
private sector entities involved in PPP projects.

How are PPP projects monitored and evaluated?

PPP projects are typically monitored and evaluated by the government to ensure that
the private sector entity is meeting its contractual obligations and that the project is achieving
its intended outcomes. This may involve regular reporting and site visits, as well as periodic
audits or evaluations by independent third-party evaluators.

What happens at the end of a PPP project?

At the end of a PPP project, the private sector entity may transfer ownership of the
project back to the government, as per terms of the contract. Alternatively, the contract may
be renewed or extended if both parties agree.

How are disputes between the government and private sector entity resolved?

Disputes may be resolved through the dispute resolution mechanisms outline in the
contract, such as mediation or arbitration. In some cases, disputes may be escalated to the
courts.

How are the PPP projects affected by changes in government leadership or policy?

Changes in government leadership or policy can have a significant

What is the role of the private sector in PPP projects?

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 The private sector’s role in PPP projects is to provide the necessary investment,
expertise, and resources to develop and operate infrastructure or services that were previously
the sole responsibility of the government. The private sector also assumes the risks associated
with the project, such as construction, financing, and operations.

How are PPP projects awarded?

PPP projects are typically awarded through a competitive bidding process. Interested
private sector companies submit proposals that meet the project requirements, and the
government evaluates the proposals based on various factors, such as technical expertise,
financial capability, and proposed project cost. The winning bidder is selected based on a
combination of factors, including the highest quality of proposal and the lowest project cost.

What are the benefits of PPP to the government?

The benefits of PPP to the government include the ability to leverage private sector
expertise, resources, and financing to develop infrastructure or service that would have been
difficult or impossible to develop using traditional government funding. PPP also reduces the
government’s burden of funding and managing large-scale projects, improves service delivery,
and transfer risks associated with the project to the private sector.

What are the difference between a PPP and a privatization?

PPP involves a partnership between the government and the private sector to develop
and operate infrastructure or services, with the private sector assuming a significant share of
the risks and rewards associated with the project. Privatization involves the transfer of
ownership and control of government assets to the private sector. While PPP may involve some
level of privatization, the two concepts are distinct.

How are PPP projects financed?

PPP projects are typically financed through a combination of equity and debt. The
private sector partner provides a portion of the equity, while the remainder is raised through
bank loans, bonds, or other forms of debt. In some cases, the government may also provide
funding, such as through subsidies or guarantees.

What happens if a PPP project fails?

If a PPP project fails, the consequences can be significant for both the private sector
partner and the government. The private sector partner may face financial losses, reputational
damage, and legal repercussions. The government may be forced to take over the project or
find a new partner to complete it, which can be costly and time-consuming. To minimize the

27
risk of project failure, it is important to carefully evaluate and manage risks throughout the
project lifecycle.

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