Fitch Group unit discounts flow off of funds for PHL infra projects

MANILA- BMI, a unit of Fitch Group, discounts draining of funds for the Philippines' infrastructure projects following the Duterte government's decision to directly finance these projects, which have also received support from China and Japan.

Economic managers said the present administration would spend about PHP8 trillion in the next five years for its infrastructure program and do away with the public-private partnership (PPP) initiative to fast-track project implementation.

The current government's bid to strengthen tie-ups with major economies in the region resulted in China's commitment to bring in about USD24 billion-worth of investments and Japan pledging some 1 trillion yen-worth of investments.

In a research note, BMI said the Philippines' infrastructure sector will continue its shift away from PPPs owing to a lack of interest from private investors and slow implementation timelines.

It, however, pointed out that as the government increases its role in the construction space, it will be supported by surging financial support from China and Japan as both seek to capitalize on opportunities in the fast-growing market.

It cited that of the 56 PPP projects announced by the Aquino administration in 2010, only five have been completed.

Since the Duterte government took office in July 2016, at least 18 projects were removed from the Philippine PPP Center's database, with several relaunched as publicly procured projects or as projects financed and sponsored by multilateral development organizations, it said.

While the market has used the PPP model success fully in implementing toll road and water infrastructure projects and its framework is considered to be in line with international best practice, other sectors have typically suffered from project delays stemming from disputed tendering processes and a lack of investor interest, it said.

Thus, BMI expects the government to also remove under the PPP program the airports, ports and rail projects, which are seen to either be directly financed by state funds or be placed under official development assistance (ODA).

BMI said this modification will limit the private sector's opportunities in investing in public infrastructure.

It, on the other hand, said that this will also help to reduce the likelihood of contractual disputes and uncertainty over financing that has weighed on proposed PPPs , thereby improving overall project implementation.

This shift therefore lends further supports our robust outlook for the Philippines ' construction industry over the first half of our forecast period between 2017 and 2021, which we expect will expand by 11.2 percent in real terms and be a global construction growth outperformer, it added.

Source: Philippines News Agency

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