FOCUS | Firms train sights on infrastructure opportunities with LGUs

August 24, 2017 - 4:58 PM
Cities, mega cities-vantage view, Interaksyon
Vantage view of Southern Metro Manila, InterAksyon file photo.

MANILA – Companies are racing to identify infrastructure opportunities at the local government level to satisfy their thirst for growth after the government decided to take on the development of big-ticket projects.

First Metro Investment Corp. (FMIC) Executive Vice-President Justino Juan R. Ocampo said in an interview that more companies will increasingly pursue public-private partnership (PPP) projects with local government units (LGU) that will deliver basic services to the public.

“The private sector has to be creative,” Mr. Ocampo said.

Conglomerates, which have actively participated in the previous administration’s PPP program, have turned to unsolicited proposals after the government opted to shoulder the funding for key infrastructure projects and bid out the operation and maintenance contracts later on to the private sector.

With the status of these proposals to national government agencies still up in the air, firms like Metro Pacific Investments Corp. (MPIC) and Ayala Corp. are teaming up with LGUs in line with President Rodrigo R. Duterte’s thrust to spread the country’s wealth beyond Metro Manila and foster inclusive growth.

“There might still be opportunities in the provinces. The government is keen on doing these big projects that are critical and immediately needed like airports and rail roads, but I think there might be opportunities elsewhere. We just have to do the studies,” Joseph M. Yap, president of Gotianun-led Cyberzone Properties, Inc., told reporters.

MPIC is leading the charge when it comes to teaming up with LGUs for infrastructure projects. Among these projects are the 42-megawatt waste-to-energy facility in Quezon City, the P27.9-billion Cebu-Cordova Link Expressway and a number of bulk water supply deals, the latest of which is a P2.8-billion project in Cagayan de Oro sealed earlier this month. MetroPac Water Investments Corp., MPIC’s unit focused on business development outside Metro Manila, continues to evaluate several prospective water supply deals.

“We’re looking all over, but I can’t divulge where because both us and Manila Water (Company, Inc.) might be looking at the same market,” Maynilad President Ramoncito S. Fernandez said in a phone interview, referring to the Ayala-led concessionaire for Metro Manila’s east service zone.

Criteria for selecting LGUs

In selecting the areas for expansion, Mr. Fernandez said the company takes into account “which of the LGUs need us most,” its willingness to partner with the private sector and if it will make efficient use of its resources.
What also makes a PPP with an LGU attractive is less red tape.

“For the Cebu-Cordova bridge, we dealt with the municipality of Cordova, the city of Cebu and the province — unlike if it is a national government (project), it concerns a lot of people [but] this one is smaller,” said Mr. Fernandez, who was the president of MPIC unit Metro Pacific Tollways Corp. when it made an unsolicited proposal to the local government.

World Bank Country Director Mara K. Warwick told reporters the private sector can find some revenue-generation opportunities in water supply, waste water management, electricity and transportation at the local level.

“Through a planning system including the local level, the work that is done to prepare plans also helps to make sure that what is being proposed is efficient and effective, and this provides the private sector the opportunity to invest in projects that are grounded in good analysis,” Ms. Warwick said.

The PPP Center, in an e-mail, said that LGUs are working with the agency and the Department of Interior and Local Government to build up their capacity to develop their own infrastructure projects in response to the growing interest of the private sector in local projects.

Makati City Mayor Mar-len Abigail S. Binary said in a forum organized by the National Competitiveness Council (NCC) on Wednesday last week that she considers the PPP scheme a “lynchpin” to improve the digital infrastructure of the city after signing five technology contracts with the private sector.

“LGUs can fund some projects on their own, but if they need private investments and partners, they can go down the PPP route,” Guillermo M. Luz, private sector co-chairman of the NCC, said in an interview.

The PPP Center said the unsolicited proposal process for both national government agencies and LGUs is provided by Republic Act No. (RA) 7718, the country’s build-operate-transfer law, while RA 7160, or the Local Government Code of 1991, authorizes LGUs to enact their own joint venture codes.

Still, the private sector taking on the government’s role in infrastructure development could have its trade-offs.
“A public highway will need to be a toll gate in order to recuperate a company’s investment. You have to reconcile the profit-driven agenda of the corporation against the public good motive of an LGU,” Rens V. Cruz II, analyst at Regina Capital Development Corp., said in a telephone interview.