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Duterte administration targets 17 PPP projects awarded by end-2017The government has set for itself an ambitious goal of at least 17 public-private-partnership (PPP) projects to be successfully awarded before December 2017, 6 more than the total 11 PPP projects successfully bidded out during the whole 6 years of the Aquino administration.

The PPP program is the flagship project of the Aquino administration established in 2010 that aims to provide an alternative way of raising funds to put up the vital

infrastructure projects in the country. Initially, optimism for its success was high with the government declaring that at least 10 projects will be awarded to the private sector by December 2010. In the end, there were only 12 projects awarded before Aquino’s term ended in June 2016, with 11 projects moving forward. In November 2015, the project proponent of the modernization of the Philippine Orthopedic Center terminated the deal it won in December 2013 following long delays on the government side, reducing the success rate of the Aquino administration in successfully bidding out PPP projects by one.

The Duterte administration now hopes to do better than its predecessor by promising to achieve successful award of 17 PPP projects by December 2017. Currently, there are 13 projects collectively worth an estimated P264 billion being prepared for bidding by the PPP Center (see PPP Projects Lined up for Award in 2016-2017).

Apart from the 13 projects being readied, there are also 53 projects left by the Aquino administration in the PPP pipeline. With a collective project cost estimated to be around P580 billion to as much as P27 trillion, these projects are being reviewed again and packaged into viable project proposals that still need to be evaluated and approved by the National Economic Development Authority (NEDA). Some of the projects had been offered before to the private sector, only to be snubbed. While others such as the Mindanao Railway project and the North-South Railway Project (South Line) were deemed

too expensive to build to be viable (see Project Updates on Mindanao and North-South Railway Projects). Including the Panay Railway Project, these billion pesos railway projects are among the priority projects that President Rodrigo Duterte has publicly declared he wants implemented during his term.

To address the issues that slow down the implementation of PPP projects overall, the Duterte administration has announced several changes:

h Streamline PPP approval process – from 29 months, the government is looking to whittle down time spent to get approval of a project and get it ready for public bidding to between 18 to 20 months. Currently, there are too many

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PRojECT UPdATES: MINdANAo RAIlwAy ANd NoRTh-SoUTh RAIlwAy

Mindanao Railway

h There were already several studies done on the Mindanao Railway project but not one proposal has passed the technical evaluation of the NEDA Board.

h The railway line, estimated to cost P78 billion, is envisioned to link the Mindanao provinces of Cagayan De Oro, Iligan, Zamboanga, Butuan, Davao and General Santos.

h Being a pet project of President Rodrigo Duterte, the re-packaging of the Mindanao Railway Project is now being fast-tracked for NEDA Board consideration.

North-South Railway

h The P171 billion commuter, long-haul North-South Railway (South Line) was left hanging until the end of Aquino’s term.

h The project, if completed, is expected to carry 316,000 passengers daily and get 44,000 vehicle users off the road.

h The North Line of the North-South Railway Project has recently started construction with an ODA loan from the Japan International Cooperation Agency (JICA).

h The submission of the prequalification documents for South Line was originally set in April but was postponed after the DOTC decided last minute to change project specifications.

layers of approval to get a PPP proposal ready for NEDA consideration. The plan is to reduce the layers and the number of departments that have to approve the project.

h Equal treatment of solicited and unsolicited proposals in the review process —The Aquino administration shied away from unsolicited projects because of legal ramifications, preferring instead to pursue infra projects initiated by itself.

h Requirement of 24/7 civil works for all project proponents – this will not only fast-track completion of project but would also have a windfall impact of employment since three shifts of workers will be needed.

h Strengthen the capacity of government agencies to review unsolicited proposals.

h Simplification of the qualification process for prospective bidders.Apart from the changes in the actual process and

implementation of the PPP program, the government is studying the expansion of the application of the PPP scheme to cover smaller projects at the local government level as well as looking at the possibility of applying a hybrid PPP scheme. According to the Department of Interior and Local Government (DILG), small-scale projects involving the provision of potable water, irrigation and electrification in far-flung communities in the Visayas and Mindanao regions are available for PPP consideration. The DILG had partnered with the World Bank recently and is presently conducting the technical studies on these projects.

Meanwhile, Budget Secretary Benjamin Diokno is pushing for a hybrid type of PPP scheme where in the government would undertake construction and the operation and management of

the project will be bidded out to private contractors. According to Sec. Diokno, the hybrid PPP will be more viable since the government can undertake construction cheaper as it can borrow at lower rates via overseas development assistance (ODA), and will not have to consider the return on investments (ROI) in computing project cost. Moreover, leaving project management to the private sector would ride on its ability to run operations more efficiently. “What we want is to provide good service at affordable prices”, Sec. Diokno said.

The Department of Finance (DOF) is also studying the possibility of doing away with bid premiums in PPP projects to address the backlog in infrastructure projects. According to the DOF, doing away with bid premiums would engage more companies to participate in public bidding and trim the costs to consumers. “Those projects that were built will eventually cost higher for the consumers because of the high front-end cost charged to the bidder. I am not sure this is the best way to go about this business of recruiting the private sector support to meet the shortfall in infrastructure,” Finance Secretary Sonny Dominguez said.

Since the PPP program began in 2010, only 4 projects have been completed. These include the Muntinlupa Cavite Expressway or MCX (Formerly known as Daang hari-SLEX Link road ), PPP for school infrastructure project (Phase 1 & II), and the automatic fare collection system (AFCS), which paved the way for the Beep card currently used in MRT-3 and LRT-1. Seven PPP projects, including the NAIA Expressway Project had faced multiple delays in completion. Sec. Diokno estimates that the Philippines will need at least 10 years continuous construction to bridge the country’s infrastructure gaps.

Aquino administration left P28 trillion worth of PPP projects in the pipeline.

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PRojECT NAMEPRojECT CoST

(IN BIllIoN PESoS)

dETAIlS

New Bohol (Panglao) Airport 4.57

• Operations and Maintenance (O&M) of the new Bohol Airport that will replace the existing Tagbilaran Airport.

• Apart from O&M contract, winning bidder will have to provide additional facilities and other necessary improvements to enhance passenger safety, security, access, passenger and cargo movement efficiency and operational efficiency. In addition, private partner should actively market the airport to develop direct international passenger traffic.

Laguindingan Airport 14.62

• Expansion/construction of new passenger terminal(s), along with all associated infrastructure and facilities as per applicable standards;

• Operation and maintenance of the passenger terminals (new and existing) during the entire concession period;

• Development of airside facilities, including, among others, the apron, runway and taxiway; and

• Enhancement/development of airside facilities to meet the enhanced scale of operations at the airport over the required duration.

Davao Airport 40.57• The O&M contract includes: Passenger terminal building expansion (from 65,000 sqm to 125,000 sqm), cargo terminal

building expansion (from13,000 sqm to 27,000 sqm), expansion of other key facilities such as car parking, full parallel taxiway, apron area and administration building.

Bacolod Airport 20.26

• The O&M contract will include: Passenger terminal building expansion, Cargo terminal building expansion, Construction of runway extension, Construction of parallel taxiway, Apron area expansion, and Expansion of other key facilities/infrastructure such as rapid exit taxiways, car parking, admin building, and other infrastructure like fuel farms, curbs, etc.

Iloilo Airport 30.40 • The O&M contract will include: Passenger terminal building expansion, Cargo terminal building expansion, Expansion of other key facilities such as car parking, and administration building, and the Construction of full parallel taxiway.

Light Rail Transit Line 2To be

determined (TBD)

• An O&M contract for 10-15 years will be granted to the winning bidder. The O&M contract will also include all future expansions done on the train line as determined by the government.

Road Transport Information Technology Infrastructure Project (Phase II)

0.298• The project will upgrade the existing Information Technology (IT) Infrastructure of the Land Transportation and

Franchising Regulatory Board (LTFRB) including the computerization of its manual processes, the development, supply and operationalization of its network infrastructure (hardware) and database, and applications (software).

Davao Sasa Port Modernization Project 18.99

• The private partner will finance the construction and modernization of the existing port including the new apron, linear quay, expansion of the back-up area, container yards, warehouses, and the installation of new equipment like ship-to-shore cranes and rubber-tyred gantry over the pre-agreed concession period. The private partner will also be responsible in operating and maintaining the port.

Kaliwa Dam Project 18.72

• Kaliwa Dam Project involves the financing, design, and construction of an additional raw water supply source with a design capacity of 600 MLD, through the commissioning of the Kaliwa Dam, including intake facilities and other pertinent facilities. Also part of the project is a water conveyance system with a design capacity of 2,400 MLD, in anticipation of additional inflows from Laiban Dam which is upstream of the Kaliwa Dam.

Regional Prison Facilities 50.20

• The project will entail the construction and maintenance of a modern prison facility in Fort Magsaysay, Nueva Ecija.

• The proposed facility should be able to accommodate 26,880 inmates, including staff housing and administrative buildings, areas for rehabilitation (sports, work and religious activity), and will be installed with high security equipment.

• The private partner will be responsible for the financing, detailed design and construction, and maintenance of the prison facility. A number of supporting accommodation and building-related services may be outsourced as part of the PPP agreement, such as laundry, waste treatment and disposal, sewage water treatment and power generation.

Light Rail Transit Line 6 65.09

• The LRT Line 6 Project is a proposed 19 kilometer railway from Niyog, Bacoor (the terminus of the LRT 1 CAVEX extension) to Dasmariñas City. The proposed ROW alignment is along the Aguinaldo Highway with 7 stations, namely: (i) Niyog, (ii) Tirona, (iii) Imus, (iv) Daang Hari; (v) Salitran, (vi) Congressional Avenue, and (vii) Governor’s Drive.

• Under a 30-year concession agreement, the private partner will finance, design, construct, operate and maintain, and procure the rolling stock for the LRT system.

Tanauan City Public Market Redevelopment Project 0.400

• The project entails the upgrading and modernization/ redevelopment of the existing Tanauan City Public Market located at Poblacion Barangay 7, Tanauan City, Batangas.

• The project includes the following: 1.) Construction of four-Storey Commercial Building with minimum building footprints of 26,000 sq. m. comprising of ground and second floor commercial building; third and fourth floor for parking and terminal and 2.) Construction of wet and dry market building with a minimum building footprint of 10,000 sq. m.

Baggao Water Supply Project 0.084• Provision of Level III potable piped water supply service which will initially serve 24 barangays in the municipality.

The project is inclusive of bulk water source development, transmission, and distribution to individual household level connections.

ppp projects lined up for award in 2016-2017

The Philippines needs 10 years of continuous construction to catch up

Source: PPP Center and WBF Research Database

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STATUS oF BIG-TICKET INFRASTRUCTURE PRojECTS IN ThE PIPElINEAS OF AUGUST 2016

PRojECT TITlE IMPlEMENTING AGENCy

FUNdING SoURCE

CIVIl woRKS TIMEFRAME PRojECT CoST STATUS / ISSUES

RoAdS/BRIdGES

Camarines Sur Expressway Project DPWH PPP TBD P2.25 billion Revisions of TOR and ABC are ongoing

North Luzon Expressway East, Phase I and II DPWH PPP TBD P49.12 billion

PPP Service is currently preparing the Project Procurement Management Plan for the project’s feasibility study

Plaridel Bypass Toll Road DPWH PPP TBD P9.33 billion For NEDA Board approval

RAIlwAyS

LRT Line 6 DOTr PPP TBD P65.09 billion For PQ docs submission

North-South Railway Project (South Line) DOTr PPP TBD P213.99 billion For NEDA Board approval

AIRPoRTS

Bacolod Airport Operations, Maintenance & Development DOTr, CAAP PPP TBD P20.26 billion For bid submission

Davao Airport Operations, Maintenance & Development DOTr, CAAP PPP TBD P14.62 billion For bid submission

Iloilo Airport Operations, Maintenance & Development DOTr, CAAP PPP TBD P30.40 billion For bid submission

Laguindingan Airport Operations, Maintenance & Development DOTr, CAAP PPP TBD P14.62 billion For bid submission

New Bohol (Panglao) Airport Operations, Maintenance & Development

DOTr, CAAP PPP TBD P4.7 billion For bid submission

UTIlITIES

New Centennial Water Source-Kaliwa Dam MWSS, DPWH PPP TBD P18.72 billion For bid submission

oThER PRojECTS

Batangas-Manila 1 Natural Gas Pipeline PNOC PPP TBD P14.72 billion For NEDA Board approval

Civil Registry System Information Technology (Phase II) PSA PPP TBD P1.59 billion For negotiation with Unisys

Manila Bay Integrated Flood Control, Coastal Defense and Expressway

DPWH PPP 2017-2066 P536.03 billion

Coastal Development Consortium (CDC), which consists of San Miguel Holdings Corporation (SMHC) and New San Jose Builders Inc. (NSJBI), prepares coverage of project scoping for ECC application

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STATUS oF oN-GoING BIG TICKET INFRASTRUCTURE PRojECTS AS OF AUGUST 2016

PRojECT TITlE IMPlEMENTING AGENCy

FUNdING SoURCE

CIVIl woRKS TIMEFRAME

PRojECT CoST STATUS / ISSUES

RoAdS/BRIdGES

CALAx DPWH PPP 2017-2020 P35.43 billion

PRIVATE PRoPoNENT: MPCAlA holdings Inc.76.1% or 430 Letters of Notice served to affected lot owners out of 565 identified affected lots as of 12 August 2016

MMSS 3 DPWH PPP 2015-2018 P26.66 billion

PRIVATE PRoPoNENT: Metro Pacific Tollways development Corp.Overall progress for all sections is calculated at 14.263% resulting to a negative slippage of 41.88%

NAIA Expressway Phase II DPWH PPP 2014-2016 P15.86 billion

PRIVATE PRoPoNENT: Vertex Tollways devt. Inc.The actual cumulative accomplishment of the approved nominated contractor is 90.90% as of 12 August 2016. The connection between NAIA expressway 1 to NAIA expressway 2 (Villamor Air Base) is expected to be completed in November 2016.

NLEx Harbor Link (Segments 8.2 & 10) DPWH PPP 2014-2019 P15.50 billion

PRIVATE PRoPoNENT: Manila North Tollways Corp.Segment 8.2: MNTC has completed the DED and has submitted to TRB for approval; DED will be returned to MNTC with comments

SLEx Toll Road 4 DPWH PPP TBD P13.10 billionPRIVATE PRoPoNENT: South luzon Tollway Corp.TRB is processing the request of SLTC for the revision of the design of the interchanges

ACRoNyMS

ABC Approved Budget Ceiling

CAAP Civil Aviation Authority of the Philippines

CALAx Cavite-Laguna Expressway

DED Detailed Engineering Design

DOTr Department of Transportation

DPWH Department of Public Works and Highways

LRT Line Rail Transit

MMSS Metro Manila Skyway Stage

MWSS Metropolitan Waterworks and Sewerage System

NAIA Ninoy Aquino International Airport

NLEx North Luzon Expressway

PNOC Philippine National Oil Company

PPP Public-Private Partnership

PQ Pre-qualification

PSA Philippine Statistics Authority

SLEx South Luzon Expressway

TBD To be determined

TRB Toll Regulatory Board

TOR Terms of Reference