Aquino: Govt to protect PPP investors from regulatory risk

President Benigno "Noynoy" Aquino III on Thursday vowed to protect investors from regulatory risks, and invited businessmen to venture into public-private partnership (PPP) infrastructure projects with the government. Aquino made the promise to some 200 foreign businessmen who attended the PPP conference in Manila. He said he was aware of the problems in the past, where investors were surprised to see the rules governing the contract they signed with government suddenly changes "without warning." "When government commits to allow investors to earn their return from user fees, it is important that that commitment be reliable and enforceable. And if private investors are impeded from collecting contractually agreed fees – by regulators, courts, or the legislature – then our government will use its own resources to ensure that they are kept whole," Aquino said. He cited as an example a contract with government to build a road or a bridge, where the private entity may specify a formula for rates adjustments. "If for some reason, a court decision threatens the adjustment, the government will compensate the private concessionaire for the difference between what the tariff should have been under the formula, and the tariff which it is actually able to collect," Aquino said. Aquino said the specifics of such protection will be detailed in the contracts that will be entered into by the government and the winning bidder of each PPP project, which he said will be examined carefully by "independent financial advisors" before it is bidded out. Aquino noted, however, that the protection will be limited to regulatory risk, saying commercial or market risk will be shouldered by investors "as it should be." Aquino also said his administration will be "clear, honest, and transparent" in all its business transactions in contrast to the previous administration which he described as a "time of backroom deals made with no clear criteria or direction." "Daylight is the standard of performance both you and I will expect of the Philippine government. Where things are not done in the dark, but rather, where our formula for success is integrated into the procedures we are all obligated to follow," said Aquino. Opposing voice While Aquino's pronouncements were well-applauded inside the Marriott Hotel where the conference was held, around 20 protesters outside condemned the government for its PPP program. Activists from umbrella militant group Bagong Alyansang Makabayan (Bayan) chanted the slogan: "the Philippines is not for sale!" "We have a long experience of public-private partnership that resulted in mounting public debt and rising rates and fees. PPPs is the reason why power and water rates are high and why toll fees have increased and why even the MRT fares are set to rise next month," Bayan secretary general Renato Reyes Jr. said in a statement. Reyes said the government's promise to shield investors from regulatory risks by assuming financial responsibility, should the need arise, is "a dangerous proposal and puts consumers at great risk because they will end up paying for the guarantees." The militant leader said the benefits of PPP projects were "short-term." Presidential Communications Development and Strategic Planning office Secretary Ricky Carandang, however, was quick to brush aside the militant groups' concern that the country's debts would rise further under the PPP program . "They are concerned that it will lead to more debt but let’s take a look at what the debt to GDP ratio is going to be at the end of all of this. Let’s take a look at what the debt servicing ratio is gonna be at the end of all this. Let’s take a look at what kind of projects, what kind of infrastructure we’re going to be able to build at the end of all this and then we’ll know if it was worth it," he said in an interview with reporters. Carandang said the activists "don’t really say anything but oppose and oppose." "This is something that, we said, is going to help free up fiscal space for social services so that we can help reduce the numbers of poverty. That’s something that they should be for. But, again, I think they’re stuck in their 1970s ideology and they’re not able to move beyond that," said the Palace official. — LBG, GMANews.TV