| 29

CHAPTER II

REVIEW OF RELATED LITERATURE

The International Community has seen the rapid growth of Public-Private

Partnership Agreements, and Foreign Investments in the world. PPPs play an

important role in meeting the infrastructure challenge and have been an

established part of many countries’ development paths.61 PPPs specifically in

infrastructure has been found to enhance existing public capacity in providing

economic infrastructure (e.g., transport, telecommunication, power, water, and

sanitation) and social infrastructure, e.g., health and education).62

Public-Private Partnership Agreements

There is no single international definition of what constitutes a Public-

Private Partnership.63 Locally, it is defined by the PPP Center of the Philippines

as a contractual agreement between the Government and a private firm towards

financing, designing, implementing, and operating infrastructure facilities and

services that were traditionally provided by the public sector. It embodies optimal

risk allocation between the parties- the Government minimizing the cost while

realizing project developmental objectives, and the private sector getting a

reasonable rate of return.64 The International Monetary Fund, on the other hand,

defines PPP as an innovative, long-term contractual arrangement for developing

61
Supra note 38.
62
Ibid.
63
Banzon, E., et al. Assessing the Feasibility of Public-Private Partnerships in Health in the
Philippines, Philippine Institute for Development Studies. (2014), Discussion Paper Series No.
2014-49, 10.
64
Public-Private Partnership Center. The Philippine Public-Private Partnership Program
[Brochure]. (2012), p.2.
 | 30

infrastructure and providing public services by introducing private sector funds,

expertise, and motivation into areas that are normally the responsibility of

government.65 In the Philippines, PPP is governed by the Republic Act No. 7718

(R.A. 7718), otherwise known as the Amended Build-Operate-Transfer Law, and

its Implementing Rules and Regulations.66 Another special law which finds

application is Republic Act No. 9184 (R.A. 9184) otherwise known as the

Government Procurement Act (“Procurement Act”). Other laws, such as the Civil

Code, Code of Commerce, Foreign Investments Law and Local Government

Code also come into play.

There are several types of PPP arrangements available to the parties,

depending on the extent of involvement of and risk taken by the private party.67 It

can vary from Utility Restructuring, Corporatization, and Decentralization, Civil

works and Service Contracts, Management and Operating Contracts, Leases or

Affermage, Concessions, BOT Projects, DBOs, Joint Venture Agreements, and

Divestiture of Public Assets.68 In the Philippines alone, there are multiple

numbers of ongoing PPP projects, ranging from facilities, infrastructure, and

transportation projects.69

65
United Nations Economic Commission for Europe. Introduction to Public-Private Partnerships:
Can Public –Private Partnerships Improve Infrastructure and Deliver Better Public Services
[Training Module]. (2012). Retrieved from https://goo.gl/RLRZ9m on March 2017.
66
Ibid.
67
Worldbank Group. PPP Arrangements / Types of Public-Private Partnership Agreements |
Public-private partnership. [Web log post], (2017). Ppp. Retrieved from https://goo.gl/1PXuWv on
March 2017.
68
Ibid.
69
Tolentino, Ferdinand. Public-Private Partnership Program of the Philippines [Presentation].
Makati City, (2013), at p. 18.
 | 31

PPP in the Philippines is any one of the variants of the permitted schemes

under the BOT Law. The BOT Law presents several variants, namely the Build-

Operate-Transfer (BOT), Build-and-Transfer (BT), Build-Own- and Operate

(BOO), Build-Lease-and-Transfer (BLT), Build-Transfer-and-Operate (BTO),

Contract-Add-and-Operate (CAO), Develop-Operate-and-Transfer (DOT),

Rehabilitate-Operate-and-Transfer (ROT), and Rehabilitate-Own-and-Operate

(ROO).70 Other modalities include service contracts, management contracts

lease or concession agreements.71 Before the amendment of the BOT Law, there

were originally two schemes, Build-Operate-Transfer (BOT) and Build-and-

Transfer (BT).72

BOT is a contractual arrangement whereby the project proponent

undertakes the construction, including financing, of a given infrastructure facility,

and the operation and maintenance thereof. The project proponent operates the

facility over a fixed term during which it is allowed to charge facility users

appropriate tolls, fees, rentals, and charges. The project proponent transfers the

facility to the government agency or local government unit concerned at the end

of the fixed term which shall not exceed fifty years.73 BT, on the other hand, is

defined as a contractual arrangement whereby the project proponent undertakes

70
Sec. 2 (b-j), R.A. 7718, An Act Amending Certain Sections of Republic Act No. 6957, Entitled
“An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure
Projects by the Private Sector, and for other Purposes” May 8, 1994, (hereinafter “BOT Law”).
71
Ricote, Eleazar E. The Philippine BOT/PSP Program (Focus on Rail Projects): Paper presented
at the 2nd Metro-Manila Urbanization Conference on Urbanization. Commission on Higher
Education-Zonal Research Center, De La Salle University, Manila, March 18 2006.
72
R.A. 6957, An Act Authorizing the Financing, Construction, Operation and Maintenance of
Infrastructure Projects by the Private Sector, and for other Purposes July 9, 1990.
73
Sec. 2 (b), BOT Law.
 | 32

the financing and construction of a given infrastructure or development facility

and after its completion turns it over to the government agency or local

government unit concerned, which shall pay the proponent on an agreed

schedule its total investments expended on the project, plus a reasonable rate of

return thereon.74

The BOT Law recognizes the role of the private sector in national growth

and development and provides the most appropriate incentives to mobilize

private resources for financing development projects usually undertaken by the

Government.75 It allowed the framework for rate setting and adjustments to mirror

market conditions to ensure the reasonable return on investment.76 It maintains

compliance with existing laws like the 40-60% rule on ownership of companies,

anti-dummy law, and others.77

Significance and Development of PPPs

There is no concrete proof that infrastructure is positively correlated with a

country’s economic development. However, in 1989, David Aschauer in his study

concluded that in the United States, infrastructure had a very strong positive

effect on private-sector total factor productivity (TFP), which was dubbed as the

74
Ibid, at Sec. 2 (c).
75
Id, at Sec. 1.
76
Villamejor-Mendoza, M. Equity and Fairness in Public-Private Partnerships: The Case of Airport
Infrastructure Development in the Philippines. Philippine Journal of Public Administration, XV
Nos. 1-2, 3, (2011).
77
Ibid.
 | 33

“Aschauer Hypothesis.”78 Aschauer’s study showed that the lack of investment in

public infrastructure resulted in the slowdown of productivity growth.79 This

finding was validated by Munnel in 1990,80 and she recommended that the

United States should start investing in improving its public infrastructures to

increase productivity growth.81

Despite the lack of any solid evidence linking economy to infrastructure

development, it is not difficult to see that investment in infrastructure influences a

country’s productivity.82 It is hard to imagine having trucks without roads or ships

without ports. This confirms the idea that infrastructure matters to growth and is

now relatively well recognized and widely understood among practitioners and

policy-makers.83 Current evidence shows that better quantity and quality of

infrastructure can directly raise the productivity of human and physical capital,

leading to growth.84 Improving and investing in public infrastructures can lead to

improvement in education, better access to facilities, facilitate private

investments, improve jobs, and so much more.85

78
Ford, R. & Poret, P., Infrastructure and private-sector productivity. Economic Studies No. 17,
(Autumn, 1991).
79
Munnel, A.H. Why has Productivity Growth Declined? Productivity and Public Investment. New
England Economic Review (1990).
80
Ibid.
81
Id.
82
Ford & Poret, Supra note 78.
83
Estache, A. & Garsous, G. The Impact of Infrastructure on Growth in Developing Countries. IFC
Economics Notes 1, (April 2012).
84
Supra note 78.
85
Ibid.
 | 34

The demand for infrastructure particularly in the ASEAN Region has never

been more demanding.86 Infrastructure makes a significant contribution to

economic and social development through output growth, reduced transaction

costs, trade facilitation, microeconomic efficiency and the spatial distribution of

development in regional economies.87

This being said, the significance of PPP for a country or a region cannot be

undermined. This is particularly true for most of the countries in the Asia-Pacific

Region, which according to recent studies lags behind other countries in terms of

infrastructure development.88 The need to focus on infrastructure development

through PPPs have been gaining momentum in the region since 1990,89 but

based on studies conducted by financial research institutes, the region has a

long way to go in order for infrastructure to maintain levels of economic growth.90

Development of PPP in the Asia-Pacific

Infrastructure plays a vital role in improving connectivity and promoting

sustainable growth in the Asia Pacific economies.91 Despite the progress for

infrastructure developments in the recent years, there is much to be done in

order to provide adequate facilities for the region’s people and to support the

86
Zen, F. & Regan, M. ASEAN Public Private Partnership Guidelines. Economic Research
Institute for ASEAN and Southeast Asia, (December 2014), at p.8.
87
Ibid.
88
Agarwal, A. PPP Trends and Initiatives in the Asia Pacific Region. Ernst & Young, LLP, (August
2014).
89
Ibid.
90
Asian Development Bank and Asian Development Bank Institute, “Infrastructure for a Seamless
Asia”, (2009). Retrieved from https://goo.gl/8PTDE7 on May 2017.
91
Pricewaterhouse Coopers Services LLC. Developing Infrastructure in Asia Pacific: Outlook,
Challenges and Solutions. (2014). Retrieved from https://goo.gl/oeZYR8 on May 2017.
 | 35

greater cross-border flow of trade and investments.92 Based on the Global

Competitiveness Report 2016-2017, four countries in the Asia-Pacific are

included in the top ten countries in terms of infrastructure ranking.93 Singapore

ranked second, followed by Japan in fifth place, the United Kingdom in ninth, and

Republic of Korea in tenth place.94 Amidst the development, infrastructure deficit

across the emerging growth markets in the region remains substantial.95 It has

been estimated that Asia needs approximately US$15-20 trillion between 2010-

2030 to bridge the huge infrastructure gap in most of the countries of the Asia-

Pacific region and maintain current levels of economic growth.96

The majority of countries in the region require vast amounts of spending to

be directed towards infrastructure to allow growth in their economies.97 Power is

needed to spur growth in manufacturing, water is needed to sustain industry and

people, and transportation networks are required for the movement of people and

goods.98 The shortfall in infrastructure investment in the region is widely

recognized, with numerous developing countries emphasizing the need as a

priority in their national development plans.99 However, infrastructural

development remains an expensive and complex undertaking, and the costs of

92
Ibid.
93
Schwab, Klaus, “The Global Competitiveness Report 2016-2017”, World Economic Forum,
(2016). Retrieved from https://goo.gl/SaVMz9 on May 2017.
94
Ibid.
95
Supra note 75.
96
Agarwal, Supra note 72.
97
Ibid.
98
Supra note 80.
99
The Economist Intelligence Unit, Supra note 14 at p. 3.
 | 36

continuous upkeep and improvement are high.100 Investment can be risky, and

constraints on public financing remain significant.101 Therefore, there is a great

need to tap and mobilize private sector capitals that can be invested into

infrastructure.102

PPP Readiness in the Asia - Pacific Region

In a study conducted by The Economist Intelligence Unit in 2011,103 which

assesses the capacity of countries in the Asia-Pacific Region to deliver

sustainable PPP projects, Australia was identified as the region's most developed

economy and a world leader in PPP practice.104 Australia topping the list is owed

to its strong regulatory, institutional and investment conditions. United Kingdom

seconded to Australia in terms of PPP readiness. It demonstrated similar

strengths with Australia, along with strong institutional capacity and sound

implementation practices.105 Both Australia and the United Kingdom were

classified as “mature” PPP markets, with substantial levels of PPP activity under

their belts and sophisticated frameworks and capacity in place for planning and

implementing complex projects.106 While Australia and the United Kingdom were

classified as “matured” PPP markets, the Republic of Korea, India, and Japan,

and the Philippines were considered as countries with “developed” PPP

100
Ibid.
101
Id.
102
Agarwal, Supra note 72.
103
The Economist Intelligence Unit, Supra note 14 at p. 4.
104
The Economist Intelligence Unit, Supra note 14 at p. 6.
105
Ibid.
106
Id.
 | 37

markets.107 States that scored 60-79.9 for the total scores in all the categories

were considered as having “developed” PPP markets.108 States with “developed”

PPP markets possess accommodating institutional and regulatory frameworks,

but lack capacity in handling challenges, such as technical capacity, effective

dispute resolution mechanisms, the adoption of viability gap funding (VGF)

policies and appropriate standards for contingent liability accounting.109 The

Philippines was assessed to have a good legal framework but is limited by the

weakness of its institutional framework, and limitations on dispute- resolution,

and financing.110 This may be attributed to the government’s inability to support

the projects, owing to its poor fiscal position, with an underdeveloped bond

market, which reduces the possibility of finding adequate funding.111

In 2011, Philippines may have been classified as an "emerging" PPP

market, but was ranked up in 2014 by the same institution.112 In the 2014

Infrascope by The Economist Intelligence Unit, Philippines was classified as an

"emerging" PPP market in 2011 to having a “developed” PPP market in 2014.113

It ranked seventh among the twenty-one countries involved in the study and is

recognized to have improved the most since 2011.114 It recorded the most-

improved regulatory and institutional frameworks and is one of the leading

countries in the study for improved investment climate and financial facilities, and

107
Id.
108
The Economist Intelligence Unit, Supra note 14 at p. 9.
109
Ibid.
110
Id at p. 28.
111
Supra note 15.
112
Ibid.
113
The Economist Intelligence Unit, Supra note 14 at p. 9.
114
Ibid, at p. 10.
 | 38

has used its increased capacity and transactional experience in recent years to

promote capacity-building in emerging PPP markets within the region.115

While the Philippines may have improved vigorously, it still scored far as

compared to countries with “matured” PPP markets. Australia and the United

Kingdom maintained its ranking as the first and second countries respectively as

the most PPP ready.116 Australia’s success can be attributed to its robust

institutional and regulatory frameworks, a favorable investment climate, a

sophisticated and well-regulated financial sector, and leads the survey for sub-

national adjustment, with most PPPs delivered by state governments.117 The

United Kingdom ranks second, and exhibits similar characteristics, with strong

institutions, a strong regulatory framework, and deed capital markets.118

ASEAN Principles for PPP Frameworks

The Association of Southeast Asian Nations119 Secretariat has developed

a set of principles for PPP framework that provides ASEAN governments with

well-tested guidelines on how to implement effective PPP frameworks. The said

principles are non-binding recommendations to ASEAN member states to

strengthen their PPP framework.120 The principles are basically subdivided into

four general categories. First, the principles address the requirement to establish

115
Id.
116
Australia and the United Kingdom scored 91.8 and 88.1 respectively in the Overall Ranking,
while the Philippines scored 64.6 in the 2014 Infrascope conducted by the Economist Intelligence
Unit.
117
The Economist Intelligence Unit, Supra note 14 at p. 28.
118
Ibid.
119
Hereafter, ASEAN.
120
ASEAN Principles, Supra note 38, at p. 3.
 | 39

a strong policy and organizational framework within the government and a sound

enabling environment for private sector participation.121 Second, the principles

deal with the PPP process from selection to implementation. It is then followed by

a third set of principles to ensure affordability and transparency, and the last

principle addresses the issue of transnational PPPs for infrastructure

connectivity.122

The ASEAN Principles for PPP frameworks recommendations for the

establishment of a well-developed PPP program is not different from the findings

of the Economist Intelligence Unit. It basically recommends that governments

should establish a robust regulatory, legal, and institutional framework.123 In

addition, it requires that the legal and regulatory framework be transparent,

predictable and adequately enforced. An effective regulatory framework also

implies an adequate evaluation of new regulations and, where necessary, reform

of the stock of significant regulations to ensure that they are up to date, cost-

effective, and deliver on the intended policy objectives.124 It also found that there

is a need to develop competent and sufficiently - resourced authorities with clear

lines of accountability to implement the legal and regulatory framework to ensure

policy predictability and stability, enhancing the overall investment climate for

121
Ibid.
122
Id.
123
ASEAN Principles, Supra note 38, at p. 5.
124
ASEAN Principles, Supra note 38, at p. 5.
 | 40

infrastructure investment, and successfully managing the public investment

process.125

To cap, the principles provide that the government should have efficient

frameworks,126 project selection and development and implementation

process,127 and it should promote affordable and budget-transparent PPP

projects,128 and have effective dispute resolution mechanisms.129

National Legislations for PPP

In a study conducted by Seungwoo Son,130 he found that common and

civil law countries differ in terms of approaching many issues relevant to PPPs.131

In many civil law countries, a separate administrative law governs PPP

arrangements because the service in question is deemed to be a public

service.132 By contrast, in common law jurisdictions such as the United Kingdom,

common law forms the fundamental basis of all commercial transactions.133 To

sum it up, civil law jurisdictions have a more rigid approach to the structuring of

PPPs than common law jurisdictions.134

125
Ibid, at p. 6.
126
Id.
127
ASEAN Principles, Supra note 38, at p. 8.
128
Ibid, at p. 12.
129
Id, at p. 14.
130
Seungwoo Son is a UNCITRAL visiting scholar and a faculty of Law at the Dankook University
in the Republic of Korea. He authored the study entitled “Legal Analysis on Public-Private
Partnerships Regarding Model PPP Rules”. June 2012.
131
Son, S. Legal Analysis on Public-Private Partnerships Regarding Model PPP Rules. Dankook
University, (2012).
132
Supra note 115.
133
Id.
134
Id.
 | 41

In fact, he found that the United Kingdom and Australia have no single

and specific legal and regulatory framework for PPPs.135 But, despite the lack of

such specific framework, these countries are the most successful in terms of

PPP implementation. In Australia, most infrastructure development falls within

the responsibility of State governments that have developed policies and

guidelines on PPP procurement.136 Most States have legislation which is

intended to facilitate delivery of complex projects by centralizing and streamlining

planning approval and land use processes.137

The same goes as well for the United States of America. It has no clear

and comprehensive regulatory framework governing the PPPs, and its use of

PPPs has been largely limited to federally funded projects.138 This is largely

attributed to the United States’ Constitution which imposes limits on the reach of

federal power which preclude the creation of a standardized and centralized

federal system for PPP implementation.139

Lessons from PPP Global Trends

In an assessment conducted by Ernst & Young140 assessing the latest

trends and reforms in Global PPP markets, it found that countries with well-

established PPP programs such as the United Kingdom, Canada, and Australia

135
Son, Supra note 115 at p. 10.
136
Ibid.
137
Id.
138
See Gaffey, D. W. Outsourcing Infrastructure: Expanding the Use of Public-Private
Partnerships in the United States. 39 Pub. Cont. L. J. 351, 352-53 (Winter, 2010).
139
Son, supra note 115, at p. 10.
140
Hereafter, EY.
 | 42

continue to nurture and stimulate their PPP models, thus responding to changing

market conditions through reflection, reform, and innovation.141 In Canada, it

found that its key to success has been unapologetic government support at all

levels, including provided dedicated funding and financial mechanisms,

pioneering standardization and undertaking efficient collaborative

procurement.142 As for the state of global PPP markets, United Kingdom

continues to lead the way in developing privately financed infrastructure

delivery.143 It found that the United Kingdom has a strong framework of

institutional support, guidance material and standard documentation at the local

level as well as the national level.144 As for its assessment with Australia, it found

that the pipeline remains lumpy because of slow project development process

and highly politicized.145

The assessment made by EY expects Asia to be one of the largest

markets for infrastructure development over the next decade, as nations turn to

PPPs to help meet their infrastructure needs and keep pace with rapid growth.146

In Southeast Asia, it found that most countries have relatively immature PPP

markets except for Singapore, South Korea, and Japan.147 This finding opposes

141
Ernst & Young. Public-Private Partnerships And The Global Infrastructure Challenge: How
Ppps Can Help The Governments Close The "Gap" Amid Financial Limitations. (2015), p. 2.
Retrieved from https://goo.gl/JsFq9J on March 2017.
142
Ibid at p. 3.
143
Id at p.15.
144
Id.
145
Id.
146
Supra note 141, at p. 17.
147
Ibid.
 | 43

that of the Economist Intelligence Unit which found Philippines to have a

“developed” PPP market.148

PPP in the ASEAN Region

In a study conducted by the Economic Research Institute for ASEAN and

East Asia149 published in 2014, findings show that there has been an increased

impetus among governments in the region to develop policy, legal, and

institutional frameworks to facilitate PPP.150 Such development lead to removal of

legal impediments to PPP procurement initiated through (i) reform of foreign

investment laws, (ii) amended procurement laws or new PPP enabling

legislation, (iii) development of criteria for use of PPP structure and stipulation of

key concession agreement terms or risk allocation regime, and (iv) development

of updated procurement rules, including requirement for competitive and

transparent tender procedures.151

The study also identified crucial policies for a successful PPP program

implementation, particularly the establishment of a central organization which will

serve as the champion of the national PPP program.152 In this respect,

Philippines, through its PPP Center stood out the most in the region.153 The

148
See Asia-Pacific Infrascope 2014, Supra note 14.
149
Hereafter, “ERIA”.
150
Economic Research Institute for ASEAN and East Asia. National Public–Private Partnership
Frameworks in ASEAN Member Countries. (2015), at p.2. Retrieved from https://goo.gl/Hete3k on
March 2017.
151
Ibid, at p. 3.
152
Ibid, at p. 9.
153
Ibid.
 | 44

central agency for planning and coordinating PPP is also in place in Thailand and

in Malaysia.154

Development of PPP Laws in the Philippines

The Philippines has one of the oldest BOT policies in the Asia-Pacific

Region and has been using its increased capacity and transactional experience

in the recent years to promote capacity-building in emerging PPP markets within

the region.155 In 2014, the Philippines was classified from an emerging country in

2011 to a developed country in terms of PPP readiness.156 It recorded the most

improved regulatory and institutional frameworks and is one of the leading

countries for improved investment climate and financial facilities.157 This can be

attributed to the continuous progression the country has made with each

administration implementing different strategies on how to engage the private

sector in its development efforts.158 “Its legal framework is replete with laws and

regulations that track the evolution of PPPs and how it relates to the political and

economic scenario at that time.”159

In 1986, President Corazon Aquino enacted Proclamation No. 50 in

December 1986, which created the Asset Privatization Trust (APT) and the

154
Id.
155
The Economist Intelligence Unit, Supra note 14.
156
Ibid.
157
Id.
158
Supra note 21.
159
Ibid.
 | 45

Committee on Privatization160 to divest the government of non-performing assets

of the government financial institutions, and certain government-owned or

controlled corporations which have been found unnecessary for the government

to maintain.161 The APT has sold two hundred thirty assets with net proceeds of

Php14.3 billion by early 1991.162

In 1987, the Philippine Constitution was put into place. It defined the role

of the private sector as a valuable partner in achieving the development goals in

the country,163 but no specific law for PPP was passed until three years later. In

1990, the BOT law was passed which brought the participation of the private

sector into the frontline of development efforts.164 The said law was amended in

1994 by President Fidel Ramos, which is currently known as RA 7718 or the

Amended BOT Law and its implementing rules and regulations.165 The

amendment brought significant changes to the old BOT law (RA 6957).

The amendments introduced seven (7) new contractual PPP schemes

from the previous two (2) in the old BOT law. Under the new law, the following

were added: (1) Build-own-and-operate; (2) Build-lease-and-transfer; (3) Build-

transfer-and-operate; (4) Contract-add-an-operate; (5) Develop-operate-and-

transfer; (6) Rehabilitate-operate-and-transfer; and (7) Rehabilitate-own-and-

160
Id.
161
Sec.1, Art.1, Proclamation No. 50, (1986).
162
Presidency of Corazon Aquino. (n.d.) In Wikipedia. Retrieved from https://goo.gl/r6KpxC on
May 2017.
163
Supra note 21.
164
Ibid.
165
Supra note 21.
 | 46

operate.166 With these seven (7) schemes added, the contracting parties could

choose to apply the most appropriate and efficient form of the scheme to an

identified project. The section for priority projects was also significantly altered.167

Unlike the old law, Congress is no longer the approving body for the list of

identified priority projects.168 Under the new law, this task has been delegated to

the executive agencies.169 For a national list of projects costing up to Three

hundred million pesos (P300,000,000.00), it shall be submitted to the Investment

Coordination Committee (ICC) of National Economic and Development Authority

(NEDA) for its approval, and to the NEDA Board for projects costing more than

Three hundred million pesos (P300,000,000.00).170 For the Local Government

Unit (LGU) list of identified projects, the same shall be submitted to either the

municipal, provincial, or city development councils depending on the amount, or

to the ICC of NEDA for those above Two hundred million pesos

(P200,000,000.00).171

One of the most significant additions brought about by the amendment is

the introduction of unsolicited proposals.172 The unsolicited proposal refers to

project proposals submitted by the private sector, not in response to a formal

solicitation or request issued by an Agency or LGU, to undertake infrastructure or

166
Sec.2, BOT Law.
167
Sec.4, BOT Law.
168
Sec. 4, R.A. 6957, An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, and for other Purposes, July 9,
1990, (hereinafter “R.A. 6957”).
169
Sec.4, BOT Law.
170
Sec.4, BOT Law.
171
Sec.4, BOT Law.
172
Sec.4-A, BOT Law.
 | 47

development projects which may be entered into by the Agency or LGU subject

to certain requirements or conditions.173 Under the law and the Implementing

Rules and Regulations, any agency or LGU may accept an Unsolicited Proposal

if these conditions are met: (a) the project involves a new concept or technology

and/or is not part of the List of priority projects; (b) no Direct government

guarantee, subsidy or equity is required; and (3) the Agency or LGU concerned

has invited by publication for three (3) consecutive weeks, in a newspaper of

general circulation, comparative or competitive proposals and no other proposal

is received for a period of sixty (60) working days.174

It is also significant to note that in the previous law, only pre-qualified

bidders were allowed to participate in the bidding process.175 Under the amended

law, however, every prospective project proponent has a chance to take part in

the project bid.176 The amended Sec.5 of the law also highlights the need for a

bidder to meet the financial, technical, and organizational requirements177 in

contrast with the lowest complying bidder sought by the old law.178

The amendments also addressed the situation where there is only one

complying bidder by adding a section for direct negotiation of contracts.179 The

173
Sec. 1.3 (cc), Revised Implementing Rules and Regulations of R.A. 6957 as amended by R.A.
7718, 2012, (hereinafter, “BOT Law- IRR”).
174
Rule 10 (a-c), BOT Law- IRR
175
Sec.5, R.A. 6957
176
Sec.5, BOT Law
177
Sec.5, BOT Law.
178
Sec.5, R.A. 6957.
179
Sec.5-A, BOT Law.
 | 48

same is resorted to when there is only one complying bidder left.180 Lastly, the

amended law expressly provided for investment incentives to the private sector

for projects in excess of One billion pesos (P1,000,000,000.00) as provided by

the Omnibus Investment Code, upon registration with the Board of

Investments.181

As for the implementing and monitoring institutions, it was first

administered by the BOT Center created by the Coordinating Council of the

Philippine Assistance Center (CCPAC) with its chairman as BOT Action

Officer.182 This was later reorganized by President Joseph Estrada’s

administration into the Coordinating Council for Private Sector Participation

(CCPSP).183 This expanded the coverage of the BOT program into other forms of

private sector participation.184 In 2002, during the Arroyo administration, it

converted the CCPSP to the BOT Center under the wings of Department of

Trade and Industry’s (DTI) Industry and Investment Group.185 It transformed PPP

as the cornerstone of the national infrastructure development plan. The BOT

Center was then converted by the Aquino Administration to the establishment of

180
Sec.5-A, BOT Law.
181
Sec. 10, BOT Law.
182
Memorandum Order No. 166, Delineating the Responsibilities of Agencies and Designating the
Chairman of the Coordinating Council for the Philippine Assistance Program (CCAP) as the
Action Officer for the Promotion of Build-Operate-Transfer (BOT) and Related Schemes,
September 14, 1993.
183
Admin Order No. 67, Recognizing the Coordinating Council of the Philippine Assistance
Program and Converting it into the Coordinating Council for Private Sector Participation, May 11,
1999.
184
Supra note 22.
185
E.O. No. 144, Reorganizing and Converting the Coordinating Council for Private Sector
Participation (CCPSP) and its Technical Secretariat to the Build-Operate and Transfer (BOT)
Center, Transferring its Attachment from the Office of the President to the Department of Trade
and Industry and for Other Purposes, November 2, 2002.
 | 49

the PPP Center attached to NEDA.186 This remains to be the current set-up

under the Duterte administration.

As to date, R.A. 7718 and its IRR remain to be the governing law for PPP

in the Philippines, although there are several pending bills pursuing the reform of

the PPP laws in the country to push ahead with infrastructure development.187

The pending bills propose the following: (1) the establishment of government

funds to guarantee the obligations of the Contracting Agency under the PPP
188
contracts; (2) the prohibition on the issuance of temporary restraining orders

or similar orders by courts against PPP projects;189 (3) the extension of the

submission period for competing proposals to an unsolicited proposal;190 (4) the

preferential treatment for projects of national significance;191 and (5) facilitation of

the acquisition of the right of way.192

186
E.O. No. 8, Reorganizing and Renaming the Build-Operate and Transfer (BOT) Center to the
Public-Private Partnership (PPP) Center of the Philippines and Transferring its Attachment from
the Department of Trade and Industry to the National Economic and Development Authority and
for Other Purposes, September 9, 2010.
187
Baker & Mckenzie. PPP Framework in the Philippines and the Latest Trend. ASEAN
Infrafinance Legal Update Vol.2, Tokyo, (February 2015), at p.2.
188
Senate Bill No. 459, An Act Encouraging More Public-Private Partnership (PPP) Projects,
Creating the Public-Private (PPP) Guaranty Fund, and for Other Purposes, Thereby Amending
Republic Act No. 6957, as Amended by Republic Act No. 7718, Otherwise Known as the Build-
Operate-Transfer (BOT) Law, July 4, 2013. Retrieved from https://goo.gl/hh2Gna on June 2017.
189
House Bill 3951, An Act Further Amending Certain Sections of Republic Act No. 6957, as
Amended by Republic Act No. 7718, Entitled “An Act Authorizing the Financing, Construction,
Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other
Purposes”, Appropriating Funds for the Said Purpose, and for Other Purposes, February 18,
2014. Retrieved from https://goo.gl/dMjsCC on June 2017.
190
Ibid.
191
House Bill 2022, An Act Strengthening Public-Private Partnership (PPP) in Infrastructure and
Development Projects, Further Amending for the Purpose Republic Act No. 6957, as Amended,
Otherwise Known as Entitled “An Act Authorizing the Financing, Construction, Operation and
Maintenance of Infrastructure Projects by the Private Sector, July 30, 2013.
192
Senate Bill No. 2447, An Act To Enable Government Infrastructure Projects And Public-Private
Partnership (Ppp) Projects By Amending Republic Act No. 8974, Otherwise Known As An Act To
 | 50

Current Status of PPP in the Philippines

In the recent years since the Aquino administration, Philippines has

continuously worked to achieve a favorable investment climate and a stable

political environment, which give rise to abundant economic opportunities that

have attracted major investors.193 Its basic legal and regulatory framework is the

BOT Law which is currently undergoing Congress deliberations for possible

amendments to expand its coverage, and possibly include Joint - Venture

Agreements as an additional form of PPP scheme.194 The proposed amendment

also seeks to implement tax exemptions for PPP participants concerning projects

of national significance.195 These developments are aimed to meet the country’s

objectives of fostering the Philippine economy by promoting private sector

participation.

However, several problems and areas of concern are very apparent in the

Philippine PPP system. In a review by Gilberto Llanto of the BOT for

Infrastructure Development in the Philippines,196 BOT contracts are oftentimes

incomplete.197 According to Llanto, infrastructure investments are long-term

contracts involving the production and operation of long-lived assets financed by

Facilitate The Acquisition Of Right-Of-Way, Sites, Or Location For National Government

Infrastructure, Appropriating Funds Therefor, And For Other Purposes, November 18, 2014.
193
Id, at p. 44.
194
Business World. House Completion of BOT Law Amendments Seen in June. (2015). Retrieved
from https://goo.gl/RSWBMf on March 2017.
195
Ibid.
196
Llanto, G. M. A Review of Build-Operate Transfer for Infrastructure Development. Philippine
Institute for Development Studies. (2010), at p. 7.
197
Ibid.