(Ppp) Infrastructure Development Projects in the Republic of the Philippines
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JAPAN INTERNATIONAL COOPERATION AGENCY (JICA) NATIONAL ECONOMIC DEVELOPMENT AUTHORITY (NEDA) DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH) PREPARATORY SURVEY FOR PUBLIC-PRIVATE PARTNERSHIP (PPP) INFRASTRUCTURE DEVELOPMENT PROJECTS IN THE REPUBLIC OF THE PHILIPPINES FINAL REPORT MAIN TEXT DECEMBER 2010 CTI ENGINEERING INTERNATIONAL CO., LTD. MITSUBISHI RESEARCH INSTITUTE, INC. EXCHANGE RATE May 2010 1 PhP = 1.97 Japan Yen 1 US$ = 46.21 Philippine Peso 1 US$ = 90.85 Japan Yen Central Bank of the Philippines LOCATION MAP OF THE STUDY AREA MAIN TEXT TABLE OF CONTENTS List of Tables List of Figures Acronyms and Abbreviations Page CHAPTER 1 INTRODUCTION 1.1 BACKGROUND OF THE STUDY …………………………………………………….. 1-1 1.2 OBJECTIVE OF THE STUDY ……………………………………………………….... 1-1 1.3 STUDY AREA ……………………………………………………..…………………….. 1-2 1.4 SCOPE OF THE STUDY ……………………………………………………………….. 1-2 1.5 SCHEDULE OF THE STUDY………………………………………………………….. 1-2 1.6 ORGANIZATION TO CARRY OUT THE STUDY ……………….............................. 1-4 1.7 FINAL REPORT ORGANIZATION……………………………………………………. 1-5 1.8 MEETINGS …………………………………………...…………………………………… 1-5 CHAPTER 2 PRESENT CONDITION OF TRANSPORT SECTOR 2.1 SOCIO-ECONOMIC CONDITION OF THE COUNTRY….……………………………. 2-1 2.1.1 Overview of the Macroscopic Economic Condition.……………………………. 2-1 2.1.2 Overview of the National Government Budget ……………………………….. 2-5 2.2 REVIEW OF DEVELOPMENT PLANS……………….…………………………………. 2-9 2.2.1 Developing a Methodology and Framework for National Transport Policy and Planning (NTPP)………………………………………………………………… 2-9 2.2.2 Formulating a National Transport Plan……..…………………………………… 2-14 2.2.3 The Study of Masterplan on High Standard Highway Network Development in the Republic of the Philippines………………….…………………………….… 2-20 2.2.4 DPWH’s Draft Medium Term Public Investment Program ………………….… 2-27 2.3 ROAD SUB-SECTOR………………………………………………………...………….... 2-34 2.3.1 DPWH Budget ………………………………………………………………… 2-34 2.3.2 DPWH Organization …..……………………………………………………… 2-34 2.3.3 National Road Network ……………………….…………………………….… 2-48 2.3.4 Nautical Highway Network System and Asian Highway…..…………………… 2-50 2.3.5 Road Transport Problems…………………...…………………………………… 2-53 2.3.6 Road Network Development Goals, Policies and Strategies………………….… 2-53 2.3.7 Proposed Road Projects ……………………………………………………..… 2-54 2.4 OTHER TRANSPORT SUB-SECTOR…….………………………………...………….... 2-55 2.4.1 DOTC and Attached Agencies’ Budget………………………………………… 2-55 2.4.2 Organization of DOTC and its Attached Agencies……………………………… 2-55 2.4.3 Rail Transport Sub-sector………….…………….…………………………….… 2-70 2.4.4 Sea Transport Sub-sector…..………………………………………….………… 2-78 2.4.5 Air Transport Sub-sector.…………………...…………………………………… 2-88 CHAPTER 3 REVIEW OF PAST AND CURRENT PPP PROJECTS 3.1 ROAD TRANSPORT SUB-SECTOR……………………………...……………….……... 3-1 3.1.1 Brief History of PPP Projects…………..................................…………………... 3-2 3.2 RAIL TRANSPORT SUB-SECTOR …………….……………………………………….. 3-12 3.2.1 Brief History of PPP Projects……………………………………………………. 3-13 3.2.2 Past and On-going Railway PPP Projects………………………………….……. 3-13 3.3 SEA TRANSPORT SUB-SECTOR ……………………………………….………….….... 3-15 3.4 AIR TRANSPORT SUB-SECTOR ……………………………………….………….….... 3-15 3.4.1 Brief History of PPP Projects..…………………………………………………... 3-15 3.4.2 Past and On-going Air Transport PPP Projects .………………………………… 3-16 3.5 LESSONS FROM OTHER COUNTRIES ……………………………….………….….... 3-18 3.5.1 Malaysia …………………..…………………………………………………... 3-18 3.5.2 Thailand ……………...………………………………………..……………… 3-34 3.6 DONOR’S PLAN TO SUPPORT PPP PROJECTS..……………..……….………….….... 3-38 3.6.1 The World Bank (WB) ……..…………………….……………………………... 3-38 3.6.2 Asian Development Bank (ADB) ……………………………..……………… 3-39 CHAPTER 4 LEGAL AND INSTITUTIONAL FRAMEWORK 4.1 LEGAL FRAMEWORK FOR PPP PROJECTS………………………………………..... 4-1 4.1.1 Laws and Regulations for Toll Road Development……………………………... 4-1 4.2 INSTITUTIONAL STRUCTURE ON TOLL ROAD DEVELOPMENT……………….... 4-6 4.3 BIDDING PROCESS UNDER RA 7718…………………………………………………. 4-16 4.4 TRANSPORT RELATED LAWS AND REGULATIONS ………………………………. 4-19 4.5 DIRECTION OF AMENDMENT OF IRR OF BOT LAW AND OTHER LAWS ………. 4-23 4.5.1 IRR of BOT Law ………………………….…………………………………….. 4-23 4.5.2 RA 7718 and EO 423 (2005) …………………………………………………. 4-25 4.5.3 Creation of PPP Law …………………………………………..………………... 4-25 CHAPTER 5 PPP PROJECT CYCLE AND BOTTLENECKS IN EACH CYCLE 5.1 PPP PROJECT CYCLE…………………………………………………………………... 5-1 5.2 IDENTIFICATION OF BOTTLENECKS AND RECOMMENDATIONS …………….... 5-1 5.3 ISSUES ON LEGAL FRAMEWORK ……………………………………………………. 5-14 5.4 ISSUES ON INSTITUTIONAL FRAMEWORK …….………….……………………….. 5-14 5.5 PPP FUND CREATION……………..…….…………………………………………..….. 5-14 5.6 DEVELOPMENT OF VARIOUS STANDARDS AND MANUALS…..…….………….. 5-14 CHAPTER 6 ROW ACQUISITION 6.1 GENERAL ROW ACQUISITION PROCEDURE …………..…….…………………….. 6-1 6.2 DETAILED WORK FLOW OF NEGOTIATION AND EXPROPRIATION …………… 6-9 CHAPTER 7 PROJECT SCREENING AND SELECTION OF PPP PROJECTS 7.1 OBJECTIVE OF THIS ACTIVITY……………………………………………………….. 7-1 7.2 PROJECT IDENTIFICATION, SCREENING AND SELECTION PROCEDURE……… 7-1 7.3 IDENTIFICATION AND LISTING CANDIDATE PROJECTS….……………………… 7-3 7.4 PRE-SCREENING OF CANDIDATE PROJECTS…………….……………………….… 7-5 7.5 FIRST SCREENING ………………………………………………………………….… 7-7 7.5.1 Prioritization Method Adopted by HSH Master Plan …………………………... 7-8 7.5.2 Priority of Projects………………………………………………………………. 7-16 7.5.3 Evaluation of Project Priority………………………….………………………... 7-19 7.5.4 Selection of Projects for Second Screening……………………………………... 7-21 7.6 PRELIMINARY STUDY AND OUTLINE OF SELECTED 10 PROJECTS……….….… 7-21 7.6.1 Alignment of Each Project ………………………………………….…………... 7-21 7.6.2 Project Cost Estimate……………………………………………………………. 7-22 7.6.3 Traffic Demand Forecast and Revenue Estimate……...…………….…………... 7-25 7.6.4 Economic Analysis and Evaluation ……….…………………………………... 7-26 7.6.5 Outline of Each Project………………..…….…………………………………... 7-28 7.7 PRE-BUSINESS CASE STUDY OF SELECTED 10 PROJECTS…………….……….… 7-38 7.8 SECOND SCREENING …………………………………………...………….……….… 7-38 7.8.1 Objectives of the Second Screening …………………………..………………... 7-38 7.8.2 Prioritization Criteria for PPP Projects of Previous Study ……………………. 7-39 7.8.3 Data Necessary to Evaluate Project Priority in the Second Screening………….. 7-46 7.8.4 Project Priority in the Second Screening ………………………….…………... 7-46 7.8.5 Selection of Projects for ODA Funding…………………….……….…………... 7-48 CHAPTER 8 PPP MODALITY AND ITS APPLICATION 8.1 DEFINITION AND OBJECTIVES OF PPP………………………………………………. 8-1 8.1.1 Definition of PPP…………….…….……………………………………………. 8-1 8.1.2 Objectives of PPP………………….…………………………………………….. 8-1 8.1.3 PPP Modalities…………………….…………………………………………..… 8-2 8.2 PPP MODALITIES………………………………………………………………………… 8-3 8.2.1 Basic Types of PPP Modality……………………………………………………. 8-3 8.2.2 Variation of Basic Types of PPP Modality……………………….……………... 8-4 8.3 APPLICABLE CONDITIONS OF BASIC TYPES OF PPP MODALITY..………… 8-5 8.3.1 Applicability of Basic Types of PPP Modality from the Viewpoint of Profitability…………………………………………………………………….... 8-5 8.3.2 General Indication of Applicability of PPP Modality………....………………… 8-12 8.3.3 Applicable Conditions of Each Type of PPP Modality………………………….. 8-13 8.4 RISKS, RISKS MANAGEMENT AND RISK ALLOCATION..…………………………. 8-14 8.4.1 Risk Identification…..……….…….……………………………………………. 8-14 8.4.2 Risk Assessment………………….…………………………………………….. 8-19 8.4.3 Risk Allocation…………………….…………………………………………..… 8-19 8.4.4 Risk Management………………….…………………………………………..… 8-20 8.5 PRE-BUSINESS CASE STUDY …………………………….....…………………………. 8-25 8.5.1 Procedure of Pre-Business Case Study…………………………………………. 8-25 8.5.2 PPP Schemes Studied for Each Project………………………………………….. 8-26 8.5.3 Results of Financial Analysis …….…………………………………………..… 8-38 8.5.4 Sensitivity Analysis …….………................…………………………………..… 8-52 8.5.5 Referential Data ….………................………………......…………………..… 8-68 8.6 SELECTION OF TYPE OF PPP MODALITY FOR 10 PROJECTS ……………………. 8-79 8.6.1 Criteria for Selection of PPP Modality of Each Project …………...……………. 8-79 8.6.2 PPP Modality Selected for Each Project ….....………………………………….. 8-79 8.7 PPP PROJECT FINANCING ……………………………………………………………. 8-89 8.7.1 ADB’s Financing Facilities for Private Sector …………...……………………. 8-89 8.7.2 IFC (International Finance Corporation of World Bank Group) ……………….. 8-95 8.7.3 Domestic Bank’s Loan (in the case of Development Bank of the Philippines) ……………..............….. 8-99 8.7.4 Case Study Concerning on Other PPP Projects of Transport Sector ………….. 8-101 8.7.5 Other Example Cases of Revenue Guarantee Scheme ……......................…….. 8-103 CHAPTER 9 APPLICABILITY OF JAPAN’S ODA TO PPP PROJECTS 9.1 JAPAN’S ODA FACILITIES…………………………………..………..………………… 9-1 9.1.1 General Conditions….……….…….……………………………………………. 9-1 9.1.2 Types of Facilities……………….………………………………………………. 9-1 9.2 APPLICABILITY OF JAPAN’S ODA TO EACH TYPE OF PPP MODALITY………… 9-3 9.3 STUDY ON CREATION OF PPP FUND……………………..………..………………… 9-5 9.3.1 Needs of PPP Projects……….…….……………………….……………………. 9-5 9.3.2 Types of PPP Fund…..………….………………………….……………………. 9-6 9.3.3 Existing and Proposed PPP Fund……..…………………………………………. 9-6 9.3.4 Project Development Facility (PDF) ……………………………………………. 9-6 9.3.5 PPP Fund to Finance Government Expenditure During Project 9-11 Implementation.…………. .…………. .…………. .…………. .…………. .… 9.3.6 PPP Fund to Finance Private Sector Expenditure During Project 9-13 Implementation ………………….……….……….……….……….……….… 9.3.7 Examples of Infrastructure Fund of Other Country ………………………….…. 9-16 CHAPTER 10 ROAD MAP FOR PROMOTION OF PPP PROJECTS 10.1 ROADMAP FOR PROMOTION OF PPP PROJECTS…………………………………… 10-1 10.2 PPP PROJECT IMPLEMENTATION