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Salceda says Congress to ratify PPP Code; House introduces “innovations” to boost green projects, ODAs, and returns of PPP projects to government

September 27th, 2023

House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that he proposed amendments to the Public-Private Partnership Law which he says the Congress will likely ratify “later today.” The amendments Salceda introduced include provisions to encourage green financing, allowing commercial involvement in Official Development Assistance for PPP projects, and boosting the returns of government in PPP projects by allowing internal rate of return as a basis for bidding and negotiation of PPP projects.

“I proposed several amendments to my colleagues and counterparts, all of which were accepted in some form. But the major ones are these three,” Salceda said. The House tax chief was also the Chair of the Technical Working Group that drafted the House version of the law.

“With my amendment, for example, the Code explicitly allows projects involving green growth, low-carbon, carbon avoidance and sustainable development, and the use of alternative assets such as carbon credits, such as those pursuant to Article VI of the Paris Agreement, or ecosystem services. This opens the door to PPPs involving the generation and trading of carbon credits and other innovative climate finance mechanisms.”

“We have a lot of potential in the market for carbon credits, because we are a low per-capita emissions country with moral ascendancy and experience in disaster risk reduction and climate change adaptation and mitigation. Last December 2022, [DENR] Secretary Toni Yulo said that they need an enabling law to establish a carbon credits market in the Philippines. With this, you can already create that market through PPPs. I expect unsolicited bids from RE companies first, who are tax-exempt on the sale of their carbon credits. They stand to benefit the most,” Salceda said.

Salceda adds that he introduced amendments that will allow more Official Development Assistance to finance PPPs.

The Salceda amendment clarifies that ODAs, when used to finance PPPs, are executive agreements and therefore do not require treaty approval. The amendment also allows “blended finance” or the participation of the private sector on the side of the financing country, in the use of ODAs for PPP projects.

“This is already standard practice among European countries that finance ODAs. The proposal will help diversify the ODA portfolio. Japan dominates our ODA sources, but France comes at a distant second, and is willing to do more if we can make these amendments.”

“As things stand, blended finance is already the way most EU countries do ODA. These countries come with expertise in highly specialized areas, such as energy, that we critically need.”

Salceda also introduced a provision allowing a maximum rate of return for private PPP partners as a bidding parameter or a negotiation term in crafting PPPs.

“Anything in excess is remitted to the National Treasury, like San Miguel Aerocity’s franchise, which allows a 12% internal rate of return. The Public Service Act amendments also provide for this.”

Salceda also brought up additional amendments, such as allowing local water districts in PPPs to combine to maximize efficiency and reduce consumer bills.

The proposal also allows all government agencies and instrumentalities to undertake PPPs.

Salceda also pushed to elevate the PPP Law into a Code “so that future amendments will be made to the Code instead of in a scattered way. We need one common set of rules to strengthen investor certainty and confidence.”

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