THE Transportation department is limiting the role of the private sector in big-ticket infrastructure projects to avoid questionable government guarantees.

Transportation Secretary Mar Roxas said the policy of the Aquino administration is to provide the public with affordable means of transportation and to do away with government guarantee “as previous administrations did in MRT [Metro Rail Transit]. They had to guarantee ridership and returns regardless of what would actually happen,” he said.

The Department of Transportation and Communications (DOTC), is now working on “reconfiguring the financing” of all projects under the department.

The reconfiguration would involve foreign funding from international donors through the official development assistance (ODA). The ODA loans would benefit the consumers, he said, since there is no rush in recovering costs. 

“It [ODA funding] is a cheaper yet effective option because of the sovereignty of the partnership since the governments of foreign donors are involved,” Roxas said.

Among the infrastructure projects that will be funded using the ODA include the 11.7-kilometer (km) railway project that will expand the length of Light Rail Transit (LRT)-1 from to Baclaran to Bacoor, Cavite, and the development of new airports in Misamis Oriental, Bohol and Puerto Princesa.

These priority projects are being initiated using the private-public partnership scheme.

The LRT line 2 extension to Masinag in Antipolo; the Laguindingan airport; and additional low-cost terminal in Cebu will also be funded through ODA, he said.

Roxas said the government is contemplating to seek ODA funding to finance the construction of such projects that are under the DOTC so the government can take advantage of the long-term and low-interest capital made available to the government. 

But, he said, they would still have to bid out to the private sector the contract for the construction.

“As originally conceived, several of these projects could have been concession agreements with the private sector. We have reconfigured the projects so that the infrastructure, the building of the railway line, for example, will be done by the government through bidding it to the private sector. But the government will avail of, for example, 1-percent, 30-year money that is in ODA,” said Roxas.

He cited the ODAs from Korea, Japan and China for the LRT extension to Cavite.

Korea and Japan are also interested in the LRT line 2 project.

With the hybrid PPP model, foreign donors can come in and fund heavy infrastructure projects, such as airport and railroad developments, while counterpart funding will be provided by a private sector consortium once operations of these new airports and trains commence, Roxas explained.

Noting the private sectors’ expertise in operating and maintaining (O&M) infrastructure projects, Roxas said the DOTC would subsequently privatize the O&M aspect.

“In short, the area where the private sector is good which is in operations, maintenance, disciplines, timetables and so and so forth, we will avail of that by having them operate it through the concession agreements,” said Roxas.

“In this way, the government knows exactly what it will pay and what it is going to get for the resources, and the private sector then bears the market risks for undertaking the O&M,” added Roxas.

For LRT line 1 extension, for instance, Roxas said the DOTC would implement a revenue-operation and maintenance scheme.

“They will collect the fare. If they perform well, if they maintain the system well, then they will be given incentives.”

For MRT line 3, his department has acknowledged that the railway system is already owned by a private entity, which is the Metro Rail Transit Corp. (MRTC). However, there is a dispute on who controls MRTC.

“So for now, it is more prudent to bid out for privatization only the maintenance [aspect],” said Roxas.

The Laguindingan airport in Misamis Oriental, he added, will be auctioned next year.

For the Puerto Princesa airport, Roxas said the terminal would be bid out later this year, while construction of runway and the likes will be open for bidding early next year.

“The projects will have to go through detailed engineering and financial closure and that always takes time. I have reconfigured the financial structure so that the feasibility study in relation to financial structure is more coherent. The biddings for the detailed engineering may happen earlier. What we are trying to do in reconfiguring is to put the market risks to the private sector. The execution risks, meaning the building of the infrastructure with the low-cost money, will be on the low-cost side,” he said.