The Regulatory Framework in the Philippines Regarding Public-Private Partnerships
One of the most striking aspects of current Philippine policy is the speed at which the internal regulatory framework is evolving. This process affects, among other areas, the role of the private sector in the economy, which is widely recognized in public-private partnership (PPP) frameworks for the provision and management of all types of infrastructure, works, and public services. A recent example of this is Law No. 11966, enacted on December 5, 2023, which approves the Public-Private Partnership (PPP) Code of the Philippines, effective from December 23 of the same month; and another, even more recent, is the implementing rules and regulations of this Law (IRR of the PPP Code), dated March 23, 2024, coming into force on April 6 of that same year.
In this context, the private sector is strengthened in two ways: first, by what is stated in the Law itself (PPP Code), which expresses that “the State assumes the indispensable role of the private sector, promotes private enterprise, and offers incentives for necessary investments,” adding that “the State will ensure that an open, fair, transparent, and competitive selection process is the central element that guarantees private investment in PPP projects,” through “a comprehensive public information policy regarding all transactions involving public interest.” Second, through its regulations (IRR of the PPP Code), reiterating in similar terms what is established by the Law in Article 2 and thereby expanding the role of this sector from a conventional focus on development support to a more inclusive and complex public-private collaboration.
The scope of public-private partnership, as extensively described in Article 4, covers all contractual agreements entered into between public agencies and private partners aimed at financing, designing, constructing, operating, and/or maintaining infrastructure or projects and services traditionally provided by the public sector. However, it specifically excludes, among other exceptions, those of a commercial nature that do not include public infrastructure or development services, which will be governed by their own regulations. It also covers contractual agreements (“Joint Ventures,” JVs), whether solicited or not, in which public and private partners contribute various types of resources, including capital, services or assets, and even equipment, land or intellectual property, to jointly undertake activities related to a public sector infrastructure or project.
It is interesting to note that Articles 4 (“Coverage”) and 3 (“Definitions”) (r) (“JVs”) seem to limit public-private collaboration to contractual arrangements. However, later on, Article 11 extends this possibility—previously not contemplated in those articles—by expressly including corporate agreements (“by creating a JV company”), in which case the equity contribution, including assets, properties or rights, must not exceed 50% of the company’s capital and will be subject to third-party valuation. The establishment of such companies will not exclude the formation of other similar companies as long as they do not compete with the former for the same product or in the same geographic area.
Incentives and Investment Recovery as Key Elements of Public-Private Partnership
The PPP Code regulates two key elements of this public-private collaboration in Articles 17 and 18: incentives and investment recovery plans. In the first case, while it does not specify them, it anticipates that projects carried out within the framework of the PPP Code will be entitled to “various incentives,” according to prevailing regulations and policies. In the second case, after acknowledging that the partner can recover investments and obtain “a reasonable profit,” it clarifies the systems through which such recovery can be accessed: either through the collection and collection of tolls, fees, rates, rents, and similar charges (“Revenue-Based Scheme”) or through predetermined payments made by the executing agency (“Availability-Based Scheme”).
Examples of Business Opportunities for the Private Sector
What has been presented here is a brief summary of the regulatory framework on this matter. This summary could also cover the public agencies responsible for its implementation—from the PPP Center to the PPP Governing Body, through the Project Development and Monitoring Facility or Alternative Dispute Resolution mechanisms—but what has been said so far may suffice for an initial approach. In any case, to conclude, among other business opportunities, those related to specific areas can be mentioned, such as infrastructure, water supply and solid waste treatment, energy (thermal and hydroelectric power plants), light rail or metro systems, education, forestry or health.
Antonio Viñal
Lawyer
AVCO Legal
madrid@avco.legal
