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1 July 2014
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Feeling the heat

The Philippines continues to tender ever-bigger PPP projects, but is it in danger of overheating the market?
In June, it was reported that Philippines PPP contractor Ayala still has appetite to bid for more projects.

While this might read as ‘Construction company still wants construction contracts’, the reason the story made the news is because there are growing concerns that the company – as well as others in the country – will simply not have the capacity to bid for (let alone win and then deliver) all the projects being put out to tender by the Philippines government.

A quick look at the winners and shortlisted bidders for the Philippines projects currently being bid out or already signed clearly highlights the potential problem. There are few international companies involved and bids are dominated by the same names, such as Ayala, Metro Pacific and Megawide. Most concerning of all in this is the fact that these firms do not have any experience of PPPs other than those Philippines contracts they are currently bidding.

For its part, the country’s PPP Centre is keen to bring international players to the table, but so far its success has been limited. Officials remain committed to opening up the country for international investment and recognise that a failure to bring in new players will likely see its ambitious infrastructure plans stall.

So why has the centre so far failed to bring in the types of investors that could really invigorate the market? After all, its geographical location is well positioned given its relative proximity to Australia, one of the most mature PPP markets anywhere in the world. And there are plenty of people in Australia who will tell you that they are closely monitoring the Philippines, without putting too much money in that direction.

One problem, of course, has been the continued delays in bid submission deadlines, which may have hit confidence in the market. While the PPP Centre argues that the moves have been necessary to ensure they’re getting the best bids and highest level of competition, others may view it as a sign of uncertainty and perhaps even instability.

Clearly, the recent announcements of new plans – including the massive $2bn Laguna Lakeshore Expressway Dike project – means that those bidding on these projects will make interesting reading. Particularly at a time when Australia has just renewed its own PPP pipeline, announcing a large swathe of new infrastructure projects that will no doubt keep plenty of its local contractors busy for a long time to come. The danger is that the Philippines has missed its opportunity here, as eyes turn back towards Australia.

For all its progress in PPPs, the Philippines must now step up a level and many of the latest round of projects will provide the country’s litmus test.

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