Enhancing BOT Law and Implementation for Infrastructure Development

Gilberto M. LlantoPhilippine Institute for Development Studies

April 11, 2007

G.M. LLANTO: Enhancing BOT Law and Implementation

Objective

Infrastructure development through an enhancement of the BOT law and its implementation

G.M. LLANTO: Enhancing BOT Law and Implementation

Rationale for BOT

Pricing through user charges of the service

User, instead of taxpayer, pays for infrastructure

An alternative mode for infrastructure development, especially in difficult fiscal situations

G.M. LLANTO: Enhancing BOT Law and Implementation

BOT Institutional Arrangement

Government is the project granting authority (implementing agencies and oversight body such as the ICC).

Private sector finances, constructs and operates the project.

G.M. LLANTO: Enhancing BOT Law and Implementation

Areas of Concern

Projects are delayed and contracts are even voided.

Inefficient implementation and monitoring.

Contracting issues, e.g., guarantees and performance undertakings, setting user charges and approval by regulatory bodies, judicial risks, etc.

G.M. LLANTO: Enhancing BOT Law and Implementation

Proposed solution: Amend IRR Amend the IRR of the BOT Law (RA 6957, as

amended by RA 7718). IRR amendments done 1998 and 2006.

1998: clarified procurement requirements and procedures for competitive bidding and the Swiss challenge process

2006: fast-track BOT approvals by prescribing a single pass project review procedure.

G.M. LLANTO: Enhancing BOT Law and Implementation

Most recent (2007) proposal to amend IRR: (a) remove power of ICC to review and approve BOT projects and contracts and (b) shorten the processing time for BOT projects.

Implementing agencies- review and approve projects, including unsolicited proposals.

ICC- review and approve list of priority projects submitted by implementing agencies

G.M. LLANTO: Enhancing BOT Law and Implementation

Proposed solution: Amend BOT Law

Salceda bill

G.M. LLANTO: Enhancing BOT Law and Implementation

Proposed solution: Executive Action

Project Quality at Entry Delays due to inadequate technical,

financial and legal expertise at the implementing agency; and

Limited information about requirements of oversight agencies

G.M. LLANTO: Enhancing BOT Law and Implementation

For least-cost purchase, simply follow the rule: stick to transparent competitive bidding.

To maintain investor interest, show credible commitment to property and contract rights.

For project quality at entry, make the implementing agencies responsible and accountable but raise legal, technical and financial capacity.

G.M. LLANTO: Enhancing BOT Law and Implementation

For efficient implementation, maintain ICC oversight function for third party check on consistency with policies on investment, fiscal incentives and procurement. Streamline ICC membership; maintain professional staff support.

G.M. LLANTO: Enhancing BOT Law and Implementation

Thank You!