THE government faces another international arbitration
claim, this time stemming from
the delayed implementation of
fare adjustments for the Light
Rail Transit Line 1 (LRT-1).
Analysts said investors
might sour on public-private
partnership (PPP) projects in the
Philippines after seeing the government fail to implement the
automatic fare adjustment under the contract entered by Light
Rail Manila Corp. (LRMC).
This shows that the government “doesn’t play fairly,”
transport expert Rene S. Santiago said.
“Message to investors is
don’t get enmeshed with PPP
(projects) of the Philippines,”
Terry L. Ridon, convenor
of public policy thinktank Infrawatch PH, said that automatic
fare adjustment was one of the
features of PPP projects under
the Aquino administration.
“While this has been met
with resistance by the public, it
has been included as a PPP feature to entice the private sector to
invest in public services.”
Ridon also noted that while
this favors the public, it affects
the PPP entity’s financial projections since investments in
public services were under the
premise that they can implement fare increases.
LRMC, the private operator of LRT-1, seeks to recover
P2.67 billion in compensation
claims and costs resulting from
delays in the fare adjustments
for 2016, 2018, and 2020, Metro Pacific Investments Corp.
(MPIC) said in a May 6 disclosure to the stock exchange.
Ridon said the government
should “renegotiate automatic
fare increase provisions with
its PPP partners and determine
whether it is a provision that
can truly implement instead of
subjecting contracts to arbitration, in order to guide the private sector on how to proceed
with PPPs in the future.”
“But we nonetheless maintain that there should be no automatic fare increases in public
services and utilities, and all
increases should be subject to
public consultation and government approvals.”
Sonny A. Africa, executive
director of think tank Ibon Foundation, said that arbitration cases
are an intrinsic risk whenever the
government privatizes public utilities and goes into big-ticket partnerships with private investors.
The alternative to PPP, Mr.
Africa said, is public financing
through government bonds and
“progressive taxation,” which is
“cheaper than relying on private
financing for for-profit operations.” BUSINESS WORLD