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ECONOMIC AND FINANCIAL ANALYSIS

A MUST IN PUBLIC PRIVATE PARTNERSHIP


The Philippines, as one of the emerging developing country, is fully cognizant
that Public Private Partnership (PPP) is vital and crucial in the countrys infrastructure
development thrust.
In fact, Philippines has gained the confidence of global investors and is ranked as
the third most preferred market in the world. The steady, safe and secure environment
coupled with strong political will and bolstered by the influx of tourism in the country are
plus factors for the rise in PPP.
The Philippines has commenced its PPP projects sometime in 2012 such as LRT
Line 1 South Extension and Operation and Maintenance, LRT Line 2 East Extension and
Operation and Maintenance, Operation and Maintenance of the Laguindangan Airport
and New Bohol (Panglao) Airport Development, to name a few.
The World Bank sometime in September 2016 in its report entitled
Benchmarking Public-Private Partnership Procure 2017 gave the Philippine PublicPrivate (PPP) Partnership Programs high scores in preparation and procurement of PPPs.
In detail, the report scores given by the World Bank is 96% in preparation of PPPs, 85%
in procurement of PPPs, 84% in contract management.

Now under the helm of leadership of President Rodrigo Roa Duterte, who hails
from Davao City, his strong policy on his wage against drugs and corruption, the
Philippines, is once again in the center of attention of the financial world.
Davao City, in particular, has been catapulted in the center of all activities and the
attention of the world, as the then Mayor of Davao City for more than twenty years and
now the President still continues to be active in its infrastructure development.
Davao City has planned a P 40-billion project dubbed as Davao Coastline and
Port Development Project, covering 200 hectare reclamation and port project to be
undertaken within the next three years in private partnership with Mega Harbour Port and
Development, Inc. The project will reclaim four islands with each island functioning first
as a modern port, second as a central business district and shopping center, the third as a
tourist and residential area and the fourth to be developed as a town.
In the advent of such a huge project coupled with the involvement of billions of
peso, this PPP could learn from the Koreas method of doing economic analysis of
projects. Koreas experience taught them that a project with good monitoring/evaluation
will have better chances for becoming a success rated project. A project with poor or no
economic analysis ends up as a poor project (WB 1996). The way Korea takes serious
consideration of doing an economic analysis in addition to the financial analysis ahas
ensured the success of the PPP projects in Korea.

The project is yet to commence but it seems that there are some sectors of society
that have not been consulted and is asking for a comprehensive consultation as the very
people that would be affected by the project were allegedly not consulted.
Davao City could learn a lot from Koreas PPP experience. The following
recommendations are pointed out:
1. Davao City should focus on the appraisal stage of the project cycle as this is
crucial before the approval and implementation of the project as this would be the stage
where the viability of the project is ascertained and this would aid in the decision-making
on approval of the investment. All stakeholders and interest groups should definitely be
given a comprehensive consultation;
2. An economic analysis of the development project as shared in the PPP lecture
should be undertaken in addition to the usual financial analysis. This would create a
balance between the interest of the proponent (financial analysis) of the project whose
focus would be basically on maximizing its profit and the projects net benefit from the
national economys point of view as well as the local;
3. Davao City should likewise learn the use of shadow prices which would
maximize and redound to the national welfare.

Prepared by:
AMELIA C. BIBERA