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Privatization, involving the sale or lease of government assets power companies, banks, water companies etc. and in the

infrastructure sector, can be achieved through various means in apublic/private partnership. These can be-

� Joint Venture: If the government wants to participate as an equity

holder or investor in a financially viable project that would give a

good return.Own Conceive Design Build Operation and

maintenanceFinancialResponsibility

�Built-Operate-

Transfer( BOT)

Public Public Private by fee contract Public

�Built-Own-Operate (BOO)

Private Public or

PrivatePrivate by contract (concession)



There are many reasons why countries choose aspecific program for Privatization:-

� It may be because a country wants to takeadvantage of the private sectors efficiency and tosave money in implementing infrastructure projects.

�

It may be out of a budgetary concern or part of aneconomic development program.

� Or perhaps privatization is seen as a global trend andtherefore the in thing to do at that time.



Privatization in the Philippines has taken place in three waves:-

The firstwaveThe first wave started in 1986-1987 during a time of great political

change in the country and involved the disposition of non-performing assets owned by the Government.

The second waveThe second wave started in 1990 with the power sector and thesuccess experienced there was then replicated through anexpanded BOT law in other areas of infrastructure, such as roads,airports, seaports, water, and even information technology.

The thirdwaveThis is the Philippines present stage and involves services such ashousing, health, postal services, and pension funds.



In the early 1990s, the Government of the Philippines found itself facing a predicament of declining financial resources andabsorptive capacity vis-à-vis the rising demand for more and moreinfrastructure services and facilities.

And true to the dictum that necessity is the father of invention, it was because of rising needs that the Government ventured intoan innovative approach of tapping private sector resources inbridging the infrastructure gap in the country.

Subsequently in 1991, Republic Act No. 6957, otherwise known as

the Build-Operate-Transfer (BOT) Law, was enacted. Twoprojects were implemented under this law:The Light Rail Transit (LRT) Line 3, an overhead railroad along akey route, EDSA; and a public market in Mandaluyong City, inthe north of Manila.



� BOT law is a Contractual arrangement between thegovernment and the private sector whereby the

latter finances, constructs and in some casesoperates and maintains a facility or project .

� The private sector is allowed to charge user fees to

recover its investments.

� Both government and private sector share projectrisks .



Three years after it was passed, Congress introducedamendments to the BOT Law through Republic Act No.7718 (the Amended BOT Law).

An Act Amending Certain Sections of RA 6957, Entitled AnAct Authorizing the Financing, Construction,Operation andMaintenance of Infrastructure Projects by the Private Sector,and forOther Purposes.

Declaration of P

olicy� Recognition of private sectors role in development� Provision of incentives to mobilize private resources

� Climate of minimum government intervention

� Specific GOP undertakings to support private sector



The original BOT law was amended to make it more flexible, allowing nine types of scheme not only BOT including bill transfer, bill lease transfer, and BOO.

A new provision was included called the Unsolicited Proposal, which allows privatesector initiatives to propose projects to the Government, but subject to certainConditions:-

UnsolicitedProposals from the private sector must not require direct governmentequity, meaning the Government will not be a part of the project company that willfinance the project;

theGovernmentwill not provide a direct guarantee, meaning the Government willnot repay loans incurred by the private sector; and

theGovernmentwill not provide direct subsidy and will not be the source of revenue, so projects initiated by the private sector should be already financiallyviable.However, the Government will give support to make the project financially viable byproviding credit enhancements. These could be incentives provided by the Board of Investments, such as income tax holidays for six years, or imposing duties as low as 3percent on importation of capital equipment. This law allows a 50-year concessionperiod.



Solicited Proposal Unsolicited Proposal

1. wherein the private sector is allowedto submit BOT project proposals

to the implementing agencies.

1. Wherein the implementing agencyprepares the feasibility study and

other appurtenant documents andsolicits bids from prospectiveproponents.

2. The resulting project is usually not

eligible for direct governmentguarantees, subsidies or equities.

2. The Government is able to provide

support that maybe required simplybecause of the fact that such supporthas actually been established by

government itself.



� The Government of the Philippines continues to pursue its policy of encouraging the private sector to participate in the financing,construction, management and operation of infrastructure services

and facilities in the country.� Through the BOT Law, (Republic Act No. 7718), the Government

has put together a portfolio of approximatelyUS$ 25 billion ininfrastructure projects involving private sector investments.

� To ensure the steady promotion of infrastructure projects that areready for private sector investments, the Government establishedthe Build-Operate- Transfer Center (BOT Center), whose mandateis to find technical, legal, financial, economic and institutionalsolutions to help government implementing agencies to make BOTprojects work.



� DaangHari SLEX Link Project Implementing Agency: DPWH EstimatedProject Cost:US$ 35.5M Proposed Scheme: Solicited BOT Expected Bidding Bid Date: First half of the year

� NAIA Expressway Phase 2 Project

Implementing Agency: DPWH EstimatedProject Cost:US$ 235.33 Proposed Scheme: Solicited BOT Expected Bid Date: First half of the year



� NLEX-SLEX Connector Project Implementing Agency: DPWH EstimatedProject Cost:US$ 477.77M Proposed Scheme:Unsolicited PPP Expected Bidding Bid Date: First half of the year

� CALA-Manila Side Expressway Project

Implementing Agency: DPWH EstimatedProject Cost:US$ 233.33M Proposed Scheme: Solicited PPP Expected Bid Date: Second half of the year



� LRT Line 2 East Extension Project Implementing Agency: DOTC EstimatedProject Cost:US$ 251.11M Proposed Scheme: Solicited PPP Expected Bidding Bid Date: Second half of the year

� LRT Line 1 South Extension Project

Implementing Agency: DOTC EstimatedProject Cost:US$ 1,555.55M Proposed Scheme: Solicited PPP Expected Bid Date: Second half of the yea



� The BOT Law, as the framework for pursuingBOT projects in the Philippines, provides notonly the legal basis for that but also provides atransparent and competitive procurementprocess for BOT.

� With the BOT Law and the BOT Center in place,the prospect of keeping a steady flow of BOTprojects to continually meet the growingdemand for infrastructure services and facilitiesin the country is bright.

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