By LM Jocson, November 15, 2022; Business World
TOLL FEES, TARIFFS and other charges to be imposed by joint ventures (JVs) between the government and private companies may soon require regulatory approval, according to proposed amendments by the National Economic and Development Authority (NEDA).
NEDA on Monday released the proposed amendments to guidelines and procedures for entering into JV agreements between the government and private entities, which was last revised in 2013.
“Tolls, fees, rentals, tariffs, and charges that a JV may charge for the use/availment of the facility/service shall be subject to the approval of the appropriate regulatory body,” the draft stated.
Under the draft rules, tolls, fees and rates can be adjusted during the life of the contract, based on an approved formula or adjustment schedule in the approved contract.
“This is an entirely new section. It clarifies the rule of existing regulators in JVs and it states a recourse mechanism if the regulatory body does not approve the formula,” NEDA Supervising Economic Development Specialist Ernest Diaz said at a virtual briefing on Monday.
In the draft rules, the agency or local government unit (LGU) should secure the advice of the regulator or the approval of a relevant body, or both, on the formula for rate adjustments even before the bidding. An appropriate regulatory body will monitor the consistency of these proposed rate adjustments.
In case a regulator disapproves of the proposed amount of the fee or toll adjustments stipulated in the contract, the agency or LGU may allow the project proponent “to recover the difference between the tolls/fees/rentals/charges stipulated in the contract and the amount approved by the regulator through measures allowed in the contract.”
UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said this is a good move since potential investors will now be aware of possible consequences in entering into JVs with the government.
“This is a very important aspect of public-private partnerships (PPPs) to make it more transparent and realistic for private companies on what they are entering into especially with government-led projects or contracts,” he said in a Viber message.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message that it will be a “delicate task” to uphold the interest of the public and provide a fair and reasonable returns for private investors.
Under the draft, the government entity can enter into a JV “if there will be better value for money for the government than if the project will be pursued through traditional or other modes of procurement.”
Infrastructure and development projects under the revised rules would refer to investments in transport, energy, water and sanitation, information and communications technology, social infrastructure and other projects such as land reclamation and dredging.
New provisions were also added to the draft rules such as requiring JVs to secure a go signal for amendments to the agreement, including increases in the project cost.
“An increase of at most 10% in cost should be submitted to the approving authority for notation. Any cost increase beyond 10% shall require approval anew,” the draft rules stated.
Under the draft proposal, JV agreements will need to undergo a feasibility study to ascertain that the project is financially and economically feasible.
Socioeconomic Planning Secretary Arsenio M. Balisacan earlier said the amendments to the guidelines will boost competition for JV projects.
The government has been pushing for more PPP projects, especially in infrastructure projects.
In October, the revised implementing rules and regulations for the Build-Operate-Transfer Law took effect.
According to the PPP Center, there are currently 74 PPP projects in the pipeline worth P2.2 trillion.