2012 Market, FX, Nationalization and Fiscal Lessons Public Private Partnerships in Urban Rail Transit Projects in the Philippines and Malaysia
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8/2/2019 2012 Market, FX, Nationalization and Fiscal Lessons Public Private Partnerships in Urban Rail Transit Projects in the Philippines and Malaysia
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Rommel C. Gavieta MA (URP), MSc (Eng)
Advisor Metro Rail Transit CorporationResearch Associate, York Center for Asian ResearchSpecial Lecturer IV, Far Eastern University (MBA Program)
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MRT 3 PROJECT
US$675million, 16 km, 13 stations
and 450,000 passengers a daydesign capacity
Underestimation of market demandfor Urban Rail Transit Services
Incomplete integration of Rail and
Non-rail business models
PUTRA and STAR Projects
Putra: US$1.5billion, 29km, 24stations and 500,000 passengers aday design capacity
STAR: US$700milion, 27km, 25stations and 500,00 passengers a dday design capacity
Transparency issues related tointernational solicitation ofproposals
Overestimation issues of marketdemand for Urban Rail Transit
ServicesIntegration issues related to urbanrail transit alignment and existingcommuter corridors
Integration issues of Rail and Non-rail business models
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MRT3 ProjectDesign capacity was reached evenafter the Asian Crisis
Mismatch between Pesodenominated fare and FXdenominated loans
No linkage between Rail and Non-rail revenues for the Public Sector
Putra and STAR ProjectsDesign capacity was not reachedafter the Asian Crisis
Mismatch between Ringgitdenominated fare and FXdenominated loans
Rail and Non-rail revenues for thePublic Sector was an afterthoughtafter completion date.
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MRT3 Project
Indonesia, Korea, thePhilippines, and Thailand havepreserved their immediatepost-crisis regimes in whichexchange rate movements are
.at least in principle.unrestricted.
PUTRA and STAR Project
Malaysia has made an officialcommitment to a fixedexchange rate, supported byextensive capital controls.
Hernandez, L (IMF) and Montiel, P.J. (Williams College); Post Crisis
Foreign Exchange Rate Policy in 5 Asian Countries Filling in the Hollow
Middle; High Level Seminar Exchange Rate regime Hard Peg or Free
Floating ; IMF Seminar; Marcvh 19 and 20, 2001
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PUTRA and Star after 1998 Asian Crisis
STAR and Putra LRTs bailed out in 2001, nationalized in 2002
Takeovers by government owned Syarrikat PrasaranaNegarra Berhad (National Infrastructure Company) (Yong,P.S.;Rail Transit PPPs: Strategies and Pitfalls, Plenary sessionon Transforming Public Transport World Urban TransportLeaders Summit; LTA Academy, Singapore 5 Nov 2008MRT3 after 2008 Global Financial Crisis
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Diokno, B. E.; Philippine Fiscal behavior in Recent History;
Philippine Review of Economics, XLVII No1 June 2010 p 39 to 87
Khoon, G.S and Mah-Hui, M.l.; The Impact of the Global
Financial Crisis: The Case of Malaysia; TWN Global EconomySeries; 2010
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Singapore and Malaysia are probably the most vulnerable. Trade and Export
tend to be concentrated in highly vulnerable segments.
Bhaskaran, M.; Challenging Time for South East Asian Economies; Global Asia
Vol 4 Number 4;
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Business Models for Urban Rail TransitProjects
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Hong Kong, German Transit Models and Swedish WaterModel Philippine Experience (MRT3 and LRT1 projects)
Most German cities created a public works consortium combining utilities (gas,water, transit, etc.). Financial planning and transport planning are thereforeintegrated across the full spectrum of public services.
Source: Chislom, Gwen; International Transit Studies Program Report of the
Spring 2000 Mission Germanys Track-Sharing Experience: Mixed Use of
Rail Corridors; Transit Cooperative Research Program RESEARCH RESULTS DIGEST
March 2002Number 47
MTR HongKong
25% to 27% from TransitRevenue and 75% to 73% fromNon-Transit Revenue
Philippines 25% from Transit Revenue and75% from National Government
Hong Kong MTR Model
German Transit Model
Minimum Subsidy Bidding (MSB), potential serviceproviders compete with each other and the enterprise thatquotes the lowest amount of subsidy requirement becomeseligible for subsidy payments subject to fulfilment ofspecified level of performance (service provision)obligations.
Swedish International Development Agency
Water PPP Model
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Her Majestys Treasury provided detailed guidance on refinancing of PrivateFinance Initiative (PFI otherwise referred to as PPP) Contracts (HM Treasury
2007). Specifically, the October 2008 Amended Refinancing Provisions states that
the Public Sector Agency (Authority) is entitled to between 50% to70% of
financing gains, depending on the amount and kind of gains generated and
subject to the Authoritys approval and value for money analysis. Refinancing
transactions may be warranted when there is:
Reduction in interest margins
Reduction in release of reserve accounts
Release of contingent junior capitalExtension of the maturity of debt
Increase in the amount of debt
Refinancing undertaken without the direct involvement of the Private SectorPartner.
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Public Sector
Maximize domestic debt and minimize international debt
Maximize long tenor debt
Minimize consumptive debt versus productive debt
Adopt the policy of Refinancing Public Private Partnership Projects from HMTreasury Model when nationalizing Public Private Projects
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Project Development Private Sector assumes financing risks for Electro-Mechanical Works and
Rolling
Public sector ciassumes vil works and financed locally.
Project Financing: Public Sector assumes Material Adverse Conditions that moves FX and
inflation rate risks
Project Business Model
Public Sector should look at blending Rail and Non-rail Revenues tominimize subsidies
Private sector should assume operations and maintenance risks to publicservice maximize efficiency.
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