96929 PUBLIC-PRIVATE PARTNERSHIPS BRIEFS Philippines: Urban Passenger Rail Overview Severe traffic congestion and environmental degradation characterize Metro Manila, particularly at the city center where high density development continues. Urban sprawl has spilled over onto surrounding provinces that are within daily commuting distance, with population in these areas now reaching 5 million. About 22.5 million motorized trips are made each day—70 percent of which are taken on public transportation. Urban rail services provide a more efficient alternative to road-based services, but Metro Manila’s mass/light rail transit (M/LRT) network needs to be expanded in reach and capacity to significantly increase daily passenger volumes. This series showcases how the World Bank Group supports the development and implementation of public-private partnerships. This support comes in the form of public sector loans, private sector finance, sector and transaction advice, guarantees, and output-based aid. PUBLIC-PRIVATE PARTNERSHIPS - MAY 2015 Project Description prepared the concession agreement and conducted an international tender to help select a private Under the current political administration, the concessionaire through a competitive and transparent Government of the Philippines has promoted public- process. Specifically, IFC provided the government private partnerships (PPPs) to accelerate the country’s with recommendations on financing mechanisms, infrastructure development. To operationalize risk allocation, and the design of the tender process. the policy, the Department of Transport and Light Rail Manila Corporation (LRMC), formed by Communications (DOTC), the main transport major local conglomerates Metro Pacific Investments planning and policy body, has launched a PPP Corp, Ayala Corp, and the Macquarie Group, won program in the transport sector to attract private the bid for the 32-year LRT1 concession. The winning sector participation in the financing, development, proposal included the payment of $200 million operations, and management of the M/LRT system. in a concession fee to the government (forgoing a The first project was a PPP concession for the maximum subsidy of $112 million that was offered existing LRT Line 1 (LRT1), which consists of the by the government) as well as a commitment to invest construction of an extension to the southern district of over $900 million to design and build the Cavite Cavite, and operation of the entire section. In 2011, extension. The concession agreement was signed in the International Finance Corporation (IFC) was October 2014. appointed as Lead Transaction Advisor to the DOTC In parallel, PPIAF provided assistance for DOTC and the Light Rail Transit Authority (LRTA), which and LRTA to establish a regulatory unit to oversee the currently owns and operates the LRT 1, to put the M/LRT PPP concessions so that DOTC and LRTA project out to tender and to select the winning bidder could transition from being “providers” to “regulators” through a competitive international process. Since the of services. Primary attention was given to the LRT M/LRT services have been operated and managed by 1 concession. PPIAF provided recommendations the public sector, it was a significant challenge for the on how to set up the unit, taking into consideration government to facilitate and regulate project execution the existing legal framework, timing, and available and service delivery by the private sector. DOTC resources. Implementation support to DOTC and sought technical support from the Public-Private LRTA has followed, operationalizing the contract Infrastructure Advisory Facility (PPIAF) to establish management components of the LRT 1 concession. a PPP regulatory unit that would focus on contract management of the LRT 1 concession. Outcomes World Bank Group Role • Expanded transport services to nearly 1 million passengers daily. IFC and PPIAF worked together to ensure successful • Generation of $200 million in concession fees from outcomes from the Philippines’ first M/LRT PPP the winning bidders to DOTC. concession. IFC prepared a transaction structure • Improvement in Metro Manila and and the Cavite consisting of operation and maintenance (O&M) of regions’ competitiveness and quality of life, due to the existing LRT1 as well as the design, financing, sustainable, mass transit-oriented development in construction, operation, and maintenance of a Metro Manila and the surrounding provinces. 12-kilometer extension to Cavite. In addition to • Reduction of greenhouse gas emissions by 40,000 formulating the PPP transaction structure, IFC also tons of CO2 per year. Photo Credits Front: Ken Marshall/Creative Commons license, creativecommons.org/licenses/bysa/2.0 worldbank.org/ppp @WBG_PPP scribd.com/wbg_ppp