I will hazard a guess that a new PPP format of infrastructure investments will be our path to recovery post-Covid19. FDR's New Deal in the US worked before as a purely government-led undertaking, and it worked. But government this time will be hard-hit and will have empty coffers.
Big businesses will lead but the middle class which holds a significant amount of savings when pooled together will form new infra companies, and entering into a new PPP format construction deals will help us bottom out. This will fuel grassroots employment, restore buying power and kickstart a consumer-led, consumption-based upswing in GDP. This is my fearless forecast.
The key therefore is for the NEDA and the PPP Center to be creative in putting together a new, out-of-the-box PPP contractual deal that will attract the middle class to invest. It is not impossible to put together, just a matter of forward-thinking, given the pressures of the current situation.
Here is one idea. New companies can enter into LGUs to do PPP projects, using the net present value of future taxes as the LGU's counterpart in the PPP venture, a case of securitizing future income from taxes. So, the future tax is the LGU asset to be securitized (backed by LGU Board Reso of pre-allocation of IRA, for example), and there is only one borrower (the LGU) and there is only one taker/investor (the business). The sticky part is agreeing on a discount factor.
The LGU becomes a part owner of the infra business, and gives stability to the deal because it will have to rest its future income from the success of the business rather than a fixed tax on both property and income of the business.
It will work. Government simply needs to provide the enabling policy.
Big businesses will lead but the middle class which holds a significant amount of savings when pooled together will form new infra companies, and entering into a new PPP format construction deals will help us bottom out. This will fuel grassroots employment, restore buying power and kickstart a consumer-led, consumption-based upswing in GDP. This is my fearless forecast.
The key therefore is for the NEDA and the PPP Center to be creative in putting together a new, out-of-the-box PPP contractual deal that will attract the middle class to invest. It is not impossible to put together, just a matter of forward-thinking, given the pressures of the current situation.
Here is one idea. New companies can enter into LGUs to do PPP projects, using the net present value of future taxes as the LGU's counterpart in the PPP venture, a case of securitizing future income from taxes. So, the future tax is the LGU asset to be securitized (backed by LGU Board Reso of pre-allocation of IRA, for example), and there is only one borrower (the LGU) and there is only one taker/investor (the business). The sticky part is agreeing on a discount factor.
The LGU becomes a part owner of the infra business, and gives stability to the deal because it will have to rest its future income from the success of the business rather than a fixed tax on both property and income of the business.
It will work. Government simply needs to provide the enabling policy.
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