PPP, GDP and You

Since it is the start of the New Year, I would like to focus my research on the construction and infrastructure industry. Last year, most of the PPPs (Public Private Partnership) got delayed except for one project which was awarded to Ayala Corporation last December 2011. This year, I am expecting an explosion in the PPPs to be rolled out.

According to PPP Center, there will 154.47 billion worth of PPP projects in 2012 that will be offered to corporations. This is a good sign for our economy because it will help in creating more jobs for us. At the same time, the GDP growth rate will increase from what we had last year. According to NSCB, , the GDP growth for the first nine months of 2011 is just 3.6% only, way lower than the estimates by economists and bankers at 5% or more. However, NEDA said there is a good chance that we achieved a 4.5 to 5.5 growth in 2011 once the 4^th quarter of 2011 is computed also.

I bet that the GDP growth rate this year will be more than 5%, considering the huge backlog of PPPs being rolled out this year. I do hope there will be no more delays this time.

Once these PPPs are executed, jobs will be created.

For example, the bridge in your town was destroyed by typhoon Sendong last year. Nobody can cross to the other side of the bridge because the river is swollen and the water is too deep. The government said they will erect a new bridge so that the commuters can pass by smoothly and education of the children would not be hampered.

Thus, the government announced an invitation to bid for the construction of the bridge through DPWH. Several companies made their bids to the government in the hope of getting the privilege in constructing the bridge. After a week of checking and scrutinizing the bids, the government announces the winner. The winner is Tulay Construction Company (TCC).

TCC began to mobilize its personnel upon receiving the Notice to Proceed from the government. It bought cement, sand, gravel and steels. New cranes and trucks were purchased also. The suppliers may hire new workers to keep up with the demand of TCC. These purchases made by TCC are helping the economy and pushes the GDP upwards.

TCC also began hiring additional laborers, masons, foremen, engineers and architects in support of constructing the bridge. They post the vacancies in your town hall and immediately the news came to you. So you went to the town hall to see the vacancies and upon seeing the opening for masons, your aura suddenly became bright. It sparks something in you because you know that you can do the job since you have a big, muscular body.

You applied for the job and you were hired instantly. The salary came and you now have a chance to buy your favorite Levi’s jeans which you have been dreaming of since last year. Your coworkers also bought some Levi’s jeans.

Because of PPPs, you were able to get a job and a source of income. Before, you were not able to buy a Levi’s jeans because you don’t have a job but now you can buy some stuff you can’t afford previously. Since you and your coworkers are new customers of Levis, the jeans company is now manufacturing more jeans to cater to their increasing customers. This increase in jeans production will push the GDP growth rate upwards.

Imagine how many Filipinos will be able to buy jeans if the 154.47 billion PPPs are executed this year. Perhaps, hundreds of thousand Filipinos will be able to work and buy goods and services.

How about us who invest in the stock market, how can we benefit from it? Well, it’s time to research and analyze about the construction companies bidding for these PPPs. Most likely than not, we will stumble upon a good prospect and we will buy it.