PPP and economic recovery in the ‘new normal’

As the COVID-19 pandemic continues to capsize economies around the world, the Philippine government is banking on its infrastructure development plan to boost economic recovery in the second half. The Department of Finance has recommended the acceleration of the Duterte administration’s Build, Build, Build (BBB) program as part of the five priority measures that the country needs to get the economy back on track. However, infrastructure development in the country over the last few years has fallen short of its potential.

Poor infrastructure has hindered the country’s economic growth for years. Its development stagnated when the Duterte administration sidelined the Public-Private Partnership (PPP) modality in favor of heavy reliance on Official Development Assistance (ODA) and concessional loans, particularly from China, as the country’s main source of infrastructure funding.

Remarkably, projects under the BBB program have continuously faced largely the same implementation bottlenecks: right of way issues, delays in the approval process, budgetary constraints, and the low absorptive capacity of the implementing agencies.

With the slow progression of the BBB program in the last two remaining years of President Duterte, the country’s economic managers have started to realize that there is a need to reassess their approach by considering the greater participation of the private sector through the PPP. One of the results of this initiative can be seen in the recent increase of PPP-funded projects under the BBB program.

In the latest virtual round table discussion organized by Stratbase ADR Institute and CitizenWatch Philippines, Senator Grace Poe, Chairperson of the Senate Committee on Public Services, supported the encouragement of PPP, Foreign Direct Investments (FDI), and the passage of the Public Services Act as strategic policies for the country’s economic recovery amid the COVID-19 pandemic.

Speaking before 300 participants including government officials, industry leaders, and other stakeholders, Senator Poe pushed for the revival of the PPP scheme as a way to safeguard the country’s fiscal position and prevent the economy from collapsing as the government reprioritizes resources to fight the pandemic.

“By contracting out the undertaking of large projects that are commercially viable, the government can free up funds to spend on health care and poverty alleviation projects,” she said.

In addition, she also emphasized the importance of opening the economy to more FDIs to encourage the entry of more players and provide the capital infusion needed by several industries including manufacturing, transportation, and logistics. She believes that PPP will encourage the entry of more players and capital investments and lead to better consumer service.

She also encouraged the private sector to take on the responsibility of behaving in a socially responsible manner in order to convince the Duterte administration about the merits of PPP.

Congressman Edgar Mary Sarmiento, Chairperson of the House Committee on Transportation, likewise supported Senator Poe’s call. He highlighted the capacity of the private sector to generate jobs, encourage economic growth, and assist the government in its initiatives to address the COVID-19 pandemic through the PPP.

He lauded the latest PPP projects such as the Cavite Barge Terminal of ICTSI, the LRT line 1 extension of Ayala and Metro Pacific, and CALAX of MPIC Tollways as proof that the government working hand-in-hand with the private sector will give better infrastructure to the people.

Given the current economic situation, it is doubtless that infrastructure development comprises one of the key components in the country’s path to economic recovery.

However, the Philippine government must first realize that in order to accelerate its infrastructure program, it cannot rely on loans or grants alone. Now is the time for the Duterte administration to revisit and strengthen its partnership with the private sector so that significant investments in the infrastructure sector could be done. Through PPP, the Philippine government could properly readjust and sustain the BBB program with due consideration to the health and welfare of its people.

The COVID-19 pandemic requires special coordination between the government and the private sector to strike a balance between economic development and health priorities. Hence, the Philippine government must ensure that the policy environment in the country be conducive for more investments to thrive.

Furthermore, it should establish a culture of transparency and accountability among its agencies so that local and foreign investors would be interested to participate in future PPP projects. Trust and confidence in the government’s regard for the rule of law, and especially respect for the inviolability of contracts, will make or break the big investment deals that the country will need for economic recovery.

Good governance is vital in attracting investments that would generate jobs, provide income security and strengthen the country’s economy beyond the COVID-19 pandemic. Collaboration and commitment established on shared values and goals will be the key driver for a new era of sustainable economic growth and resilience in the “new normal.”

Victor Andres C. Manhit is the president of Stratbase ADR Institute.