Partnering for a flood of innovation: PPPs and disaster resilience

Disaster resilience is critical for developing nations, particularly for the Philippines, which has to endure frequent typhoons, floods, and other natural calamities due to its geographic and climatic characteristics. The potential damage to life and property and the disruption cannot be dismissed. At this point, we need all hands on deck — both the government and the private sector.

In March 2024, an opportunity for tackling disaster-related challenges emerged with the enactment of the Public-Private Partnership (PPP) Code and its Implementing Rules and Regulations. At its core, PPPs are a partnership between a public agency and a private company, coming together to finance, design, construct, operate and maintain projects that are typically government responsibilities. What makes this arrangement particularly innovative is that both parties share the risks involved, and the private partner’s investment return depends on how well it performs.

Zeroing in on disaster resilience, the Code also required PPPs dedicated to creating infrastructure projects to consider climate change adaptation and mitigation, disaster risk reduction and management, and biodiversity conservation.

A significant mandate within the PPP Code is to integrate climate resilience and development policies and programs at every stage of a PPP projects — from planning and design to implementation. Climate change safeguards have become crucial criteria for approving PPP projects at the local and national levels.

The pressing issue is assessing the current status of climate change PPPs in light of the recently enacted PPP Code. Where are we now?

THE STATUS QUO
In October, the Asia-Pacific Ministerial Conference on Disaster Risk Reduction (APMCDRR) held a conference with the goal of accelerating disaster risk reduction. The event sought to align stakeholders with the goals of the Sendai Framework for Disaster Risk Reduction 2015-2030. For reference, the framework stemmed from consultations initiated in March 2012 and inter-governmental negotiations held between July 2014 and March 2015, supported by the United Nations Office for Disaster Risk Reduction (UNDRR). During the conference, President Marcos and National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan underscored the importance of PPPs in bolstering disaster resilience.

However, in a statement by the Presidential Communications Office, Mr. Marcos revealed that a significant portion of the flood-control budget appears to have gone to a small group. Citing a Department of Public Works and Highways (DPWH) report, Marcos noted that P545 billion was spent on flood control projects since July 2022. The initial review found that P100 billion, representing 20% of flood control projects over the past three years, was allocated to just 15 of the 2,409 contractors involved in disaster resilience, with five contractors handling projects across the country. In his fourth State of the Nation Address (SONA) on July 28, the President ordered an audit of flood control projects.

His remarks were delivered shortly after the country suffered widespread flooding in the wake of Typhoon Gorio and other tropical storms, and against a backdrop of questions raised about the budget process in Congress.

In a report by the PPP Center of the Philippines, environmental experts want PPPs to play a bigger role in combating climate change and enhancing disaster resilience, especially following the devastation of Super Typhoon Carina. At a climate change forum hosted by the Philippine Business for Environmental Stewardship (PBEST), Environment Undersecretary Annaliza Teh cited the need for government collaboration with the private sector and civil society. She stressed the importance of transparent governance to ensure accountability and effective implementation of climate initiatives. It is a critical concern, given the substantial impact of climate change which displaced 2.5 million Filipinos in 2023, and threatens to slow GDP growth by 2100.

However, despite numerous frameworks designed to involve the private sector in combating climate change and improving disaster resilience, the country continuously suffers every time there is a disaster. This could suggest a gap between plans and effective action.

WAY FORWARD
To fully harness the potential of the PPP Code in advancing disaster resilience, it is crucial for the government to solicit proposals from the private sector. Alternatively, the private sector can initiate engagement by submitting unsolicited proposals. This dual approach ensures that the PPP Code is effectively utilized, providing a structured framework for both types of proposals.

For solicited proposals, the process can take two forms: single-stage or two-stage. Both start with the government advertising the opportunity. The two-stage process involves pre-qualification followed by tendering, submission, and evaluation of bids. The single-stage mode skips the pre-qualification but similarly concludes with bid evaluation and contract award.

Unsolicited proposals start with the private sector submitting directly to the government, followed by thorough completeness checks. Once verified, these proposals will be endorsed to the appropriate implementing agency, and subjected to a comparative challenge before finalizing the award.

To further encourage private sector participation, the government could also explore establishing additional incentives for developers working on disaster resilience projects, akin to the incentives available to renewable energy developers under Republic Act No. 9513 or the Renewable Energy Act.

Strengthening disaster resilience in the Philippines hinges on transformative cooperation, innovative financing mechanisms, and strategic planning — all of which PPPs can address effectively. As the Philippines deals with fiscal constraints and climate uncertainty, PPPs offer a promising path to fortify communities, enhance livelihood security, and fuel sustainable development. This collaborative effort can play a vital role in safeguarding the future.

The views or opinions expressed in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The content is for general information purposes only, and should not be used as a substitute for specific advice.

Joelle Garcia is a manager specializing in infrastructure & capital projects at Cabrera & Co., a Philippine member firm of the PwC network.

+63 (2) 8845-2728

joelle.mae.garcia@pwc.com