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LGUs, big and small, pursue public-private partnerships

PPP.GOV.PH

By Kyle Aristophere T. Atienza, Reporter

LOCAL governments are blazing the trail on public-private partnerships (PPP) for climate adaptation and infrastructure projects, but not all towns and cities could be expected to follow, according to analysts, given the factors on governance, technical capacity, and market demand.

Quezon City is among the local government units (LGUs) harnessing the potential of joint ventures with the private sector, with Mayor Josefina Tanya “Joy” Belmonte-Alimurung recognizing PPPs as crucial to the city’s green push.

“Quezon City consistently enters into partnerships with the private sector in this critical area,” she said in a Viber message. “We are open to partnerships and joint ventures with the private sector that will help us make our city more resilient [to climate change].”

Waste-to-energy facilities, energizing public buildings with solar power, rehabilitation of drainages and a main disposal facility, and adoption of electric vehicles are among the city’s priority projects for PPP, Ms. Belmonte said.

Quezon City, located in the capital region Metro Manila, is the richest city in the Philippines, with total assets of more P451 billion in 2021. It is also the country’s most populous city, accounting for more than two million of the Philippine population.

Puerto Galera, a much smaller town located in an island province, is also pursuing its sustainable development  goals “through the incorporation of more partnerships with the private sector.”

“Since the local government does not have the technical expertise in management and operation, as well as funding for some priority development projects like water system, waste resource recovery program and disaster risk management, the support of the private sector would truly be significant in the realization of the said programs,” Joan Margarrete “Teej” A. Yap, chief of Puerto Galera’s environmental and natural resources office, said in a Facebook Messenger chat.

Ms. Yap noted that Puerto Galera, which is known for its beaches and dive spots, already relies on partnerships with the private sector to implement projects that can make its tourism economy sustainable and make the island resilient to the threats of climate change.

“Some of the projects aligned to be under the PPP are the municipal waterworks system, construction of new communal irrigation for agri-tourism programs, small water impounding project, construction of artesian wells, spring development and rainwater collectors, among others,” she said.

She added that the town of about 42,000 people is also set to construct a P16.5-million waste recovery facility next year, which will also rely on investments from the private sector.

“The local government also believes that involvement of the private sector in the implementation of our government programs can also ensure economic development because technology and innovations could be expected,” Ms. Yap said.

Baguio City, dubbed as the country’s summer capital whose local officials have warned of the threat of irreversible urban decay, also sees PPPs as key to the realization of local climate adaptation projects and other development programs.

“The city government of Baguio plans to enter into more PPPs since its local funds would not be enough to simultaneously implement all the critical projects that need to be implemented,” Mayor Benjamin B. Magalong said via Viber.

“We see the private sector as our co-implementer of our strategies.”

The mayor said a mini-hydro power plant and waste-to-energy facility are among the city’s priority PPP projects.

Mr. Magalong, a retired police officer, said the city government ensures that public projects with private firms undergo public consultations.

“Project should start from the right process starting from the selection to ensure that the project is beneficial to the people. Conduct public consultation of the selected project to ensure that it will be supported by people being aware of the benefits that they enjoy from the project,” he said.

NOT ALLBut not all local government units (LGUs) — there are 81 provinces, 146 cities, and 1,488 municipalities in the Philippines — are ready for the PPP scheme.

“This is because PPPs are private investments that are very dependent on the existence of demand by markets and customers willing to pay for services,” Renato E. Reside, Jr., an associate professor at the University of the Philippine School of Economics, said in a Messenger chat.

Political risks in poorer LGUs are high, Mr. Reside said, adding that they may also struggle with operational and regulatory demands.

“Lower income LGUs will continue to be reliant on public funding and project development,” he said.

Lawmakers seek to amend the Build-Operate-Transfer (BOT) law, with a proposed measure requiring approval from the National Economic and Development Authority (NEDA) Board only for projects worth over P5 billion.

Projects that cost more than P300 million need to be submitted to NEDA Board for approval upon the recommendation of NEDA’s Investment Coordination Committee under the existing BOT rules.

Terry L. Ridon, convenor of infrastructure think tank InfraWatch, said lack of technical competence in terms of project preparation, monitoring, and implementation remains a threat to PPPs at the local level.

“LGUs should… undertake capacity-building relating to good governance and project planning to assure technical competence and ethical standards,” he said in a Messenger chat. “The step forward is to require LGUs to undergo PPP trainings led by the PPP Center together with other infrastructure agencies.”

Ms. Belmonte of Quezon City believes that transparency initiatives as well as anti-red tape efforts have helped them gain the trust of private players.

“First and foremost, we believe that ease of doing business initiatives that make it easier to do business and reduce red tape play a critical role, and so we have done a lot in this area such as putting various services online and increasing transparency,” she said.

The city chief said they are planning to provide tax incentives for certain businesses to attract more private investments.

“Provided that we pursue projects that make sense and that are structured and priced correctly, we are confident that our PPPs will be honored,” Ms. Belmonte said, noting that the city has a PPP selection committee, which chooses long-term projects and ensures that the city is not disadvantaged.

“In order to make PPPs work, we believe it is important that the partnerships are structured correctly to ensure that they are not disadvantageous to the city and likewise have mechanisms for the private sector to recoup their investments in a reasonable manner.”

Mr. Magalong of Baguio said aside from tax incentives, internet connectivity and uninterrupted supply of water and electricity have boosted the city’s attractiveness to private investments.

The highly-urbanized city also attracts PPP partners “by promoting good governance beyond politics,” he added.

‘PROFESSIONAL’The national government’s PPP Center has been assisting LGUs in terms of developing proposals and linkages with investors, among others,

“PPPs allow LGUs to get access not just on private sector financing but also on the technical expertise and efficiencies of qualified private sector players,” PPP Center Deputy Executive Director Jeffrey I. Manalo said in a Viber message.

Mr. Manalo cited that the agency backs a Department of Environment and Natural Resources risk resiliency program that helps climate-vulnerable LGUs, composed of 24 provinces and 4 major urban areas.

“Through this technical assistance, a pool of experts was hired to assist in the preparation of resilience roadmaps,” he said.

The PPP Center and the Department of Interior and Local Government have also released a joint memorandum circular that “contains a template PPP Code for joint venture agreements that LGUs can adopt as their legal framework for entering into PPPs,” he said.

To mitigate political, legal and regulatory risks as well as demand risks that hinder PPPs, local leaders should create a “credible and professional” environment for businesses and investments, Mr. Reside said.

“PPP is ultimately attracted to stable macroeconomic, legal, regulatory and political environments… Political stability is necessary because investors typically desire to have a long-term horizon for demand and business planning purposes beyond the typical political electoral cycle.”

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