PPP Arrangements in LGU - Implications For Future of LED in Cainta - ASOG MPM - ACCI

PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
PUBLIC-PRIVATE PARTNERSHIP ARRANGEMENTS IN THE LOCAL GOVERNMENT: IMPLICATIONS FOR THE FUTURE OF LOCAL ECONOMIC DEVELOPMENT IN THE MUNICIPALITY OF CAINTA
Angeles, Ricardo C. Jr. Cavestany, Cody R. Cavestany, Lester G. Ilagan, Ramon A.
Ateneo School of Government Master in Public Management Modern Management for Local Governance
Prof. Aurma M. Manlangit Prof. Mary Jane C. Ortega
December 2012
Table of Contents
Chapter 1 - Introduction ...................................................................................................................3
Chapter 2 Policy and Legal Framework
.................................................................................15
Chapter 3 - Recommended PPP Projects and their Possible Implications to the Future of the Local Economic Development Of Cainta ........................................23
Chapter 4 Conclusion ................................................................................................................35
Bibliography ................................................................................................................................39
Annex A - PPP Risk Matrix ..........................................................................................................41 Annex B PPP Modalities ...........................................................................................................43 Annex C DILG MC 2011-16 .....................................................................................................44 Annex D Eligible LGU Projects for PPP ..................................................................................46
CHAPTER ONE INTRODUCTION
One of the most important innovations in government involves the introduction of PPP that have brought the government, especially at the local level, new sources of funding and facility. These people centered type of partnerships are the foundation of the social contract of the government with its people.(Shergold, 2012) The PPP Program has been the vehicle for private sector participation in the provision of infrastructure services and the private sector has always played a significant role in the countrys pursuit of bridging gaps in the economy. This paper recognizes that PPPs are a powerful tool that can bring about positive outcomes for local governments. (Rivenbark, Marlowe, & Vogt, 2010) PPPs, specifically at the local level could facilitate a range of economic development, revitalization, and infrastructure projects that could not happen without private sector investment. Local development is a term that is widely used to indicate the development efforts through LGUs in the area of public services and facilities. PPP in local development is a mechanism that brings together the private and public sector together to provide basic services to the community. (Regmi, 2008) PPPs can also help local governments shift the risks and costs of operating expensive assets onto private sector operators who have the expertise and capacity to operate those assets more efficiently and effectively. This allows local governments to focus on their core competencies of delivering public services. (Rivenbark, Marlowe, & Vogt, 2010) It is in this context that this paper seeks to find the association of PPP agreements to local economic development (LED) particularly in the Municipality of Cainta. This chapter provides an overview of the relationship of the two concepts, PPP and LED, based on the New Public Management (NPM) and governance theories. Figure 1 below is a theoretical framework the researchers developed to understand the implications of PPP to the future of LED in Cainta.
Understanding PPP The concept of PPP arose from the pressure to change the standard model of public procurement due to the increasing public debt during the 1970s and 1980s.(Wikipedia) For the Philippines, PPP started in 1990 when it became the first country to in Asia to give PPP a legal framework through the Republic Act (RA) 6957, or the Build-Operate-Transfer (BOT) Law of 1990. Perhaps one of the most notable achievements in PPP was the privatization of the Manila Water and Sewerage System (MWSS). President Aquino vowed to promote and support the PPP program of the Philippines. The Presidents Social Contract with the Filipino People imagines a country that has inclusive growth and characterized by rapid, sustained, and broad-based economic growth; focused on creating more jobs and new opportunities to achieve full employment; and significantly reduced poverty.
PPP, known as private sector participation in public enterprises, is broadly defined as arrangements between government and private sector entities for the purpose of providing public infrastructure, community facilities and related services. It is a contractual arrangement between the public, in this case the local government, and the private sector, with clear agreement on shared objectives, for the delivery of goods and services that would otherwise have been provided through traditional public sector procurement. (Regmi, 2008) The PPP Center adds that PPP targets the private sector to finance, design, implement and/or operate infrastructure facilities and services that were traditionally provided by the public sector.(Public-Private Partnership Center, 2012) In PPP projects, the private firms get a reasonable rate of return on their investments as part of the risk allocation between the two parties. PPP arrangements mainly address the limited funding resources for local infrastructure or development projects of the government thereby allowing the allocation or use of public funds to other local priorities. PPP is geared towards both parties gaining improved efficiency and project implementation processes in delivering public services. More importantly, PPP emphasizes Value for Money focusing on reduced costs, better risk allocation, faster implementation, improved services and possible generation of additional revenue. According to the LGU PPP Manual, the PPP model in the Philippines contains the following elements: a contractual agreement between the public sector and the private sector shared risks and resources value for money outcome orientation acceleration of the infrastructure provision and faster implementation
PPP can take various forms, made possible through a wide range of modalities. The most usual forms of PPP are contracting out or outsourcing, leasing, build operate and transfer (BOT) and build own and operate (BOO). The types of PPP are summarized in the table below. Table 1: Types of Public-Private Partnership Contracts
Table 2: Traditional Funding Modalities and PPP
Other benefits or possible outcomes of PPP include: Utilization of sectoral core competency Fiscal performance increases and economic value loss if controlled Contributes to local economy Effective and better public services Cost competitiveness Risk sharing Fulfills the obligation of state and Corporate Social Responsibility (CSR) for the private sector Helps the local government to become an enabler and facilitator rather than of a provider, and Promotes local employment opportunities.
Moreover, the LGU PPP Manual lists these Potential Benefits of Venturing into PublicPrivate Partnerships: Access to private sector financial resources, technology, technical expertise and operating competence Mitigation of fiscal and resource limitations Prospective operational cost savings for local governments Reallocation of LGU resources for other priority needs Flexibility in management of LGU assets Cost-based/market-based fares, fees and charges for greater service sustainability Professionalization of personnel and organizational structures
Profit motivation impetus to ensure efficiency and effectiveness in service delivery
Protection of projects from possible adverse political interferences in service delivery
Investment incentives
However promising the partnership looks in terms of the benefits for both the local government and the private sector, there are also risks involved. Political risks, unreliable service, inability to benefit from competition, bias in the selection process of projects and partners, labor issues and unequal accountability are some of the risks that have been experienced at the local level. These risks emphasize the importance of ensuring that both parties undertake proper risk analysis from two perspectives (local government as the procurer and private firm as the sponsor) to ensure than value for money is achieved and that the project generates revenues to cover the capital and operating costs. New Public Management Theory The call for a reduced, effective, efficient and more participatory development of government programs and projects to provide goods and services resulted in the forming of the New Public Management (NPM) theory. The four elements of NPM mentioned by Mzikayise Shakespeare Binza (2009) in his doctorate thesis entitled, A Public-Private Partnership Model for the Improvement of Local Economic Development in South African Metropolitan Government are as follows: 1. a much better and larger use of alternative market-line service delivery mechanisms like outsourcing, privatization, partnerships, joint ventures, etc.;
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2. intensified organizational and spatial decentralization of the government and production of services; 3. a constant theoretical emphasis on the need to improve service quality; and 4. an equally relentless insistence on attention to the wishes of individual service users The principle of NPM is for government to be more flexible, linear, efficient, effective and economical toward an improved quality of life of all people. It emphasizes value for money in carrying out local development projects and programs in the form of proper public financial management in satisfying the needs of the people and managing the limited resources of the local government. Binza also states that the development of PPPs lies to a great extent in the theory of NPM. Good Governance Theory Good governance is central to creating and sustaining an enabling environment for development and the provision of quality services in an equitable, participatory and transparent manner. According to World Bank, good governance is encapsulated by having a predictable, open and enlightened policy-making, competent bureaucracy inspired by a professional standards acting toward public good, backed up by rule of law, involves a transparent process and strong civil society participation in public affairs. Good governance requires the government, in this case the local government of Cainta, to collaborate with communities before making decisions which may affect their sustainable livelihoods. In the context of this paper, undertaking PPPs must be established under the good governance principles that call for the cooperation or involvement of the private sector and civil
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society in promoting a local government process that focuses on improving sustainable local economic growth and development. This local government process must be transparent to provide the public with choices aimed at satisfying their respective needs and wants. Unraveling Local Economic Development In todays capitalist world, LED is gaining widespread attention in many countries as a cornerstone of sustainable development, in order to address the alarming global issues of poverty and inequality. International organizations such as the United Nations, the World Bank and the Organisation for Economic Co-operation and Development have endorsed LEDs role in urban development and business promotion. (Nel & Rogerson, 2005) But what exactly is LED? Local Economic Development has been defined in the following ways: 1. a participatory process where local people from all sectors work together to stimulate local commercial activity resulting in a resilient and sustainable economy. It is a tool to help create decent jobs and improve the quality of life for everyone, including the poor and marginalized. (United Nations Human Settlements Programme, 2009) 2. the process by which public, business and nongovernmental sector partners work collectively to create better conditions for economic growth and employment generation. The aim is to improve the quality of life for all. (World Bank, 2003) 3. a participatory development process that encourages partnership arrangements between the main private and public stakeholders in a defined territory, enabling the joint design and implementation of a common development strategy, by making use of local resources and competitive advantages in a global context with
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the final objective of creating decent jobs and stimulating economic activity (Gasser, Salzano, Meglio, & Lazarte-Hoyle, 2004) In the three-abovementioned definitions, it is evident that the following key words or phrases are essential to an understanding of LED: process; partnership; economic growth; and a good quality of life for all. PPP Model working towards LED In an effort to improve LED and to facilitate public service provision, local governments are advancing synergies in the form of sustainable partnerships with the private sector. It is therefore the aim of the government to manage LED initiatives and programs effectively and efficiently and to redistribute resources equitably among their constituents. In other words, LED would be improved and sustained through PPPs. The PPP model is developed to improve and sustain local economic growth and development that contribute to job creation that would reduce unemployment and eventually lead to alleviate poverty. (Binza, 2009) It is then the role of local governments in LED to create a market between localized demand and supply that aims to create, implement, and sustain the vision of quality of life. The outcome then of LED is a better quality of life characterized by a safe environment that has vitality and pride. It is having an environment that promotes involvement of the private sector and the community. It is growth in accordance to local plans and policies. LED seeks for a local government that provides a quality of life characterized by having local economic prosperity.
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Locale of the Study: The Municipality of Cainta, Province of Rizal The Most Populous and one of the Wealthiest Municipalities in the Philippines The first-class urban municipality of Cainta in the Province of Rizal, known as the gateway to the East, is the most populous municipality in the Philippines,1 with a population of 289,833 as of the 2007 Official Census, in a land area of 4,299 hectares. With a population density of 11,810.63 people per sq km, the highest in the province of Rizal, the municipality experiences rapid
urbanization. With its gross income of about P700 million, Municipality of Cainta is considered as one of the richest municipalities in the country. Based on the Commission on Audits 2009 Annual Financial Report for Local Governments(COA, 2010), the Municipality of Cainta is one of the richest municipalities in the country, having an equity or net assets of 1.464 billion Pesos ($34M) and a gross income of 627 million Pesos ($14M). The graph below charts the equities and gross incomes of the top ten wealthiest municipalities in the Philippines:
Official population data (as of Aug 1, 2007) show that Bacoor, Cavite which is now a city, used to be the most populous municipality in the Philippines. Caintas aspiration to also become a city has been endorsed by the League of Cities of the Philippines, based on the requirements set by the Constitution and the Local Government Code.(Pasaylo, 2011)
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1,600 1,493 1,400 1,200 in Million Pesos 1,000 800 600 400 200 0 627 682 1,100 903 670 893
Wealthiest Municipalities in the Philippines (2009 COA Report)

639 427 317 524 513
534 437 435 432 283 217
Equity Gross Income
Municipalities
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CHAPTER 2 POLICY AND LEGAL FRAMEWORK
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Governments around the world, including our own, are experiencing a paradigm shift into a more localized approach toward nation-building and sustainable development as local chief executives fulfill their roles as the captains of public service to our countrymen. This role is expressly provided in the 1987 Constitution and the Local Government Code of 1991, granting local government units the power, authority, responsibilities and resources to provide the basic services and facilities for the people. Sections 2 of the Local Government Code of 1991 mandates the autonomy of local government units, to wit: Sec. 2. Declaration of Policy. (a.) It is hereby declared the policy of the State that the territorial and political subdivision of the State shall enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities and make them more effective partners in the attainment of national goals. Toward this end, the State shall provide for a more responsive and accountable local government structure instituted through a system of decentralization whereby the authority, local government units shall be given more powers, and resources. The process of
responsibilities
decentralization shall proceed from the national government to the local government units. Moreover, Section 17 of the LGC lays down the basic services devolved unto the LGU from the national government, to wit:
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Section 17. Basic Services and Facilities (a) Local government units shall endeavor to be self-reliant and shall continue exercising the powers and discharging the duties and functions currently vested upon them. They shall also discharge the functions and responsibilities of national agencies and offices devolved to them pursuant to this Code. Local government units shall likewise exercise such other powers and discharge such other functions and responsibilities as are necessary, appropriate, or incidental to efficient and effective provision of the basic services and facilities enumerated therein. On Local Economic Development Local governments have the legal duty to initiate and promote Local Economic Development policies and programs. Section 14, Article X of the 1987 Constitution in its declaration of Local Government principles states that The President shall provide for regional development councils or other similar bodies composed of local government officials, regional heads of departments and other government offices, and representatives from non-governmental organizations within the regions for purposes of administrative decentralization to strengthen the autonomy of the units therein and to accelerate the economic and social growth and development of the units in the region. In addition, Sections 15 of Republic Act 7160 or the Local Government Code states Every local government unit created or recognized under this Code is a body politic and corporate endowed with powers to be exercised by it in conformity with law. As such, it shall exercise powers as a political subdivision of the national government and as a corporate entity representing the inhabitants of its territory. And Section 16, states that Every local government
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unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and selfreliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. Based on these legal foundations, LGUs have a critical role in improving the economic viability of province, a city, or a municipality. Through the planning and implementation of their policies and programs, LGUs shape their territories economic development and affect the overall welfare of their constituents and their businesses.(United Nations Human Settlements Programme, 2005) On Public-Private Partnership in The Philippines According to Executive Order (EO) No. 8, series of 2010, the Philippines shall implement Public-Private Partnership (PPP) as a cornerstone strategy of the national development plan to accelerate the infrastructure development of the country and sustain economic growth2. The administration further pledges to provide the enabling environment for private sector investment through a stable macroeconomic environment and sound and consistent public policies.3
2 3
Executive Order (EO) No. 8, series of 2010. A PPP Manual for LGU, Vol. 1, page 3.
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The PPP program has been the vehicle for private sector participation in the provision of infrastructure services. The private sector has always played a significant role in the countrys pursuit of bridging gaps in the economy. In 1986, private sector played a leading role in national development when the government undertook massive divestment, disposition and sale of all business-related assets. This was later formalized in 1990 when the then newly restored
Congress enacted Republic Act (RA) 6957, An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for other purposes, better known as the Build-Operate Transfer (BOT) Law. After successful
implementation of national projects, the BOT Law was amended in 1994 through the enactment of RA 7718 or an Act Amending Certain Sections of RA 6957. The Philippine BOT Law and its subsequent amendment provided national implementing agencies and local government units (LGUs) with a new avenue for financing and fast-tracking the implementation of infrastructure and development projects. The legal and regulatory framework for PPP expanded its coverage to include non-traditional infrastructure sectors such as health, education, information and communication technology, and other social infrastructure and development projects. 4 The cascading to the LGUs of the private sectors participation in the financing, construction, operation, and maintenance of the infrastructure projects, including non-traditional sectors like health, education and agriculture, has increased the efficiency of the countrys vision towards hastened infrastructure development and sustained economic growth. PPP finds support in the provisions of the 1987 Constitution, specifically Section 20 of Article II which states that The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments. Pursuing this
4
Ibid.
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constitutional mandate, the Philippine Congress enacted Republic Act No. 6957 as amended by RA 7718 or the Philippine BOT Law which centered in PPP infrastructure development. The enactment of RA 6957 allowed LGUs to enter into contractual arrangements with the private sector to implement infrastructure projects through two variants Build-Operate-andTransfer (BOT) and Build-Transfer-and-Operate (BTO). RA 7718 enhances the provisions of RA 6957 by broadening the list of PPP government implementing agencies such as government owned and controlled corporations (GOCCs), government financing institutions (GFIs) and state universities and colleges (SUCs); putting in place incentives for attracting private sector investments to venture into PPP projects; and allowing negotiated unsolicited proposals provided that these comply with conditions outlined in the Law. More importantly, RA 7718 provided for the inclusion of other contractual arrangements or schemes to implement PPP projects. 5 These contractual arrangements include Build-Operate-and Transfer (BOT), Build-and-Transfer (BT), Build-Own-and-Operate (BOO), Build-Lease-and-Transfer (BLT), Build-Transfer-and-Operate (BTO), Contract-Add-and-Operate (CAO), Develop-Operate-and-Transfer (DOT), RehabilitateOperate-and-Transfer (ROT) and Rehabilitate-Own-and-Operate (ROO).6 The Government Procurement Reform Act of 2003 (RA 9184) for the procurement of goods, supplies and services expanded and improved the participation of the private sector in government contracts.
5
6
Ibid, page 5.
See Annex B for the key characteristics of the PPP Modalities
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The implementation of the PPP projects at the local level is facilitated by the Local Government Code of 1991 (RA 7160). As much as the Code vests upon the LGU wide latitude of prerogative to enter into contracts involving its properties, this prerogative should however be used along and harmonized with other relevant legal pronouncements. DILG MC No. 2011-167, issued by the late DILG Secretary Jesse M. Robredo, recognizes the need to facilitate the localization of the mandated powers and functions of the PPP Center and, thus, enjoins all Local Chief Executives to establish a PPP Sub-Committee in the Local Development Council that would, among others, assist the Local Development Council (LDC) in the formulation of action plans and strategies related to the implementation of PPP programs and projects.8 LGU Potential Benefits from PPP PPP has recognized benefits to the LGUs in that it provides the latter access to private sector financial resources, technology, technical expertise and operating competence. Due to the increased access to private sector financial resources, the LGUs are able to mitigate fiscal and resource limitations; to save operational costs; to reallocate its resources for other priority needs and to professionalize personnel and organizational structures. Moreover, profit motivation in PPP provides an impetus to ensure efficiency and effectiveness in service delivery. LGU Preparedness for PPP The successful implementation of PPPs at the LGU level is dependent on the careful assessment of the factors to be considered in implementing PPP projects.
7 8
See Annex C - DILG MC 2011-16 Ibid.
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At present, PPP readiness assessment tool in the Philippines is yet to be formulated but the LGUs may refer to the assessment tool developed by the United Nations Economic and Social Commission for the Asia and Pacific (UNESCAP) which was originally created to evaluate a countrys readiness to undertake PPP projects. Although originally developed for countries, the UNESCAP guide has features which could be adopted by local governments. The ideal espoused in the guide is for small informed groups comprised of stakeholders to sit together and answer a readiness assessment questionnaire. After answering the questionnaire, the groups shall then discuss the commonality and difference in their perceptions of the PPP environment. Ideally, the LGUs shall consider the results of the self-assessment in preparing PPP action plans. The areas of focus in the UNESCAP guide that may be applicable to LGUs are: (1) business climate, (2) financial environment, (3) legal and governance environment.
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CHAPTER III RECOMMENDED PPP PROJECTS AND THEIR POSSIBLE IMPLICATIONS TO THE FUTURE OF THE LOCAL ECONOMIC DEVELOPMENT OF CAINTA
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According to the LGU PPP Manual, one of the most important considerations in pursuing Public-Private Partnership(PPP) ventures for local government units is the identification of programs and projects to be packaged or pipelined for PPP. (Public-Private Partnership Center, 2012). And as illustrated by the PPP Manuals table below, several local executive offices and legislative committees have different responsibilities in the planning and implementation of PPP ventures.
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Cognizant of the high level of executive and legislative planning involved to implement PPP at the local levels, this chapter focuses on the recommendations of the researchers to the concerned public officials of the Municipality of Cainta regarding possible PPP projects and arrangements that have implications to the Local Economic Development(LED) of the Municipality of Cainta. It is hoped that these recommendations will serve as initial points of discussion of not only the PPP Sub-Committee of the Municipal Development Council, but also of the LED Steering Committee of Cainta whose role is to formulate a multi-sectoral LED strategy for the Municipality. In discussing the implications of possible PPP projects and arrangements to the Local Economic Development of Cainta, the researchers have selected the first four LED Program Options9 proposed by the World Bank in their Local Economic Development Primer: (Swinburn, Goga, & Murphy, 2006) LED Program 1: Improving the Local Business Investment Climate
See Annex C for LED Program Options
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LED Program 2: Investment in Hard Strategic Infrastructure LED Program 3: Investment in Sites and Premises for Business LED Program 4: Investment in Soft Infrastructure As stated in the abovecited Primer, the Municipality of Cainta, in their determination of their LED strategy, will need to decide upon their own key programs, using the program options discussed here as guidelines, according to their needs and resources. Local Economic Development Program 1: Improving the Local Business Investment Climate If the Municipality of Cainta is to reap the rewards of PPP, it must market itself as a business investor and entrepreneur-friendly municipality. The private sector will not pursue their business interests, much less partner with the public sector, in a locality which is unfavorable and unprofitable. Evidently, this program is one of the key components in the LGUs role as an LED Enabler, as discussed in class by Professor Manlangit. Cainta is considered to have a competitive advantage over other areas because of her proximity to Metro Manila. Its like getting all the benefits of being in the metropolis but paying for them at provincial rates. There is adequate access to transportation and communication technologies and public utilities such as electricity from Meralco and water from Manila Water. The Light Rail Transit (LRT) Line 2 Extension (East/West) Project is already underway, extending from the existing Santolan Station to the Masinag Junction in Antipolo City, with an Emerald Station in between, fronting Robinsons Place Metro East in Cainta. The continuous and consistent increase in business taxes collection in the Municipality (see Table below) is a positive indicator of the growth of businesses in Cainta.
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Business Taxes Collection in Cainta, Rizal (in Million Pesos)

255 188 207
155
173
2007
2008
2009
2010
2011
The Municipality of Cainta also recognizes that the Business Processing and Licensing Office is often the first point of contact between the business owners and investors and the local government. And in accordance with the Anti-Red Tape Act of 2007 (Republic Act No. 9485), the Municipality of Cainta implemented a Business One-Stop Shop (BOSS) Center in January 2012 for renewal of business permits and licenses. And it will be implemented again in January 2013. This project eased the process of getting a business permit by accommodating all the municipal agencies and offices involved in the process into one area and using Information Technology to have computer interconnectivity among them. As more and more opportunities for PPP open up at the local levels, the private sector investors will look for local government units that foster a strong business climate and good governance. With its strong Local Business Investment Climate, Cainta is poised to take advantage of the PPP arrangement towards local economic development.
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Local Economic Development Program 2: Investment in Hard Strategic Infrastructure
In his message to local governments in the LGU PPP Manual, the Secretary of SocioEconomic Planning and NEDA Director General, Cayetano W. Paderanga, Jr., advised that PPP processes would greatly enable the local officials to develop infrastructure that will form part of their so-called legacy projects of the local officials. 10 An area wherein PPP for infrastructure investments could be enhanced is in improving Caintas disaster preparedness. Due to the flooding disasters brought about by typhoons and heavy rains, aggravated by the impacts of climate change, as is evident in the Ondoy disaster in 2009 and the Habagat disaster in 2012, the development of flood mitigation strategies including infrastructure interventions is a top priority for the Municipality of Cainta. Examples of recent projects include the 1.2km drainage interceptor that was constructed in a low lying area in Barangay San Andres in 2011. Regular dredging and desilting of major waterways such as the Cainta River and nearby creeks and tributaries have also been ongoing simultaneously with sewerage renovation and rip-rap construction. One of the biggest challenges to achieving climate and disaster-resilience is that it is still perceived by many to be an environmental problem. But in reality, it should be seen as an economic problem, a development problem and a political stability problem so that proper efforts and resources are allocated to it. (Climate Change and Challenges for Local Government Changes We Need Now, 2011). Seen from this perspective, it becomes incumbent upon the private sector to get involved and partner with the local government to scale up investments in urban planning, infrastructure and building safety to create a more disaster-resilient
10
See Annex D for the LGU PPP Manuals list of Eligible Projects for PPP
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Municipality. In turn, the local council must look into enacting ordinances levying taxes, fees, and charges that will ensure that the private sector partners will get a profitable return on their investments in anti-flooding infrastructure. Aside from infrastructure investments in disaster preparedness, other PPP arrangements should also be identified in the following sectors in Cainta: 1. Solid Waste Management The construction of the Cainta Materials Recovery Facility (MRF) using the PPP experiences of Calamba Citys fully functional cluster-barangay MRF 2. Health The upgrading of the Cainta Municipal Health Center into a primary care public hospital became a reality on December 20, 2005 when the Bagong Cainta Municipal Hospital opened its doors to the public, fully equipped with an X-ray Machine, an Emergency Room, an OB-GYNE service, a Pediatric Ward, and an Operating Room. Since then, more than 20,000 residents of Cainta have enjoyed the affordable, and often free medical services, thanks to the heavy subsidies provided by the local government to promote public health. However, the subsidies take a heavy toll on the municipal budget and PPP is seen as a strategy to help address this problem. State-run hospitals have allowed the involvement of private firms in providing public health services. Some examples include the radiology services of Jose Reyes Memorial Medical Center, which is now run by Himex; the dietary services provided by the Carte-blance at the Lung Center of the Philippines; and Fabricare for Lung Centers laundry. But such PPP arrangements in public hospitals are often accused of increasing the fees that
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patients have to pay, hurting those who can only afford to go to public hospitals. (Olea, 2011) 3. Housing The local government, in partnership with real estate developers and/or the National Housing Authority, has the capacity to provide socialized housing not only for the urban poor in Cainta who live in at-risk areas, but also for government employees who would like to avail of housing loans. 4. Public Cemetery Inaugurated on October 26, 2012, the Cainta Public Cemetery is in need of a private firm that will provide the incineration services inside the 19,000 square meter property. 5. Transportation Terminal using the PPP experience of Butuan Citys Termi-Mall Local Economic Development Program 3: Investment in Sites and Premises for Business (related to Program Option 8: Sector and Business Cluster Development)
Under the related Local Economic Development Programs of Investment in Sites and Premises for Business (Program 3) and Sector and Business Cluster Development (Program 8), improvements are spearheaded by the LGU to increase the growth of businesses, especially in sectors where the Municipality has a competitive advantage. The following projects for commercial and industrial development have been identified by the researchers as possible areas for PPP ventures: A. Renovation of the Cainta Public Market B. Business Process Outsourcing (BPO) and Information Technology (IT) Business District C. One Town One Product Business Development A. Renovation of the Cainta Public Market
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According to the LGU PPP Manual, the public market is one of the most preferred projects by LGUs for PPP implementation due to the profitability and high commercial value. (Public-Private Partnership Center, 2012) As illustrated by the PPP Manuals table below, the public sector encourages and enables the private sector to finance the construction/renovation of the public market. Upon construction, the private sector investor operates the public facility over a fixed period during which they levy charges for use of the infrastructure. After the fixed term, the private sector subsequently transfers ownership and operations back to the public sector. The successful PPP arrangements for the renovation of the public markets of the cities of Malabon, Mandaluyong and Cagayan de Oro can serve as benchmarks for Cainta.
B. Business Process Outsourcing (BPO) and Information Technology (IT) Business District As the LED Enabler, the local government can also target profitable and in-demand sectors such as the Business Process Outsourcing (BPO) and Information Technology (IT). Many of the industrial and manufacturing companies along Imelda Avenue in Cainta have moved to other towns and most of their real properties are bought by Real Estate developers for residential purposes. And although this change is positive because it would mean that Cainta would have more residents, it is also recommended that certain sites are zoned exclusively for IT or BPO districts. According to IBMs Global Locations Trend Annual Reports, the Philippines has been the number one BPO country in the world since 2010. And this industry is certainly
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getting bigger and stronger. It provides not only lucrative jobs for Caintaos, but also highlyskilled training for them, opening up further employment opportunities, both here and abroad. At present, Cainta is home to Teletech, which has been inducted into the Philippine Economic Zone Authority (PEZA) Hall of Fame. C. One Town One Product Business Development Another way to help businesses in the municipality is to follow the lead of Thailand and Japans One Town, One Product (OTOP) project. It is a good way to support micro, small, and medium enterprises (MSMEs) to manufacture, offer, and market distinctive products or services through the use of indigenous raw materials and local skills and talents.(Department of Trade and Industry, 2008) The local government of Cainta should take the lead in choosing and promoting a product or service thats viable and profitable for the residents of the municipality. Cainta should be proud of its rich heritage in making native delicacies called kakanin or bibingka, proudly claiming the title, Bibingka Capital of the Philippines. It is common knowledge among Caintaos that bibingka is a localized version of the Indian/Goan dessert, bebinca. This dessert was brought to us by the Indian sepoys who came with the British forces that occupied Manila in the 18th Century. Some of the sepoys stayed behind after the short British occupation of Manila and settled in Barrio Dayap in Cainta. Local Economic Development Program 4: Investment in Soft Infrastructure The development of livelihood programs is an area where PPP investments in soft infrastructure can be further explored. Cainta already has a successful showcase project which is the Water Lily for LIFE Program, which even has an environmental component. The water hyacinth plant, more commonly called water lily in the Philippines because of it produces lily-
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like violet flowers, float on waterways like thick carpets that clog rivers and waterways. Since the Ondoy disaster, the local government has regularly cleared the Manggahan Floodway of water hyacinths, as part of the efforts in disaster-preparedness. But instead of throwing the water hyacinths away, the local government has found a way to put them to good use. Under a joint undertaking with the Department of Trade and Industry and the largest electric company in the Philippines, MERALCO, the Municipality of Cainta started the Water Lily for LIFE Livelihood Program, with the members of the womens groups as participants and beneficiaries. This project used water lilies as raw materials for crafts and products. From harvesting to marketing, this livelihood program has been providing extra income for the mothers of informal settler-families near the waterways who belong to the marginalized sector.
Photo: Water hyacinth plants (water lily) clogging the waterways in Cainta
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Photo: Finished products from the water lily plants
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CHAPTER 4 CONCLUSION
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As early as 1997, the United Nations General Assembly had declared that the United Nations activities should focus on the promotion of private sector involvement in development through public-private partnerships and other interactions. (United Nations Secretariat, 1997) This global paradigm shift has finally arrived in our country, as is evident in President Aquinos Social Contract with the Filipino People which affirms the important role of the private sector as a major partner of the government in attaining the Philippines national development objectives of inclusive growth and poverty reduction. Recognizing the indispensable role of the private sector as the main engine for national development, the Aquino administration identified the implementation of Public-Private Partnership (PPP) as a cornerstone strategy of the national development plan to accelerate the infrastructure development of the country and sustain economic growth11. Through the PPP Center, local governments are gaining the knowledge and skills to take advantage of the opportunities presented by PPP arrangements, especially in the promotion of local economic development. And similar to other global governance trends and national development policies, the successful planning and implementation of the Public-Private Partnerships at the local level requires that the local chief executive is on board. The so-called leadership buy-in in Organizational Development parlance is a must to drive the reforms necessary to make the PPP strategy succeed, primarily because key legislative and administrative officials need to be involved. But whats in it for them? Why must the local chief executive, along with the other key public officials, take the lead in implementing PPP in their locality. Why must they form the PPP Sub-Committee of the Municipal Development Council, and perhaps even the LED Steering
11
Executive Order (EO) No. 8, series of 2010.
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Committee? The answer lies in Transformational Leadership the kind of leadership that will focus more on legacy programs and projects, rather than dole-out politics. The common practice of traditional politicians in providing dole-outs and financial assistance to their constituents to keep them satisfied with their governance needs to be changed. It has to be replaced with the Aquino administrations dimensions of good governance, including transparency, accountability, rule of law, and most specially, participation of the civil society and the private sector. The private sectors support of the government, through PPP arrangements, would support transformational leaders who are committed to promote the general welfare. And these PPP arrangements in local government units have direct implications to the future of local economic development, as is evident in this studys discussion of theoretical and legal frameworks and identification of possible PPP ventures. Cainta envisions herself to become a progressive, prosperous and habitable city of responsible residents. Thanks to the decentralized structure of the Philippine government, the local government of Cainta has the power, authority and resources to make this vision a reality. The researchers hope that this paper would be utilized by the local officials to initiate strategic plans to promote Local Economic Development with the help of active partnerships with the private sector through PPP arrangements, in order to achieve the ultimate goal of having a good quality of life for all in Cainta - A quality of life where all families have adequate food, shelter, water and other basic needs; A municipality where all children have access to schools that have high standards of education; A place where everyone, especially the women, the children and the elderly, have quality and affordable health care; A local government that truly values the spiritual, mental and physical well-being of her people; A locality that is a beacon of
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environmental sustainability and disaster preparedness - a municipality that lives in harmony with nature; And ultimately, a Cainta thats free from poverty!
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BIBLIOGRAPHY
Bartik, T. J. (2004). Local Economic Development Policies. In J. R. Aronson, & E. Schwartz, Management Policies in Local Government Finance (p. 624). Washington, DC: nternational City/Country Management Association. Binza, M. S. (2009). A Public-Private Partnership Model for the Improvement of Local Economic Development in South African Metropolitan Government. The Nelson Mandela Metropolitan University. COA. (2010). 2009 Annual Financial Report for Local Governments. Quezon City, Philippines: Commission on Audit. Department of Trade and Industry. (2008). One Town, One Product (OTOP-Philippines). Retrieved 2011 June from Department of Trade and Industry: http://www.dti.gov.ph/dti/index.php?p=442 Gasser, M., Salzano, C., Meglio, R. D., & Lazarte-Hoyle, A. (2004). Local Economic Development in PostCrisis Situations: Operational Guide. Geneva, Switzerland: International Labour Organization. Nel, E., & Rogerson, C. M. (2005). Local Economic Development in the Developing World: the Experience of Southern Africa. New Jersey, USA: Transaction Publishers. Public-Private Partnership Center. (2012). A PPP Manual for LGUs Understanding PPP Concepts and Framework (Vol. 1). Quezon City, NCR, Philippines : Public-Private Partnership Center. Public-Private Partnership Center. (2012). A PPP Manual for LGUs Understanding PPP Concepts and Framework (Vol. 2). Quezon City, NCR, Philippines : Public-Private Partnership Center. Public-Private Partnership Center. (2012). A PPP Manual for LGUs Understanding PPP Concepts and Framework (Vol. 3). Quezon City, NCR, Philippines : Public-Private Partnership Center. Regmi, R. R. (2008, October 22-23). Public Private Partenrship in Local Development. A Perspective of Private Sector . Kathmandu. Rivenbark, W. C., Marlowe, J., & Vogt, A. (2010). Bookstore . Retrieved December 29, 2012, from ICMA Publications: http://bookstore.icma.org/ Shergold, P. (2012, October). Transforming Government. (M. &. Company, Producer, & McKinsey & Company) Retrieved December 29, 2012, from McKinsey & Company: http://www.mckinsey.com/ Shimomura, Y. (2003). The Role of Governance in Asia. Singapore: Institute of Southeast Asian Studies. United Nations Human Settlements Programme. (2005). Promoting Local Economic Development through Strategic Planning - Volume 2: Manual. Kenya: UN-Habitat. United Nations Human Settlements Programme. (2009). Promoting Local Economic Development through Strategic Planning Volume 5: Trainer's Guide. Kenya: UN-Habitat.
PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta United Nations Secretariat. (1997). Public-Private Partnerships: The Enabling Environment for Development. United Nations. Wikipedia. (n.d.). Publicprivate partnership. (Wikipedia, the free encyclopedia) Retrieved from Wikipedia: http://en.wikipedia.org/wiki World Bank. (2003). Local Economic Development. A Primer. Developing and Implementing Local Economic. Washington DC, USA: World Bank.
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Annex A - PPP Risk Matrix
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Annex B PPP Modalities
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Annex C DILG MC 2011-16
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Annex D Eligible LGU Projects for PPP

PPP Arrangements in LGU - Implications For Future of LED in Cainta - ASOG MPM - ACCI

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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta

Angeles, Ricardo C. Jr. Cavestany, Cody R. Cavestany, Lester G. Ilagan, Ramon A.

Prof. Aurma M. Manlangit Prof. Mary Jane C. Ortega

Chapter 1 - Introduction ...................................................................................................................3

Chapter 2 Policy and Legal Framework

Chapter 4 Conclusion ................................................................................................................35

CHAPTER ONE INTRODUCTION

Table 2: Traditional Funding Modalities and PPP

Profit motivation impetus to ensure efficiency and effectiveness in service delivery

Protection of projects from possible adverse political interferences in service delivery

Wealthiest Municipalities in the Philippines (2009 COA Report)

534 437 435 432 283 217

Equity Gross Income

CHAPTER 2 POLICY AND LEGAL FRAMEWORK

See Annex C - DILG MC 2011-16 Ibid.

See Annex C for LED Program Options

Business Taxes Collection in Cainta, Rizal (in Million Pesos)

Local Economic Development Program 2: Investment in Hard Strategic Infrastructure

Photo: Finished products from the water lily plants

Executive Order (EO) No. 8, series of 2010.

Annex A - PPP Risk Matrix

Annex B PPP Modalities

Annex C DILG MC 2011-16

Annex D Eligible LGU Projects for PPP

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