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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
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
CHAPTER ONE
INTRODUCTION
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 country’s 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.
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PPP Arrangements in the Local Government: Implications for 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 President’s 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.
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 Public-
Private 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
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 today’s 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 LED’s “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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 Audit’s 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:
1 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. Cainta’s 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
1,493
1,100
903 893
639 524
437 435 432
627 682 670
317 427
513
283
534
217
0
200
400
600
800
1,000
1,200
1,400
1,600
in M
illio
n P
eso
s
Municipalities
Wealthiest Municipalities in the Philippines (2009 COA Report)
Equity
Gross Income
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
CHAPTER 2
POLICY AND LEGAL FRAMEWORK
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 local government units shall be given more powers,
authority, responsibilities and resources. The process of
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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 self-
reliant 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 growth”2. 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 Executive Order (EO) No. 8, series of 2010. 3 A PPP Manual for LGU, Vol. 1, page 3.
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 country’s
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 sector’s 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 country’s 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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-and-
Transfer (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), Rehabilitate-
Operate-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 Ibid, page 5. 6 See Annex B for the key characteristics of the PPP Modalities
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 See Annex C - DILG MC 2011-16 8 Ibid.
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 country’s 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
CHAPTER III
RECOMMENDED PPP PROJECTS AND THEIR POSSIBLE IMPLICATIONS
TO THE FUTURE OF THE LOCAL ECONOMIC DEVELOPMENT OF CAINTA
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 Manual’s table below, several local
executive offices and legislative committees have different responsibilities in the planning and
implementation of PPP ventures.
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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
9 See Annex C for LED Program Options
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 LGU’s 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. It’s 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 Robinson’s 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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.
155 173
188 207
255
2007 2008 2009 2010 2011
Business Taxes Collection in Cainta, Rizal (in Million Pesos)
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
Local Economic Development Program 2:
Investment in Hard Strategic Infrastructure
In his message to local governments in the LGU PPP Manual, the Secretary of Socio-
Economic 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
Cainta’s 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 Manual’s list of Eligible Projects for PPP
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 City’s 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 Center’s laundry. But such PPP
arrangements in public hospitals are often accused of increasing the fees that
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 City’s “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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 Manual’s 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 IBM’s 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
getting bigger and stronger. It provides not only lucrative jobs for Caintaños, but also highly-
skilled 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
Japan’s “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 that’s 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 Caintaños 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 women’s 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
Photo: Finished products from the water lily plants
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
CHAPTER 4
CONCLUSION
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 Aquino’s
“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 growth”11
.
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 what’s 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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 administration’s dimensions of good governance, including transparency, accountability,
rule of law, and most specially, participation of the civil society and the private sector. The
private sector’s 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 study’s 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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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
environmental sustainability and disaster preparedness - a municipality that lives in harmony
with nature; And ultimately, a Cainta that’s free from poverty!
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
BIBLIOGRAPHY
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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
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
Annex A - PPP Risk Matrix
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
Annex B – PPP Modalities
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
Annex C – DILG MC 2011-16
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
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PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta
Annex D – Eligible LGU Projects for PPP
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