True partnership

It is the declared policy of the State to recognize the indispensable role of the private sector as the main engine for national growth and development and provide the most appropriate incentives to mobilize private resources for the purpose of financing the construction, operation and maintenance of infrastructure and development projects normally financed and undertaken by the Government. Such incentives, aside from financial incentives as provided by law, shall include providing a climate of minimum government regulations and procedures and specific government undertakings in support of the private sector.”

Thus reads the Declaration of Policy of Republic Act No. 7718, or the Amended Build-Operate-Transfer Law enacted in the early 1990s, when the country’s development was nearly crippled by the lack of new infrastructure due to the economic blight and short-sighted policies of the 1980s.

RA 7718 remains in effect and is the conceptual basis of the Aquino administration’s economic centerpiece, the Public-Private Partnership program. But developments on the ground indicate that policymakers have strayed far from the philosophy of the private sector as a partner. If anything, recent bumbling attempts to roll out PPP projects for key pieces of infrastructure have turned the relationship between the state and private investors into this: the state as taskmaster, and the private corporation as beast of burden.

Take, for example, the government’s most recent essay into the PPP scheme—the extension of Line 1 of the Light Rail Transit system. On paper, the project looks straightforward: A private investor will shell out P60 billion to build an 11-kilometer southward extension of LRT-1 (Southeast Asia’s oldest light rail system) in exchange for the right to profit from its operations over a period of three decades. But the government tucked into the proposed contract a number of “deal-breakers” that scared off even the bravest of investors.

Specifically, the government wanted the bid winner to shoulder the estimated P2 billion in annual real property taxes (a real problem, considering that the investor will have to deal with fickle-minded local government units). It also imposed limits on the rate at which the investor could raise train fares (in itself a politically charged issue). And it turned a deaf ear to pleas from prospective bidders for these prohibitive rules to be eased. The result was predictable: All but one conglomerate pulled out of the bidding (and submitted a “conditional bid”).

Of course, private investors remain keenly interested in helping fund the country’s most important infrastructure elements, like airports, toll roads and mass transit systems. Recently the brothers Jaime Augusto and Fernando Zobel de Ayala descended from their gleaming office tower to ride the LRT-1 along with the rush-hour crowd. Their verdict: It’s a project worth their time, effort and money … but under the right regulatory environment and a more acceptable level of returns on their capital.

Some businessmen are known to love their country, but we cannot count solely on their altruism. They are, after all, tasked with making their money grow. They have a responsibility to their stakeholders to generate an acceptable return on investment in relation to the risks involved.

To be sure, policymakers—smarting from the embarrassment of the LRT-1 project’s failed bidding—have revised the terms to take into account the private sector’s earlier concerns. But the same shift—a return to the mind-set of true partnership—must happen for the entire PPP program.

We need trains that are not packed like sardine cans, that run on time, that do not break down every other day. We need airports that can serve the booming number of tourists and Filipino travelers. We need highways that can accommodate the huge number of private and public vehicles, and ease traffic congestion in the cities. And we need them fast.

Big-ticket infrastructure projects will create thousands of direct jobs, and hundreds of thousands more in indirect, downstream and upstream employment. It is one of the keys to creating true inclusive growth for the Philippines. Thus, the shortcomings of the PPP program must be addressed expeditiously.

The last thing anyone wants come 2016 is a legacy of a clean and honest government, and a constituency that remains just as impoverished as it was six years earlier. Under such a scenario, whatever gains of “daang matuwid” can easily, quickly, be undone.