Our deified PPP strategy is junk in other places

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Try searching for a global review/critique of the PPP, or the public private partnership, and you will be surprised with what you will find.
Progressive economists and liberal commentators in the US, for example, generally view the PPP with suspicion, and the gist of their PPP description is the following :

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• PPP projects enrich the private actors

• PPP projects create bad jobs

• PPP projects rob the taxpayers blind

OMG. We have been living under the impression that PPP is a sure-fire strategy to modernize the country’s fraying infrastructure, serve as a giant economic stimulus and create jobs on a massive scale. Why is the outside world so skeptical of our cherished path to modernization and growth? Can we get some enlightenment cum clarification, please. Our public intellectuals should help debunk the outside world’s skepticism that the PPP does nothing but enrich the private players, create bad jobs and shaft the taxpaying public.

For four long years, the supposed liberating impact of the PPP on a country like ours with a shabby infrastructure (and one sorely needing big-ticket infra projects) has been unquestioned. Our star, high-profile economists have not been heard raising a pipsqueak on the downsides of the PPP. The financial press has never investigated the PPP experience countries that pioneered in it, and countries that also opted to use the PPP as the main and most financially-viable strategy to rebuild their fraying infrastructure.

The silence is surprising. The simple question on why private returns under the PPP are often higher than the rate of government bonds—despite the fact that it is the public sector that absorbs all the risks and challenges—is not even asked.

We have to take note of the fact that some of our high-profile economists have proclaimed themselves crusaders for public good and have been inveigling with passionate intensity against anything that is corrupt, wasteful and irrelevant. These economists have powerful media platforms, too, and they incessantly exploit these platforms to burnish their reputations as crusaders for public good. Why they have missed critiquing the PPP is, then, quite strange, given their wont to bloviate on TV against all supposed evils in the country.

In short, the PPP, absent the empirical evaluation, has been accepted as the key tool to modernize everything from airports to water and irrigation systems. You also have to wonder why the Left —whose list of public evil is longer than a wine list—has yet to give its in-depth take on the many wrongs about the PPP.

A diligent search would also find out that only two tangential points have been raised against the PPP projects. But these do not say anything about the most important thing: the fundamental soundness of the PPP as the key strategy toward modernization and growth.

The first quibble has been on the slow pace of the PPP implementation. Day in and day out, this has been the main issue in the financial press, and the main beef of commentators who think they have patented the right to lob the heavyweight commentaries on growth and development issues.

The second quibble has been on the competence and financial capacity of some of the winning bidders—their inadequacy to undertake the mammoth projects under the PPP. Such controversy is represented by the fight over which consortium or group had the right to undertake the Cebu airport project.

It turns out that the two quibbles do not get into the heart of the main issue: the fundamental soundness of adopting the PPP as the key strategy to growth and modernization.

The validity of the main criticism against the PPP—that it enriches the private players first and foremost—is something that stands out even without the help of an in-depth evaluation.

Take a list of the private sector bidders for the PPP projects and you will see that they are the wealthiest, most—connected oligarchs in the country. In fact, if you have the list of the companies owned by the Forbes magazine dollar billionaires and you have the list of 90 percent of the bidders.

Once our PPP experiment is over and done with, the income gains will not be widespread but severely limited. To the .01 percent of Philippine society mostly. Not only that. What will be primarily enhanced are the airlines owned by the same people, the power companies owned by the same people, the telecommunication companies owned by the same people. The seaports where cargo handling is operated by the same people. And the ever expanding retail networks of the same people.

After the completion of the PPP projects, the construction workers will all go home to where they came from, the wage bonanza short and temporary. Many will go home broke, maimed and disabled.

In an ideal world, the PPP projects would not have passed muster the test of social justice and economic equity.

So it is never too late to look deep into why our PPP verities have been dismissed as virtual scams in the more developed societies.

mvronq@yahoo.com

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12 Comments

  1. The problem with PPP’s is that the govt provides most of the money.Profits goes to the private partners then when the investments goes bad (as in during the GFC or bad construction) then the govt is left paying as the guarantor of those loans.

  2. PPP means that the government dont have the money to build our infrastructures. Para pumogi sa mata nating mamamayan inembento nila itong PPP. Bukod sa kumisyon na matatanggap sa mga investors dahil sa pagpayag sa mataas na singil o ROI sa gagamit, meron pa silang maipagmamalaking proyektong nagawa. Lagareng hapon ika nga.

  3. Why would anyone in his right mind compares the PPP in US and in PH or to any country for that matter. If it did not work in the US, it should not be taken that it will not work for other countries. I believe Private Partnership Project will work as long as the controls are in place, lessons learned are implemented and risks are identified and managed properly. In our democratic society there are many people who find reasons not to act than to act. In Dubai where I am currently working nobody questions the project of the Ruler or Leaders because people see the benefits and it is difficult for anyone to question because of strong leadership. In PH and some countries like Mexico, India, etc. there are many distractors, interested parties than contributors. As a result, there are more delays in the development and further worsening of conditions.
    I will not even question whether the bidders are wealthy individuals or not. The fact that the PPP are mega projects, I would expect the bidders will be big names in the business. Therefore, PPP or any alternate way of modernizing will only be successful if all controls are in place and an audit system is effectively implemented. I am sure there will be specific requirements for bidders to follow. The challenge in any project is the effective implementation of the project management plan, change control management, project execution, various control plans, etc.

    • I would suggest reading on the current news in our country. You have been away too long my friend. PPP won’t work in the Philippine context, we can’t even build a 1 km road without it being riddled with corruption, i cannot even begin to imagine what they’ll do with mega projects.

  4. .01 of Philippine society owns most of our wealth, they can manipulate leaderships of the government so PPP’s projects are for them. When are we going to experience the widespread distribution of Philippine wealth? Most probably when we will have a president who can go against the .01%.

  5. Vicente Penetrante on

    If I may add, in case some people do not grasp my comment, the 3 gists you mentioned nailed what is PPP

    Happy New Year!

  6. It’s the same way they used to deify the ‘privatization’ process. But in reality, there are many projects that should be run by the state and not the private sector.

  7. chthonic monster on

    “there is far more danger in public than in private monopoly, for when govt. goes into business it can always shift its losses to the tax payers, govt. never makes ends meet and that is the first requisite of business”!

    “industrial combination is not wrong in itself, the danger lies in taking govt. into partnership”!

    PPP, piss poor planning!

  8. Anything named Public Private Partnership, PPP, is clearly wrong. In the rest of the world PPP means that government and companies had colluded to steal money from the public. Government cannot successfully run companies. Companies cannot prosper under red tape. A PPP is doomed from the beginning in achieving anything good. Of course they are successful in getting money into the pockets of the individual partners. PPPs under any form should be outlawed.

  9. Your take on philippine economists is right, I dont think they have a clue. Are they looking after themselves, yes of course they are, would they accept a payment to say something in favour that really isnt in favour, yes of course they would, its the filipino way. Its how its always been & is so hard to eradicate. But saying that who in this country ever asks tough questions of government, no one. There should be a weekly programme where top senators are questioned in depth & i mean with tough questions not like what is normally asked of them & then half the time the person asking the question will also help in giving the answer.