Protecting the essence of PPPs

For several decades, the Philippines has relied on public-private partnerships (PPPs) as a catalyst for progress- a key enabler of infrastructure development through collaboration between government and private sector to improve quality of public services and consequently, stimulate growth.

The Philippines pioneered the involvement of the private sector in public infrastructure and development projects in Asia when it enacted the Build-Operate-Transfer (BOT) Law (RA 6957) in 1990. According to a report by the Asian Development Bank, around 116 PPP projects from different sectors from 1990 to 2019 have successfully achieved financial closure. The total investment made in these PPP projects is estimated to be around $44 billion.

When President Ferdinand Marcos Jr. took office, the significant contributions of PPPs to our country’s economy were further highlighted as part of his 10-point agenda for economic renewal and long-term growth. President Marcos Jr. emphasized the need to “encourage private sector engagement and investment for the benefit of the public above all” and “provide legal and regulatory support to public-private partnerships” – a laudable move to address infrastructure gaps and drive economic progress.

We have repeatedly seen how PPPs have become instrumental in bringing life to large-scale projects, particularly in the fields of infrastructure, transportation and social welfare. However, these collaborative efforts are now under significant threat due to a proposal to expand the Commission on Audit’s (COA) jurisdiction over private entities.

Senate Bill 2907 seeks to expand COA’s powers to audit private entities engaged in partnerships with the government as well. Aside from the fact that the proposal goes beyond the COA’s constitutionally prescribed limits, it also encroaches on the autonomy of private entities. These risks discourage key local and foreign investors and threaten the realization of priority PPPs of the country.

The proposed amendment compromises the collaborative nature of PPPs and jeopardizes its very essence.

While the intent of legislative oversight and transparency is laudable, the implications of such a proposal could adversely impact investments by the private sector and potentially stall developments in major infrastructure projects and key partnerships.

PPPs clearly define the roles of the involved parties from the public and the private sector. To my knowledge, PPP agreements already include built-in frameworks overseen by the PPP Center and implementing agencies. Subjecting the private sector to government audits effectively blurs lines of distinction and creates an environment of uncertainty for both parties. This can also have chilling effect on the private sector, potentially discouraging them from supporting the government’s agenda and thus derailing years of progress.

Private sector confidence is nurtured and sustained by consistent rules in a stable regulatory environment. Subjecting private entities to unwarranted and unnecessary scrutiny creates a discouraging environment for business and investment activity.

It has long been established that PPPs thrive in an environment of mutual trust and confidence. Under these partnerships, the public and private sectors take on complementary roles, working together to facilitate growth and development for the benefit of the public.

By altering the framework under which PPPs operate, the proposed legislative amendment risks damage to years of progress and collaboration. Passing such an amendment also goes against the priority agenda of the Marcos, Jr. administration, which has made significant strides in promoting PPPs.

On a global scale, this could also hurt the Philippines’ reputation as a lucrative and stable investment destination. It has long been established that collaboration between the public and private sector enables national progress. With the Philippines aiming to become an upper middle-income country, such legislative amendments are not only discouraging for investors but also potentially damaging to the years of development and progress both the public and private sectors have worked so hard to achieve together.

It is imperative that we bring forward a strategic approach to enhance transparency without stifling private sector participation. I appeal to our policymakers to consider the broader implications of such amendments and ensure that legislative action works to enable nation-building instead of derailing it.