“Sustainability of Private Public Partnerships in Philippine Infrastructure Development in

alignment to 2030 Sustainability Development Goal (SDG) Agenda”

An Economic Analysis Case Study

Mark Joey S. Ayson

Environmental Forestry, UPLB

INTRODUCTION

Nature of Sustainable Development

Sustainable development has become a catchphrase among academics and business. The

term "sustainability" has been used in scholarly papers, local government and company

boardrooms, and public relations officers' offices for decades. Unfortunately, sustainability has

become a "fashionable" notion in principle, but it is too expensive to execute for large

organizations, corporations, and local or national governments (Adelman, 2018).

The development of the notion of sustainability is sometimes disregarded. Although the

evolution and history of a notion may appear to be inconsequential, it may help us predict future

trends and concerns and make the twenty first century “the Sustainable Century” (Elkington,

1997 as cited by Paul 2008).

Establishment of Sustainable Development: Goals and Ideals

The Human Environment meeting in Stockholm, Sweden in 1972 became the first

complete worldwide conference devoted only to environmental issues, with 113 governments

and representatives from 19 international organizations in attendance (Ziai, 2016). The linkages

between environment and development were addressed by 27 experts, who said that "while there

were tensions between environmental and economic concerns in particular settings, they were

inherently two sides of the same coin" (Mensah, 2019). This 1972 conference was critical in
securing international agreements on ocean dumping, ship pollution, and trafficking vulnerable

and endangered species. Endorsing the "Stockholm Declaration on the Human Environment,"

which incorporats progressive ideas such as Principle 13, emphasizing the need to integrate and

analyze the development planning for environmental preservation (Robert, 2005). According to

the study, "the Stockholm Conference's use was limited since environmental preservation and the

need for growth, particularly in poorer nations, were considered as conflicting concerns and dealt

with individually and uncoordinatedly" (Mensah, 2019). Some critics such as Egelston (2012)

suggest first distinguishing the trade-offs between our natural resources (environment) and

economic development than focusing in making linkages between the two. Following the

Stockholm Summit, according to UN archives, nothing was done to integrate environmental

problems into development plans and programs. It was clear that a more comprehensive

approach, one that addressed both economic development and environmental concerns, was

required (Robert, 2005). According to Vogler (2007), the United Nations Conference on

Environment and Development (UNCED), which took place in Rio de Janeiro, Brazil, in the

summer of 1992, was became a historic gathering of various heads of state, private and public

organization all over the world. The Conference's principal outcomes were the Rio Declaration,

Agenda 21, and the Commission on Sustainable Development (Lonnroth, 2016). The

conference's main topic was sustainable development, albeit there was some disagreement about

what that meant. The UNCED process attempted to aid in the achievement aiming to create a set

of principles and plan of action with sustainable development as its framework (Zusman, 2019).

At the Kyoto climate change summit in 1997, industrialized nations

agreed on defined goals for decreasing greenhouse gas emissions, resulting in the Kyoto Protocol,

a fundamental framework with specifics to be negotiated over the next several years. The United

States recommended that emissions be maintained rather than lowered, whereas the European

Union wanted a 15% cut (Ziai, 2016). The United States, on the other hand, the only country that

disagree on the application of the Kyoto Protocol. With the European Union ratification of the

Kyoto Protocol however resulting to its inadequacy in terms of EU’s CO2 emission which

remains unchanged for a long time. In general, the outlook for 2030 is poor.

The Millennium Summit in New York City on the other hand, continue the goal or

agenda of UNCED on developing the Millennium Development Goals, which they put a 15-year

deadline and making the 1990 agenda of UNCED as their framework or baseline. According to

these 15-year goals, "the world's poor's livelihoods and well-being are increasingly portrayed in

terms of access to opportunity and a lack of instability and vulnerability" (Adger, 2007). They

show the economic, social, and environmental pillars of long-term prosperity in a more concrete

way (Lagoarde-Sebot, 2020). Unfortunately, according to Lagoarde-Segot (2020), the world still

has to confront "this deadly combination of apathy and concealment, and eventually rebuild the

trust between people, business, and government," which is critical if the Millennium

Development Goals has a deadline of years.

Further, on the year 2002 in Johannesburg, the World Summit on Sustainable

Development (WSSD) became the focal point on the framework of creating alliances among the

United Nations government, along with both Government and Non-government organization, in

pooling resources addressing global-environmental, health, and poverty challenges. The WSSD

maintained the framework of Millennium Development Goals just adding few rules or goals,
such as reducing the number of people without basic sanitation, minimizing chemical-related

harmful impacts, and preventing biodiversity loss (Von Frantzius, 2004).

There are no valid argument that environmental protection has always been ignored in

favor of reducing poverty chances. As what the mountain people mention “We want the change

and development you are mentioning and planning, however, there are no ‘Us’ in that

development”. Rather, it appears that the demand for environmental protection and sustainability

in the name of human development has evolved into a more rallying cry in improving the lives of

the world's poorest people now and in the future (Lee, et.al., 2016).

SDG in the Philippine Context

Under ex. President Benigno Aquino III changed Philippine government policy on

public-private partnerships in order to encourage more participation in the development and

operation of essential infrastructure projects. This is in addition to the objective of boosting

infrastructure spending. These PPS projects are funded under the build–operate–transfer (BOT)

approach. Under the BOT model, private corporations compete for a government agency's

concession to fund, design, and construct a significant public project such as a transportation

system or utility. The winning private company (concessionaire) administers the facility for a

fixed period, generally decades, before taking it over to the government.

(Mohieldin 2018) discuss how governments commit to the Sustainable Development

Goals (SDGs) in a balanced and integrated manner to achieve progress on the three important

parts of the society: The economy, social, and the environment. "The SDGs are cross-cutting and

ambitious, necessitating a revolution in how we work together," according to (Mohieldin 2018).

This plan pushes the public to radically review or change the countries level or kind of

investments for both public and private sectors.

Nature of Public-Private Partnership

The beginning of public-private partnership is still unknown whether when or who started

it (Bovaird, 2010). This strategy has been in the works in Western Europe for some time, but the

parties concerned are unaware of it. In 1989, California became the first state to approve a law

allowing public-private partnerships, followed by Virginia in 1995.

A public-private partnership (PPP) according to (Hodge & Greve, 2017) is a contract

between the government and a private enterprise to fund, develop, execute, and administer

infrastructure and services that were previously supplied by the government. This agreement

provides risk sharing between the two parties as well as cost savings while reaching project

development objectives. This type of structure is pre-built to ensure an acceptable return on

investment for the private sector.

PPP improves the public sector in both monetary and non-monetary ways (Hodge &

Greve, 2017). It allows people to combine the finest aspects of their race, hierarchy, or class.

Improvements in resources, skills, market awareness and knowledge, and lastly technology are

being provided by the private sector. While public sector under a controlled framework

according to Mehra, (2020) offers possibilities to participate in strategic infrastructure

development while safeguarding the public interest . PPP also solves the public sector's limited

financial capacity allocated for local infrastructure or development projects, and it allows public

fund to be used for other local priorities (Mehra, 2020). Also, Mohieldin (2018) mentioned that
PPP catalyzes both sectors to gain efficiency improvement and project implementation processes

in delivering services to the public.

PPP on Philippine Economy

The Philippines passed Asia's first Build-Operate-Transfer (BOT) statute (Republic Act

(RA) No. 6957) in 1990 (Sharma, 2012), making it the first PPP jurisdiction in the area. The

legislation was revised in 1994 by Republic Act No. 7718, which contained new concepts such

as BOO (Build-Own-Operate) (Kintanar, 2003). Between 1990 and 2017, PPP projects in the

Philippines totaled 56,073 million dollars (149 projects), according to the World Bank PPI

Database cited by (Paul, 2012). The Philippines is the sixth largest emerging economy in terms

of investment value. Development investment peaked in 1997, and the subsequent drop in 2002

followed a pattern found in other emerging and developing economies. According to the World

Bank PPI Database, the energy sector accounts for 73% for all the project and 67% for the total

investment of all the PPP projects in the Philippines. Furthermore, from 1990 to 2017, the top six

sponsors in the Philippines by investment value were all local corporations, accounting for 62.7

percent of the total $ 35,143 million invested (Corong, 2013).

Objectives

This analysis is to figure out the sustainability of Private-Public Partnership (PPP) in the

Philippines Infrastructure Development in alignment to 2030 Sustainable Development Goals

(SDGs). The aim of this analysis is to identify if the 2030 Sustainable Development Goals are

sustainable and if it would benefit both sectors, Public and Private Sectors.
The goal of this analysis is to examine the following

1. Is the 2030 Sustainable Development Goals being sustainable and would it benefit both

sectors, Public and Private Sectors?

2. Do the public could benefit from the 2030 Sustainable Development Goals?

3. The advantages of PPP in the Philippines infrastructure Development

PPP and 2030 SDG Agenda in the Philippines Context

Although there are few studies on the long-term feasibility of Private Public Partnerships

in Philippine Infrastructure Development in line with the 2030 Sustainable Development Goals,

there are various recordings and publications that describe the SDGs' viability.

Economy

According to (Asian Development Bank 2017), growing nations throughout the

area would need to invest up to $26 trillion in infrastructure projects ranging from

transportation networks to sustainable clean water by 2030 to maintain growth,

alleviating poverty, while mitigating climate change (Business World, 2017). According

to the Asian Development Bank (2017), Southeast Asia's infrastructure investment needs

at the time were $2.759 trillion, or around $184 billion per year — or 5.0-5.7 percent of

GDP.

According to Corong (2013), President Rodrigo R. Duterte's government aims to

sanction or spend up to P8.2 trillion on infrastructure projects through 2022, when growth

would slow from the previous six years' average of 6.2 percent. Collaboration with a

private enterprise would aid the administration's infrastructure project financing. PPP

would be a realistic choice in this case. Duterte, on the other hand, turned down the PPP

in favour of his own ODA (Official Development Assistance) strategy (Capuno, 2020).

Society and People

According to (National Economic and Development Authority 2020), ODA is

defined as "an act exempting Official Development Assistance (ODA) from the foreign
 debt limit in order to facilitate the absorption and optimal utilization of ODA resources,

amending for the purpose paragraph 1, section 2 of Republic Act No. 4860, as amended."

Furthermore, according to Section 4 of the Republic Act (RA) No. 8182,

generally known as the "Official Development Assistance Act of 1996," says that all

earnings from ODA assets should be allocated in ensuring that there is equal economic

growth in all provinces under prioritized development projects. This is to ensure that

local issues such as land area, overpopulation, resource scarcity, education, and poverty

rates would be taking into account along with enhancing its economy.

Finally, Asian nations, such as the Philippines, should step up efforts to raise

awareness of the 2030 Sustainable Development Goals (SDGs) at all levels of

government. The best way to raise awareness is to employ multimedia, such as television

and radio, as well as social media (Sunam, 2018).

FRAMEWORK

When researching sustainability, there are several frameworks to consider. (Enders 2015)

suggests that compassion be used instead of efficiency. According to Ender (2016), the only

solution is to decouple economic efficiency from environmental consumption if one sector does

not want to give up the goal of "(higher) economic development" while still seeking

"sustainability." Without innovation, such de-linking would be impossible, according to Ender

(2016).
 (Enders 2016) goes on to say that the fundamental or significant difficulty with non-

"sustainable" progress is the never-ending loop of more output and more need with no measure,

timeline, or endpoint, none of which can be remedied by increasing efficiency.

CONCEPTUAL FRAMEWORK

Economic
Sustainability
Growth

Innovation

Figure 1. The Linkage of Sustainability and Economic growth for Innovation approach

Figure 1 show the framework that is applicable for the Philippines sustainable

developmental growth. In the Philippines, economic growth always has a corresponding

consequence behind it. In instance, when a certain city develops, its environment suffers

especially the ecosystem, trees, wildlife, etc. Businesses thrived all across the Philippines,

regardless of their physical location. In the Philippines, on the other hand, sustainability is a

difficult task, especially given the country's low resources. Population growth has reached an
unsustainable level, according to the World Bank, with resources insufficient to meet demand.

This type of economic imbalance depletes resources and goes beyond the needs of the

environment. In addition, the Philippines' infrastructure has fallen below 3% of its maximum

GDP. This was caused by the Asian financial crisis of 1997, which continues to have an

influence on the Philippines' GDP (Business World 2017). As the two variables have a negative

consequence on their own respective field, their linkage should not be broken, because according

to (Enders 2016) these two variables cannot be conceived without innovations.

According to a 2016 study by the United Nations Industrial Development Organization,

innovation is crucial for economic success. On the other hand, the development goals for a

country's potential to originate and deploy optimal technology differ greatly. Furthermore, a

country that has effective access to technology at all levels, from local to national, and across all

industries may gain enormously from technical growth and economic success. According to the

United Nations, innovation requires a favorable enabling environment, which includes both

physical and human capital development, research and development investment, policy and

regulatory frameworks, and other factors.

 RESULT AND DISCUSSION

Advantages of Private-Public Partnership

According to Ito (2018), an amount large enough to fund other equally vital operations

will help the government budget significantly. It's mostly due to improved access to private-

sector capital. Second, PPP permits more precise risk allocation. Public-private partnerships can

assist both sides assign risk more efficiently, based on the parties' competitive advantages and

project features, to meet the rising need for infrastructure. When PPP is firmly established, its

efficacy is defined. PPP contracts are also efficient since they priorities outcomes above inputs.

A deal like these benefits both the government of the country and the private enterprises in

accordance with their contract. It is more concerned with the spread of development and their

long-term viability than with resource exploitation.

PPP provides a full integration that gives incentives to a unit to make sure that they fulfil

each project function, such as project design, construction, operation, and maintenance, in a cost-

effective manner (Azzorpardi, 2021). PPP also allows the government to transfer project risk to a

private company that can better manage it, lowering total costs. PPP is also concerned with

service delivery. According to (World Bank Institute, 2014) and (Pongsiri, 2002), a PPP

enterprise concentrates on providing services without delaying goals or encountering the

constraints that occur in the public sector. PPP contracts also specify outcomes rather than

inputs, allowing for greater flexibility. PPP also allows private companies to fully utilize their

assets. They are given a provision to use facilities in low cost to minimize cost of service and

increase and sustain multiple incomes streams. PPP contracts may also serve as a springboard for

obtaining more funds (Azzopardi, 2021). According to (Sharma, 2012), charging consumers may
generate more or more money, and it can easily be done better with private operations than with

governmental. Finally, PPP contracts require both parties to be accountable.

Adaptation of Collaborative Structure in line with SDG 2030

If the 2030 Agenda only revolves on governmental based frameworks, according to

(Sunam 2018), is is more likely will become unfeasible. In order to attain real-world benefits of

"leaving no one behind," government institutions should invest for stronger national integration

and localization of SDGs, along with the participation of different stakeholders on multiple

levels.

According to (Meuleman & Niestroy 2015), governments must build and implement

collaborative and inclusive frameworks that can accommodate a diverse variety of partners and

sectors at various levels in order to fulfil the 2030 Agenda. According to Sharma (2012), a lack

of coordination among multiple stakeholders is one of the barriers to building partnerships,

which restricts stakeholders' ability to respond more effectively to concerns about the 2030

Agenda's implementation. According to (Sunam 2018), collaboration strategies help stakeholders

deal with opposing expectations and move forward with implementation.

Public-Private Partnership Risk allocation

Government when entering PPP should first recognize if the contracts are inefficient will

be a source of unsuitable risk in its allocation (Trebilcock, 2015). Risk allocation as explained by

Hayford (2006) to the private partner and its multiple stakeholders will result to a downside and

could cost higher than necessary (Sharma, 2012).

 If the hazards and downsides materialize due to government’s steps on taking risks

allocation, they have no choice but to raise the taxes to pay for the unnecessary cost or rather

limit the services to meet its responsibilities. While if these risks are the responsibility of the

private sectors, they will just give the burden to the government or by giving higher premiums

directly to the consumers (Pongsiri, 2002).

Government and Public institution around the globe recognize the collaborative effort of

private sector in which some risks are shared between the two. Many states, however,

historically believed that privatization meant to give the burden of allocation and distribution

only to the private sector (Faulkner, 2004). The government idea is that, when the competitive

tension becomes hyper, the least or the inferior competitor will receive the risk because they

have no power to refuse nor ignore it (Azzopardi, 2021). When the government maintains a high

degree of competitive tension, risks are eventually assigned to the party least able to refuse them,

rather than the party most equipped to deal with them (Azzopardi, 2021).
CONCLUSION

Philippine should speed up infrastructure development, which is trailing behind its

ASEAN counterparts. Dutertenomics' current major concerns in terms of public sector

infrastructure development are not securing economic means through support from capacity-

building financial firms and bilateral donors like the Asian Development Bank (ADB), Japan,

China, Korea, and the Asian Infrastructure Investment Bank, nor in government budget through

tax reform. The Philippines, on the other hand, is no exception, as developing nations' wide

macroeconomic downside risk becomes obvious. The PPP environment may suffer as a result of

continuous inflation and devaluation of peso. Although Philippine government bonds are

presently classed as investment grade, the cost of acquiring funding might rise if the rating is

reduced.

The shift in infrastructure development of PPP in 2010 and PPC (Public – private

collaboration) in 2017), provoked debates in the Philippines regarding "PPP vs. ODA," but

expecting the government to provide all necessary infrastructure in a country that lags behind its

ASEAN peers is impractical. As a result, the argument is no longer about how to create

complementary public-private connections while taking into consideration the unique

characteristics of each project either environment or other PPP/ PPC on a local and global scale.

Hence, the Philippines may consider promoting "PPP and ODA," with PPP as reinforcement and

ODA as a booster.

The criteria of a PPP project’s success or failure are based on whether it is efficient or if

effective infrastructure services can be provided at a reasonable price or within the allocated

budget of the private investors or partners. Along with these criteria if the interest of the public

are protected and secure while the construction, operation, and the maintenance are being

handled.
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