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PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

1

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

Table of Contents

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

2

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

CHAPTER ONE

INTRODUCTION

3

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

4

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.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

5

Government: Implications for the Future of LED in Cainta 5 Understanding PPP The concept of PPP

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.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

6

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

7

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

in the table below. Table 1: Types of Public-Private Partnership Contracts Table 2: Traditional Funding Modalities

Table 2: Traditional Funding Modalities and PPP

in the table below. Table 1: Types of Public-Private Partnership Contracts Table 2: Traditional Funding Modalities

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

8

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

9

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

Government” are as follows:

Development

in

1.

a

much

better

and

larger

use

of

alternative

South

African

Metropolitan

market-line

service

delivery

mechanisms like outsourcing, privatization, partnerships, joint ventures, etc.;

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

10

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

11

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.

Settlements Programme, 2009)

(United

Nations

Human

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

12

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.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

13

Locale of the Study: The Municipality of Cainta, Province of Rizal The Most Populous and one of the Wealthiest Municipalities in the Philippines

and one of the Wealthiest Municipalities in the Philippines The first-class urban municipality of Cainta in

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)

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

14

1,600 1,493 Wealthiest Municipalities 1,400 in the Philippines (2009 COA Report) 1,200 1,100 1,000 903
1,600
1,493
Wealthiest Municipalities
1,400
in the Philippines (2009 COA Report)
1,200
1,100
1,000
903
893
800
682
670
627
639
524
534
600
513
427
437
435
432
317
400
283
Equity
217
200
Gross Income
0
in Million Pesos
Municipalities
Municipalities

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

CHAPTER 2

15

POLICY AND LEGAL FRAMEWORK

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

16

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:

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

17

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

18

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.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

19

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”.

4 Ibid.

Pursuing this

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

20

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

21

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. 2011-16 7 , 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.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

22

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.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

CHAPTER III

23

RECOMMENDED PPP PROJECTS AND THEIR POSSIBLE IMPLICATIONS

TO THE FUTURE OF THE LOCAL ECONOMIC DEVELOPMENT OF CAINTA

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

24

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.

offices and legislative committees have different responsibilities in the planning and implementation of PPP ventures.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

25

Government: Implications for the Future of LED in Cainta 25 Cognizant of the high level of

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

Options 9 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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

26

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.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

27

Business Taxes Collection in Cainta, Rizal (in Million Pesos)

207 188 173 155
207
188
173
155

255

Business Taxes Collection in Cainta, Rizal (in Million Pesos) 207 188 173 155 255 2007 2008

2007

2008

2009

2010

2011

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.

Local Economic Development Program 2:

Investment in Hard Strategic Infrastructure

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

28

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

29

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

30

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

31

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.

and Cagayan de Oro can serve as benchmarks for Cainta. B. Business Process Outsourcing (BPO) and

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

32

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 18 th 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-

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

33

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.

near the waterways who belong to the marginalized sector. Photo: Water hyacinth plants (“water lily”) clogging

Photo: Water hyacinth plants (“water lily”) clogging the waterways in Cainta

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

34

the Local Government: Implications for the Future of LED in Cainta 34 Photo: Finished products from

Photo: Finished products from the water lily plants

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

CHAPTER 4

CONCLUSION

35

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

36

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.

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

37

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

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

38

environmental sustainability and disaster preparedness - a municipality that lives in harmony

with nature; And ultimately, a Cainta that’s free from poverty!

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

BIBLIOGRAPHY

39

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PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

Annex A - PPP Risk Matrix

41

PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta Annex A

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

42

PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta 42

PPP Arrangements in the Local Government:

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Annex B PPP Modalities

PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta 43 Annex

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

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Annex C DILG MC 2011-16

PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta 44 Annex

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

PPP Arrangements in the Local Government: Implications for the Future of LED in Cainta 45

45

PPP Arrangements in the Local Government:

Implications for the Future of LED in Cainta

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Annex D Eligible LGU Projects for PPP

in the Local Government: Implications for the Future of LED in Cainta 46 Annex D –