Building the Capacity for Local Public-Private Partnerships

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A key development priority of the Philippine government under its “Build, Build, Build” program is to accelerate high-impact infrastructure projects that will keep up with the needs of the country’s rapidly-growing population and improve the quality of its existing facilities.

These projects are set to be financed mainly through public resources and official development assistance, yet the government also acknowledges the importance of drawing in private investments for these efforts. However, the full potential for public-private partnerships (PPP) in improving and expanding the country’s infrastructure remains largely untapped.

Local Government Units (LGUs) are playing a more central role when it comes to infrastructure development in line with the government’s directive and the trend on decentralization, wherein local governments are assigned with increasing authorities, responsibilities and resources. As this applies also to PPP projects, LGUs may capitalize on the huge potential offered by PPP for their infrastructure requirements. To begin with, there are a lot of benefits that they can get for embarking on PPP, like the optimized risk allocation, wherein risks are borne by the party who can best manage it.

On the other hand, a PPP project can also be complex to prepare and take a considerable amount of time to implement. It moreover requires specialized skills, which are not always available, particularly to LGUs where PPP is still an undiscovered financing mode for local infrastructure projects.

The primary avenue for private sector participation is outlined in the government’s PPP program, governed by laws on Philippine Build-Operate-Transfer and Joint Venture Agreements. The Public-Private Partnership Center of the Philippines (PPP Center) is at the helm of this program – facilitating and assisting PPP programs and projects at the national, regional and local levels.

In recent years, CDIA has established a close cooperation with the PPP Center, driven by their common objective of supporting local governments in the country through advisory services, technical assistance and capacity development.

CDIA, apart from having supported nine cities in the country in infrastructure project preparation and financing, has taken steps to collaborate with PPP Center on a broader, yet targeted capacity development program aimed at improving the capacity of LGUs to plan for local PPP projects and increase their proficiency in fiscal management.

Targeting to address some of the key challenges faced by local governments in implementing PPP projects, the PPP Center and CDIA have implemented various activities in the last two years:

  • Stakeholder consultation for local PPP projects together with the League of Cities of the Philippines to analyse gaps at the meso level that hamper the realization of PPP projects. Capacity building of technical staff, information sharing, and support on regulatory aspects were key hurdles identified by both the public and private sectors.
  • Workshop on Project Concept Notes to aid local governments in decision-making and pushing forward their respective PPP projects at the initial project development phase. Six local governments were oriented on the components of a Project Concept Note, a document required for seeking project preparation assistance from development partners and government financial institutions.
  • Financial Modelling Training to equip local governments on financial statements, assumptions, calculations and projections relative to their PPP projects. The training has helped the participants get a clearer picture of the true financial scope of their projects, which would be advantageous to better market their project ideas to private sector partners. At the same time, the exercise has allowed them to have a more solid information that would come in handy during negotiations with private partners.
  • Training on Joint Venture Agreements in response to the observation that local governments in the country tend to do more PPP projects via joint ventures. A set of training activities that will help key local personnel to engage effectively on joint ventures has currently been initiated.
  • Development of PPP Guidebook that will help to enhance the knowledge of local governments on PPP, with actual case studies that other municipalities can benchmark with, and learn lessons from.

Since June 2017, Mr. Gebhard Ott has been working on behalf of CDIA as Development Advisor in the PPP Center, and together with them developed strategies and implemented the above-mentioned activities to aid local governments in preparing and implementing infrastructure projects through PPP mechanisms.

“The capacity building activities that CDIA and the PPP Center provide to local governments can improve how public resources can be managed when it comes to projects with the private sector,” said Mr. Ott.

CDIA’s advisory support has been well-received by the PPP Center, particularly its assistance to building the capacities of local governments.

“The collaboration of the PPP Center with CDIA is very timely with the renewed policy direction of the government in the implementation of PPPs in the country to reach out to local implementing agencies. This initiative has led to the enhancement of the PPP Center’s capacity building program for local government units (LGUs) in developing and implementing local PPP projects,” said Feroisa Francisca T. Concordia, Director IV, Capacity Building and Knowledge Management Service, PPP Center.

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