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Current Discourse in Infrastructure Policy in the Philippines: Interrogating Collaborative Issues in the

Context of Regional Futures”

Primer C. Pagunuran

Abstract. The paper imparts the desired groove that is enabling for the trajectory and future spot of private infrastructure in-country over decades of apparent failure resulting in a ‗public-private sector Divide‘ that pits governments and private project proponents in either a tug-of-war or in an institutional disconnect. It begs answer to the wolf‘s cry – ‗why public-private partnerships in infrastructures fail‟? Instead, let there be an Asia-Pacific collaboration that plays out in full bore by integrating standards or guidelines for private infrastructure across jurisdictions in at least two pivotal concerns, namely: 1) uniform policy and 2) a ‗satisficing‘ investment opportunity, to chop an idea from Simon. Some mixed research methodologies were employed in this investigation but it largely relied on qualitative research as well as discourse analysis. The paper‘s findings show peripheral evidence of a so-called ‗backlash against private infrastructure‘ (Gomez-Ibanez, Lorrain, and Osius, 2004) occurring at varying levels in the immediate environs of the infrastructure development scene that necessitates drawing up of policy options, choices, even lessons from the regional infrastructure world by governments. Specifically laid-down pre-conditions for a successful infrastructure program are examined as ‗navigational aids‘ from which to chart new directions or reforms. Another set of policy recommendations is given in this seminal work against which sound infrastructure policy agenda will be tested. In sum, a new ‗legal, institutional, and policy construct‘ will be accomplished by legislative fiat that collapses all the common causes of failures in public-private partnerships and build better institutions to re-start a new milestone in infrastructure history. This humble work professes to be an original and relevant contribution to knowledge largely on its design to formulate a consensus and a currency to codify a ‗magna carta‘ for private infrastructure not just as a local development agenda but more importantly, as a regional prototype given contemporary global trends. If there were to be any positive future for private infrastructure across time, boundaries, and jurisdictions, then it should be the case for collaborative sharing of domestic experiences and consensus by local ‗champions‘ and these case studies form part of inference and discourse analyses on the subject. To the issue at bar on how to achieve a level of dynamic and vibrant infrastructure environment, there must prescribe what Donahue terms as ‗organizing principles over the public or private performance of collective tasks‘ given that choices or decisions by governments have to be made. This paper attempts to open a policy window and take a good aim at this ‗Pacific Rim of fire‘ in privatization and infrastructure failures, as if it were. No longer shall there be constant conflicts between private providers and the governments even while privatization decision is in essence one of ‗private means, public ends‘ (Donahue, 1989). Shared articulation of sound infrastructure policy agenda and any perceived stimulus for local and regional development must tend toward a joint, coordinative, and collaborative work in such a call for a policy template on private infrastructures and privatization deals that could be utilized across regions, continents, and borders.

Keywords: private infrastructure agenda, public-private partnership, privatization failures, infrastructure

policy futures, magna carta for private infrastructure

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“Current Discourse in Infrastructure Policy in the Philippines:Interrogating Collaborative Issues in the

Context of Regional Futures”

Primer C. Pagunuran

―Infrastructural power thus becomes the quintessential indicator of modern statehood‘‘ (Agnew, 2009: 117).

Prefunctory

This seminal or exploratory work attempts to bring to the surface a working notion of the policy discourse needed to push privatization, public-partner partnership, or similar contractual arrangement in terms of why they fail, the backlash in privatization so that certain conditions are formulated for a successful infrastructure program that in turn will serve as ‗navigational aids‘ for governments or economies otherwise below the performance chart. The current thrust in private infrastructure in the Philippines leaves much to be desired. It has every indication of operating on the side of failure as though this particular in-country perspective plans to fail each time a big-ticket public-private partnership or privatization deal is forged. And when it fails as to indicate apparent privatization backlash, one tends to ponder how another in-country perspective within the rim appears to gravitate around a consensus amongst actors or institutions. So what currency is in use? Answers must find themselves in the realm of social, politics and law from a rim-perspective if only to unbundle some of the moral, social, political, legal, and even institutional challenges to a level playing field as one former National Security Advisor, Jose Almonte espoused for good governance. As much as one could contemplate of a regional infrastructure world, the presupposition that the more developed countries fare better than the developing countries informs of evidence that the former actually incorporates the development agenda of the latter bolstering political notion that collaboration or integration is the new name of the game. And it might rightly be so. As if in that deep rush or great leap in search for impetus for regional cooperation through ‗shared infrastructure‘ could be anywhere that dominates more contemporary discourse on collaborative infrastructure talks. Not few scholars would be ready to argue that if there is a regional future, it should be more so with a global one. And how far away is the Philippines in terms of its own stage of development in the overall development process could be one question worth a respectable answer. Thus, in a study focused on the best practices of Australia and Peru (UNCTAD Investment Advisory Series, Series B, Number 2, 2009). It is clear that there is a shared given or in so far as its own ‗anthropology‘ (Fritzen, 2013) is concerned and these are as follows:

- a well-prepared project pipeline

- visible political will toward successful project outcome

- quality of governance

- good risk-allocation ethos

- developed and stable legal system

- potential local partners

- specific project legislation for confidence, commitment, sustainability

- availability of project debt finance, including government support

- government uses high quality advice during procurement phase

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- potential for profit

- evidence of success with the first project

It is hoped that in fact, some organizing principles bear upon a collective task as Donahue is wont to say. However, at those instances where chronic nuances hardly disappear, one truly wonders why other nation-states in the rim succeed better than others with a great deal of ‗social-scientific regularities‘ (Sunstein‘s Foreword, Albert Hirschman‘s Development Projects Observed). Scholar Albert Hirschman‘s metaphor may well be instructive. There are to be two explanations that work in concert, one is the pseudo-imitation technique that makes ‗projects appear less-difficult-ridden than they actually are‘ and pseudo-comprehensive-program technique that gives ‗project planners the illusion than they are in possession of far more insight into the projects‘ difficulties than is as yet available. Thus, it is then akin to ―crutches‘ that encourage him to proceed ‗at a stage when he has not yet acquired enough confidence in his problem-solving ability to make more candid appraisal of a project‘s prospective difficulties and of the risks he is assuming. Perhaps, to the extent that actors may be guilty of this, therein lies the explanation of certain nuances encountered somewhere in the development planning. What PPP means in the first place

In an OECD Analytical Report (April 2014), ‗Pooling of Institutional Investors Capital – Selected Case Studies in Unlisted Equity Infrastructure‘ which also mentioned about the Philippines (Philippine Investment Alliance for Infrastructure Fund – Philippines), the term public private partnership broadly refers to ‗an arrangement, typically medium to long term (20 to 30 years), between the public and private sectors where the services that fall under the responsibilities of the public sector are provided by the private sector‘. A key point is that a PPP is not simply a joint venture or the contracting out of certain services such as construction, maintenance and operations but instead the government enters into a contractual arrangement with a single firm (Special Purpose Vehicle) that agrees to provide the service. The SPV, then ‗typically subcontracts‘ with construction and operating companies allowing the government to concentrate on specifying the services that should be provided, and the contractor to provide the services at minimum cost (citing Irwin et al 2012). Case of the Philippines

In the area of infrastructure studies, an in-country experience could well reflect a much larger scene elsewhere viewed from a researcher‘s radar screen, as if it were. Thus, the various ‗stories from the field‘ of countries in the Pacific Rim on how they go about their infrastructure programs may be aggregated to draw relevant conclusions with regard to the type of policy platform upon which certain development agenda must rest. A cursory look at ‗publicized failures‘ of privatization in East Asia, for example, ought to show what the controversies were as causes of such failure and with them, assess the ‗future of infrastructure‘ (Gomez-Ibanez et al).

The case of the Philippines is consequently worth a look. In most of its big-ticket infrastructure projects, however cleared by the National Economic and Development Authority, a form of institutional disconnect is mirrored on its failures to push projects to completion to the point the private sector generally gets disillusioned with the ‗increased costs of doing business‘

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(Llanto, 2010). For one, it is but an inevitable given that a ‗whole array of public agencies or actors comes into partnerships at the local, national, regional, and global levels to utilize resources to respond to public needs‘ (Bertucci, 2003).

The state of Philippine infrastructure is said to be 2nd worst in the ASEAN region per

news article from Philippine Star dated December 2, 2003 citing report from the Global Competitiveness Report, 2012-2013. In fact, the Philippine Institute of Development Studies identifies the need for government to organize a group of experts to formulate clear mechanisms as well as institutional make-up in so far as bank resources for infrastructures are concerned. The group must come from both the public and the private sector.

For instance in 2013, the required investment is $5 billion for some 21 projects in the

pipeline under the public-private partnership program where 3 of which do not even have yet cost estimates. In other words, not only is the government quite slow, even on the matter of having to spend much of an appropriated budget but that it only spent 11% in 2012 what otherwise was appropriated. Failures in East Asia Infrastructure is already on the international policy agenda of developed countries in support of growth in developing countries (Bitar, 2011). It is almost saying that an infrastructure program being pursued in a particular country is not far divorced from that of another within the rim. It probably requires a marked degree of confidence for a developed country to actually factor it in its infrastructure blueprint or roadmap.

For the purpose of discussion, it will help to disabuse our minds in our search for empirical or historical evidence of the ‗challenge to privatization‘ and the accompanying ‗future of infrastructure‘ (Gomez-Ibanez et al, p. 2) if we try to run down the ‗publicized failures‘ of privatization in East Asia or the high-profile controversies involving countries and their projects. Apparently, the data were culled from the database created by the World Bank. This comparative picture situates the case of Philippines, if and when it fails, as it did fail in certain or PPP projects in the administrative past. So, these high-profile controversies in East Asia include the following:

Table 1: Failures in East Asia on privatizations

Country Year Controversy

Bangkok, Thailand 1993 Thai government‟s seizure of an elevated private expressway

India 1994 cancellation of Enron‟s Dabhol power plant

Indonesia, Pakistan, Philippines 1997-1998 Asian financial crisis forced independent private power producers to renegotiate the take-or-pay contracts with government power companies (corruption in the award of original contracts)

Latin America (Mexico) late 1994 Bankruptcy of roughly two dozen private toll roads (after peso devaluation in 1994)

Tucuman, Argentina 1996 Seizure of water concession

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Cochabamba, Bolivia and Arequipa, Peru

2000 Violent rioting that stopped planned water and electricity privatizations

Argentina 2002 Suspension of utility tariff revisions in the wake of government‟s default and devaluation

California 2000 Electricity crisis in summer of 2000

Britain 2001 Bankruptcy of Railtrack, the private company that bought all of Britain‟s railway infrastructure in 2001

Source: Gomez-Ibanez‘, ‗Future of Infrastructure‘

In truth, there had been disputes between governments and private infrastructure

providers usually resulting in the cancellation or expropriation of the project. More examples could be supplied but suffice to say that waves upon waves of reforms in infrastructure policy must really happen on a periodic basis until the ‗market for private infrastructure matures‘ (Gomez-Ibanez et al, p. 4).

Pre-conditions for success The case of East Asia quite collectively magnifies ‗why public-private partnerships in infrastructure fail‘ on the one end. Thus the call for collaboration emerged as part of the larger infrastructure landscape on the other and there are at least known parameters or ‗pre-conditions for a successful infrastructure program‘ which must serve as navigational aids for other countries when they chart their own. In the end, there ought to be a vibrant and positive future for private infrastructure across time, boundaries, and jurisdictions. At bottom, there must prescribe what Donahue refers to as ‗organizing principles over the public or private performance of collective tasks‘ and collaboration is the social currency. Infrastructure environment – Philippine case It is now important for the Philippines to have a ‗sound infrastructure plan‘ that could really impact on the country‘s inclusive growth and equity such that ‗developed countries and companies can invest and build partnerships with the public sector and private local firms‘ (Bitar, 2011, p. 201). It cannot be gainsaid that in the more contemporary global light, infrastructure is already built on a wide-angle view such that in effect, the international policy agenda of developed nations actually support conceived growth in developing countries according to Bitar (p. 202). And Philippines truly needs a ‗shot in the arm‘ before it lags behind in infrastructure thrusts. And historically enough, we can safely infer an administration‘s level of performance by the infrastructures we see on the ground. The conjugal leadership of then President Marcos and his wife has seen to this vision the long-term impact of such infrastructures – specialty hospitals, cultural centers, long-span bridges, and the like. Studies do validate (Bitar citing Rozas and Sanchez, 2004) of a clear and positive correlation between growth and investment in tolled roads, seaports, airports, rails, dams, water systems, and the like. In short, this holds the key for the country‘s economic development to

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really take off reminiscent of Walt Whitman Rostow and his 5 model postulates of economic growth. Quickly, it might be of keen interest to cite the following conditions for a successful infrastructure program (Bitar, p. 205), to wit:

1) “a shared policy decision (public sector focuses on both human capital and physical capital) 2) a responsible economic policy (monetary and exchange policies in harmony with fiscal

measures) 3) laws and institutions (sound procedure for solving disputes, transparency in bidding

processes, anticorruption stance) 4) a solid and duly regulated banking system (access to private financing, transform short-term

credits into a bond system) 5) a long-term plan (transcends one administration and is followed by the next)”.

In the case of the Cavite-Laguna toll road project, for example, the Department of Public Works and Highway has disqualified San Miguel Corp. in the bidding for a P35.4-billion toll road deal south of Metro Manila due to a technicality despite a possible appeal to be filed (Inquirer, 12 June 2014). Paradoxically, it involves a mere deficiency in its bid security as regard the expiry of a financial bond making it short by 4 days although this matter was duly communicated by its foreign subsidiary to be in order.

Interestingly, San Miguel Corp. last year won the P15.5 billion NAIA Expressway Project

(PPP) after offering to pay the government P11 billion for the right to build the toll road. Thus, it is clear that its exclusion will severely limit government options on how to maximize benefits aside from indicating the absence of a level playing field. Chances are, it could have given the best possible deal for this vital infrastructure project.

This simply reflects that certain rules, laws, and institutions betray sound procedures for

solving trivial matters in the bidding process largely due to a mistaken zeal to promote an anticorruption stance. Infrastructure investment barriers There are ‗stories from the field‘. If these in-country experiences could be collated, then

certain commonalities in terms of the causes that can make investors hold back could be drawn.

An OECD Paper (2014) entitled, ―Pooling of Institutional Investors Capital – Selected Case

Studies in Unlisted Equity Infrastructure‖, citing that survey conducted by Allen & Overy (2009)

reveals that public financial support and guarantees on funding come at the bottom of the list of

what investors require when into infrastructure investments and that instead they are after a

‗robust rule of law and attractiveness of the regulatory environment together with a successful

track record of other infrastructure projects closed‘ (OECD Paper, 2014, p. 29).

These apparently are the most cited elements that drive the choice in which jurisdiction

to invest in infrastructure. Furthermore, there are given barriers and there could yet be a clear

and agreed benchmark based on high-quality data on infrastructure investment (OECD Paper

2014, p. 31). But the common barriers in light of the risks investors take on infrastructure

projects could be cited as follows, namely:

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Table 2. Barriers to Investment for Infrastructure Assets

Categories Barriers

1. The Investment Opportunities - Lack of political commitment over the long term

- Regulatory instability - Fragmentation of the market among

different level of government - No clarity on investment opportunities - High bidding costs - Infrastructure investment opportunities in

the market are perceived as too risky

2. The Investor Capability - Lack of expertise in the infrastructure sector

- Problem of scale of pension funds - Mis-alignment of interests between

infrastructure funds and pension funds - Regulatory barriers - Short „termism‟ of investors

3. The Conditions for Investment - Negative perception of the infrastructure value

- Lack of transparency in the infrastructure sector

- Shortage of data on infrastructure projects

Source: OECD Pension Fund Investment in Infrastructure: Policy Actions, Working Paper 2011

Source of interrogation Indeed, the renewed concern with infrastructure can be traced to two worldwide developments that took place over the last two decades. First was the ‗retrenchment of the public sector since the mid-1980s in most industrial and developing countries‘, from its dominant position in the provision of infrastructure, under the increasing pressures of fiscal adjustment and consolidation. Secondly, the opening up of infrastructure industries to private participationis seen as a part of a worldwide drive toward ‗increasing reliance on markets and private sector activity‘, which has been reflected in widespread privatization of public utilities and multiplication of concessions and other forms of public-private partnership. While this process first gained momentum in industrial countries (notably the U.K.), over the last decade it has extended to a growing number of developing economies, particularly in Latin America (Calderon and Serven, Central Bank of Chile Working Papers, September 2004) as well as in Asia, and parts of Africa or so-called Third World countries. Bridging or widening infrastructure gaps In a study done by Kumar and De (2008) titled, ‗East Asian Infrastructure Development in a Comparative Global Perspective: An analysis of RIS Infrastructure Index‘, the authors arrived at the conclusion and proposal of the need to bridge ‗infrastructure deficits across the region‘ (p. 25) but that such entails ‗huge magnitude of resources estimated between US$200 to 500 billion per year (p. 25). This alone certainly serves as a tall order in the absence of a viable regional framework. And how well indeed we can narrow the infrastructure gap remains a challenge for effective future regional collaboration in a single regional future. Truly enough, authors are quite

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correct in their prescription that the ‗gaps existing between EAS countries in terms of level of infrastructure attainment need to be addressed as part of the programme of regional economic cooperation and integration for promoting balanced regional development. Otherwise, the programmes of regional cooperation could work to further widen the development gaps‘ (p. 21). Globalization pathway

Peter Newman & Andy Thornley in their work, ‗Planning World Cities: Globalization and Urban Politics‘ (2011) theorized and insightful of their submission that certain global institutions are relatively of recent origin in the global landscape. As mentioned by the authors, these are the International Monetary Fund, UN-HABITAT, World Bank which are said to set wide ranging standards for cities. Moreover, the North American Free Trade Agreement (NAFTA), the European Union (EU), and APT (ASEAN Plus 3) have also emerged in recent years to coordinate issues of economic policy in the regions. So students or scholars of public administration may have already attempted to examine the impact of such global institutions on domestic economies of countries with links to any of these foreign lending sources or global arrangements.

A criticism could already be hailed against the worldview that held long sway. And this is the so-called American ‗hegemonic cycle‘. Is globalization or regionalization in a more intermediate sense as we understand it today the outcome of geopolitical crusade waged largely by the United States? Perhaps, it is important to assail the element of choice in the face of apparently unifying global trends on the part of modernizing governments involved. True enough, this explains why the problem of global cooperation and coordination might be suffering from so-called ‗heavy institutional deficit‘ as some scholars will say.

In terms of futures, should there then be a prescribed standard path in urban planning and development of world cities given the global economic forces shaping governments as if they would have already suffered from the ability to make choices independent of global trends? Understandably, we are made aware that in the case of some Third World countries, these currents are not even enough to interfere with their own development as in the case of South Korea, Japan, and Singapore. These are driven by forces independent of world trends as if to say that such choices are ‗sterile‘ to use Samuel Huntington‟s line.

If we are to imagine a global radar screen where all societies in a political sense and economies in a development sense manifest their individual direction or behavior in relation to the more dominant currents or trends, we might be able to arrive at certain observable facts on the important cities in America, Europe, and Asia. We may understand specific responses to the ‗forces of globalization‘ (Newman & Thornley) but still, there will not be a case of what these authors in fact call as ‗one-size-fits-all‘ in the realm of urban planning and development.

Thus the impact, nay the debate on globalization must find light in those particular cases where some deviation or departure from global norm, if we can call it that, has occurred. And one underlying thread worthy of examination extols the call for accountability which as one scholar says is the „central desideratum of every moral code‟ in John Donahue‘s book, The Privatization Decision: Public Ends, Private Means (1989).

This is consistent with the advocacy of Newman & Thornley for development planners ‗to re-evaluate their work‘ in the face of changing circumstances or a level of state activity that characteristically involves the public and private sectors and therefore different interests that in turn respond to the new conditions in similar or dissimilar ways depending largely on the dictate

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of interest. And if that be what Huntington referenced to as a presidential one and ‗consistent with nothing else‘ (Huntington), then either there is danger or there is wisdom to public choices being made. A typical measurement index By way of an illustration on how, for example, measurements are made on transport infrastructure, it is said that several aspects of transport infrastructure such as availability of and quality of roads, railways, air transport and ports are to be taken into account. There are a set of comparable indicators or determinants, the use of which would capture the availability and quality of transport infrastructure: (i) Air Transport is captured with the help of passengers carried per 1000 population and air freight million tonnes per kilometres of area, (ii) Road infrastructure is captured by the length of road network per 10,000 sq. km. of surface area, and percentage share of paved roads, (iii)Railway infrastructure is captured through length of railway lines per 10,000 sq. km. of surface area (Kumar and De, 2008). Table below reflects global ranks of EACs in infrastructure development as follows:

Table 3:Evolving Global Ranks of East Asian Countries in Terms of Infrastructure

Development

1991 2002 2005

Japan 5 4 2

Singapore 6 2 3

New Zealand 13 12 14

Korea 26 15 15

Australia 7 16 16

Malaysia 37 27 29

Brunei 27 31 36

China 49 43 39

Thailand 43 38 42

India 50 49 51

Vietnam 92 75 61

Indonesia 69 63 62

Philippines 76 65 63

Lao PDR 99 84 92

Myanmar 90 91 95

Cambodia 100 93 98

Source: Kumar and De (2008), as extracted from an earlier table of RIS Infrastructure Index Scores and Ranks of Countries (p. 14)

Spectre of ASEAN integration or regional future Perhaps, it was Scott Stephenson of the Department of Geography at UCLA who first

coined, nay invoked, the term collaborative infrastructures to precisely describe a ‗new

paradigm of state and private collaboration‘ although it is one geopolitically-specific, with

reference to the ‗Artic actors pursuing mutual economic and environmental interests that aims to

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address an ‗imbalance between despotic and infrastructural power in the Artic, manifest in a rise

in post-Cold War militarization and nationalist rhetoric‘.

Certain benefits conferred by infrastructural power are a powerful incentive for long-term

cooperation among Arctic states such that even while states unilaterally increase their military

presence, they are forging multilateral agreements to promote security and resource

development at local and regional scales (Stephenson) and if this kind of scenario repeats itself

in the case of the China-Philippine row over Spratly Islands, then so much the better of choices

- geopolitical realities that rarely afford such simplicities (Stephenson, p. 311), at least at first

glance.

The Artic is an ocean surrounded by continents, to which five countries - Russia, Norway, Greenland (Denmark), Canada, and the United States lie near it. Moreover, it has unusually broad continental shelves thus making a large proportion of the Arctic Ocean ―at risk‖ of being claimed (citing Dodds, 2010; Smith, 2010) according to Stephenson. And, Article 76 of the UNCLOS was not written exclusively in relation to the Arctic—it was intended to settle ocean claims worldwide—and until recently, debates of Arctic seabed sovereignty have been largely confined to the academic realm (Stephenson, p. 312).

State-owned industries for sale

By mid 90s, privatization has become a buzzword in the former Soviet bloc, South America, Africa, and Asia and so-called ‗public-private partnership‘ in terms of a private investment consortium collecting revenues from users of a facility and a trend that is about taking place in any other part of the globe. However, on the same breadth, private involvement is also rapidly growing in South America, Europe, and the United States. In fact, this is said to have been around for several centuries or what Europe terms as ‗concessions‘. This ‗global move‘ (Levy, 1996, p. 1) originally contemplates that when the consortium‘s limited term of ownership expires, title to the project reverts back to the government at no cost. In the case of a tolled expressway in the Philippines, the North Luzon Expressway in particular, this transfer is entirely a myth if not a historical anomaly. Levy (1996, p. 2) citing World Development Report 1994 from the World Bank provided evidence to the notion that ‗a country‘s infrastructure changes according to income levels in terms of infrastructure (i.e. sanitation, water, railway, irrigation, telecom, roads, power). Historically, the ‗first of such build-operate-transfer project in the modern world‘ (Levy, p. 19) is the Suez Canal that links the Mediterranean Sea with the Red Sea largely for commercial exploitation and position of power. So it was built for a concessionary period of 99 years and all nations are required to pay the same schedule of toll rates with no preferential rate treatment according to Levy (p. 19). If we just more deeply look into other details, it is interesting to note that modification is also being made when in January 1856, a provision required that at least 80% of all workers employed on the project must be Egyptians not to mention that the government of Egypt partakes of 15% of the company‘s annual profit, 75% accrues to the company, and 10% paid out to initial stockholder (Levy).

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While there are advantages, a concession also has its attendant risks and ‗no BOT project is immune‘ according to Levy. For purposes of policy discourse, the risks may thus be enumerated as follows:

- Political instability in host country as a concern (i.e. concessions range from 20 to 40 years)

- Cost overruns might bring the project progress to a halt or end in default (i.e. the Channel

Tunnel‟s initial budget of $9,7 billion ballooned to $16 billion)

- Unfavorable exchange rate fluctuations place undue burden on the consortium (i.e. 20%

devaluation of the Mexican peso in December 1994 reverberated through many markets)

- Consumers on usage fees (i.e. toll rates in Mexico as 8 times higher per mile than in the US)

- Drastic changes in demographics or number of consumers projected to use the facility (i.e.

Hongkong‟s tunnel project suffers from „under-subscription‟)

Government versus industry

The best of all possible worlds is one harmonizing government and industry to each

other‘s mutual benefit (Levy, p. 403). Quite historically, such partnership is neither a new

phenomenon nor a novel one. Were it not that King Ferdinand and Queen Isabella of Spain

hired a private contractor to map out a new route to India in 1492, the journey would not have

turned out successful.

Arguably, there cannot be economic growth without infrastructure development. With

today‘s world as one of a huge marketplace that allowed investors to shift funds and

investments in pursuit of their highest returns especially in an era of advanced

telecommunication technologies, every nation has to propel its environment as haven for

investment.

The case of the American infrastructure, this despite US‘ image as one of the world‘s

premier economies, could be disturbing although it has been for decades and quite purposively

late in shifting interest in private sector participation in achieving its public tasks. Against this

backdrop, Levy then posed the question, ―If the US cannot afford to put its infrastructure back

into first-class condition, what then is to be expected from less fortunate or the emerging and

developing countries?‖

On the other hand, the Association of Southeast Asian Nation (ASEAN) inspired

confidence when in its regional environmental action plan in 1995 it advanced three solutions to

the problems created by expanding economies (Levy, p. 397). And these are:

- Improve the investment climate of the region to attract private participation in many

infrastructure projects to be built

- Provide a political climate where regional governments extend loan guarantees and technical

assistance for targeted infrastructure projects

- Develop innovative ecological financial arrangements (i.e. cancellation of portions of debt

obligations if the debtor country agrees to attain certain environmental milestones)

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Philippines’ vision of the future

Guidelines in financing BOT projects may actually have universal application to all

similar projects. As cited by Levy, in a September 1993 presentation by Latif Chaudry of the

Asian Development Bank, there are identified risks that should be taken into account in decision

making. Let us cite them briefly:

- Sponsors: Financial capability and experience in project of similar nature of sponsor has to be

checked to achieve a desired level of trust.

- Turnkey Construction Contractor: The same criteria in evaluating a sponsor to that of the

contractor and down to the major subcontractors and suppliers. The case of the Philippines‟

MRT could be lesson in this regard.

- Potential Delays: If project revenues are delayed, how will the debt be serviced?

- Cost Overruns: When costs overruns occur, who will pay for them?

- Design Parameters: What if the design parameters are not met? What will be the

consequences?

- Insurance: Does the contractor carry all-risk insurance?

- Post Commission: There should be adequate warrantees in place to cover when something

goes wrong after commissioning by project operators.

- Force Majeure: Its effect on the project requires of other contingency plans in place or in

sight.

- Buyer Obligation: What if the buyer cannot meet its obligations? This is best applied in the

case of the Pagbilao Power Plant Project (Philippines).

Without discussing even further, let it be sufficient to conclude that there are unintended

externalities, positive or negative, that are inescapably missed by a feasibility study, however

well studied.

Real partnerships

In a paper presented in 2005, Wettenhall aptly defined that real partnerships will have

the following menu, namely:

- Be genuinely collaborative

- Have horizontal, non-hierarchical relationship

- Consensual decision-making

- No single-superior invoking closure

- Organizational structure such as a partnership board or forum

- Operate on the basis of complementarity and collaboration

- Synergies between involved persons and organizations

- Respect and trust as forms of social capital

In so far as laid menu is concerned, Wettenhall posited that market-driven competition

would be unlikely to satisfy these conditions. Instead, only ‗relational contracts‘ (p. 79) are likely

to do so. Overridingly however, the ‗needs of the whole must come before those of the

individual parties involved (Wettenhall, p. 79).

By way of final word, Wettenhall warns of the need to ―examine what it is about such

infrastructure schemes that makes the partnership dynamic and more positive and mutually

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satisfying all in the interests of better understanding this method of interactive enterprise

organization that commands so much attention today‖ (p. 72).

It cannot be denied that even while supposedly the commercial risks in the project

shifted away from government as promised in the advocacy rhetoric, huge risks remain in the

government domain. In the end, governments must embrace their own policy stance

(Wettenhall, p. 76). Precisely in the Australian case studies undertaken by Wettenhall, it was

instructive to know that indeed, in the case of Australian governments, it would have been even

better to use public sector debt to finance public infrastructure as the same results in more

efficient, equitable, and relevant outcomes since they have low level of public debt, strong credit

ratings and budget surpluses.

Development plan and infrastructure policy – as a two-faced coin The Department of Public Works and Highways is understandably the line department traditionally mandated the planning of infrastructure, such as roads and bridges, flood control, water resources projects and other public works, and the design, construction, and maintenance of national roads and bridges, and major flood control system (Cabral, 2009). Apparently, the Medium-Term Philippine Development Plan is the one supported by aforementioned activities. Polices and strategies in road infrastructures, for example, have their administrative moorings on the improvement of law and order, tourism, growth, and in support of key agricultural areas. Furthermore, a given set of desired outcomes are projected that range from rehabilitation, widening, upgrading, and the construction of new infrastructures (i.e. roads or bridges) according to Cabral. A cursory look at the DPWH 2005-2010 MTDP infrastructure policies and strategies does show that they are built on the so-called ―10-Point Agenda‖. And this has largely been what then PGMA wanted achieved during her term as president. Again, they have underlying philosophical moorings like the creation of millions of jobs, more classrooms for everyone, right revenues collected, a network of transport and digital infrastructure to link the entire country, decongestion of Metro Manila and the spread of growth in Visayas and Mindanao, an international service and logistics center in the Southeast Asian region, computerized elections, peace in Mindanao and insurgency areas. Perhaps, we may ordinarily fail to realize how improved roads can support peace and problem in Muslim Mindanao. But a review of the origins of PPP/BOT in light of administrative history will help show if a sound policy culture actually cascades to the present. And if this is so, administrative thought should provide in the process policymakers or legislators a helpful guide especially when certain infrastructure-related problematiques do arise.

Issues & challenges

Good institutions spell the difference, so does Raul V. Fabella say. In his article, ‗Development Thinking and the Rise of the Human Agency‘ or Chapter 9 of the book, Built on Dreams Grounded in Reality – Economic Policy Reform in the Philippines, he right concludes that ‗good institutions remain the development challenge of our time‘ (Fabella, 2011, p. 244).

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And even if policymakers continue to work toward measures supportive of the call for accountability, it is clear that the best articulation of such public ideas that would promote that sense of accountability actually hinges upon whether the country has already acquired good institutions. And it is no argument that even the work alone in building institutions, to borrow from Samuel Huntington, is actually costly. At this point in time, the infrastructure environment itself probably has yet to develop a sound infrastructure plan. The bias of the exploratory discourse is likewise on being able to indicate what Scott Fritzen calls the ‗patterns of bureaucratic accountability‘ in an article in International Journal of Public Administration. The Philippine government should be able to exhibit good governance where public-private partnerships or privatization deals are concerned in a way that builds sustained confidence on the part of both local and foreign investors. It might help to follow the model of ‗Malaysia Incorporated Policy‘ (Charles, 2003) that is said to have enabled Malaysia to be competitive in the international market place in today‘s globalized world. The country must try to follow the trends set by Southeast Asia countries on public-private sector collaboration in public service delivery. It is not to say, however, that all are successes and nothing is a failure. The ability to understand such success or failure in a whole array of privatization deals that have been experienced in East Asia, for example, should serve as stern warning against such ‗backlash against private infrastructure‘ (Gomez-Ibanez, Lorrain, and Osius, 2004) not just in terms of the content but as well as the context of such failure. Quickly, a lot could be mentioned of such privatization deals gone badly rather than smoothly in countries like – Bangkok in 1993; India in 1994; Indonesia, Pakistan, and the Philippines in 1997-98; in Mexico in 1994; in Argentina in 1996; in Bolivia in 2000; and in Peru in 2002 as all cited by the authors Gomez-Ibanez et al in their article, ‗The Future of Private Infrastructure‘. In the case of the domestic scene, what we normally understand as infrastructure are those that are mainly on transport infrastructure. For it is always said that ‗politicians love roads‘. In this area alone, there are a lot of bureaucratic ‗miscarriages‘, if this humble author could call it that. But now under the aegis of a reforming government, the policy shift is toward greater accountability and it is hoped that all the constraints, executive privileges invoked, confidentiality, and all that would be relaxed to pave the way for a more maturing political understanding of the public-private partnerships that should be desired not just at the policy, legal, or institutional level but right at where the investors operate – the business or economic platform. Toshinori in his article, ‗The Charging Principle for the Development and Maintenance of Transport Infrastructure‘ has been instructive on ‗transport system costs‘ and perhaps, his insights could be used in an immediate but future legislative enactment that will be constructed as a result of this modest work. Such piece of proposed legislation shall then take into account an array of factors (Toshinori, 2013) like revenue from users, vehicle-related taxes, and policy that will rationalize transport infrastructure capacity given future traffic volumes. This paper though is a case for all kinds of infrastructure development in the country in terms of laying down the universal policy framework or what we in the field calls the ‗enabling

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environment‘ for a sound infrastructure policy agenda as well as the sound infrastructure plan itself. Benefits/Challenges and Government role

There is this so-called Philippine Investment Alliance for Infrastructure fund the role of

which is to catalyze the private sector for its close relationship between the manager and its investors because of the small number of parties. Fortunately, the investors in PINAI are generally observed to have a good understanding of market conditions and investment climate, which makes it easier to communicate with each other. While the investors have no formal role in management, mutual sharing of market information and insights greatly assists the sourcing, evaluation, and management of PINAI‘s investments in what could more appropriately be referred to a ‗system of exchange‘ reminiscent of Barnard. Such qualifies as a healthy mode of exchange to work to their mutual benefit.

Furthermore, it is postulated that emerging market economies like the Philippines are actually facing a ‗large gap between investment demand and investment supply‘ (i.e. foreign direct investments). The current administration in the Philippines, headed by President Aquino gave preferential priority to infrastructure investment, with a focus on the use of PPPs in the country. The administration is creating a market through its pipeline of PPP projects, allowing the PINAI fund ‗to focus uniquely‘ and exclusively on the Philippines. The current administration has prioritized infrastructure as a key driver for the country‘s sustainable growth, and is implementing regulation providing clear rules for private investment, which is necessary for providing additional private investment in infrastructure. On whether or not there is a vicious cycle of weak of public services by government, the challenge then becomes on how to reverse the cycle (World Bank, 2005, Foreword). Joachim von Amsberg, Country Director, Philippines East Asia and Pacific Region expected a road map in infrastructure services that would move the country instead into a ‗virtuous circle of growth and development‘.

On the one end, there must be an increase in investments as much as about 5% of the

GDP and an increase in the efficiency of spending on the other. Christian Delvoie Director, Infrastructure Department East Asia and Pacific Region likewise expected of achieving agreed policy frameworks presumably across and along all areas of public-private partnership concerns, both hard and soft.

And in so far as explanation is concerned, the poor business environment is caused by

so-called four c‘s, namely: Cs—inadequate cost recovery, corruption, insufficient competition, and low credibility of institutions (citing Executive Summary). On the heels of the NICs: The role of the bureaucracy The national ‗psyche and policy‘ could be set in motion to move toward a strong regional to global outlook that it will do well for those developing countries to learn how to walk without crutches with confidence, nay trust, on the work being performed in the area of infrastructure, by each country from their own domestic or national borders, specifically those referenced developed countries whose economies, societies, and governments have long ago transcend social, political, and cultural barriers.

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Philippines is in need of this articulation that it no longer needs to divine wisdom from emerging approaches in the field when it has already reached its own maturity in the policy realm and its own economic viability. The prospect of ASEAN integration should be met with a state of preparedness especially in that single area of infrastructure thrust and policy and bridge the institutional disconnect or tug-of-war that only allowed the courts to intervene on matters best left for policy analysts. For if legal wisdom of any kind is a mere articulation of public ideas, then the best gatekeepers would be those involved in infrastructure studies by technicians across the infrastructure spectrum and its business culture.

ASEAN Nations need indigenous innovation to transform their economies but are then

perceived to be ‗doing little about it‘. Murray Hunter observes that economic development within the individual ASEAN states

has been ‗heavily dependent upon government infrastructure (rather than private) development, foreign direct investment, and the growth and diversification of local conglomerate firms‘.

Government policy is also at the mercy of external economic factors such as the state of the global economy, particularly the most important trading partners. Consequently, ‗government policy tends to be reactive to external conditions rather than proactive in seeking new technologically driven industries‘ (cited as End Notes by Hunter).

Asean by 2015

According to Bhattacharyay, for ASEAN to evolve by 2015 as an integrated economic community, it must achieve cooperation in infrastructure development for physical connectivity especially in the area of cross border infrastructure. And these are supposed to be in the areas of energy, transportation, and communication sectors. The importance of the role of infrastructure cooperation in economic growth and integration must be assailed (Bhattacharyay, 2009, p. 2).

ASEAN to stand for Association of Southeast Asian Nations and its regional goals for

economic growth, social progress, and cultural development not to mention regional peace and security; AFTA to stand for ASEAN Free Trade Area and its goal to eliminate tariff barriers in the region for a single production base and regional market for half a billion population; AEC to stand for ASEAN Economic Community and its goal to strengthen integration, existing and new initiatives with clear timelines (Bhattacharyay,p. 1) – all these simply dramatize a regional future in sight. And there are other similar organizations the role of which is as a ‗steering committee‘ for regional affairs of all member nation-states.

Perhaps, the highest mark of such collaboration would be in the area of physical

connectivity through cross-border infrastructure (CBI) development which is crucial for enhanced regional cooperation and economic integration (citing Kuroda, 2006, p.2). Thus perhaps, he then went to broadly define the concept of infrastructure as not limited to public utilities, but may also refer to information technology, informal and formal channels of communication, software development tools, and political and social networks which support the economic system (such as a city or a country). And interestingly, it includes the soft aspects of infrastructure such as operating procedures, management practices, and development policies that interact with societal demand and the physical world to facilitate the transport of people and goods, and the provision of safe water and energy among others (citing National Research Council 1987).

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The whole conception of a vibrant cross-border infrastructure is not limited to those mentioned but it could include tunnels, canals, rails, or even those that would physically connect boundaries and borders. And for another, the development of an appropriate ASEAN infrastructure financing mechanism for developing and financing bankable projects, particularly cross-border projects, is crucial for enhancing physical connectivity within the region (p. 18).

Conclusion

ASEAN countries will require infrastructure investments amounting to US$596 billion during 2006–2015, with an average investment of US$60 billion per year (Bhattacharyay, p. 15). And this alone is a tall order given current shortfalls in quantity and quality of infrastructure.

With strong cooperation and coordination among member countries, the help of MDBs

like ADB and World Bank, more integrated and stable financial markets, the creation of innovative financial instruments, and ‗sound macro-economic policies‘ (Bhattacharyay, p. 19) towards effective maintenance and development of pan-ASEAN infrastructure, there is no doubt that ASEAN can strengthen its economic integration and achieve the goal of the ASEAN economic community by 2015.

There remains glimmer of hope for a regional future in the Pacific rim in terms precisely

of collaborative infrastructure between and amongst nation-states concerting to explore even cross-border infrastructure projects. Certainly, certain policy frameworks agreed around not just a consensus but a currency have to harmonize to prepare for what Rostow theorizes as the ‗five stages of growth (Seligson and Passe-Smith, 2008).

It could be calculated that in the near future, East Asian countries will be able to

transform their economies as to attain within a space of few years levels of per capital possibly at par with the ranks of advanced, industrial countries. As scholars would say, theoretically, the bureaucracy itself serves as a ‗midwife to economic development‘ under the following conditions namely:

- a political leadership determined to pursue a transformational agenda with little fear of

electoral backlash; - a meritocratic, technically competent bureaucracy (or an elite, „piloting‟ segment of it) capable

of intervening in the economy - an „embedded‟ bureaucracy as one enjoying dense informational links to the companies and

market sectors to be promoted, and - an „autonomous‟ bureaucracy, i.e. not one captured by any special interest and therefore

capable of „disciplining‟ capital by, for instance, stopping subsidies where this was necessary.

Perhaps, the business environment for infrastructure for the Philippines as reported by

the World Bank Group of the Philippines as a well-documented literature is really far from the

desired nor the ideal. By and large, some factors may remain ‗business as usual‘ and would

reform only to a significant degree over a given length of time. These are the 4 C‘s if we may

have to repeat it here, namely: low cost of recovery, corruption, insufficient competition, and

low credibility of regulatory and judicial institutions.

However, on the brighter side of things, if only the Philippine government can bind itself to

follow certain key recommendations, then the future of infrastructure in this country could still be

bright and vibrant. Let us just cite these recommendations that could again ‗pole-vault‘ to use a

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favorite term during the term of then President Ramos very briefly. The ‗way forward‘ (World

Bank, p. 78) is based on key recommendations that must prescribe. Roughly, let us just

encapsulate them as follows:

- cross-sectoral priorities through two approaches, namely – 1) implement cost-covering tariffs

(subsidies, if justified, could be part of the cost recovery equation) and implement a rigorous

and credible fiscal reform program

- step up anticorruption efforts by – implementing the 2002 Government Procurement Reform

Act complemented with financial management reforms

- resolve issues surrounding stalled private sector projects (with Supreme Court as the typical

articulator of public ideas not the technicians or policy analyst involved)

- strengthen and reorient central agencies (i.e. NEDA, DBM, DoF, and interdepartmental

committees)

Truly these and more are in need of much policy reform, hence this exploratory work and

the current discourse must interrogate a lot of issues as to collaborative concerns and

development agenda that must be harmonized in terms perhaps of organizing principles as

those set at highest standards by the more development societies, economies, and

governments.

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