Challenges and Opportunities in Subnational Public-Private Partnerships in the Philippines

If designed and implemented well, public-private partnership (PPP) projects can fill the gaps in the public provision of infrastructure facilities and social services at the subnational level. The more than three decades of implementing subnational PPPs in the Philippines have highlighted many challenges, partly due to capacity gaps at the subnational level and fragmentation in previous legal frameworks. This fragmentation was characterized by varying and inconsistent local legislative council ordinances on PPPs and joint ventures for local government units, as well as nationally designed joint venture guidelines for water districts. The policy environment has evolved from being fragmented to having a legal framework that unifies the various policy approaches of subnational entities. Going forward, the new PPP Code can help subnational government entities be more judicious in entering into new PPP contracts. However, some ongoing and newly awarded contracts still have unresolved issues. One possible solution is contract redesign or amendment when the existing contract is burdensome to end-users or has the potential to make them unnecessarily bear a significant portion of project performance risks. This is permitted under Section 19 of the new PPP Code. Moreover, execution-level policymaking should continue, such as updating joint memorandum circulars, revising manuals and guidelines, updating PPP Governing Board policies, and creating new policies for maximizing commercial value capture or land value capture. To address knowledge and capacity gaps, new technical assistance support for capacity building must be established. A community of practice should also be nurtured. Lastly, the promotion of subnational PPPs in sectors where the PPP program can be expanded should be pursued. Comments on this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph.