PPP: More Public Debt, Less Government Responsibility

Undermining The Courts

In addition, the risk insurance guarantee may also have the effect of undermining the system of check and balance and the use of courts to protect public interest.

For example, people who will turn to courts to question and stop the implementation of disadvantageous and harmful PPP contracts – like those that will lead to an enormous increase in toll rates, MRT fares, water and electricity bills, etc., or those that will result in physical displacement, environmental degradation, etc. – may get a favorable ruling.

But this favorable ruling will be negated, if not become practically meaningless, because the private operator will still be compensated through the risk insurance, which the people themselves will ultimately pay for to the World Bank, ADB, or whichever multilateral bank is funding the risk insurance.

Infrastructure Fund

Aside from the risk insurance, the Aquino administration is also working with the multilateral banks for the establishment of the Philippine Infrastructure Development Fund (PIDF). This new entity is being patterned, according to the finance department, after India’s Infrastructure Development Finance Co. Ltd. (IDFC) and Indonesia’s PT Indonesia Infrastructure Finance (IIF).

In its website, the IDFC is described as “India’s leading infrastructure finance player providing end to end infrastructure financing and project implementation services”. On the other hand, the IIF was officially launched just last August as a private infrastructure financing company with an initial capital of US$170.3 million from the Indonesian government, the World Bank’s private lending arm International Finance Corp. (IFC), and the ADB on top of a 2 trillion rupiah loans from the same multilateral banks.

There is no official and final announcement yet on how the planned PIDF will raise resources. But it is likely that similar to the IIF of Indonesia, the Philippine government will shell out funds for the new entity’s initial capital, which is also expected to be beefed up by loans from the World Bank, ADB, and other foreign creditors.

In earlier statements, finance officials also disclosed that the PIDF may engage in issuing 25-year bonds domestically, targeting pension and insurance companies. The money borrowed will then be re-loaned to investors involved in PPP projects. Thus, in effect, the PIDF will become a mechanism of the Aquino administration to guarantee funders and creditors that the money loaned to PPP investors will be repaid.

Corporate Takeover

For the Aquino administration, the private sector does not simply aim to profit but is in fact the “main engine for national growth and development”. Thus, through PPP projects, many crucial responsibilities of the government are being transferred to profit-oriented private corporations and banks, particularly the development and operation of core infrastructure such as roads and mass transportation network, power generation, and water supply and distribution, among others.

Consistent with the neoliberal agenda, PPP reduces the role of the public sector in stimulating growth and development, and consequently undermines the responsibility of the government to ensure economic opportunities for the weak and vulnerable and equitable distribution of wealth.

The supposed role of the government as regulator is tokenism at best since the main idea as espoused by neoliberalism is to let the corporations operate in the most favorable condition possible, i.e. no state intervention.

PPP initiatives are governed by contracts that set out the terms of the supposed partnership. But these contracts are often pre-designed by multilateral funders and banks to ensure that they are attractive enough for the private investors, in the process taking away any meaningful government regulation. One example is the MWSS privatization wherein the World Bank-designed concession contracts created a government regulatory body that is toothless and ineffectual.

The Cost of PPP

The Aquino administration, whose team of economic managers and advisers are made up of the same people behind the neoliberal reforms of the past regimes, including the Arroyo administration, considers PPP as a magic bullet that will help solve the country’s chronic fiscal deficit and lack of infrastructure. Combined with a strong anti-corruption drive, the program will supposedly bring in and maximize private investments, create jobs, and consequently address poverty.

But as repeatedly pointed out by critics, the country’s experience since the time of Cory clearly shows that PPP initiatives do not guarantee savings for the government. Worse, in many cases, notably the privatization of the power industry, PPP initiatives even increase public debt.

Unfortunately, with additional schemes being cooked up such as the regulatory risk insurance and infrastructure fund on top of the usual incentives, the danger of more indebtedness and, as a consequence, of even less resources for social services and development needs looms large under the Aquino administration.

Aside from further bloating the debt burden, Aquino’s PPP thrust will also merely facilitate the increased corporate takeover of government roles and functions that expectedly results in various abuses and harm against public interest.

IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.


Share This Post

2 Comments - Write a Comment

  1. The Aquino III government reasons that there are no funds available for much-needed infrastructure projects. One wonders why, despite the fact that the Philippines is a resource-rich country. It’s obvious that Filipinos are being stiffed in these one-sided deals for minerals extraction (mining) and gas-oilfield-geothermal projects. Add to that the woeful monitoring of just how much of these resources are taken out of the country, further defrauding Filipinos of their agreed-upon shares. Nationalization of these extractive industries won’t happen under this current political set-up. I have doubts as to Pnoy’s ability to: (1) Guarantee that the Philippines gets its just share from private exploitation of minerals and energy sources and (2) Use the government revenues from these extractive industries to fund much-needed infrastructure projects. PPPs are just “creative” ways of debt-financing, the servicing of which falls on the much-burdened shoulders of ordinary Filipinos.

  2. “Aside from further bloating the debt burden, Aquino’s PPP thrust will also facilitate increased corporate takeover of government roles and at the expense of public interest”

    Maraming mga banyaga ang magpapautang sa Pilipinas dahil mas malaki ang kita sa Pilipinas ng kanilang pera. Kung saan mas malaki ang kita, duon pupunta ang pera. Mataas ang peso dahil pinababa ng mga Kano ang kanilang pera. Mas dadalas na magpupunta sa Amerika ang mayayaman na Pinoy dahil mabigat ang peso. Samantalang tiis ang mga tumatanggap ng dollar galing sa mga OFW, tiis din ang mga “exporter” sa Pinas dahil mas mahal na ang ginagawang produkto sa Pinas, at hindi lang tiis dahil maaring magsara sila o magbawas ng mga trabahador. Maganda ang kita ng mga banyaga o Pinoy na may Kapital na gagawa ng mga Project sa Pinas. Garantisado pa ni Pnoy ang kita nila! Sa ganitong panahon na pinabababa ni Uncle Sam ang dollar, meron mga panalo sa Pilipinas at maaring meron din matatalo at maghihirap. Hi di ako ekonomista, mahilig lang ako magbasa. Eto ang sabi ni Keynes at binanggit niya si Lenin:

    “Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and while the process impoverishes many, it actually enriches some. – As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.

    Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” …(JM Keynes, The Economic Consequences of Peace)

    Bigat ng Ingles, mahirap maintindihan! Pag bumagsak ang ekonomiya ng mundo, sino ang sasagip sa mga Pinoy? Si Pacman, si Pnoynoy, si Pokwang (PPP, hehehe), si Charice, si Willie, si Kris, si Boy Abunda? PPP—Pagpapahirap sa mga Pinoy Panghabangbuhay!

Comments are closed.