PPPs growing in ASEAN, but corruption risks are high

Lynda C. Corpuz

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PPPs growing in ASEAN, but corruption risks are high
Conflicts of interest and political influence are high-risk areas in public-private partnerships, speakers say in the ongoing ASEAN Responsible Business Forum

KUALA LUMPUR, Malaysia – Public-private partnerships projects (PPPs) are growing in the Association of Southeast Asian Nations (ASEAN), with new laws being approved in countries with lots of potential for PPPs.

“Investor and lender feedback shows they are more likely to draw comfort if a country is committed to a PPP program, rather than a one-off transaction,” Asian Development Bank’s (ADB) PPP specialist Pratish Halady wrote early this year.

But as these countries open their markets for PPPs, so do opportunities for corrupt practices arise.

PPPs involve a contract between a public sector authority and a private party, in which the latter provides a public service or project, and assumes substantial financial, technical, and operational risk in the project.

“Not many companies are capable [of engaging in PPPs]. So I’m not surprised there’s not a lot of companies participating in [such projects],” thus conflicts of interest and political influence arise, said Francesco Checchi, Southeast Asia and the Pacific for the United Nations Office on Drugs and Crime (UNODC) regional anti-corruption adviser during a consultative workshop on the 2015 ASEAN Responsible Business Forum, Tuesday, October 27.

Generally, it is difficult to regulate services that are both state- and privately-owned, he added.

“Promoting interests that are not aligned with the public interest, that’s the problem. Political interference is a special challenge in PPPs. If not addressed in advanced, that [would] be very difficult to [manage]. In a worst case scenario, companies don’t develop integrity framework,” Checchi said in an interview with Rappler.

According to the PPP Infrastructure Resource Center, “PPPs can be susceptible to corrupt activity if not carefully planned and designed, as with general public procurement. Prevention of corruption requires the integration of anti-corruption approaches during project design.”

The UN Convention Against Corruption (UNCAC) have requirements for member-states to produce and implement regulations for prevention of corruption in the private sector, including PPPs.

Addressing regulatory gaps

In the Philippines, PPPs have become the thrust of the Aquino administration, particularly to improve infrastructure in public education, public works, mass transportation, and airports. (READ: PH’s PPP thrust: Work in progress)

PPP Center’s executive director Cosette Canilao told Rappler in July that the government targets to award 21 projects more before Aquino steps down in 2016. (WATCH: Rappler Talk: How public-private partnerships work in infra projects)

ASEAN has a healthy PPP ecosystem in the Philippines. Here, neighboring countries can take a cue from the Philippines, whose large and publicly viewable pipeline signals a clear long-term commitment to its PPP program,” Halady wrote.

Jose Cortez, executive director of Integrity Initiative Inc in the Philippines said in an interview Tuesday that the country’s decades-old Build-Operate-Transfer (BOT) Law is exempt from some of the provisions of Republic Act No. 9184 or the Procurement Reform Act. 

“What the BOT Law requires is that the private sector (should be) part of the bidding process, which some point out as clear conflict of interest. In the Procurement Reform Act, third-party observers come from independent groups like civil society organizations,” Cortez cited.

Thus, passing the PPP Act (which provides for more liberalized government regulations and procedures to better address the needs and concerns of PPP investors) would really be helpful to improve the PPP activities of the government. “PPPs are here to stay as better options than taking out loans from multilateral organizations that would only put the burden of paying those loans to the taxpayers,” Cortez said.

Competing interests of politicians themselves are also another high-risk area in PPPs. “We have anti-corruption laws that are enforced, like the Anti-Graft and Corrupt Practices Act, Code of Ethics for public officials, and the Constitution itself. But what we’re missing at this point is the corporate liability of individuals,” Cortez said. He added that a big gap exists in terms of compliance by the private sector with the provisions of UNCAC.

Cortez said that PPP activities in the country are at risk of being jeopardized since “the Philippines has no existing law that defines corporate liability or that would criminallize corruption in the private sector, but some ASEAN countries have laws that prohibit bribery [of] national and foreign officials.”

Overall, accountabillity, commitment, trust, integrity, openness or transparency, and network are musts in the fight against corruption, he said.

“Corruption has eroded the integrity of almost all institutions. Now, we’re on the trust-building mode where our institutions are trying to win the trust of the public,” Cortez said, adding that if transparency is prevalent in the company’s culture, then it is easier to detect corrupt practices. – Rappler.com

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