Philippine infrastructure

[ANALYSIS] Investigating government’s engagement with the private sector in infrastructure

Dean de la Paz

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[ANALYSIS] Investigating government’s engagement with the private sector in infrastructure

Raffy de Guzman/Rappler

In a quickly emerging environment dominated by TikTok, print and online fake news, ChatGPT journalism and Op-Eds, payola, press releases and public relations operators and campaigns, demolition jobs and distortions, the Fourth Estate is gradually but inevitably being cauterized

A long time ago in another galaxy far, far away, when we won back our democracy after nearly two decades under a deadly dictatorship, the centerpiece agenda of the late President Corazon C. Aquino was to restore to the countless victimized, tortured, and killed some form of justice. In profound ways, this prayerful woman who conscripted the rest of her life to God and the nation for which her husband had died, was simply following through on the ancient medieval morality play pitting good against evil.

Two programs initiated by her centered on reparations for the victims of Ferdinand E. Marcos’s Martial Law. One was the dogged pursuit and recovery of plundered ill-gotten and stolen wealth. 

The other was to channel what was recovered to the poorest via what unfortunately had eventually become a failed agrarian reform program.

Though not from a lack of good intentions, as substantial agricultural hectarage shifted ownership to farmer-beneficiaries, the question of comparative productivity and land valuation arose together with the prospect of potentially higher values where land use shifted from marginally producing agriculture to higher value industrialized, commercialized, and urbanized uses.

The traditional economic pyramid where the larger base was composed of agricultural activity quickly flipped on its head as high-value productivity entered the equation and agricultural land could not be converted to more productive uses fast enough. Industrialization, commercialization, and urbanization soon prioritized infrastructure development not simply to augment agricultural economies but as a productive replacement.

The need to rise from the economic disaster that the late despot presided over necessitated foreign direct investments (FDI), and Aquino’s deregulation and liberalization programs not only catalyzed FDI but gradually shifted focus to infrastructure.

Any matrix depicting the various modes that government engaged the capital-rich private sector – from Build, Operate and Transfer (BOT), Service Contracts (SC) and Public-Private Partnerships (PPP) to privatization and franchise grants or conditional foreign funding – all have similar shared assumptions, common objectives, and transitional ends.

All assumed greater professionalism, higher operational efficiencies, and economies of scale. All assumed the transfer of development risk to the private sector who then charge risk premiums. All assumed greater gross domestic productivity. And all assume an eventual re-transition to government upon achieving internal rates of return.

For the dwindling few among the Fourth Estate that double as the Northern Star to keep the bureaucracy and the private sector on the path to inclusive development, most of the beneficial metrics and upsides when investigating infrastructure are obvious, even quantifiable.

Unfortunately, the full compendium of infrastructure costs is not, especially where social, environmental, and cultural costs are factored in.

Most government infrastructure projects ballyhoo benefits long before these start or thereafter along its development stages. There is no problem identifying those. A proponent’s media kit, public relations operators and press releases and its cocktail circuits suffice.

The difficulty is in seeing where the costs lie beyond our tax pesos, the cost compendia, and who pays ultimately pays when a comprehensive accounting is undertaken.

Some costs are quickly evident, media can readily develop poignant stories that pinch the heart. Displaced communities that catalyze malnourished children, sudden unemployment, inflicted dangers to health and well-being, increased poverty, and even the increased instances of premature death. You need no special gumshoe skills to highlight these.

Such superficiality unfortunately hides the more pervasive and substantial cancers where a blind rush to build, build and build is recklessly pursued. Education, poverty, headline inflation, increased taxes and subsidies, food and energy inflation, corruption, patronage politics and political dependence, and even the prevalence and perpetuation of political dynasties, are among those deeper yet expansive costs.

Analyze and reflect on a handful of examples.

One. A concrete viaduct built over water sensitive agricultural land where resulting distortions in land valuation and geography force a shift from low revenue agriculture to higher revenue land use.

Two. A series of high-voltage transmission lines and giant towers built over residential communities. Its hidden costs include a decrease in property valuation, municipal tax deficiencies and traumatic residential displacement.

Three. A commuter railway system built along informal settler communities residing on government land. Its hidden costs include the diversion of Chinese Overseas Development Assistance from transportation usages to non-revenue social relocation and the unplanned construction of housing for displaced communities.

Malacañang abolishes controversial Arroyo-era Northrail train project

Malacañang abolishes controversial Arroyo-era Northrail train project

Four. An irrigation and potable water supply dam built over indigenous land and ancient burial sites. Here the socio-economic costs are immeasurable.

Five. A coal-fired power plant built along a coastline hosting fishing and aquaculture livelihoods. Its hidden costs run from displacing fishing communities and fishkills, to creating sulfuric acid rain, toxic effluents and discharges, aquifer contamination and mercury diffusion. Often, quick-growing Ipil-ipil reforestation to reduce the toxic carbon footprints, relocating fisherfolk inland, and a repatriation program including ayuda (aid) and cash transfers, pop-up school classrooms and trauma clinics do not suffice to replace what was taken from them.

In all these projects, benchmarks and objectives differ between proponents, between the government and the private enterprise, and certainly against those of the public. Not all directly impact on the poor and vulnerable. Not all involve corruption. Not directly.

Not all costs are measured by profit and loss (P&L) accounting used to justify infrastructure. Where these involve capital expenditures, then it is not only the P&L that media investigating might examine, but integral to complete reportage are also the engineering designs, the type of funding involved, the liabilities, whether long term or short, the sources of equity, and the type of physical and personal assets and the history qualifications, technical expertise and the financial wherewithal of its proponents.

It is lamentable, that in a quickly emerging environment dominated by TikTok, print and online fake news, ChatGPT journalism and OpEds, payola, press releases and public relations operators and campaigns, demolition jobs and distortions, the Fourth Estate is gradually but inevitably being cauterized. The current quality of reporting on infrastructure is simply a case in point. –

Dean de la Paz is a former investment banker and managing director of a New Jersey-based power company operating in the Philippines. He is the chairman of the board of a renewable energy company and is a retired Business Policy, Finance, and Mathematics professor. He collects Godzilla figures and antique tin robots.

1 comment

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  1. ET

    Queries: 1) Should government-private sector transactional relationship in infrastructure be continued? 2) What should be done to the Fourth Estate, which is “gradually but inevitably being cauterized”? Will Dean De La Paz write about his answers to these queries? I will eagerly wait for his articles on these.

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