CTIP's Advocacy: Promoting Trade and Investments through PPP

Garfield, NJ, March 9, 2015 (Newswire.com) - The Council for Trade and Investment Promotion (CTIP) an international non-profit organization registered in the State of New Jersey has embarked an advocacy leading towards the promotion of trade and investments through Public-Private-Partnership (PPP). To do this CTIP shall partner with the public sector, most especially with the Local Government Units (LGUs) and private organizations such as Chamber of Commerce and other trade associations in Countries where CTIP has local chapters. This initiative is the true meaning of PPP.

While most infrastructure projects which are national in character are attended to by the national leadership, the LGU's infrastructure development initiative are practically left behind in terms of upgrading its existing infrastructure, perhaps because of budgetary constraints or simply not in the national leadership's list of priority development.

The provincial governors and their respective municipal mayors are left to manage their meager resources in the name of efficient public service. Their finances is not even enough to maintain existing road network within their jurisdiction. The biggest challenge confronting the LGUs therefore is "undertaking infrastructure development" in partnership with the private sector.

What is Public-Private-Partnership (PPP)?

{C}{C}{C}Public Private Partnership is a contractual concept or arrangement between a public agency (federal, state or local) and a private sector entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility.

Under PPP, the private party provides public service or project and assumes substantial financial, technical and operational risk in the project.

Even in the best of times, governments at all levels are challenged to keep pace with the demands of their constituencies. During periods of slow growth, government revenues are frequently not sufficient to meet spending demands, necessitating painful spending cuts or tax increases. Partnerships can provide a continued or improved level of service, at reduced costs. And equally important, partnerships can also provide the capital needed for construction of major facilities. By developing partnerships with private-sector entities, governments can maintain quality services despite budget limitations.

In the infrastructure sector, complex arrangements and contracts must guarantee and secure streams of cash flows, to make PPP projects prime candidate for “Project Financing”. A typical PPP example would be a hospital building financed and constructed by a private developer and then leased to the hospital authority. The private developer then acts as landlord, providing housekeeping and other non-medical services while the hospital itself provides medical services.

Another similar project could be the LGUs Health Department can create a PPP concept whereby the private developer will put up an Emergency Hospital or Clinic or Health Center in a site within its jurisdiction but far from the main general hospital. The Health Center can provide the patients with first aid before sending them to the main general hospital. The private developer shall put up the facility (stationary or mobile clinic) equipped with needed medical equipments for emergency purposes. Operating the facility will be the responsibility of the LGU.

A well defined financing must be in placed to move forward with a project. Likewise, a well defined “exit strategy” must be pre-determined to convince investors that this kind of project is not only viable but also “doable”.

Legal Framework

The government’s budgetary constraints and management of operational requirements are always a major concern by any State or local government units in undertaking infrastructure development projects. In this kind of environment, when the government is experiencing budgetary constraints, projects such as Transportation Infrastructure Projects and “renewable energy” is a good candidate for a Public-Private Partnership mode, where several contractual arrangements are available to fit the requirements of both the Public and the Private Sector.

An indispensable condition for the successful implementation of a PPP Mode is a legal environment where property rights and contractual agreements are protected and enforced. The legal framework for private sector investment in infrastructure has to be clarified by a clearly defined allocation of roles, functions, and duties across the spectrum of institutions and stake holders.

At the minimum, an effective implementation of a project under a PPP Mode hinges on the following:

1. A legal and economic environment that is conducive to a mutually beneficial partnership;
2. Clarity in articulating the duties and responsibilities of the parties to the contract;
3. Certainty of recovering investments and availability of mechanisms for dealing with risks and unforeseen events; and
4. Transparency and credibility of the government’s processes for review and approval of proposed PPP Mode projects and the associated contracts for implementation.

Creating PPP Center and Project Development and Monitoring Facility (PDMF) -

It is extremely important for the Government to create a PPP Center in partnership with the private sector. The partnership with the private sector, especially a non-profit organization like CTIP with international presence, will not only spell the difference between success and failure in terms of promoting PPP to the international players on PPP, but also open up collateral opportunities to the businesses in the LGUs.

To make the PPP Center responsive and dynamic to the needs of the LGUs, the following are suggested action program:

1. The PPP Center will be a joint initiative of CTIP and the LGU;
2. The Center will be jointly managed by CTIP and the LGU;
3. Both Parties will raise the funds needed to operate the Center. It will solicit financial subsidy or assistance or donors from both public and private sources;
4. The LGU will provide a "list of possible projects" that can be undertaken under the PPP Mode for the Center to promote eligible Projects to potential investors/developers overseas;
5. The Center will encouraged solicited and unsolicited proposals to develop possible PPP Projects;
6. The Center shall assist the drafting of a legal framework on PPP, making sure that the draft framework shall be responsive to the needs of time and of the LGUs, for submission to the Provincial Governor or City Mayor, for its review, corrections and endorsements to the Legislative Department or City or Provincial Council for its enactment;
7. The Center will not enter into contract to implement PPP Projects. The Center's responsibility is to promote the Country as a trade and investment destination for PPP, with the PPP Projects as its tool to promote trade and investments; and
8. The Center will form its own Executive Board as a policy making body of the Center.

Finally, experience will tell us that while the word PPP is popular in many countries, there are only few countries are in fact been successful in promoting PPP as a concept in undertaking government infrastructure development. The development of PPP Projects in the Philippines is a classic example of a success story. Credit to the creation of a PPP Center, the management of which is in partnership with both the public and the private sector. The business model is worthy of emulation. It is a legacy that the political leadership in the country will leave behind to its people.

About CTIP

The Council for Trade and Investment Promotion (CTIP), an international non-profit organization is registered in the State of New Jersey. CTIP has been creating local Chapters overseas to promote its objective  Its advocacy is to promote trade and investments through Public-Private-Partnership (PPP). For further information, please check CTIP website www.councilfortradeandinvestment.org.