PPP schemes cost government more, says Canadian study

The study revealed that for every two schools financed through PPP in Alberta, Canada, an additional school could be built for the same cost.

By INA ALLECO R. SILVERIO
Bulatlat.com

MANILA — As President Benigno Aquino III prepares to deliver his second State of the Nation Address (SONA) on July 23, he is expected to sing praises to his administration’s centerpiece program comprised of public-private partnerships (PPP).

Youth group Anakbayan in Mindanao said Aquino’s claims that PPPs are good for the economy is not based on fact. It said the exact opposite has been proven by a recent study in Canada, which revealed that allowing the private sector to fund infrastructure projects costs more than if the government spends for it.

“President Aquino has turned over the responsibility to provide the Filipino people with important and necessary social services to the private sector, ” said Cherry Orendain, Anakbayan spokesperson in the Southern Mindanao Region.

Orendain cited a study conducted by the Canadian Union of Public Employees (CUPE) declaring that government infrastructure projects cost more when funded in partnership with private or corporate institutions.

“The study revealed that for every two schools financed through PPP in Alberta, Canada, an additional school could be built for the same cost, ” Orendain said.

In a study released May 2012, CUPE said that public-private partnerships cost more yet deliver less. It said the privatization of British Columbia’s sewage treatment system had it pushed through would have cost $116 million more. The construction of an events center experienced deficits, delays and cost over-runs that forced the city of Penticton, B.C to reduce services in other vital areas, including policing and community recreation. The city was unable to transfer the construction risk to their private partner and taxpayers were handed a bill for over $25 million in added costs.

In January 2012, the auditor general of New Brunswick released an analysis of two schools placed under the PPP scheme. It was discovered that the government made the decision to privatize with “no evidence” to support the move, and only performed a value-for-money assessment after deciding to go ahead with the PPP scheme.

“The government’s $12.5 million in estimated P3 cost savings was inflated by overstated maintenance and other costs. In fact, public procurement would have been $1.7 million cheaper,” the report said.

The PPP scheme applied to a hospital project in Montreal costed the province $10.4 million more than it should, have the project been built on government funds alone.

It also concluded that “when private companies fail to deliver on large public projects they can walk away—the taxpayer is inevitably forced to pick up the pieces.”

CUPE said evidence is mounting that PPPs and contracting out in Canada do not result in savings or reduced risks. It said chronic underfunding has created a crisis that is putting enormous pressure on Canada’s municipalities to privatize city services regardless of the detrimental impact it will have on future city budgets and the quality of life of community members.

“The challenges facing municipalities must be solved through increased long term public funding. Maintaining public ownership and control over water and wastewater facilities, solid waste pick up, public transit, municipal buildings, road and bridges, public housing and recreation centers and other vital services are essential to ensure democratic, equitable, affordable services,” it said.

Pushing for public investment program

Despite protests against its PPP schemes, however, the Aquino administration continues to extoll its supposed virtues.

Recent reports have it that the National Economic and Development Authority (Neda) is set to begin its midterm review of the three-year-old Philippine Development Plan (PDP). The Neda is also aiming to complete by early 2013 the yet unfinished Public Investment Program (PIP).

According to Neda Director General Arsenio M. Balisacan, in interviews with the media, the review of the development plan and the investment program will also include discussions on Executive Order (EO) 79 on mining, which Aquino recently signed, as well as the extension of the Comprehensive Agrarian Reform Program (CARP) until 2014.

By virtue of EO 79, the administration will not allow new mining agreements. The extended land-reform program in the meantime, is supposed to expedite land distribution until 2014.

The PDP is the blueprint of the Aquino administration’s 16-point agenda to supposedly achieve inclusive and sustainable economic growth during his term. When it was first presented to the public, Malacañang said that through it, the government will reduce poverty incidence to 16.1 percent in 2016; create an average of a million jobs every year; achieve a gross domestic product (GDP) growth of seven to eight percent every year and increase the country’s investment rate to 22 percent by 2016.

As for the PIP, it outlines all the government’s projects that it seeks to complete until Aquino’s term ends in 2016. Previously, the Neda said that the 2011-2016 PIP would cost some P4.2 trillion ($100 billion); an estimated P3.7 trillion ($88 billion) will go toward financing various infrastructure projects, and the rest to the government’s micro-lending program for small and medium enterprises.

As contained in Aquino’s 2012 budget proposal, proponents said that PPPs would resolve shortages in infrastructure such as school buildings and hospitals. According to Department of Education (DepEd), the government will spend P20 billion ($476 million) to lease school facilities from the private sector to meet the backlog of 150,000 classrooms by 2016, since it can only afford to build only 10,000 classrooms annually.

In the meantime, there are pending bills in Congress seeking to privatize the country’s water districts and 26 public hospitals – seven of which are in Mindanao, including Davao City’s Southern Philippines Medical Center.

Doublespeak

Anakbayan is far from being convinced by the Aquino government’s announcements on economic development. It said that despite the administration’s claims that the country’s Gross Domestic Product (GDP) grew by 6.4 percent, countless other statistics indicate a woeful situation faced by Filipinos.

Anakbayan cited a report of independent thinktank Ibon Foundation saying that one out of every four Filipinos experience involuntary hunger and over 11 million households consider themselves poor. Poverty statistics, in the meantime, rose by two million within the first quarter of the year.

As for the country’s debt burden, data from the National Statistical Coordination Board revealed that it has reached P5.5 trillion ($130 billion), increasing by 7.7 percent or P370.51 billion ($.8.8 billion) as of May 2012. Each Filipino is in debt by at least P54, 068 ($1,287) each if the burden is shared by the rest of the population.

“Noynoy Aquino’s “daang matuwid” has become a cruel irony. While his administration boasts of development, 1.4 million families in Mindanao experience hunger,” Anakbayan’s Orendain said.

Anakbayan, along with other progressive youth organizations, will join mass protests against Aquino’s SONA on July 23. ()

Share This Post