ADB: LGUs lack technical, financial know-how in PPP implementation

To fill in the infrastructure gap at the local government level, Manila-based multilateral lender Asian Development Bank (ADB) has recommended coming up with specific guidelines that will cover local public-private partnership (PPP) projects.

In a report titled “Philippines: Public-Private Partnerships by Local Government Units,” the ADB noted LGUs have already been tapping PPP  arrangements to build infrastructure as early as 1991, the first of which was the commercial building used as a public market in Mandaluyong City.

A number of LGUs pursued big PPP projects not only in infrastructure but also in power generation and bulk water supply in the subsequent years, but some of these initiatives “met many obstacles along the way,” the ADB noted.

Major impediment

According to the report, “lack of technical and financial resources for project preparation, monitoring, and implementation has always been cited and continues to be a major impediment to LGUs undertaking PPP projects.”

“These needs have to be addressed simultaneously and comprehensively by technical assistance and financing facilities,” it said.

The ADB said LGUs should come up with guidelines on doing local PPPs through joint ventures.

“The lack of guidelines for LGUs forming joint ventures with the private sector has been the source of uncertainties for LGUs interested in that particular form of PPP, which does not fall under the ambit of the Build-Operate-Transfer Law, as amended,” the ADB said.

The Manila-based multilateral firm added LGUs can also enact their own PPP code or omnibus ordinance covering all applicable PPP modes.

Local PPP codes may include fiscal and nonfiscal provisions to better attract investors, it said.

Legal front

On the legal framework, the ADB recommended the following: Clarification of an approval authority for LGU PPP projects costing above P200 million; establishing a deadline for the confirmation of LGU PPP projects; streamlining National Economic and Development Authority-Investment Coordination Committee (ICC) and Regional Development Council review processes, including ICC forms tailored for LGUs; and clarifying the audit scope of national and local PPP projects done through joint venture arrangements.

The ADB also pointed out that a transparent regulatory body must be set up.

“Having a competent, independent, and transparent regulatory body in the sectors where PPPs are being welcomed is very important to protect the interests of all concerned—the customers, private investors, and government entities involved,” it said.