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September 16, 2011
Public Private Partnerships in education, health ‘more costly’– ACT Teachers Party

“The financial cost of repaying the capital investment of Private Finance Initiative investors is therefore considerably greater than the equivalent repayment of direct government investment.” – England’s House of Commons Treasury Committee

By JANESS ANN J. ELLAO
Bulatlat.com

MANILA — ACT Teachers Partylist Rep. Antonio Tinio called on other members of the House of Representatives to remove the funding for public private partnership (PPP) from the national budget for 2012, citing that PPP would only turn out to be more expensive than government funding, as evident in the experience of other countries.

As contained in Aquino’s 2012 proposed budget, Aquino said public private partnerships would resolve the shortages in infrastructure such as school buildings and hospitals. “The private sector will finance and build classrooms while government pays them an annual amortization over a period of several years,” Tinio said.

Education secretary Armin Luistro earlier floated the idea that private institutions could be contracted to run public schools. “Technically, I can have a public school, I approach a foundation and say why don’t you run this school and we will support you with the following subsidies, and then you make them autonomous?” Luistro said.

This year, P5 billion ($115.7 million) would be allocated in the implementation of PPP schemes for the education sector. The Department of Budget and Management said it would “fast-track the construction of schools,” and as many as 60,000 classrooms would be constructed this year under the PPP.

Tinio cited a study by the Canadian Union of Public Employees which revealed that “for every two schools financed through P3s in Alberta (Canada), an additional school could be built for the same cost, if all were built using traditional public sector contracting models.”

Tinio added that Canada’s experience in PPPs show that it would cost more if infrastructure projects were funded by private institutions. “Malacanang must first make the case before the public that taxpayers will get better value for money through PPPs. We challenge them, show us the numbers first.”

Health sector

Aside from education, the health sector, too, according to Tinio, would suffer in the end if Congress will not reject Aquino’s proposal to privatize the maintenance and operations of 25 regional public hospitals in the country.

In House plenary deliberations last September 12, Tinio questioned the $71.4 million allocation for Public Private Partnership Strategic Support Fund for the rehabilitation, maintenance and operation of the 25 hospitals. He called on his colleagues to realign it instead as an additional fund for its Maintenance and Other Operating Expenses and Capital Outlay.

The 25 regional hospitals that the Department of Health plans to privatize are the following: Cagayan Valley Medical Center, Veterans Regional Hospital, Baguio General Hospital and Medical Center, Ilocos Training and Regional Medical Center, Region I Medical Center, Paulino Garcia Memorial Research and Medical Center, Jose B. Lingad Memorial Medical Center, Batangas Regional Hospital, Bicol Medical Center (Naga City), Bicol Regional Training and Teaching Hospital (Legaspi City), Quezon Memorial Hospital, Jose B. Reyes Memorial Medical Center, Rizal Medical Center, Amang Rodriguez Medical Center, San Lazaro Hospital, Vicente Sotto Memorial Medical Center, Eastern Visayas Regional Medical Center, Corazon Locsin Montelibano Memorial Regional Hospital, Western Visayas Medical Center, Samar Provincial Hospital, Northern Mindanao Medical Center, Southern Philippines Medical Center, Zamboanga City Medical Center, Cotabato Regional and Medical Center, and CARAGA Regional Hospital.

Negros Oriental 1st district Rep. Jocelyn Limkaichong, during the interpellation, said that under the proposed scheme, private sector would be “awarded contracts to maintain and operate the regional hospitals and allowed a Return on Investment of 10 to 12%.” But Tinio asserted that such scheme would result in higher fees for hospital services as private companies have to profit from it.

Tinio also raised the possibility of mass lay-offs or downsizing of employees when the private sector begins to manage public hospitals. Limkaichong, who also sponsored the DOH budget, gave “vague and general assurances regarding these questions.”

“This proposal is odious and reprehensible. There is no place for profit-making when it comes to the right of Filipinos, especially the poor, to quality public health services,” said Tinio. He added that outright privatization of the health sector would only make the healthcare gap even wider.

Other government agencies that have allocations for PPPs in its 2012 budget includes the Department of Transportation and Communication ($199 million) and Department of Public Works and Highways ($69.4 million)

Rethink PPP

The United Kingdom, known for aggressively promoting public private partnerships for the construction of over 700 public infrastructure projects, is reportedly beginning to reconsider the said scheme. Tinio said the British parliament has declared that “PPPs as a financing method for public infrastructure is now extremely inefficient.”

The UK House of Commons Treasury Committee, last month, said in its report that it has serious doubts on the widespread use of Private Finance Initiatives, their version of Aquino’s PPP. The report added that the UK government would have saved more if it borrowed money on its own account instead of allowing private institutions to do the projects.

“The financial cost of repaying the capital investment of PFI investors is therefore considerably greater than the equivalent repayment of direct government investment,” the report read.

“It is ironic that just as the Aquino administration is embarking on a big push for PPPs, the rest of the world is coming around to the fact that PPPs are a costly and ultimately inefficient method for funding public infrastructure,” Tinio said, “It’s private profit at the people’s expense.” (http://bulatlat.com)

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3 thoughts on “Public Private Partnerships in education, health ‘more costly’– ACT Teachers Party

  1. Pingback: The costs of the Aquino government’s K to 12 program - Bulatlat

  2. Pingback: Philippines news: ‘2013 budget for electioneering, PPPs’ | Pinas news library

  3. The quote before the story is misleading – it mentions only one of the pros and cons of a PPP, and it IS a disadvantage of PPPs. BUT would you buy something after considering only one aspect of the object’s pros and cons?

    For example, several UK government reports found that PPPs are on time and on budget enormously more often than non-PPPs. As a great example that I do in our PPP workshops, in Canada’s major drinking water disaster some years ago, the town of Walkerton thereafter changed from government run drinking water to a PPP!

    Just look at the litany of public sector project disasters – governments are really poor at doing one-off projects. The private sector is usually better because for them, it’s not a one-off.

    Here in British Columbia, Canada, we have been tremendously successful in large infrastructure PPPs.

    PPPs are NOT a panacea, and are inappropriate for some governments and projects, but in many they are a tremendous benefit to taxpayers.

    regards

    John Hunter
    J. Hunter & Associates
    338 Roche Point Drive
    North Vancouver BC Canada V7G 2M2

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