High expectations on private operators
On Sept. 14, after three decades of planning, the government transferred the management of the Ninoy Aquino International Airport (Naia) to a San Miguel Corp.-led consortium, the New Naia Infrastructure Corp. (NNIC).
The NNIC promised to improve the services and facilities of Naia within the 15-year concession period (with an option to extend it for another 10 years) given by the government, with high expectations that the takeover would generate P900 billion in revenues and at least 58,000 additional jobs.
Two days later, the government awarded the contract to operate, maintain and expand the Laguindingan International Airport in Misamis Oriental to Aboitiz InfraCapital, Inc., the infrastructure arm of the Aboitiz Group, for 35 years.
The difference in concession periods reflects the perceived time frame within which the concessionaires would be able to recoup and profit from their investments.
Obviously, as the country’s premier international gateway, the Naia is way ahead as a “cash cow” compared to the Laguindingan airport, which still has to prove its worth as a viable regional gateway.
In making those awards, the government had conceded (albeit indirectly) that it does not have the resources and expertise needed to efficiently manage those airports, and that private operators could do a better job.
There is a precedent in the government’s actions. Ten years ago, it awarded the management of the Mactan-Cebu International Airport to a private consortium and the airport has been competently managed since then, even receiving two major awards from the international airport industry.
The public-private partnership (PPP) system the government used in the recent awards is a welcome change from the past administration’s approach on funding significant infrastructure projects.
The Duterte administration showed scant faith in PPPs and instead looked primarily to China’s promise of massive grants and loans.
As things turned out later, except for three projects, China’s grandiose promises did not materialize and so years of planning and negotiations went down the drain.
Worse, the mendicant attitude of the then president, who was practically subservient, emboldened China to more aggressively intrude into the Philippines’ maritime territory.
A change in management style and procedures is inevitable when a government-run entity is turned over to private hands. For one, the assigned manager has to make sure that things run efficiently so its investors can get ample returns on their investments.
If he or she fails to live up to their expectations, the ax would fall on him or her without much ado. Hence, the pressure to succeed is a daily struggle.
And most importantly, if the project requires the infusion of additional funds, the same can be done quickly and with the minimum of bureaucratic red tape.
In contrast, the KRA (or key result area) of most government managers is to remain in the good graces of the appointing power and the people around him or her, so they can continue to enjoy the perks and privileges of the position. Doing a good job would just be icing on the cake.
Add to that the need to comply with convoluted government rules, that range from getting budgetary allocations from Congress (which can be a pain in the neck) to holding public biddings that are subject to stringent oversight and audit regulations to satisfying requests of politicians for favorable treatment for their friends and relatives who want to do business with the office.
So far, the infrastructure projects that had been undertaken through the PPP mechanism have, by and large, proven their worth. It is a tribute to the staff of the government offices that prepared the terms and conditions of those projects that they made the awards based on merit and did not allow, if at all, political interests to influence their decisions.
In a year’s time, we will know whether the concessionaires in the Naia and Laguindingan airport have lived up to their promises to the government.
