DURING The Manila Times’ Economic Forum on Feb. 18, one theme that emerged was the need to utilize more private-sector resources for national development. Attracting private-sector investment, whether from foreign or domestic sources, has always been a critical objective of economic development strategy, but as several of our esteemed speakers emphasized, the need in areas such as infrastructure, climate adaptation and essential public services, such as health care and education, is too great to be met by government investment alone.
Of course, this is not a new idea. Over the past two to three years, as funds for traditional overseas development assistance from governments and even private-sector donors have become much tighter, multilateral development banks, such as the World Bank and the Asian Development Bank (ADB) — represented at our forum by country office chief economist Gonzalo Varela and Philippines country director Andrew Jeffries, respectively — have increased their efforts to leverage more private capital by expanding their non-sovereign financing for “bankable” development projects. It is not “mission drift,” as one of our own columnists recently mischaracterized it, but practical realism.
Likewise, the Philippines has, in the recent past, used public-private partnership (PPP) schemes to pursue development, although not always without imposing unreasonable higher costs on the public. Well-designed or not, however, the PPP project pipeline has slowed to a trickle in the past couple of years.
The challenge in attracting private-sector investment for the development of public goods is that it is often quite difficult to create a reasonable business case for what it is needed for. Some areas are rather easy. Transport infrastructure — roads and bridges, rail systems, airports, and port facilities — can generate revenues through usage fees. Utility infrastructure — water, energy, and communications — can generate revenues through sales of their respective commodities. However, other areas of development that are just as critically needed are not necessarily good for business, which requires some creative thinking to make them appealing to private investment.
A good example was provided by the ADB’s Asian Development Blog in a post that was coincidentally published the same day as The Manila Times’ forum on Wednesday. The Philippines and most other countries in the Asia-Pacific region suffer massive economic losses from natural disasters. The ADB said that between 2014 and 2023, these losses led to an average annual decline of 1.5 percent of gross domestic product (GDP) across the region, or an average cost of $127 million a day. If the current trend fed by increasing environmental impacts and climate change-driven effects continues, the region’s GDP could shrink by 17 percent by 2070.
Investing in better early warning systems is the key to reducing these losses, protecting livelihoods and supporting development by reducing risk. All countries know this, of course, but despite efforts to develop better monitoring and warning systems, the losses persist, so clearly the efforts are inadequate. At least here in the Philippines, we can point to consistent underinvestment in systems as the biggest culprit. For example, the excellent Project NOAH rolled out during the administration of the late president Benigno Aquino III, which provided the Philippines with weather monitoring and warning capabilities nearly on par with more developed places, such as Japan and Hong Kong, was eventually defunded not because its value wasn’t recognized, but because it had to compete with more immediate priorities.
As the ADB blog points out, early warning systems and their derived response plans should be considered continuous strategic investments. Left to the government, however, particularly one such as ours where policy roadmaps are erased and redrawn every six years, or even more frequently, that is impossible. At best, improvements are piecemeal and generic, and usually happen in response to a significant tragedy. If, however, the initiative was left to the private sector, with more capital, broader and faster access to new technology, and incentive to maintain the systems at maximum effectiveness over the long term, the real economic gain for the country at large would be immediate, substantial and sustainable.
Disaster warning systems are just one example, of course. The same goals can be applied to many disparate problems, such as the deficit of hundreds of thousands of school classrooms, overcrowded and underequipped public hospitals, or grossly inadequate waste management systems. Can it be done? Certainly. Will it be done? That’s up to us as the voters, citizens and businesses who keep the cogs of this country turning to demand that it is.