Advantages and Benefits in Joint Venture Projects with LGUs

Mr. Ramon CF Cuervo III taking notes on how to present the ideas he gathered for the city of Manila.

Mr. Ramon CF Cuervo III taking notes on how to present the ideas he gathered for the city of Manila.

In this my third write-up on “Public-Private Partnership for LGUs”, I wish to focus on the need and advantages by going into joint venture projects with local government units. In the wide spectrum of possibilities,  my favorite modality , as i learned from the PPP “Guru” & Legal expert, Justice Agra, is to utilize Joint Ventures as a means for a Private – Public – Partnership for LGU Projects.

The governing law and rules for joint ventures with local government units is found in ; law of partnerships, the implementing rules and regulations of 1991  local government code, and as a supplement, the NEDA joint venture guidelines.

My particular favorable interest , in going into joint ventures, is that there are no stringent laws restricting joint ventures,  of the private sector with LGUs. Local government units , in general , have adopted a more liberal view in using Joint Ventures,  as a vehicle for their projects. This was  avoiding too much government intervention, red tape, political hostilities. Join Ventures are also more responsive to the needs of the general welfare of the public.

It is important of local government units to have fiscal autonomy , where they can source funds and go into projects that generate cash flow for a particular Barangay, municipality, city or province.

By involving the private sectors expertise, resources, technical know how, management capabilities, independence, and in general, a more professional capability to engage in a particular project,  that will be for the benefit of the local governments unit.

What is important , is the private sector proponent’s  credibility, integrity, and track record that would win the necessary public trust and acceptability by the local government unit.

There is more reasons to believe, that private sector participation will bring about the growth, development, and financial well-being,  as well as economic prosperity, of a local government unit.

To sight an example, the city of Naga when former DILG Secretary Jesse Robredo was a mayor, managed to develop Naga. The Far Eastern University bestowed Secretary Robredo with a doctorate in Humanities, honoris causa, during its 80th commencement exercise held at the plenary hall of the Philippine International Convention Center on April 4, 2008, recognizing his efforts to develop Naga City. He served for a total of nineteen (19) years as Naga City Mayor before being appointed on July 9, 2010 as Secretary of the Department of Interior and Local Government (DILG). Former DILG Secretary Robredo was able to transform Naga City from being dull and lethargic to being one of the “Most Improved Cities in Asia,” as cited by Asiaweek Magazine in 1999.

During his time in city hall, Secretary Robredo was credited for “dramatically improved stakeholdership and people participation in governance, in the process restoring Naga to its preeminent position as the premier city of Bicol Region.”In 1995, in recognition of his skills and competence as a leader and development manager, Secretary Jesse Robredo was elected President of the League of Cities of the Philippines, the national association of city mayors. He also chairs the Metro Naga Development Council.” He served as chairman of the Regional Development Council, the regional planning and coordinative body of Bicol’s six provinces and seven cities, from 1992 to 1998.

On the other hand, we see the premiere capital city of the Philippines, the city of Manila, unfortunately, is bankrupt, and in need of funding, cash flow, revenues, so as  to be sustainable.

Former President and now Manila Mayor Joseph Ejercito Estrada

Former President and now Manila Mayor Joseph Ejercito Estrada, seeking means to generate funds for the city of Manila.

In an article of Philippine Star written last January 2,2014 by Jose Rodel Clapano, said , Former President Joseph Estrada ,” ran for Manila mayor to save the city from “decay” owing to the mismanagement of former mayor Lim. Many experts viewed Estrada’s victory in the May 2013 mayoralty election as his chance to vindicate himself. But now that he is in his coveted post, Estrada realized that he inherited a bankrupt city government from his predecessor. Estrada said the city government owed the Maynilad Water Services, Inc., P613.6 million and the Manila Electric Co. some P57.7 million that accumulated during the Lim administration.Aside from this, Estrada said the city government has a budget deficit of P3.5 billion, a financial situation that virtually tied his hands to use funds for new projects. On his first day in office, Estrada started cleaning the Manila Police District (MPD), which he said had ceased to be “Manila’s Finest.”

“Even the Manila policemen were not spared by my predecessor. He did not release the allowances of the police and the contributions of the city hall employees to the Government Service Insurance System (GSIS) were not remitted during my predecessor’s term,” Estrada said. “The situation is worse than when I became President,” Estrada added. He has asked Maynilad and Meralco to give him more time to pay the city government’s debts. “I am confident that we can pay it within a year. Right now, I am ensuring that every single centavo in taxes and other forms of income to be generated by the city government will directly go to the city coffers,”

Estrada said. “This is the biggest challenge in my life. I did not face this during my presidency. This is my last hurrah,” Estrada said. As part of the city government’s efforts to raise revenues, 97 real estate properties worth P103.5 million owned by delinquent taxpayers were set for auction on Nov. 26. Another problem, which needs prompt action from the city government, is the indiscriminate dumping of garbage that clogs waterways in Metro Manila and causes floods. Estrada had led the inauguration of the redeveloped Estero de Santibañez in Paco, Manila.  He said that 30 percent of some 8,700 tons of garbage generated daily by Metro Manilans goes to “canals, creeks and rivers,” since only 70 percent of the  garbage is collected.

The uncollected garbage ends up in Pasig River before it goes to the sea and settles in Manila Bay, Estrada said.Estrada said cleaning all the esteros in Manila is in line with his vision to bring back the glory of Manila. During his 100 days as Manila Mayor, Estrada said the MPD carried out 161 police operations against all forms of illegal gambling which resulted to the arrest of 209 persons.Estrada said that after 15 years, the MPD is again a reliable group ready to help and secure the people from criminality.”

Given the situation of the city of Manila, my advice for those who wish to invest and turn the crisis into an opportunity is to go into joint venture projects with the city of Manila so as to address the issues and challenges that city is faced with.  The private sector, as responsible citizens, should take a serious look to save the financial problems of the city of Manila.  The city of Manila is undergoing a serious urban decay, challenges of peace and order, the streets are dark, and public safety compromised.

Fortunately , or “Unfortunately” , Manila is the education center of the Philippines. The large Student population, and the forward and backward linkages to Business activities generated by the Students, has turned Manila University Belt, as  one of the most important  economic base of the city.

Yet, these universities and colleges do not pay city taxes, and real estate taxes , and are not contributing directly  to the financial and fiscal  needs of the city. Another issue, is that the city of Manila is a port city, being the center for trade, exports and imports of good and a major shipping hub. Again, the city of Manila has no control over the port harbor, it is under the jurisdiction of Philippine Ports Authority.

Ironically, one can observe that major city roads are being used by huge trailers, trucks, container vans, who utilizes the major thoroughfares and roads of the city , causing traffic jams, road destructions and enjoy free access without necessarily contributing to the funds for the needs of the local government.

Another area that i am still wondering how or why, is there an ” autonomous ” territory within the city of Manila. This  is one of our National Treasure, Hermitage sites, The ” Walled City” of Intramuros, rich in history, from the early Spanish era of the 16 th century. The Intramuros Walled City, if I am not mistaken, has certain privileges, and some type of “independence” from the jurisdiction of the City of Manila.

Intramuros is one of the top tourism destinations in the city of Manila.

Intramuros is one of the top tourism destinations in the city of Manila.

Presidential Decree No. 1616, Creating the “Intramuros Administration” for purposes of restoring and administering the  development of Intramuros.

Please click the link below for P.D. No.1616:

Intramuros Administration, which benefits from tourism income and revenues but  there are some legal and territorial issues that have to be addressed on the Management and Administration of Intramuros which is within the city of Manila.

These are some of the ” road-blocks”  and challenges that the City of Manila  has to face. There  is also the overwhelming  anarchy and hostilities of illegal sidewalk vendors,  criminal business activities, and the “mafia”  type of underground operations going on within the City if Manila. Clearly ” Underground ” business activities, yet quite visible to all who walk the streets of Manila, sees these illegal practices. Do they pay taxes? Are these ” black magic business ” contributing to the Fiscal and financial needs of the City of Manila? Can the Local Goverment collect fees or licenses from them? I doubt .

4. It will be interesting for a financial institution , to engage in securitization and issue development bonds , so as to build up the capital necessary for cash generating , urban renewal projects,  housing developments, and revitalization of the city.

5. Since the city is highly populated with students and there are dormitories numbering to the thousands,  the city of Manila could consider going into a joint venture with a real estate management expert. This way, the Dormitory business can be regulated, and  that the LGU can control  the quality, standards, safety and security of students that require conducive accommodation.  These could be a good cash generating joint venture , capitalizing on the large need and demand,  to improve the quality of dormitories for the students of Manila.

These  suggestions made, as to the  advantages and benefits in going into a business joint venture with a Local Government Unit, is but a ” tip  of an iceberg” . There are countless possibilities, and business opportunities, the private sector , can initiate innovations, new creative methods to improve social services, and in this way contribute, in an active , positive manner to the redevelopment and revitalization of the premiere capital of  the Philippines , the City of Manila.

To end, i wish and hope that the Honorable, former President, and now  Mayor of Manila, Joseph Estrada, Vice Mayor Isko Moreno,  and the City Council, to work closely with former Justice Secretary Atty. Alberto C. Agra, in doing the Legal  framework , manual and guidelines for PPP Projects for the City of Manila.

Mr. Ramon CF Cuervo III, Board Member of Philippine Regulatory Board Real Estate Service with former Justice Secretary Atty. Alberto C. Agra

Mr. Ramon CF Cuervo III, Board Member of Philippine Regulatory Board Real Estate Service with former Justice Secretary Atty. Alberto C. Agra


This entry was posted in Economics, Finance, Philippine Government, Real Estate. Bookmark the permalink.

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