Enemies, seen and unseen

May 22, 2022 | 5:54 pm

Introspective By Romeo L. Bernardo

Last Monday, I escorted my wife Amina to the Peace Partners’ Recognition Day 2022 held by the Office of the Presidential Adviser on Peace, Reconciliation and Unity (OPAPRU) at the Philippine International Convention Center (PICC). She was one of the awardees. I was happy to attend the event, not just because Amina was being recognized for her unwavering support for peace but also because of my deep admiration for Secretary Carlito “Charlie” Galvez, OPAPRU chief. Through Amina, I have known Sec. Charlie as a man dedicated to the peace process and to a final and peaceful resolution of the armed conflict in Mindanao. I personally got to know him through the partnership between the government and the private sector to protect our people and the economy from the pandemic.

The public-private partnership started when Finance Secretary Carlos Dominguez requested Jaime Augusto Zobel de Ayala to help organize private sector support for the COVID-19 Inter-Agency Task Force (IATF) in its war against COVID-19. Sec. Charlie was the National Task Force Chief Implementer. Apart from regular consultations between the government, the private sector on how to deal with COVID’s economic impact, we rallied the private sector around the testing, tracing, and treatment efforts led by Sec. Charlie.

We private sector representatives were deeply impressed by Sec. Charlie’s strategic understanding of the problem. Instead of merely expanding RT-PCR testing capacity and increasing the PPE inventory, he convinced us to look at a broad front: to Test, Trace, and Treat. Hence the name T3, which he coined at our very first meeting.

Thus, when Sec. Charlie promised “a better Christmas” last May, we were hopeful (https://bit.ly/BetterChristmas051622).

Working with him has made me appreciate Amina’s optimism over the peace process under Sec. Charlie’s leadership and concern about preserving the gains made by OPAPRU under a new administration. She and her fellow awardees hope that Sec. Charlie can continue to serve as Peace Adviser. I can see how the qualities that he exhibited during our work on the pandemic made his stewardship of the peace processes successful.

Let me list the five qualities that impressed us in the private sector, as defined by Bill Luz when he toasted Sec. Charlie at a thanksgiving dinner on May 5, tendered for all in the partnership to neutralize COVID.

First, he was data-driven. Sec. Charlie absorbed all the details of our presentations and used them to help evolve the strategy for our very fluid situation. From those presentations, he adapted the concept of our “Walls of Protection” and deployed the communications plan for people to get vaccinated and build their layers of protection.

Second, he was a perfect fit for the challenge. The Philippines may have gotten off to a slow start in vaccine procurement, but Secretary Charlie proved to be an expert negotiator with the vaccine manufacturers. After negotiating for peace with rebels holding rifles on the table opposite him, he said negotiating with vaccine manufacturers was a relative walk in the park. Whereas in the first quarter of 2021, we feared that we would not have enough vaccines for our people, he eventually helped secure more than enough supplies for the population — including children, second boosters for adults, and boosters for adolescents.

Third, his engineer’s mind could easily process the challenges we were facing. The entire COVID response, and especially the National Vaccination Program, had so many moving parts. Sec. Charlie’s strategic mind shifted from the big picture to the tactical, and back, as conditions shifted and changed. He taught us his “Center of Gravity” approach, and later led us to his “Focus and Expand” strategy, telling us to build “Depth of Defense” along the way. Eventually, our pandemic response’s reach broadened across the country, while preserving gains that had been made.

Fourth, he was extremely hardworking. Secretary Charlie was constantly on the move during this entire COVID period, traveling around the country, going to the airport countless times to accept vaccine shipments, inaugurating vaccination sites, and giving his weekly briefings to the President. He has placed himself at risk of catching COVID so many times that he’s been swabbed for an RT-PCR test around 300 times. And as if the Vaccine Czar job wasn’t enough, he continued with his work as the Peace Adviser, traveling to Mindanao often as the needs warranted.

Finally, he was humble and a pleasure to work with. He promoted teamwork and empowered people to speak and share ideas. We had many discussions on policy and protocol and he was always ready to listen. His calm and cool demeanor and his way of explaining things and giving credit to people were always appreciated. We’re all truly proud to say that we had the chance to serve under a four-star general like Secretary Galvez.

Those five qualities are needed if the mandate of the government for peace, reconciliation, and unity are to be successfully implemented. At the OPAPRU event, Sec. Charlie noted that development is not possible without peace, and peace is unattainable without development. Today, more than ever, we need a leader at the helm of OPAPRU who can strengthen the foundation for peace and development.

The country’s road to a just peace is strewn with barriers, which requires strong, yet compassionate leadership. The creation of a meaningful autonomy in Muslim Mindanao is both a social justice, and peace and development issue, following the Constitutional promise of “closing the gap between law and justice.” Presently, the administration of the Bangsamoro Autonomous Region of Muslim Mindanao has been overburdened by COVID-19 at a time when the Bangsamoro Transition Authority was just starting to work on a new governance mechanism — that of a parliamentary system. Meanwhile, the threats from violent extremism and the inadequate rehabilitation of the victims of the Marawi Siege were major burdens hobbling the projects of the BARMM leaders.

Another major block on the road to peace is the threat of insurgency from the CPP-NPA-NDF, with the peace process suffering ups and downs in the negotiations amidst allegations of insincerity. Unlike the Moro liberation fronts that had fought for independence, and accepted autonomy in Muslim Mindanao, the Left has always moved for a total change in our national political system and are present in impoverished communities from North to South. As threats go, this has more teeth as the insurgents have held private sector operations hostage in their conflict zones.

The job of the Office of the Presidential Adviser on Peace, Reconciliation and Unity is critical, as the country attempts to rise from the economic devastation of the pandemic. Agriculture has to grow, factories must be operational. Tourism must open our sites to the world. But, as Sec. Charlie had noted, development cannot succeed without peace. As many have noted, it is hoped the country’s journey to peace and development can continue under Sec. Charlie’s stewardship.

 

Romeo L. Bernardo was finance undersecretary from 1990-96. He is a trustee/director of the Foundation for Economic Freedom, Management Association of the Philippines, and FINEX Foundation.

romeo.lopez.bernardo@gmail.com

 

PPPs — Partnerships towards a Progressive Philippines

May 8, 2022 | 5:37 pm

Introspective By Romeo Bernardo

 (Part 2)

I point to two critical challenges, which can gain so much from a well-structured and implemented public-private partnerships (PPPs) environment:

1.) Boosting healthcare: Significantly adding healthcare capacity should be a top priority. We need both “beds” and “heads” — hospitals and healthcare practitioners — if we truly want to future-proof our healthcare system. With around 100,000 beds, our bed-to-population ratio of 1.0 remains under the World Health Organization (WHO) standard of 3.0. To reach a ratio of at least 1.25 by 2025, the country needs to increase its capacity by at least 54,000 beds. This is a massive undertaking that government cannot do alone. If we want to increase hospital bed capacity, we need to attract more private sector investments, through incentives and other mechanisms such as PPP arrangements, so we can entice more private players to be involved.

However, the other half of the challenge is the glaring gap in the country’s pool of doctors, nurses, and allied professionals. For example, we have around 0.4 doctors per 1,000 population, well below the WHO-prescribed standard of 1:1,000. The next generation should be encouraged to pursue training in healthcare-related fields. The government should explore incentivizing universities and medical schools to lower tuition costs and increase class sizes. PPPs can also be harnessed to establish more medical schools and training facilities, further empowering Filipinos all over to take on the call of service as healthcare providers.

Part and parcel to the government’s plan of strengthening Philippine healthcare is the implementation of Universal Health Care (UHC). Private healthcare providers should be encouraged and incentivized to establish primary healthcare facilities, in coordination with LGUs, to support the roll out of UHC. Furthermore, as the private sector continues to innovate with new mechanisms in line with UHC, the government should also be flexible in its regulations, able to adapt and evolve with these new business models. The private sector is eager to support UHC and, like how we dealt with the pandemic, cooperation and collaboration with the government are key if we want to see UHC through.

Finally, PhilHealth plays a vital role. To ensure PhilHealth’s future success and build resilience in the healthcare system against the future unpredictability with the pandemic, there are clear opportunities that should be addressed now, particularly on improving technology and systems for claims processing, fraud detection, and collections and reimbursements. The private sector can help by lending its collective wealth of technical knowledge and experience with global best practices. Should PhilHealth need to outsource certain functions or consult on what are the best strategies as it reforms, the private sector is readily available to help and provide support where needed.

2.) Addressing our learning crisis: The pandemic has aggravated a Learning Crisis that has been creeping upon us for decades but has been highlighted in recent years with our dismal placings in several international assessments of learner competencies, and, most recently, with the World Bank’s staggering data showing us at the bottom of the heap in almost all categories. Using data from PISA, TIMSS, and SEA-PLM (Program for International Student Assessment, Trends in International Mathematics and Science Study, and Southeast Asia Primary Learning Metrics) the World Bank (2021) estimates that 90% of 10-year-olds cannot read a simple story.

There are three areas with great opportunities for a strong Public Private Partnership to make a difference:

A. Improving the voucher system to accelerate school opening and learning recovery: The government has been successfully running large scale education subsidy programs in high school. In SY 2021-22, about a million private junior high students are ESC grantees while in senior high, about a million students are voucher recipients.

The positive impact is clear cut. In August 2020, an ADB study concluded that the programs promote the efficiency of the mixed public-private education system, enable greater choice, empower the parents and the learners, and promote diversity of providers.

But there is much more potential to expand and refine these programs such as (1.) increasing high school slots; (2.) redesigning programs towards the adoption of a universal voucher across eligible grade levels; (3.) adding grades 1-6; (4.) differentiating the grant amount using parameters such as socio-economic status, school location, SHS tracks or strands; (5.) quality assuring all participating schools and (6.) prioritizing disadvantaged students such as children with disabilities and indigenous peoples.

In higher education, the government is spending massively by subsidizing state colleges and universities offering free tuition for all. As has been pointed out by the Philippine Institute for Development Studies (PIDS), the government’s think tank, this is sub optimal: there is not enough financial support for the truly needy students (tuition is only a portion of the cost), leakages to the non-poor, and inimical effects on private institutions, many of which are much more efficient in providing education than their public counterparts. To address these shortcomings, a PPP model wherein a portable voucher is provided exclusively to the poor that would allow them to enroll in the post-senior high school of their choice, whether public or private, can be adopted. This is more efficient in using taxpayer money, and by empowering students to choose, provides a market test of the quality of public provision.

Additionally, vouchers need not be limited to college, but can also be deployed for other post-senior high school training programs more attuned to the needs of our country, e.g., digital skills.

B. Improving digital connectivity and 21^st century teaching and learning: Improved availability of good digital connectivity in urban centers has partially addressed the inability to do face to face classes in the last two years. However, this has widened the digital divide in terms of access to remote education platforms.

A possible PPP solution to this would be for the government to tap the technological and management expertise of telcos to expand their reach into those areas. Financially supporting their infrastructure and facilities roll out in areas that would not otherwise be commercially viable and providing subsidies to poor users using, for example, the CCT (conditional cash transfer) mechanisms would help solve this pressing problem.

But technology alone cannot solve the learning crisis. Guidance by trained and well-supported teachers is also needed for students to maximize the benefits of digital connectivity.

C. Education Commission 2: If Education Commission 2 is passed into law, it would be a golden opportunity for the public and private sectors to work together to reboot our educational systems.

Ideally, the reboot should be informed by a holistic, data-driven assessment led by PIDS, the government’s think tank. Its review should cover legislative, policy, and administrative gaps, including the assessment of budgetary requirements to support public and private education sectors equally. The private sector could take the lead in providing technical assistance for a truly reimagined education system focused on improved learning for all.

Healthcare and education are just two areas that can flourish and create meaningful social impact through PPPs that are designed properly and implemented under the right enabling environment. I remain steadfast in my belief that there is a golden opportunity for us to build on the trust and collaboration gains created between government and the private sector during our collective response to COVID’s challenges, and channel these towards structured, well-designed, and longer-term contractual PPPs.

However, unlike the partnerships done during the pandemic — which are one-shot endeavors — contractual PPPs typically require long-term commitments, including significant capital from proponents and financiers. Thus, given the complex nature of such arrangements, such contractual PPPs need to be commercially viable, sustainable, and predictable.

Allow me to provide some recommendations to ensure that such a vibrant environment for contractual PPPs will emerge:

1. Institutionalize Public-Private dialogues for each of the government’s priority sectors, and supplement these with a Steering Committee, Secretariat, and regular cadence. While these may sound mundane, a continuous series of regular monthly dialogues with clear accountabilities and next steps will be much more effective than the current approach of ad hoc and irregular meetings when crises arise. The T3 (Task Force T3 [Test, Trace, Treat]) experience validates this arrangement.

2. Place the spirit of partnership and collaboration at the center of joint initiatives. Partners should recognize the strength of the private sector and the limitations of government, and vice versa, and seek to bridge these gaps through cooperation. We note that the government has had difficulty in the building and operation of projects, especially those that are complex and require high levels of technical expertise (e.g., IT projects, massive infrastructure initiatives, etc.). The private sector can certainly fill in these gaps, but under the appropriate environment of trust and genuine partnership.

3. Respect the basic principle of risk allocation. Parties that can best manage particular risks should be the primary ones to carry these. Thus, on the issue of Material Adverse Government Action (MAGA), such risks should not and cannot be borne by the private sector, as this may result in unviable projects that do not generate interested qualified bidders.

4. Respect the sanctity of contracts. Business thrives in an environment of predictability and consistency, with internationally recognized mechanisms existing to resolve disputes between parties. Robust PPP arrangements would greatly benefit from this environment of respect for private partners, their contracts, and the decisions of international arbiters in cases of disputes.

5. Design globally competitive PPP contracts. Connected to the above, arrangements that are investment-friendly attract the highest quality local and global players that can best meet the requirements of government and the public at the least cost, while promoting healthy competition. The amendments to the Public Services Act that allows 100% foreign ownership in key infrastructure projects are a step in the right direction. However, the proposed amendments to the BOT (build, operate, transfer) Law’s Implementing Rules, covering exclusions to what constitutes MAGA, uncertainty in determining “reasonable” rates and returns, and removing arbitration as a dispute-settlement mechanism, among others, are a worrying development.

To close, the COVID-19 pandemic appears to have ushered in unprecedented levels of trust and a much tighter partnership within the private sector, and between the private sector and the government — the bayanihan spirit coming to life. I believe that there is no other more opportune time than this post-pandemic period to build on these gains and create an environment where public-private partnerships, broadly defined, become a critical vehicle for addressing our several development challenges in the delivery of needed public services and infrastructure, both hard and soft. The government’s limited fiscal resources at this time require that it spend these more wisely, and leverage the same with private financial resources, and technical and management know-how.

I am grateful for valuable inputs from Fred Ayala, Paolo Borromeo, Bill Luz and Paolo Monteiro. Mistakes all mine.

 

Romeo Bernardo served as finance undersecretary during the President Cory Aquino and President Fidel Ramos administrations. He currently sits on the boards of the Foundation for Economic Freedom, the Management Association of the Phil. and the FINEX Foundation.

romeo.lopez.bernardo@gmail.com

 

PPPs — Partnerships towards a Progressive Philippines

 

May 1, 2022 | 5:47 pm

Introspective By Romeo Bernardo

 (Part 1)

It has often been observed that our best qualities as a people emerge during times of national catastrophe — typhoons, flooding, volcanic eruptions, earthquakes, tsunamis. This spirit is expressed in a word that does not directly translate to English: “bayanihan.” Defined as the enduring value of the Filipino “to help fellow countrymen in times of need without expecting anything in return,” this comes from the word “bayani” (hero). Bayanihan is an invitation for heroes from all walks of life to work together.

The once-in-a-generation COVID-19 pandemic is perhaps the mother of all catastrophes in terms of duration, global reach, and the suddenness and severity of its impact on peoples’ lives and the economy — truly an existential threat to individuals and institutions. It is fortunate that our national response, both public and private, has been proportionate to the disaster, showcasing the best of public-private partnerships (PPPs).

In April 2020, responding to a call from the government for a partnership to manage COVID, the private sector created Task Force T3 (Test, Trace, Treat). Starting initially with a small group composed of Ayala, AC Health, McKinsey, MPIC Hospitals, the Philippine Disaster Resilience Foundation (PDRF), Unilab, and Zuellig Pharma working with the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF), Department of Health, the Asian Development Bank, Presidential Adviser for Entrepreneurship Joey Concepcion’s Go Negosyo, and the Foundation for Economic Freedom, under the baton of Bill Luz and Fred Ayala, T3 quickly expanded to cover the entire business community in a consortium working with government across many different fronts of the COVID response.

At the outset, the work focused on expanding the RT-PCR testing capacity nationwide, from 4,500 tests per day in the third week of April 2020 to 30,000 by the end of May (and eventually to over 100,000 tests daily). A second job of increasing PPE (personal protective equipment) inventory was also given to the task force. Eventually, T3 worked on over a dozen projects, all the way to the national vaccination rollout with Secretaries Charlie Galvez and Vince Dizon.

COVID-19 showed, in a tremendously tangible way, the power of bayanihan in successfully meeting a massive challenge. I share the belief that this same spirit of partnership can likewise propel us to solve our most burning, persistent problems, and truly create a Progressive Philippines.

KEY THEMES AND LESSONS OF T3
Partnerships work. Both sides of the partnership complemented each other’s strengths and covered for each other’s limitations. For instance, the agility of the private sector made immediate response measures possible as the government realigned its budgets and mobilized its machinery. Meanwhile the public sector’s size, reach, and resources made massive impact at scale possible, supplementing what the private sector had started. Building on these, key themes begin to surface on what truly made T3, as a cooperation model, successful:

Speed is of the essence. As noted, the private sector’s agility was crucial during the early stages of the crisis, while the more bureaucratic and massive ship of the State undertook the required legislation and organizational effort. We saw this quite clearly across all the partnership initiatives, from the earliest relief undertaking (Project Ugnayan) and in expanding testing capacity, building quarantine facilities, building up PPE supply, data management, communications, and vaccine deployment, among others.

Private sector investments in technology, supply chains, and human capital made the difference. The resource base, capabilities, and access of the private sector taken together across industries, and, most especially, globally, appears to be at an advantage versus most governments. This was most evident in vaccine logistics and administration, data management and analytics, communications, and the development and application of internationally recognized best practice protocols and the latest scientific findings on the virus.

Taskforces over traditional reporting lines. A multifaceted catastrophe such as COVID-19, cannot just rely on official “boxes and lines” on who is responsible for what. In this case, this is not just a “public health crisis” that would normally fall under the Department of Health, which has historically been limited in its resources, but also a “socioeconomic crisis,” as severely affected livelihoods, ultimately translates to lives impacted. We have heard many stories of Filipinos who were risking infection by continuing to make ends meet outside of quarantine: say in many ways, “Hindi nga ako mamamatay sa sakit, mamamatay naman ako sa gutom” (Yes, I won’t die of disease, but then I’ll die of hunger).

Initially, the IATF used what was once considered as the strictest quarantines to control contagion, driven by understandably cautious health professionals. However, through well-organized, targeted consultations involving the government economic managers; and the severely impacted, but committed private sector groups across industries (healthcare, retail, transportation, construction, education, etc.); while drawing on the experience and expertise of other countries secured from global knowledge banks (the Asian Development Bank, McKinsey, and Boston Consulting Group), the strategies and policies were refined that allowed us to eventually “dance with the virus” and minimize the adverse impact on our people. Proposed measures now had to go through this multistakeholder group during their regular cadences before implementation. Thus, after a severe 9.6% contraction of the GDP in 2020, we have bounced back and are enroute to full recovery.

Public sector scale augments private sector speed. While the private sector can contribute early and quickly, especially technological resources not available to government, the reality is that for adversities of this magnitude, only the public sector has the massive financial resources, and legislative and executive powers needed to address them systematically. This is especially relevant as the private sector itself was severely impacted commercially and needed fiscal support from the government.

This was highly evident in the government’s large-scale, and wisely diverse vaccine procurement — which built upon the initial vaccine procurement effort of the private sector for their stakeholders — the “ayuda programs,” and the actual vaccination at the local government level, after private experts helped develop data-based strategies. All told, counting public spending, lending, fiscal stimulus, and the government’s COVID-19 response amounted to P3 trillion or 15.6% of GDP from March 2020 to April 2022, according to the Department of Finance.

Inclusive Capitalism emerges as an idea whose time has come. As these partnership efforts materialized alongside government, a heightened sense of social responsibility and a greater appreciation of stakeholder impact appeared to manifest within private institutions. These have certainly long been present within the Philippine private sector and have been building up for many years through coalitions and alliances, such as the Philippine Business Groups (FINEX, MAP, MBC, PCCI, PBEd, PBSP, etc.), and the Philippine Disaster Resilience Foundation, among others.

Amidst COVID-19, further strengthening its alignment to a stakeholder-centric model of doing business became a compelling proposition to the private sector. As a tangible expression of this, in November 2020, more than 20 business associations launched the Covenant for Shared Prosperity, inspired by a similar movement of the Business Roundtable in the United States.

PPPs AS A PLATFORM FOR NATIONAL DEVELOPMENT PRIORITIES
The pandemic was certainly an existential crisis. It’s almost impossible to consider anything else that may be as severe, immediate, and all-encompassing in its impact on the nation and its people. Yet there are disaster-proportion adversities already upon us that are perhaps not so apparent, since they do not come in a big blow, but creep up on us slowly — the proverbial thief in the night, or the lobster in the boiling pot. I can point to subpar education and healthcare quality, outdated infrastructure, poor child nutrition, lethargic FDI, poor ease of doing business metrics, and many others, as fundamental and persistent challenges that the country continues to suffer from.

There may be opportunities for harnessing more PPP to address these, based on more long-term commercial contracting commitments, rather than pure altruism for one-shot short-term undertakings during an existential crisis.

Fortunately, we have in place one of the more advanced PPP legal, regulatory, and governance frameworks that has yielded globally cited examples of successful partnerships benefiting the public. Since the passage of the Build-Operate-Transfer Law, we have seen multiple examples of success in the expansion of our power, water, expressway, and airport infrastructure.

T3 only cemented the value of this engagement model with the private sector, given its tremendous contributions to the fight against COVID and in bringing much-needed attention to our healthcare space.

Looking forward, we can build on these PPP successes in physical infrastructure and, in light of the COVID crisis, the social sector to address some of these fundamental problems that we face.

(To be continued. Part 2 covers possible PPP interventions in health services and education and suggests revisions in government mindset and policies for a more enabling PPP environment.)

I am grateful for the valuable input from Fred Ayala, Paolo Borromeo, Bill Luz, and Paolo Monteiro. Mistakes are all mine, the author.

 

Romeo Bernardo served as finance undersecretary during the President Cory Aquino and President Fidel Ramos administrations. He currently sits on the boards of the Foundation for Economic Freedom, the Management Association of the Phil. and the FINEX Foundation.

romeo.lopez.bernardo@gmail.com