ADB Summit Panel Discussion III— Build to Develop: the Impact of Social Infrastructure Investments
45th ADB Annual Meeting of the Board of Governors
Philippine Corporate & Investment Conference
SMX Convention Center, Mall of Asia, Pasay, 2 May 2012, 2:15 P.M.
Source: Office of the Vice President
Good afternoon. I thank the convenors of the 45th Annual Meeting of the ADB’s board of governors—particularly the Public-Private Partnership Center of the Philippines—for inviting me to be a panelist in today’s discussion.
Social infrastructure investment is essential to developing socially inclusive and environmentally attractive settlements. In addition, it contributes to the development of human capital, worker productivity and ultimately, economic health.
Within the country’s development agenda, investment in housing plays a profound role, most especially in job generation. The construction of one housing unit creates work for at least eight persons, and for every 100 new jobs in the construction industry, another eighteen jobs are generated in other sectors.
Housing investment also helps “unlock” dead capital and stimulates local property taxes. Over time, it builds household wealth — by appreciating in value and providing a base for income generating activities, while opening the door to credit.
As the chairman of the Philippines’ Housing and Urban Development Coordinating Council or HUDCC, I wish to focus on the public and private partnerships potential for scaling-up affordable housing in the Philippines and giving Filipino families, the underprivileged above all, a dignified life.
By 2030, the urban population of the Philippines is estimated to hit 96 million, with three of every four Filipinos living in urban areas. At present, the informal settlements in our cities remind us of the supply-demand imbalance in basic urban services, infrastructure, and housing. It is this knot that we seek to untie and in this goal, the participation of the private sector is of paramount importance.
If properly structured, public-private partnership projects can accelerate the provision of pro-poor and low-income housing. Beyond arresting urban poverty, this breaks ground for new towns and cities to be established outside the usual urban hubs thus rationalizing the pace of urbanization.
What is the enabling environment?
The law sets the stage for this cooperation to take place. Our Urban Development and Housing Act or UDHA charges the state to carry out a comprehensive urban development and housing program in cooperation with the private sector to uplift the living conditions of the homeless and underprivileged.
Furthermore, the PPP framework is guided by President Aquino’s 16-point agenda, the “Social Contract with the Filipino People,” which makes clear that the Philippines’ national development objective is to achieve inclusive growth and reduce poverty.
At this point, let me share with you our experience on PPP modalities and emerging deal structures.
Good laws are a necessary foundation but the true test of resolve occurs when the rubber finally meets the road, as the saying goes. Firm proof of how PPP can change the housing sector was gained in the development of poor urban communities sector project. With ADB extending funding, HUDCC worked with local government units, the Development Bank of the Philippines, microfinance institutions, community-based organizations and private developers to encourage PPPs across the scope of socialized housing.
This gave life to three PPP transaction structures which shifted the responsibility of securing project financing to the private sector. The first entails the packaging by the local government of socialized housing projects for private sector implementation. Through open bidding, the local government grants rights to a proponent who finances, develops, constructs, and manages a mixed use housing development built on local government unit land. To liquefy the developer, the Home Development Mutual Fund or Pag-ibig, a strong and vibrant fund owned by its members but managed by the government, provides end user financing.
The second structure focuses on private sector initiative. Privately owned land is developed, marketed and managed solely by the private sector. The national and local governments support the endeavor through the critical tasks of granting permits and licenses, and through the delivery of basic municipal services and identification of target market communities.
The third structure builds on the strength of microfinance institutions. In this modality, a local government develops the site and on its own or through a contractor, builds the housing units. A bank or non-bank microfinance institution then offers appropriate housing microfinance products and services to enable the target beneficiaries to purchase the plots and units developed by the city or municipal governments.
In the aftermath of typhoon Sendong in the Southern Philippines, another multi-stakeholder framework emerged. Local government units, the national government and the private sector like businesses, academe, and others contributed resources such as land or funds for site development and the building of houses.
The construction was undertaken by NGOs such as Habitat for Humanity or Gawad Kalinga, organizations who also generate construction funds from their private partners.
What are the further improvements in the enabling environment?
Further acceleration of PPP investments and frameworks of cooperation can be realized if a correspondingly investment-friendly business climate exists and strong private sector support in mass housing is both encouraged and safeguarded.
Tax incentives are already provided by law and we will support these with non-tax incentives such as reducing red tape in the processing of housing loans, registration and issuance of land titles, and housing permits. We continue to work with local government units to review and simplify processes in the issuance of development permits so that fewer barriers exist to private sector investment.
Idle and underutilized government (proclaimed) lands are available to private entities for development as part of our asset reform program. A portion of the land may be developed for commercial purposes and part of the proceeds shall be used as enabling components for the development of socialized and low-cost housing, all at no cost to government.
In order to make housing units affordable, a usufructuary arrangement shall be adopted as an alternative mode of disposition to intended beneficiaries. This shelter strategy will reduce cost by eliminating the price of land from the cost of housing development to provide not only decent and affordable housing for the common Filipino, but to nurture communities that are sustainable and resilient to climate change.
Our progress thus far is only the opening act. The combined strength of government and the private sector, harnessed by a common noble vision, will help us bring this effort to a successful close.
Thank you very much and good day!