PRIVATIZING PHILIPPINE PUBLIC SERVICE DELIVERY:
Opportunities and Risks
Privatization may seem like a perfect solution for deficit-plagued governments, but the morning after can bring some unpleasant surprises. As a city or country drowned in deficits and faced multiple lawsuits, city leaders saw outsourcing as a light at the end of a collapsing tunnel. But it was only a mirage. The search for financial salvation is sweeping the country as local governments grapple with waning sales and property tax revenues. The economic recession has strangled budgets, forcing layoffs and the disbanding of departments. Feeling pushed to the brink of bankruptcy, cities are trying to find effective ways to make do with less. Over the year, more public officials have turned to outside sources for help in providing services at a lower cost to the country’s provinces or cities. In theory, the idea of contracting public services to private companies to cut costs makes sense. If someone is willing to fix streets or put out fires for less money, that should be a plus for a government’s bottom line. Many provinces and local governments have identified hundreds of millions of pesos in savings by hiring outside contractors -- or a neighbouring city’s services -- to handle tasks like trash collection, electricity repair, and water and wastewater treatment. For me, privatization of public services is by no means a perfect solution. Some agencies don’t have the metrics in place to prove in advance that outsourcing a service will save money. Problems from poorly conceived contracts can create cost increases that surpass the costs of in-house services, and if there’s shoddy contract oversight, a government is vulnerable to corruption and profiteering. The privatization of public services can erode accountability and transparency, and drive governments deeper into debt. Governments at all levels are just desperate to balance their budgets, and they’re grasping at privatization as a panacea. But there’s evidence that it often is a very bad deal with hidden costs and consequences when you turn over public service to a for-profit company. Various governments -- from small towns all the way up to provinces-- have been sending public services to the private sector since the 1980s. The trend stems from the common belief that private companies can help governments save or make money by doing jobs faster and cheaper, or managing a public asset more efficiently. Sterile philosophical debates about ‘public versus private’ are often detached from the day-to-day world of public management. Over the last several decades, in governments at all levels throughout the world, the public sector’s role has increasingly evolved from direct service provider to that of an indirect provider or broker of services; governments are relying far more on networks of public, private and non-profit organizations to deliver services. Like most countries, the Philippines telecommunications industry was once a monopoly of the Philippines Long Distance Telephone Company (PLDT) overseen by the Philippines government. In 1995, the government decided to privatize the industry and created the Public Telecommunications Policy Act of 1995 (RA 7925) in the hopes of creating a more level playing ground for all companies. The Act was defined as the new legal, policy, and regulatory framework in the promotion and governance of Philippine telecommunications development. The country was divided up into eleven regions, opening up the market to various competing telecommunication companies. The Act covers all telecommunications entities, protects users' rights, increases the roll-out period from five to three years, enforces the deregulation of value-added services and the complete privatization of all government telecommunications facilities by 1998. The dismantling of the monopoly and opening of the country to other telecom companies has resulted in a drastic improvement in teledensity. Local...
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