Ren de los Santos, Research Manager of the Stratbase Group and Resident Fellow for Global Politics of the Stratbase ADR Institute
Millions of years ago, dinosaurs roamed the earth. Behemoths of a forgotten world, they were the alpha predators that preyed on smaller animals and had access to unlimited sources of food. Because of this, dinosaurs exponentially increased their size to vast proportions.
However, their mass extinction event was triggered after a meteor crashed to earth, causing widescale food shortage due to the earth’s changing climate. Slowly, the survivors of the catastrophe had to scavenge for food and gradually as the famed father of evolution, Charles Darwin proposed; only the strong survived.
Survivability in this context was because of one fundamental factor; adaptability. Those who were able to survive did so by being able to adjust to the minimum requirements for survival. This analogy goes well with our modern-day dinosaur, which is state bureaucracy.
Classical political theorists posit the importance of state control on all matters of public management. The state-centric control over key industries assumes the unerring ability of the state to manage for the common good and its unparalleled ability to re-invest public funds to produce co-generational value with its constituents. It has to be argued that these assumptions have been proven to be problematic in practice.
Fact is that the government is overburdened and underdelivering. Today, the government deals with so much that it fails to ensure service quality and efficiency in managing its various arms. An example of this is the water crisis that has plagued the Philippines in the ’90s. It was the time that the government was struggling to solve the backlog in service delivery all due to bureaucratic quandary that it was experiencing.
It may be true that the 90’s heralded the Philippines push for globalization and has experienced rapid economic growth, but it was also the time that its weaknesses were exposed. In reality, the government failed to prioritize the most significant areas of infrastructure development despite having access to public funds and experts in the field. The bureaucracy was too big, too slow and too fat; like how the dinosaurs lumbered, the ones that had failed to evolve were the first to be wiped out.
An example of how privatization worked is how the water crisis was solved with the privatization of the of the MWSS water distribution to Manila Water and Maynilad. When Metro Pacific Investment Corporation (MPIC) handled the Maynilad consortium, service delivery pales in comparison to what it is today.
Before, 55% had unusable water pressure, and only 32% had access to a steady stream of water supply every day. Today, 98% now have water security while having the ideal water pressure. Moreover, Maynilad now has laid down 2,300 kilometers of pipeline that is up to par with global standards, which ensures the safety and quality of water delivered to customers.
Finally, water is made cheaper compared to what consumers had to pay when they had to have water delivered to their homes for as high as P40 per drum in some areas.
This feat was replicated in various other projects in the Philippines that were successful upon privatization. Millions of Filipinos benefit daily from the privatized operations of toll roads, power generation, transmission and distribution, ports, land development and ongoing Public Private Partnerships (PPP) for the government’s infrastructure projects.
In a nutshell, privatization is how management and operations of state-owned enterprises are transferred to the private sector. Moving its management has specific benefits that help these institutions streamline their processes and accelerate their growth as compared to when the government handled it.
Comparing government management ethos, private enterprises are niche-oriented and are customer-driven. The increased accountability of private firms motivates its management to serve its stakeholders to maximize the potential of their investment. This win-win cohabitation creates more intergenerational value than state-owned management, which often falls behind due to decision gridlocks and management bottlenecks.
Private enterprises are also more agile than the state in adopting new management philosophy and processes due to its performance culture than tenured officials because of the pressure to perform.
When it comes to capital, state-managed firms are prone to be politicized, which often lead to the discontinuation of much-needed projects and diversion of funds depending on the whims of top management. Finally, privatization benefits the consumers by being more accessible than the state; thus, private enterprises can act on problems quicker to lessen inconveniences to the customers and the communities it serves.
Much like the survivors of the mass extinction event, cutting the bureaucratic burden and adapting to the environment will benefit the government and the nation it serves. It is high time for the government and its institutions to refocus its functions and priorities to where it matters, and this is oversight and regulation for the benefit of our people.
This article was originally published in philstar.com. Image Source: The STAR/Michael Varcas.