PARTNERSHIPS FOR GROWTH PROGRAMS

Business is one of the defining features of Naga.  Despite its locational disadvantages and limitations, Naga is, undisputedly, the Heart of Bicol.  It is the regional center of business.  Its claim to this is bolstered by the following facts:

• Naga is among the country’s fastest-growing economies with an annual growth rate of 6.5%

• With an area and population equivalent to only 0.48% and 2.9% of the Bicol total, it accounts for approximately 21% of investments.

• It is a location of choice for top companies looking into the potentials of the regional markets.  Many of these firms have operations that extend up to the Southern Tagalog region and Samar/Leyte in the Visayas.

What the city is today can be attributed in large part to the presence of a dynamic local business community.  The private sector is a vital stakeholder in our development. 

Given the private sector’s importance in development, it is no surprise that among the city’s most notable partnerships is with the business community.  LGU partnership with this sector has allowed Naga to stimulate economic growth and, thereby, sustain the city’s equity-building programs.

This article presents these partnerships. 

Forms and Types of Partnerships

As pointed out above, the city government’s partnerships with the private sector can be for:

• Growth-oriented strategies – which are employed by the city to promote economic development and expand investment opportunities;

• Equity-building strategies – that are targeted at the poor to ensure that they benefit from the fruits of development.  They are service delivery mechanisms for fulfilling the promise of development for all— particularly the poorest sectors of society— which every leadership aspires to.

This presentation focuses on public-private sector partnerships in the city’s growth programs.  However, it should be noted that Naga’s private sector is also heavily involved in equity-building programs.  This is based on the principle that by giving the private sector the opportunity to practice corporate social responsibility, we are able to address social issues which, in turn, is needed for building an environment conducive to business.

Partnerships in growth-related programs can be:

• Project-based – These are specific projects where private sector expertise and resources are tapped to complement government capability

• Institutional – This refers to mechanisms that involve the private sector, usually organizations and aggrupations, in government-initiated bodies so that they can participate in the decision-making process and implementation of development programs.

Naga’s partnerships with the private sector may also be government-initiated or private-led.  They may occur at the level of  the local government and organized private sector groups, or the LGU and individual firms.

Project-Based Partnerships

Since 1988, the city has adopted several strategies to improve the investment climate.  The efforts started with confidence-building measures and programs meant to recapture Naga’s reputation as the Bicol region’s premier city (Naga was reduced from a first- to a third-class city at that time and business confidence was low).  Much of these were directed towards opening up business opportunities and revitalizing/decongesting the old Central Business District (CBD).  Much of city life, over the past four (4) decades, had revolved around the 30-hectare CBD.  Its size unchanged, the CBD in the late 1980’s, was already overcrowded.  The initial efforts—which had government at the helm— developed areas at the peripheries of the CBD.

The current programs are directed towards sustaining growth—through the development of other growth zones. The private sector has taken the lead and is developing distinct commercial areas in other parts of the city.

The major efforts undertaken are:

GOVERNMENT-LED INITIATIVES

Urban Transport and Traffic Management Plan (UTTMP)

The UTTMP relocated transport terminals outside the CBD.   Naga is a melting pot for people coming from the six (6) provinces of Bicol, being the region’s center of trade and commerce.  These people converged on the city through bus and jeepney terminals located within the CBD.  After lengthy deliberations, especially with the business sector, all bus and jeepney terminals were relocated outside the old business district.  These were operated by interested private sector partners.

This strategy was implemented through an ordinance—part of the local government’s authority to redirect and control growth using its police and regulatory powers.

The pedestrian traffic created by the terminals perked up economic activities at the peripheries of the CBD. At no cost to the city government, the commercial area effectively expanded by a third.  The strategy also eased traffic flow within the CBD, restoring order, life and vitality to the city’s prime commercial hub.

Panganiban Upgrading and Beautification Project

Initiated in 1989 as part of the Naga Local Initiatives for Economic Activities and Partnerships (LEAPS) program, this strategy created a new business corridor out of a 1.2 kilometer-long swampy example of urban blight— the Philippine National Railways (PNR) property along the railtracks and Panganiban Drive which, from the east, serves as the main thoroughfare leading to the CBD.  This was at no cost to the city government.

This was a partnership with the PNR, which owned the right-of-way along the railtracks, and the private sector. The city government leased the property for a term of five years, renewable for the same period.  The lease price was P 25.00 per square meter per annum (or P 282,000.00 for the entire area per year).  The city, then, sub-leased the same property to interested private developers at P 30.00 per square meter per year.  However, developers were required to build and operate duplex-type commercial buildings using a uniform design conceived by the city in partnership with the private sector.  

This Build-Operate-Lease arrangement even pre-dates the Philippines’ Build-Operate-Transfer Law.  There are now 20 uniform commercial buildings in the area utilized as medical clinics, boutiques, display stores, tailoring shops, offices and pawnshops.  Aside from opening up a new commercial area, the project also resulted in the beautification of Panganiban Drive.

Satellite/District Markets

At the heart of the CBD is the Naga City Supermarket, once Asia’s largest.   To disperse development to other areas, the city government encouraged the operation of district or satellite markets.

District markets are generally owned and operated by local governments.  Instead of using government resources, however, the city decided to involve the private sector.  Also  part of the LEAPS program, businessmen were encouraged to construct and operate satellite markets in strategic areas within the city, following a set of government requirements.

There are now five (5) privately-owned district markets.  These are;

There are also instances when the local government feels the need for the operation of a satellite market but the business community initially believes that the project will not be viable.  In such cases, the city operates the market but, still, with the private sector as partner.  The Peñafrancia District Market is an example. 

The Peñafrancia market was conceptualized in 1996 to address the problem of transient/sidewalk vending by families in an urban poor relocation site.  These families were selling their wares along the Peñafrancia Shrine and Museum— two of Naga’s historico-religious and tourist attractions— and were already becoming an eyesore.   The city government constructed and operated a market on land leased, at a minimal amount,  from the private sector; and relocated the vendors to this new site.  The project benefited the private sector as the city was able to introduce improvements on privately-owned land.  The urban poor families were given an opportunity to earn a regular livelihood.  And the city was able to address a festering social concern.

The Peñafrancia District Market has become a model for other markets to be constructed in three (3) of Naga’s barangays.

Private-Led Initiatives

Central Business District-II (CBD-II)

CBD-II or the Roxas-Panganiban Growth Triangle, is a 250-hectare area whose core is a 27-hectare development being undertaken by Ruby Shelter Builders and Development Corporation.  Compared to the UTTMP and the  Panganiban Upgrading Project which moved growth to other areas at the periphery of the old business district, CBD-II is an effort to create another distinct commercial area.

CBD-II is a private development started in 1993.  The local government was tapped to provide the growth stimulus.  The city established an integrated bus terminal on a lot donated by Ruby Shelter.  The terminal is one of the anchors of CBD-II development.   City Hall is also constructing a sports complex on another donated lot.  Furthermore, it built some of the main arteries in the area.  All of these projects were approved by Nagueños in a local referendum.

Through CBD-II, the city was able to acquire land that it uses for public facilities.  The private sector, on the other hand, was able to expand commercial activities and use the facilities constructed by the city as “anchors” for development.

Naga’s learnings from the UTTMP and district market development are being put to use in CBD-II development.  Dubbed as Naga’s transport exchange,  CBD-II is now host to a satellite market and two privately-owned integrated jeepney terminals servicing two-thirds of all inter-municipality PUJs, aside from the integrated bus terminal.  Establishments supporting and catering to the market created by these facilities have sprouted within the area.  Ruby Shelter’s 27-hectare core development alone has resulted in a 100% expansion of the commercial district.  It has been able to stabilize the previously exorbitant prices of commercial space in Naga. 

The operation of the integrated bus terminal within CBD-II is also an example of public-private sector partnership.  Built at a cost of P 48M—partly through a World Bank loan-- on a 2-hectare lot, the terminal is used by approximately 800 buses everyday.  It caters to passengers travelling to and from Naga to Manila, the Visayas, and other Bicol towns and provinces.  Aside from transport facilities, the terminal also features 41 commercial spaces.

Instead of running the terminal, the local government bidded out its operation to the private sector.  The bid documents submitted included information on the proposed terminal system of operations, fees to be paid by bus companies using the facility, and the amount to be paid as lease to the city.

Under the lease-management agreement, the city government is responsible for enforcing the local ordinance mandating that all buses load and unload passengers at the terminal; and major repair, maintenance and renovation of physical facilities.

On the other hand, the private sector partner is generally responsible for terminal operations including providing personnel and passenger facilities. 

The lease is for a period of 3 years, renewable for the same period thereafter.  However, the leasing of all commercial spaces within the terminal is managed by the city government.

Privatization of the bus terminal has allowed the city government to provide an efficiently-managed public facility without the burden of hiring new operations personnel while, at the same time, earning enough revenues to cover the facility’s amortization costs, at least.

Naga Southwest Development Project

This is a multi-billion property development project at the southwestern portion of Naga.  Envisioned as the first-class commercial and residential district of the city, the development covers approximately 90 hectares.  It was inaugurated early last year and is in partnership with one of the country’s leading property development conglomerates.  

The project will be anchored on the construction of a new four-lane diversion highway that opens up the entire area to future development.  The private sector will shoulder the cost of road construction.  It will also donate to the city government 5 hectares of land, 2 of which will be used for the relocation of displaced families.  The city government, on the other hand, will take care of right-of-way problems.

Institutional Partnerships

The business community is part of the Naga City People’s Council.  Aside from this mechanism, however, there are other institutional partnerships that have opened up avenues for involvement in decision-making.  At the same time, it has allowed the city government to capitalize on private expertise in policy-making and program implementation.  Among Naga’s institutional partnerships are:

City Development Council

The 1991 Local Government Code mandates the creation of a City Development Council (CDC) which initiates the development of a comprehensive multi-sectoral development to be approved by the City Council (Sangguniang Panlungsod).  It assists the city in setting the direction of economic and social development.

Specifically, the CDC has the following functions:

• Formulate long-, medium-term and annual socio-economic development plans and policies;

• Formulate the medium-term and annual public investment programs;

• Appraise and prioritize socio-economic development programs and projects;

• Formulate local investment incentives to promote the inflow and direction of private investment capital; and

• Coordinate, monitor and evaluate the implementation of development programs and projects.

The CDC is composed of the following members:

• The City Mayor

• All barangay captains

• The Chairman of the Committee on Appropriations of the City Council

• The Congressman or his representative

• Representatives of non-government organizations who shall constitute not less than one-fourth of the total membership

The business community, as part of NGO representation, is part of the CDC.  For Naga, this has been a mechanism used to build consensus on and finalize, among others, the following:

• The Naga City Comprehensive Land Use Plan (CLUP) – a master document used to rationalize the allocation and use of land resources, and guide physical development, taking into account the city’s demography, socio-economic profile, existing infrastructure and facilities, and growth directions;

• The city’s public infrastructure programs (including circumferential roads) which open up new growth areas; and

• Other programs with a city-wide impact (e.g. solid waste management).

Naga City Investment Board

Aside from bodies mandated by the Local Government Code, the city has also institutionalized other partnership and participatory mechanisms with the private sector.  Among these is the Naga City Investment Board (NCIB).

The city, in 1999, organized NCIB as a result of the Sanggunian’s approval of the Investment Incentives Code.  The NCIB is tasked with investment marketing and administration of incentives.

The Board’s operation is an example of how the city is able to push growth through business-led initiatives.  Naga has identified eight priority investment areas where it wants to direct new investments.  The NCIB, with the assistance of a technical arm fully-funded by the city government, promotes these areas.  The Board is private-led.  50% of its 11 members come from the private sector—  from the chambers of commerce and industry and the NCPC.   The City Mayor sits as titular chairman.  The vice chairman and presiding officer, usually the President of the Metro Naga Chamber, practically sets all directions.  Being private sector-led, the NCIB is more credible among new investors.

Coupled with a culture of excellence within city hall, the NCIB is also a mechanism by which Naga is able to maintain an investor-friendly environment.  It operates a one-stop business processing center for new enterprises.  Businessmen are given advice on requirements that they have to comply with and the fees to be paid.  The center also facilitates the applications.  This includes submitting, facilitating and following-up requirements with various government agencies and public utilities.  The facilitation function covers any registration requirement from processing business permits and securing connections with public utilities to land conversion applications and securing a Presidential Proclamation for economic zones.  A feedback mechanism provides the local government bureaucracy with inputs on further improving  services.

Within the year, the city will be expanding the mandate of the NCIB.  To be renamed as the Naga City Economic Development Board, its functions will cover investment promotion and other concerns that have a bearing on the economic development of the city.  Its membership will be increased from 11 to 15.  And 70% of members will come from the private sector.

Naga City Tourism Council

The Naga City Tourism Council (NCTC) is composed mainly of establishments in tourism-related industries.  Naga is not blessed with a wealth of natural tourist attractions.  Tourism, therefore, has not received much focus over the past years-- aside from the two-week long Peñafrancia festivities held in honor of Our Lady of Peñafrancia.  The city, however, can claim to be the hub of Bicol tourism as it houses all the necessary tourist facilities and amenities, and provides easy access to the region’s wealth of tourist destinations.  Along with the local government’s newly-organized Naga City Visitors Center (NCVC), the NCTC is now actively vying to turn Naga into Bicol’s convention city.  The target is to capture at least 2.75% of the total domestic market for conventions, conferences, trainings and other corporate events in the next five (5) years.

Typical Problems Encountered

There are two (2) major problems encountered by the city government in the implementation of its growth-related strategies.  These are:

Urban Poor Displacement

The development of new growth zones almost always affects urban poor families.  This is especially true in a city where, in the 1980’s, the urban poor accounted for 27% of household population.  New commercial districts require land development.  Urban poor families are displaced because they typically do not own the land on which they live.  

The Panganiban Beautification Project, for example, was built over swampy urban poor settlements.  Development by private owners in the CBD-II and Naga Southwest Development initiatives displaced or will displace approximately 100 families each.

Consensus-Building and Community Ownership

New development projects almost certainly encounter opposition from certain sectors of society.   This is to be expected as various sectors have their own issues that need to be addressed and interests to protect.  The urban poor is one such sector.  Growth-oriented strategies also encounter opposition from certain segments of the business community itself.    Transport operators and firms located in the old business district initially opposed the UTTMP, satellite market and CBD-II projects.  This was borne out of the apprehension that these projects would lead to diminished markets and higher operating costs.

Naga treats opposition by even a small segment of society as a problem since we value community ownership of city initiatives.  Development should not exclude certain sectors, even if they belong to a small minority.  However, mechanisms must be in place to ensure that conflicts of interest do not unduly delay growth programs.

Measures Adopted to Address Development Problems

Kaantabay sa Kauswagan/Urban Poor Program

The city’s Urban Poor Program (dubbed as Kaantabay sa Kauswagan or Partner in Progress) has addressed the problem of urban poor displacement in growth zones.  In fact, this multi-awarded program was conceptualized to address the perennial problem of squatting and urban blight.   It provides relocation sites, relocation assistance (including building materials) and basic infrastructure development.  Wherever possible, relocation sites are situated near the beneficiaries’ sources of livelihood.     The program is also complemented by the city’s livelihood program. Kaantabay helps the poor acquire capital (land) over time and builds a sense of permanence.   The livelihood program allows them to develop capability and build capital now, thus, addressing the problem of urban poor families leaving their relocation sites due to the absence of income opportunities. This program seeks to augment the incomes of target clients— defined as those households whose average monthly income is below P 15,000.00.  Among the program components are micro-lending, training and marketing assistance.

Kaantabay has proven to be an effective tool in facilitating the development of new commercial districts in areas populated by urban poor families.   Through land sharing solutions, “conflicts” between investors and urban poor families have been averted.  In the case of the Naga Southwest Development project, the private sector is donating 2 hectares to be used as relocation site for affected urban poor families.  In another commercial expansion area, the South Riverfront Growth zone-- the location of Naga’s largest shopping mall (LCC Mall)-- LCC, instead of just demolishing urban poor families’ houses, designated a relocation site and provided financial assistance for relocation.  The city government convinced families to resettle and worked with LCC to fast-track on-site development.   At CBD-II, we are going a step further this year.  The previous programs simply provided urban poor families with land which they could call their own.   In partnership with private developers, we are introducing a housing component.  Relocated families will have a house and lot to settle in.  This pilot project will cover 127 families.  The United Architects of the Philippines (UAP) is working on model houses.

Participatory Mechanisms and the Institutional Framework for Partnerships

As emphasized in the Naga governance model, where the various sectors are treated as both partner and beneficiary, partnership systems should be coupled with participatory mechanisms that allow involvement in government decision-making.     This framework has allowed Naga to address the problem of consensus-building.  Partnerships feed off participation as the latter builds ownership of local initiatives.  It allows more project partnerships to flourish as various sectors “get into the act,” so to speak.

Insights

Importance of Private Sector Participation

The private sector has much greater resources than government.  This is the rationale behind BOT, BOL and other variants.  The challenge, therefore, to local government managers is to be able to access them in every possible opportunity.  Most often, these opportunities do not come in a silver platter; they have to be created.

Importance of Role Definition

In every undertaking, Naga makes it a point to determine what specific resources are needed and match them with what is available in the community.  This, therefore, becomes a question of assembling groups with the required specialization and similar motivation for each program.  For instance, the strong linkage with business through the NCIB has been institutionalized since Naga recognizes that the private sector can do a better job in its area of specialization.  Business, after all, prefers to work with business first.

Planning and Complementary Programs

Particularly for new growth zones, complementary government programs are needed to minimize the ill effects brought about by development on affected sectors, especially the urban poor.   Development, after all, cannot happen only for the sake of development.  It must be viewed within the context of, ultimately, creating an environment that facilitates prosperity-building for the poor.  A balance must be achieved between growth-oriented programs and equity-building efforts for the poor.  For Naga, the complementary efforts are Kaantabay sa Kauswagan and the livelihood program.  The private sector is also involved in these programs for they understand that these will also lead to a business-friendly environment.

Plans built-out of consensus-building are also important tools to guide development.

Partnerships and Participation

Participatory mechanisms allow partnerships to flourish.  Both are key components of the Naga governance model.   Any partnership must always take the partners’ and other sectors’ interests into account.  Participation allows these interests to surface.  The resulting partnership systems are stronger for parties understand what is at stake for them.