[Good Business] Beyond profit: Unpacking private sector motivations in PPP

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The $3 billion concession agreement awarded to the San Miguel Corporation-led New NAIA Infrastructure Corporation (NNIC) to rehabilitate the Ninoy Aquino International Airport (NAIA) has ignited considerable debate.

Several petitions filed before the Supreme Court have questioned the constitutionality of the deal and its compliance with the Public-Private Partnership (PPP) Law, particularly citing the absence of clear terms regarding how the consortium would be compensated.

While the controversy primarily focuses on legal and constitutional issues, the arrangement underscores broader considerations about why private entities engage in PPPs with the government.

Although profit is often seen as the primary motivation, private sector participation in such partnerships is driven by various compelling factors, including altruism, strategic positioning, capacity building, corporate social responsibility, and a commitment to societal progress.

One significant reason private entities engage in PPPs is altruism — the desire to contribute positively to society without expecting direct compensation. This selfless motivation often manifests in projects that improve public welfare, such as rehabilitating essential infrastructure to enhance national competitiveness.

In the case of NAIA, improving airport facilities could foster economic growth, attract tourism, and uplift the public’s travel experience, reflecting a broader societal benefit.

Beyond altruism, some private entities are motivated by asymmetry, or the strategic advantage gained through access to critical resources and influence over key infrastructure. These partnerships allow businesses to secure a competitive edge, expand their market presence, and grow their operations.

For San Miguel Corporation, managing NAIA provides an opportunity to cement its position as a major player in the country’s infrastructure development.

Another important motivation is the opportunity for capability and capacity building. By participating in PPPs, private entities invest in skills development, workforce training, and process improvement, enabling them to strengthen their internal competencies.

Large-scale government projects often require companies to innovate, adapt, and optimize their operations, helping them become more proficient and competitive in the long run. Capacity building further emphasizes workforce development, inventory management, and talent cultivation to enhance organizational effectiveness. These investments benefit the business and contribute to the project’s overall success.

Corporate Social Responsibility (CSR) is also critical in motivating private sector participation in PPPs. Many businesses view these partnerships as fulfilling their commitment to societal and environmental well-being.

By addressing issues such as ecological conservation, public health, or infrastructure development, companies enhance their reputation and foster goodwill among stakeholders.

For example, a well-executed NAIA rehabilitation project would demonstrate the private sector’s commitment to improving public infrastructure and quality of life, reinforcing its role as a responsible corporate citizen.

Efficiency and innovation are equally significant factors. Private entities often bring their expertise in operational management, enabling government projects to be executed more effectively and efficiently.

By introducing new technologies, streamlining workflows, and enhancing productivity, businesses contribute to better service delivery and cost-effectiveness. In addition, PPPs encourage innovation through collaboration and experimentation, allowing companies to develop new products, services, and processes that benefit both the project and their operations.

For instance, modernizing NAIA’s facilities could involve implementing cutting-edge technologies that improve passenger experience and operational efficiency.

Private entities also engage in PPPs to build legitimacy and enhance their reputation. High-profile collaborations with governments bolster a company’s image, establish reliability, and strengthen its standing as a trusted partner in nation-building.

The NAIA project, for example, provides San Miguel Corporation with an opportunity to align its brand with a transformative national initiative, reinforcing its credibility and influence.

Similarly, sustainability and stability are key motivators, as private entities seek to create long-term value for society while ensuring financial security. Investing in sustainable infrastructure benefits the public and provides the company’s longevity and resilience in an increasingly competitive market.

Finally, value creation remains a cornerstone of PPPs, focusing on delivering both economic and social returns on investment. By leveraging their expertise, resources, and innovation, private entities can ensure that projects generate long-term societal benefits while achieving their financial goals.

The NAIA rehabilitation project, if managed effectively, could serve as a prime example of how PPPs can create transformative outcomes that address public needs while delivering value to private investors.

Ultimately, while profit is a key driver for private entities entering into PPPs, it is far from the only motivation. Altruism, capacity building, innovation, CSR, sustainability, and strategic positioning significantly shape these collaborations.

The controversy surrounding the NAIA concession deal underscores the importance of transparency and accountability, but it also highlights the potential of PPPs to deliver meaningful societal benefits when managed effectively.

Understanding the diverse motivations behind private sector participation provides a more nuanced view of PPPs as instruments for nation-building and societal progress. – Rappler.com

Severo C. Madrona Jr is a Professional Lecturer at the Department of Commercial Law, RVR College of Business, De La Salle University. With a public policy and business development background, he writes about strategic leadership, labor economics, and fiscal policy.