Introduction
In recent years, planning and implementation of sustainable infrastructure has gained popularity [1]. Although there is no agreed definition of sustainable infrastructure amongst practitioners, the term often refers to the three “pillars of sustainability” (economic, environmental, and social sustainability) and operational sustainability [2–4]. According to Endo et al. [5], while academic scholars also have a tendency to define the term in a comprehensive manner covering the three “pillars of sustainability”, some focus on only one or some of the sustainability pillars when using the term. Given the lack of clarity in the use and definition of the term, the most descriptive definition of sustainable infrastructure that is currently available may be the one given by the Inter-American Development Bank (IDB): “infrastructure projects that are planned, designed, constructed, operated, and decommissioned in a manner to ensure economic and financial, social, environmental (including climate resilience), and institutional sustainability over the entire life cycle of the project” [4]. An explanation of each sustainability pillar of sustainable infrastructure is summarized in Table 1. It should be noted that social sustainability here is defined as a condition of enhanced livelihoods and social well-being of all relevant stakeholders [4].
Table 1. Sustainability pillars focused under sustainable infrastructure
Sustainability pillar | Explanation | Reference |
|---|---|---|
Economic sustainability | - Sustainable infrastructure has a positive net economic return, considering all benefits and costs over the project life cycle - Sustainable infrastructure has a financial sustainability by generating a sound revenue stream based on adequate cost recovery | [4] |
Environmental sustainability | - Sustainable infrastructure preserves, restores, and integrates the natural environment - Sustainable infrastructure limits pollutions and contributes to a low-carbon, resilient, and resource-efficient economy | |
Social sustainability | - Sustainable infrastructure has a social impact and encourages inclusiveness; it enhances livelihoods and well-being (satisfaction) of affected people, including disabled, poor, and disadvantaged people - Sustainable infrastructure provides services promoting gender equity, health, safety, and diversity | |
Operational (institutional) sustainability | - Sustainable infrastructure has robust institutional capacity to realize and maintain high quality and stable operations |
Source: Prepared using [4]
Since the adoption of the Sustainable Development Goals (SDGs) by the United Nations General Assembly in 2015, additional attention has been given to sustainable infrastructure. Of note, Target 9.1 of the SDGs sets the development of “quality, reliable, sustainable and resilient infrastructure” as one of the development targets. The concept has become widely used by the international development community particularly in the context of development cooperation. Sustainable infrastructure is especially critical in urbanized environments; the majority of the world’s population lives in cities and peoples’ lives and activities in these cities are sustained by infrastructure [6]. Demand for sustainable infrastructure and related services in urban areas is particularly pressing in low- and middle-income countries that have megacities with 10 million inhabitants or more [7].
Although the importance of sustainable infrastructure has been widely acknowledged, implementation remains a challenge. This is due to various enabling and disabling factors, particularly in relation to financial arrangements and governance modes [5, 8–10]. Existing research suggests that there are a number of financial arrangements and governance characteristics that lead to the development of sustainable infrastructure, but which depend on a number of factors in the project contexts, such as the management culture of each country, the project sector, and the institution that implements the projects [5, 11, 12]. Additionally, many scholars regard partnerships among stakeholders, such as public, private, civic, and supranational actors, and a good mixture of vertical and horizontal governance structures, as the key factors for sustainable infrastructure, from both the financial and governance perspectives (e.g., [5, 12, 13]). However, empirical insights into the financial and governance conditions needed for sustainable infrastructure, especially in developing countries, are scarce. Moreover, there has been little research on the dynamics of financial arrangements and governance modes applied to infrastructure projects, even though infrastructure projects generally have long life cycles, and the financial arrangements and governance modes may vary over time [14–16].
Against this background, the current research aims to provide empirical evidence on the impact of longitudinal changes in financial and governance enabling factors on the implementation of sustainable infrastructure projects in developing countries. To do this, the research focuses on public–private partnerships (PPPs) and official development assistance (ODA) finance provided through multilateral/bilateral development banks (MDBs/BDBs), which represent the majority of finance arrangements for infrastructure projects in developing countries [5, 17–21]. Moreover, PPPs and ODA finance involve various stakeholders including public, private, and supranational actors. By focusing on the interactions between these stakeholders, effective governance characteristics and modes for sustainable infrastructure development can be analyzed.
This research focuses on three urban railway case projects in Manila, the Philippines (a megacity with high demands on infrastructure development), as its case studies. All three of these projects have changed their financial arrangements (i.e., conventional public finance, PPPs, and ODA finance) and the relevant governance modes over time. As a result, the cases allow for an analysis of the types of financial arrangements and relevant governance characteristics that could effectively promote sustainability concepts in infrastructure projects. The research question is therefore set as: What are the impacts of longitudinal changes of financial arrangements and governance characteristics on sustainable infrastructure development over the implementation phases of urban railway projects in Manila, the Philippines?
Literature review
Financial and governance factors enabling sustainable infrastructure
Financial arrangements and governance modes are imperative to the implementation of infrastructure projects. Indeed, the need to address a lack of finance and sound governance when implementing infrastructure development and sustainable development has always been at the center of discussions among the international development community [22, 23]. There has been an increase in research on the available financial arrangements that enable sustainable infrastructure delivery. According to the extant research, the financial arrangements can be categorized into three types: conventional public finance, ODA finance, and private finance [5, 20, 21]. Conventional public finance is a traditional financial arrangement for infrastructure development and includes financing by public funds raised via general and environmental budgets from state and local governments [24, 25]. Recently scholars have focused on ODA finance and private finance, because conventional public finance alone is not enough to fill the growing demand for infrastructure [20, 24]. As for private finance, PPP schemes, which are explained later in this paper, are usually regarded as typical financial arrangements for utilizing private funds, regardless of the country. However, recently some developed countries have applied other innovative forms of private financial arrangements, including green finance (e.g., green bonds), corporate social responsibility (CSR), social impact bonds, and crowd funding [5, 21, 24].
In the academic field, governance is one of the most important topics when it comes to public works projects or public administration studies. Governance is the process of ruling, cooperating, and controlling the relevant stakeholders or the process of balancing public, private, and citizen interests [26, 27]. Governance considers a change in the actor constellation during the formulation and implementation of policies and projects, and is described as societal steering and coordination with networks over time [28–30]. Governance modes are “various forms through which governance can be realized” [31]. Governance modes are determined by the roles and responsibilities of the public, private, and supranational stakeholders from the dimensions of polity (i.e., stakeholder interaction; system of rules that shapes the actions of social actors) and policy [5, 30]. Therefore, governance modes can be defined as forms of polity and policy on the process of ruling, cooperating, and controlling the relevant stakeholders [30, 31].
Governance modes in the polity dimension (modes of stakeholder interactions) are categorized into either hierarchical mode—(a top-down mode, which gives “one or a few actors the possibility to reach collectively binding decisions” [30]—and market mode, where “actors remain free to choose their desired courses of action” when focusing on a system of rules that lead stakeholders’ interactions [30, 32]. In addition, there is an in-between mode where the actors interact with each other in a collaborative manner, which is often defined as collaborative governance mode [30, 33]. Under the collaborative governance mode, trust among the stakeholders is important to improve the quality of their collaboration, which in turn leads to consensus-oriented outcomes; here, facilitative leadership plays an important role [33–36]. Facilitative leadership contributes to stakeholders engaging and collaborating with each other in collective decision-making in a cooperative manner that is based on solid mutual trust, the setting of clear ground rules, and the exploration of mutual gains [33, 37–41]. On the other hand, governance modes in the policy dimension can be described by the strength of policy/regulation; there is a type of state-led governance with material policy regulation (strong policy/regulation), a private-sector-led governance with procedural policy regulation (weak policy/regulation), and the in-between type [30].
In recent years, academic scholars have focused on the relationship between the governance modes and their impact on the outcomes of infrastructure projects. For instance, scholars recently emphasized the importance of a collaborative governance in stakeholder interactions and exchange of knowledge among public, private, and community stakeholders for generating strategic policies, political support, and the diversification of funding sources for sustainable infrastructure development [24, 42]. Scholars also suggest that relational governance conditions (i.e., collaborative governance conditions), such as trust and conflict management, are critical to achieving successful performance in projects [43, 44]. Moreover, they advanced the importance of mixing such relational governance conditions with hierarchical governance, such as the use of sanctions and risk allocation based on contracts, for the successful delivery of infrastructure projects, including sustainable infrastructure projects [5, 11, 20, 21]. Stakeholder management is also considered an important element in gaining support and legitimacy for infrastructure projects, which raises social sustainability. Verweij (2015) [45] suggests that the public sector plays a significant role in stakeholder management by coordinating the local stakeholders.
However, most of the current studies on financial and governance-enabling factors for sustainable infrastructure focus on a general context or on developed countries, and few focus on developing countries (see for example, [25, 46]. This study therefore aims to provide a first step towards understanding how different financial and governance factors affect infrastructure projects in developing countries in bringing in greater incorporation of sustainability concepts and what are the success factors. The research focuses on PPPs and ODA finance provided through MDBs/BDBs (explained further below), as they are the key financial arrangements in developing countries and involve various stakeholders [5, 17–21].
PPPs for sustainable infrastructure
Simply defined, PPPs are long-term cooperation between the public and private sectors for the provision of infrastructure and services. Partners share the roles and responsibilities, risks, costs, and profits [5, 47–49]. There are a wide variety of PPP arrangements; however, a well-known distinction is made between the “concession” and “alliance” models [43, 49, 50]. The concession model is “a form of cooperation in which the government sells the long-term exploitation rights (the concession) for a lump sum.” Under this model, the emphasis is generally on business-like interactions among the stakeholders (market governance). In contrast, the alliance model is “a form of cooperation characterized by intense involvement on the part of the government in the different phases of the project” with emphasis more on process management (collaborative governance) [43]. The concession model of PPPs is divided into several models based on the contract types, as set out in Table 2. There are, however, additional models depending on the mode of classification [14].
Table 2. PPP models based on the contract type
Public–Private Partnerships | |||||||
|---|---|---|---|---|---|---|---|
Private Participation | |||||||
Contract type | Public Sector Procurement | < –––Weak | Strong––– > | ||||
Operation and Maintenance (O&M) Concession | Build-Lease-Transfer (BLT) | Design-Build-Finance-Operate (DBFO) | Build-Transfer-Operate (BTO) | Build-Operate-Transfer (BOT) | Privatization | ||
Construction | Public sector | Public sector | Private sector | Private sector | Private sector | Private sector | Private sector |
Operation | Public sector | Private sector | Public sector | Private sector | Private sector | Private sector | Private sector |
Ownership | Public sector | Public sector | Private sector during contract, then public sector | Public sector | Private sector during construction, then public sector | Private sector during contract, then public sector | Private sector |
Finance | Public sector | Public sector | Private sector | Private sector | Private sector | Private sector | Private sector |
Contract term | N/A | Middle to long term | Long term | Long term | Long term | Long term | N/A |
Source: prepared using [14]
From a financial perspective, PPPs are considered an effective way for the public sector to reduce financial expenditure, since they mobilize private finance for infrastructure development. In addition, those who advocate for the use of PPPs for sustainability-related objectives also emphasize that PPPs could increase the effectiveness and efficiency of public service delivery due to the collaborative governance characteristics of utilizing private sector knowledge, complementary resources, and management expertise in the form of business-like practices and thinking; this ensures the stability of economic, environmental, and social subsystems [12, 51, 52]. Scholars emphasize the importance of trust to enhance the performance of PPP projects through collaborative governance [34–36, 53]. Trust stimulates exchange of information and knowledge among the stakeholders, which could promote the development of new solutions [53–56]. In this sense, facilitative leadership is also deemed critical as a tool for promoting trust and collaboration among the stakeholders [33–41]. In addition, scholars suggest that mixing the governance characteristics of collaborative stakeholder interactions with hierarchical governance, such as the use of sanctions and risk allocation based on contracts, is important for the successful delivery of sustainable infrastructure projects [5, 11, 12, 53].
According to Pinz et al. [12], while empirical research is still limited, there is some evidence of the successful use of PPPs for sustainability-related objectives. For example, PPPs could contribute to the improved cost efficiency of public service delivery [57, 58], improved ecological sustainability [59], and stronger social sustainability by fostering accountability in public service delivery and setting procurement criteria that take social perspectives into account [46, 60]. However, it should be noted that the general effect of the use of PPPs and their application and implementation of the sustainability concept for infrastructure projects is still controversial [12, 61]. This suggests the need to investigate what types of PPP schemes and governance modes, and which other conditions lead to the realization of sustainable infrastructure development.
ODA (MDB/BDB) finance for sustainable infrastructure
As an important financial arrangement for realizing sustainable infrastructure development, multilateral/bilateral development banks (MDBs/BDBs) provide official development assistance (ODA) or technical assistance and finance sources for infrastructure projects in developing countries with concessional conditions (e.g., low-interest loans, grants, and guarantees) [62, 63]. MDBs refers to institutions such as the World Bank (WB) and the Asia Development Bank (ADB), while BDBs refers to institutions such as the French Development Agency (AFD) and KfW Development Bank of Germany. BDBs are generally regarded as within the family of MDBs as they also provide the same types of technical assistance and concessional finance for infrastructure projects. From a finance perspective, ODA finance is critical for developing countries that do not generally have sufficient finance sources to cover the significant amount of capital costs required for infrastructure projects [62]. Grants or concessional loans significantly contribute to improving the fiscal health of the projects, which leads to greater economic sustainability.
From a governance perspective, ODA finance from MDBs/BDBs plays an important role in sustainable infrastructure development and implementation. First, MDBs/BDBs generally take on a facilitative leadership role in the collaboration process between the MDBs/BDBs, the recipient countries, and other related institutions involved in the sustainable infrastructure projects they finance [19]. For instance, MDBs/BDBs provide technical assistance for the development of feasibility studies that look out sustainability issues in infrastructure; the provision of finance is then conditional upon the adoption of these studies [64]. However, it should be emphasized here that collaborations among the stakeholders are vital to develop their agreed priorities in the sustainability pillars (economic, environmental, and social sustainability); the extant research reports a case that MDB’s strong prioritization of economic/financial sustainability in infrastructure projects diminished social sustainability perspectives [65].
Second, MDBs/BDBs also take a top-down leadership role in setting policies and regulations for sustainable infrastructure, particularly on environmental and social matters. In general, MDBs/BDBs have stricter safeguarding policies on environmental and social issues for their infrastructure projects, which encourages more sustainable infrastructure projects in the recipient countries [17, 63, 64].
Methodology
Qualitative comparative analysis
This research aims to investigate the financial and governance enabling factors in sustainable infrastructure, focusing on projects implemented through PPPs and ODA finance. Additionally, the research focuses primarily on developing countries where PPPs are one of the key finance arrangements for sustainable infrastructure. While PPPs are often studied from a Western, global North perspective, little is known about PPPs and their related finance arrangements and governance modes in the Global South. In addition, ODA finance, which is another key financial arrangement for sustainable infrastructure, is mostly utilized by developing countries.
To investigate the enabling factors, this research conducts a comparative analysis using all three urban railway case projects in Manila, the Philippines, namely: LRT1, LRT2, and MRT3 (described below). The selected case projects were chosen for several reasons: First, due to their complicated operation and maintenance systems, the application and implementation of sustainability concepts in railway sector projects tends to be diverse. This is especially so in relation to social and operational sustainability [66]. While cities in developing countries often have few railways, Manila has three different railways operated by three different operators, which allowed for comparative analysis. Furthermore, as the selected projects have long histories of preparation, decision-making, and implementation, they are appropriate cases for examining the dynamics of modes of governance and financial arrangements over time.
In order to conduct the case comparisons over time, the projects were first divided into different phases based on their applied financial arrangements and governance modes. We then evaluated and rated indicators of the outcome (i.e., implementation of sustainability concepts) and factors leading to the outcome for the purpose of comparative case analysis. These processes were conducted using information from interviews, extant research, documents published by the railway authorities, the government of the Philippines, and the MDBs and BDBs, and news articles. To examine the outcome and factors leading to the outcome, we collected the following information for each project and phase; (1) financial arrangements, (2) governance modes, and (3) implementation of sustainability concepts. Factors (1) and (2) are factors that lead to the outcome (outcome (3)). Details of indicators for these factors and the outcome are set out in Table 3. Criteria for their rating are defined in Table 4. It should be noted that the research analyzed to what extent safe and comfortable facilities and service were provided for users including disabled and disadvantaged people to evaluate social sustainability, based on the extant research [4, 12]. The research used narrative information from interviews, documents, and news articles for the analysis (see the Appendix for the information). It is also noteworthy that we proved possible rating options (e.g., ± / + and + / + +) for the outcomes (3) of projects and phases difficult to be evaluated by a sole definitive rating (e.g. + and −).
Table 3. Details of outcome and factors leading to the outcome for analysis
Factors leading to the outcome | Indicators | Details | References |
|---|---|---|---|
(1) Financial arrangement | Financial arrangements applied to the projects | Which financial arrangements were applied to the projects (i.e., public finance, PPPs (O&M, BLT, DBFO, BTO, or BOT), ODA finance (grant or loans), or their combinations)? | [5, 14, 67] |
(2) Governance mode | Modes of stakeholder interactions | Which mode of stakeholder interaction in project management was applied (i.e., hierarchy (vertical) mode with central locus of authority, market (horizontal) mode with dispersed loci of authority, or in-between mode (collaborative governance))? | [5, 30, 33] |
Strength of policy/regulation | To what extent were policy/regulations strong and for which sustainability pillars? (i.e., policy /regulations giving (very) positive/negative effects for economic/environmental/social/operational sustainability) |
Outcome | Indicators | Details | |
|---|---|---|---|
(3) Implementation of sustainability concepts | Economic sustainability of the projects | To what extent did the projects have economic sustainability (i.e., economic impact, financial sustainability, and cost-reduction)? | [4, 12] |
Environmental sustainability of the projects | To what extent did the projects have environmental sustainability (i.e., prevention of natural environment and efficient use of resources)? | ||
Social sustainability of the projects | To what extent did the projects have social sustainability (i.e., poverty, social impact, and equity (human rights); safe and comfortable facilities and service for all users including disabled and disadvantaged people)? | ||
Operational sustainability of the projects | To what extent did the projects have operational sustainability (i.e., stability of a high standard of operation)? |
Source: Authors
Table 4. Criteria for rating of the factor and outcome
Factors leading to the outcome | Indicators | Details | References |
|---|---|---|---|
(1) Financial arrangement | Financial arrangements applied to the projects | Not applicable (rating is not used for this indicator) | |
(2) Governance mode | Modes of stakeholder interactions | Not applicable (rating is not used for this indicator) | |
Strength of policy/regulation | • Very positive (+ +): if there are policies/regulations causing positive impacts introduced by both the government and MDB/BDB • Positive ( +): if there is a policies/regulation causing positive impacts introduced by the government or MDB/BDB • Negative (−): if there is a policies/regulation causing negative impacts introduced by the government or MDB/BDB • Very negative (−−): if there are policies/regulations causing negative impacts introduced by both the government and MDB/BDB | [5, 17, 30, 63, 64] | |
Outcome | Indicators | Details | Reference |
(3) Implementation of sustainability concepts | Economic sustainability of the projects | • Very high (+ +): if both economic impacts and project profitability are positive • High ( +): if either the economic impacts or project profitability is positive, while another is moderate • Moderate ( ±): if either the economic impacts or project profitability are positive, while another is negative, or if both economic impacts and project profitability are moderate • Low (−): if either the economic impacts or project profitability is negative, while another is moderate • Very low (−−): if both economic impacts and project profitability are negative | [4, 12] |
Environmental sustainability of the projects | • Very high (+ +): if the reduction of CO2 emissions and other environmental impacts by the project are positive • High ( +): if either the reduction of CO2 emissions or the other environmental impacts by the project are positive, while another is moderate • Moderate ( ±): if either the reduction of CO2 emissions or the other environmental impacts by the project are positive, while another is negative, or if both the reduction of CO2 emissions and the other environmental impacts by the project are moderate • Low (−): if either the reduction of CO2 emissions or the other environmental impacts by the project are negative, while another is moderate • Very low (––): if both the reduction of CO2 emissions and the other environmental impacts by the project are negative | ||
Social sustainability of the projects | • Very high (+ +): if the railway system significantly considers social sustainability aspects (i.e., safe and comfortable facilities and service for all users including disabled and disadvantaged people) • High ( +): if the railway system considers social sustainability aspects (i.e., safe and comfortable facilities and service for all users including disabled and disadvantaged people) to some extent, but there is still room for improvement • Moderate ( ±): if the railway system considers social sustainability aspects (i.e., safe and comfortable facilities and service for all users including disabled and disadvantaged people) to some extent, but there is much rooms for improvement • Low (−): if the railway system has (a) issue(s) from a social perspective outweighing the positive aspects (i.e., safe and comfortable facilities and service were not delivered for all users including disabled and disadvantaged people) • Very low (––): if the railway system has (a) significant issue(s) from a social perspective significantly outweighing the positive aspects (i.e., safe and comfortable facilities and service were significantly not delivered for all users including disabled and disadvantaged people) | ||
Operational sustainability of the projects | • Very high (+ +): if the railway system realizes stable and reliable operation • High ( +): if the railway system generally realizes stable and reliable operation, while there is still room for improvement • Moderate ( ±): if the railway system still realizes stable and reliable operation somehow, while there are often (a) issue(s) in sustainable operation • Low (–): if the railway system does not realize stable and reliable operation due to (a) chronic operational issue(s) • Very low (––): if the railway system does not realize stable and reliable operation, significantly, due to (a) chronic and serious operational issue(s) | ||
Source: Authors
The research then compared differences and commonalities in the financial arrangements and governance modes, and their outcomes (i.e., implementation of sustainable concepts in infrastructure projects), between the phases and the case projects. By doing so, the research analyzed whether the application of PPPs and ODA finance led to successful implementation of sustainable infrastructure. The research also analyzed and discussed what governance modes and other conditions of PPPs and ODA finance could be effective for sustainable infrastructure development.
The current research utilizes both primary and secondary data to evaluate and rate each indicator. For the primary data, we conducted interviews in November and December 2022, with three government officials related to the urban railway projects, five officials from the railway operators, and five development experts/consultants. Detailed information of the interviews is summarized in Table 5. To maintain the quality of the research, we selected only interviewees who are/were involved in the case projects and have significant knowledge of the sustainability issues of the projects. We conducted semi-structured interviews to collect a wide range of information relevant to financial and governance enabling factors and their impact on the implementation of sustainability concepts. Secondary data was collected from documents published by the railway authorities, the government of the Philippines, and the MDBs and BDBs. In addition, we utilized information from research papers and news articles (see the Appendix for the documents, papers, and news articles that were analyzed).
Table 5. Interview information
Interview No. | Interviewee [Number of interviewee(s)] | Status of interviewee |
|---|---|---|
1 | Official of Department of Transportation (DoTr) (1) | Government official |
2 | Officials of PPP center (2) | Government official |
3 | Officials of Light Rail Transit Authority (LRTA) (2) | Railway operator’s official |
4 | Officials of Light Rail Manila Corporation (LRMC) (2) | Railway operator’s official |
5 | Official of DoTr-MRT3 (1) | Railway operator’s official |
6 | Railway development consultant (1) | Development expert/consultant |
7 | Railway development consultant (1) | Development expert/consultant |
8 | Officials of development institution (2) | Development expert/consultant |
9 | Official of development institution (1) | Development expert/consultant |
Source: Authors
The primary and secondary data were analyzed with a focus on the outcome and factors leading to the outcome during each phase and project; we identified which parts of the interview memos, the documents, papers, and news articles provided relevant information on the outcome and the factors 1 and 2, and summarized the information by each phase and project in the Appendix to this paper which also sets out the information sources (the interview number and names of the documents, papers, and news articles). Based on the summarized information, the evaluation and rating of each indicator were determined in accordance with the set criteria.
Case projects: three urban railway projects in Manila, the Philippines
The research focuses on three case projects, namely LRT1, LRT2, and MRT3, three urban railway projects in Manila, the Philippines. Details of the three railways are outlined in Table 6, below.
Table 6. Outline of case projects
LRT1 | LRT2 | MRT3 | |
|---|---|---|---|
Operation start | 1984 | 2003 | 2000 |
Length (km) | 20.35 | 13.52 | 16.9 |
Number of stations | 20 | 11 | 13 |
Project owner | LRTA | LRTA | MRTC |
Operator | 1984–2000: METRO (LRTA) 2000–2014: LRTA 2014-: LRMC | LRTA | DOTC/DOTr |
Project (finance) scheme | • ODA finance • Conventional public finance • PPP (long-term (32 years) O&M concession) (since 2014) | • ODA finance • Conventional public finance | • Conventional public finance • PPP (Build-Lease-Transfer: BLT (25 years)) • ODA finance (since 2017) |
Past/ongoing extension plan | • South Extension (ongoing) | • East Extension (2021) • West Extension (under consideration) | N/A |
Source: Prepared using [68]
Each of the railways has its own financial arrangements and governance characteristics, which may lead to different outcomes in the application and implementation of sustainable infrastructure. LRT1 is owned by the Light Rail Transit Authority (LRTA), which is a public corporation established in 1980 for the development and operation of LRT projects in Manila. LRT1 was financed with ODA finance and conventional public finance. The railway was operated by METRO (private party) and LRTA itself until 2014, when operation and maintenance (O&M) was transferred through a PPP scheme with O&M concessions (long-term (32 years)) to the Light Rail Manila Corporation (LRMC), a private entity. In contrast, LRT2 has been, and continues to be, owned and operated by a public entity (LRTA), although PPP schemes have been considered. LRT2 was financed through ODA finance and conventional public finance. In contrast to LRT1 and LRT2, MRT3 has operated under a PPP scheme since the beginning of the project; MRT3 utilizes a Build-Lease-Transfer (BLT) model, a type of PPP scheme, with subsidies from the government. Under the BLT scheme, the Metro Rail Transit Cooperation (MRTC) (a private entity) financed and constructed MRT3 and leased it to the Department of Transportation and Communications (DOTC, later reorganized under the Department of Transportation (DOTr)) (a public entity), which has had a mandate to operate and maintain the railway since 2000. Additionally, ODA finance has been utilized for rehabilitation of the railway system since 2017.
Results and discussion
Phases of the case projects
The three case projects can be divided into several phases based on financial arrangements and governance modes, as shown in Table 7. Details of the longitudinal changes in financial arrangements and governance modes for the case projects are summarized with their supporting references in the Appendix.
Table 7. Phases of the case projects
LRT1 | |
Phase I (P-I) | Development and ramp-up phase from 1977 to 1994: The operation was sound at the beginning but worsened due to a dramatic increase in passengers and technical glitches |
Phase II (P-II) | Rehabilitation and strengthening phase from 1994 to 2014: Major rehabilitation and strengthening projects were implemented to improve operational sustainability using ODA finance |
Phase III (P-III) | PPPs phase from 2014 to now (2022): PPP scheme was designed to realize more sustainability outcomes. PPP scheme was applied from 2014 |
LRT2 | |
Phase I (P-I) | Phase of “LRTA as operator” from 1996 to 2014: LRTA plays its role as operator of LRT1 and LRT2 |
Phase II (P-II) | Phase of “LRTA as operator and grantor” from 2014 to now (2022): LRTA plays its role as operator of LRT2 as well as grantor (supervisor) of LRT1 |
MRT3 | |
Phase I (P-I) | Development and ramp-up phase from 1991 to 2012: The operation was sound at the beginning but worsened due to a dramatic increase in passengers |
Phase II (P-II) | Degradation phase from 2012 to 2017: operation dramatically deteriorated due to the coercive change of the maintenance company by the government |
Phase III (P-III) | Rehabilitation phase from 2017 to now (2022): Major rehabilitation project was implemented to improve operational sustainability using ODA finance |
Source: Authors
LRT1 can be divided into three phases based on the financial arrangements: the development and ramp-up phase (Phase I), the rehabilitation and strengthening phase (Phase II), and the PPPs phase (Phase III). There are clear distinctions between the financial arrangements in each of the phases, which could affect governance modes and the outcome (i.e., the implementation of sustainability concepts). LRT1 was funded through a concessional ODA loan from Belgium (Phase I). From 1994, ODA loans from Belgium and Japan were used to significantly rehabilitate LRT1 in order to improve the quality of operation and service (Phase II). From 2014, LRT1 applied a PPP scheme (Phase III).
LRT2 can be divided into two phases based on the governance modes or role played by LRTA, namely the“LRTA as operator” phase (Phase I) and the “LRTA as operator and grantor” phase (Phase II). While there are clear differences in the governance of the projects, both phases applied the same financial arrangement (ODA finance and conventional public finance). LRTA played its role as operator of LRT1 and LRT2 in Phase I. From 2014 (Phase II), it became operator of LRT2 as well as the grantor (supervisor) of LRT1 due to the application of a PPP scheme to LRT1.
MRT3 can be divided into three phases based on the financial arrangements and/or governance modes: the development and ramp-up phase (Phase I), the degradation phase (Phase II), and the rehabilitation phase (Phase III). There are clear differences in the financial arrangements and/or governance modes of the projects in each of the phases. MRT3 was funded through a PPP-BLT scheme and was operated by a private entity (Phase I). In 2012 (Phase II), the government intervened in the operation of the railway and changed the maintenance company to a private entity, which led to a deterioration of the operation [68]. In 2017 (Phase III), the government used a new financial arrangement, namely an ODA loan from Japan, to recover the quality of the operation.
Implementation of sustainability concepts
The outcome or implementation of sustainability concepts throughout the phases of the case projects are summarized in Table 8. Reasons for the ratings are summarized in Table 9. Detailed explanations of the implementation of sustainability concepts in the case projects are presented with their supporting references in Appendix.
Table 8. Rating of implementation of sustainability concepts
LRT1 | LRT2 | MRT3 | ||||||
|---|---|---|---|---|---|---|---|---|
P-I | P-II | P-III | P-I | P-II | P-I | P-II | P-III | |
Economic sustainability | ± | ± | ± / + | ± | ± | ± | − | ± |
Environmental sustainability | ± | + + | + + | + + | + + | + | ± | + + |
Social sustainability | ± / + | + | + / + + | + / + + | + + | ± / + | −/–– | + |
Operational sustainability | ± / + | ± / + | + + | + + | + / + + | ± / + | −/–– | + / + + |
+ + : Very high; + : High; ± : Moderate; –: Low; and ––: Very low
Source: Authors
Table 9. Summary of reasons for the ratings
Cases | Rating | Reasons for determining the ratings |
|---|---|---|
Economic sustainability | ||
LRT1 (P-I and P-II), LRT2 (P-I and P-II), and MRT3 (P-I and P-III) | ± | - There were both positive and negative aspects, which resulted in “moderate” status - Positive aspect: huge economic impact by reducing travel time and mitigating traffic congestion - Negative aspect: little financial sustainability without government subsidies |
LRT1 (P-III) | ± / + | - There were both positive and moderate/negative aspects, which resulted in a “moderate” or “high” status - Positive aspect: huge economic impact by reducing travel time and mitigating traffic congestion - Moderate/negative aspect: LRMC (private operator) realized financial sustainability (business in black) in 2015. The financial condition of LRTA (the public owner) was continuously in the red |
MRT3 (P-II) | − | - There were both moderate and negative aspects, which resulted in a “low” status - Moderate aspect: there was a significant deterioration in economic sustainability due to frequent operational disruptions. However, the railway still achieved a positive economic impact - Negative aspect: little financial sustainability without government subsidies |
Environmental sustainability | ||
LRT1 (P-I) | ± | - There were both positive and negative aspects, which resulted in a “moderate” status - Positive aspect: reduction of CO2 emissions by a modal shift from cars to rail - Negative aspect: negative environmental impacts during the construction of the railway |
LRT1 (P-II and P-III), LRT2 (P-I and P-II), and LRT3 (P-III) | + + | - There were positive aspects in relation to the reduction of CO2 emissions brought about by a modal shift from cars to rail and strict control of air, water, and waste pollution (anti-pollution measures) during the construction and operation phases, which resulted in a “very high” status |
MRT3 (P-I) | + | - There were both positive aspects and moderate aspects, which resulted in a “high” status - Positive aspect: reduction of CO2 emissions as the result of a modal shift from cars to rail - Moderate aspect: there were no clear anti-pollution measures during the construction phase |
MRT3 (P-II) | ± | - Both reduction of CO2 emissions and other environmental impacts by the project were moderate, which resulted in a “moderate” status - There was a significant deterioration in environmental sustainability due to a “reverse” modal shift caused by frequent operational disruptions. Nonetheless, there was still a positive impact on the reduction of CO2 emissions by the railway, though the impact lessened over time |
Social sustainability | ||
LRT1 (P-I) and MRT3 (P-I) | ± / + | - The railways included designs and facilities that addressed social inclusiveness - However, from a social sustainability perspective there was still room for improvement in some facilities (e.g., steps between the vehicles and platform and the capacity of the lifts) - In addition, the railways faced frequent overloading and delayed operations, which negatively affected social sustainability |
LRT1 (P-II) and MRT3 (P-III) | + | - The railways included designs and facilities that addressed social inclusiveness - However, from a social sustainability perspective there was still room for improvement (e.g., some facilities, such as escalators and lifts, remained in their original form), which resulted in a “high” (not “very high”) status |
LRT1 (P-III) | + / + + | - The railway introduced new facilities and systems that dramatically increased convenience for railway users, including disabled and disadvantaged people - Positive social impacts from the new facilities and systems outweighed (to some extent) the limitations inherent in the original design of the facilities, which resulted in a “high” or “very high” status |
LRT2 (P-I) | + / + + | - The railways utilized designs and facilities that took social sustainability perspectives into consideration - In relation to social considerations, the designs and facilities were better than the other railways with large railway vehicles and large station decks with braille blocks, for example - However, some facilities (e.g., lifts and escalators) tended to be degraded and broke down over time, which resulted in a “high” or “very high” status |
LRT2 (P-II) | + + | - The design and facilities of the railways took social sustainability perspectives into consideration - In relation to social considerations, the designs and facilities were better than the other railways with large railway vehicles and large station decks with braille blocks, for example |
MRT3 (P-II) | –/–– | - There was a significant deterioration in social sustainability due to frequent operational disruptions (e.g., chronically long queues and crushes, long waiting times at the station, and non-functioning lifts and escalators), which became critical social issues in the country |
Operational sustainability | ||
LRT1 (P-I and P-II) and MRT3 (P-I) | ± / + | - While the railways generally delivered high-quality operations, at times the limited capacity of the railway system led to a degradation in operational quality or operational problems, which resulted in a “moderate” or “high” status |
LRT1 (P-III) and LRT2 (P-I) | + + | - The railways delivered high-quality operations without operational problems |
LRT2 (P-II) and MRT3 (P-III) | + / + + | - LRT2 (P-II) generally delivered high-quality operations without operational problems. However, the headway of the railway service was increased due to an increased shortage of available rail vehicles, which resulted in a “high” or “very high” status - MRT3 (P-III) generally delivered high-quality operation; however, the railway has not yet obtained ISO 9001 (international standards in quality management system), which the other railways do have, which resulted in a “high” or “very high” status |
MRT3 (P-II) | −/–– | - There were frequent operational disruptions, which became critical social issues in the country |
Source: Authors
For LRT1, the railway system had moderate economic and environmental sustainability, while it had relatively high social and operational sustainability during P-I; it generated huge economic impact and contributed to the economic growth of the region especially by reducing travel times and mitigating traffic congestion. However, due to the high capital costs of the project, LRT1 was only able to achieve financial sustainability because of the government subsidies. The results show that the project had a positive impact on the environment particularly in the reduction of CO2 emissions as a result of a modal shift from cars to rail. However, there was a report of negative environmental impacts during the construction phase due to a rushed construction job. While the railway did include designs and facilities that addressed social inclusiveness, such as dedicated seats/vehicles for vulnerable people and escalators and lifts in the stations, not all stations had these. Nonetheless, a number of areas were identified where social considerations could be improved, such as the lack of air conditioners, steps between the vehicles and platform, a lack of braille blocks in the station, and the capacity of the lifts. At the beginning, LRT1 delivered high-quality operations at the same level as developed countries; however, its capacity was limited by the dramatic increase in passenger numbers as well as a decrease in operational vehicles due to poor maintenance and technical glitches, which over time caused frequent overloading, passengers being left off trains, and delays in operations. This also negatively affected the social sustainability aspects of the railway (i.e., safety and comfort levels).
In P-II, LRT1 dramatically contributed to improved environmental sustainability including the reduction of air, water, and waste pollution and traffic noise in the area through the rehabilitation projects. The rehabilitations also had a positive impact on social sustainability (i.e., the improvement of safety and comfort of the railway system and the stations), although some facilities (e.g., escalators and lifts) remained in their original form. Operational sustainability was also strengthened by an increase in the carrying capacity of the railway during the rehabilitation projects, and a return to the previously high-frequency of train operations so as to accommodate the increasing number of passengers. However, due to chronic delays in the procurement process, operational sustainability was gradually reduced once again. Economic sustainability remained at the same level due to unchanged conditions.
During P-III, economic, social, and operational sustainability was raised by the shift to private operation. LRT1 (P-III) generated a more economically positive impact due to an increase in the number of operational rail vehicles. Moreover, LRMC’s (the private operator) operation was financially sustainable although the financial conditions of LRTA (the public owner) were continuously in the red. With regards the social sustainability aspects, the private operator ensured the availability of escalators and lifts in the stations, although there was still room for improvement in the original design of the facilities (e.g., steps between the vehicles and platform and the capacity of the lifts). In addition, LRMC introduced new facilities and systems, such as electronic payment systems for goods in kiosks and public utility charges, bike taxis and buses to and from the stations, mobile applications providing information on the railway system, high-definition security cameras and crowd management, which increased the level of convenience, accessibility, and safety for railway users including disabled and disadvantaged people. These measures had a high social impact by enabling people including disabled and disadvantaged people to use the railway more easily and safely despite the limitations inherent in the original design of the facilities. The involvement of the private operators helped to bring about high-quality, reliable operations and operational sustainability. As a result, LRT1 obtained ISO 9001 (international standards in quality management system) in 2017.
Looking at LRT2, sustainability was high from all perspectives even during P-I, although economic sustainability was moderate due to the same reasons as LRT1 (P-I) (set out above). With regards to the environmental aspects, in addition to a reduction in CO2 emissions brought about by the modal shift, environmental conditions such as air, water, and waste pollution during and after construction were well managed. It is notable that LRT2 (P-I) had high social sustainability due to the designs and facilities that took social sustainability perspectives into consideration, including large railway vehicles, large station decks with braille blocks and no steps up into the vehicles, and large, transparent lifts to accommodate users more safely and comfortably. However, some facilities (e.g., lifts and escalators) tended to be degraded and broke down over time. Thanks to its large railway vehicles, LRT2 (P-I) managed to achieve a high standard of operation with a low load factor and high frequency of service. LRT2 (P-II) maintained high levels of sustainability in all of the pillars examined. In particular, social sustainability increased thanks to continuously available high-capacity lifts and/or escalators and the adoption of a new system originally invented for LRT1 (e.g., the mobile applications). However, it is noteworthy that operational sustainability was slightly reduced, though LRT2 obtained ISO 9001 in 2019. The number of available rail vehicles was lower due to heavy technical glitches mainly caused by the aging machinery, which increased the headway of the railway service over time.
MRT3 (P-I) showed almost the same sustainability outcomes as LRT1 (P-I), for the same reasons. The only marked difference is that MRT 3 (P-I) had higher environmental sustainability as there were no indications of negative environmental impacts during the construction phase. In contrast, MRT3 (P-II) showed negative sustainability outcomes in all aspects except environmental sustainability, especially in social and operational sustainability due to a dramatic deterioration in railway operation. Frequent operational disruptions caused by inappropriate maintenance by the maintenance company, led to social issues such as chronically and extraordinarily long queues and crushes, long waiting times, and breakdowns of lifts and escalators at the stations. At times, this caused dangerous situations for the users, for example, when train doors malfunctioned during operation. The unreliable and poor railway system incentivized users to take other forms of transport rather than using MRT3, which eventually had a negative effect on both the financial situation and the environmental aspects (i.e., re-emission of CO2 and atmospheric pollutants caused by “reverse” modal shifts). Thanks to a major rehabilitation, MRT3 recovered its previous sustainability outcomes in phase III. Moreover, the rehabilitation resulted in stable high-quality railway operations, which raised both social and operational sustainability. MRT3 (P-III) also showed higher environmental sustainability by incorporating anti-pollution measures during the rehabilitation work.
Comparing the three cases, it can be seen that despite the past situations, all had high sustainability outcomes (LRT1 (P-III), LRT2 (P-II), and MRT3 (P-III)) in 2022, when the research was conducted. It is also noteworthy that there were a number of commonalities between the sustainability outcomes of LRT1 and MRT3 during P-I, but the pathways to attaining the current outcomes (as of 2022) differed (i.e., LRT1 (P-II) produced positive outcomes, while MRT3 (P-II) generally produced negative outcomes). Another noticeable feature is that, in contrast to LRT1 and MRT3, LRT2 generally achieved high sustainability outcomes in P-I.
Financial arrangement
The financial arrangements of the case study projects over the three phases, one of the factors leading to the outcome (implementation of sustainability concepts), are summarized in Table 10. Details of the financial arrangements applied for each phase and case project are summarized with their supporting references in the Appendix.
Table 10. Financial arrangements
LRT1 | LRT2 | MRT3 | ||||||
|---|---|---|---|---|---|---|---|---|
P-I | P-II | P-III | P-I | P-II | P-I | P-II | P-III | |
Public finance | X | X | X | X | X | X | X | |
PPPs (O&M concession) | X | |||||||
PPPs (BLT) | X | X | X | |||||
ODA (concessional loan) | X | X | X | X | X | X | ||
ODA (grant study /technical assistance) | X | X | X | X | X | X | ||
Source: Authors
LRT1 (P-I), LRT1 (P-II), LRT2 (P-I), and LRT2 (P-II) had the same financial arrangements, namely public finance with ODA finance, including concessional loans and grant studies/technical assistance for the development/rehabilitation projects. LRT 1 (P-I and P-II) utilized ODA loans and grant assistance from Belgium and Japan, while LRT2 (P-I and P-II) utilized those from Japan. LRT1 changed its financial arrangement during P-III, to a PPP (O&M concession) with ODA finance, rather than using public finance. This is because PPPs were regarded by the Benigno Aquino III administration as an important financial arrangement to mobilize much needed investments in infrastructure and deliver better public infrastructure services. For LRT1 (P-III), technical assistance from the International Finance Corporation (IFC) of the World Bank with concessional ODA loans from Japan were utilized as ODA finance.
Both public finance and PPPs (build-lease-finance or BLT) were used throughout the phases of MRT3. PPPs (BLT) are schemes that utilize private funds to cover capital costs; however, under the BLT contract, the government was obliged to continuously use public finance to compensate the private parties for shortfalls in fare revenue during the operational phase. In addition to public finance and PPPs, ODA finance was used during MRT3 (P-III); DOTr rehabilitated the railway system by using ODA loans from Japan and technical assistance from the ADB, the Department of Foreign Affairs and Trade (DFTA) (the Australian government), and the Japan International Cooperation Agency (JICA).
Comparing the three cases, it is noticeable that LRT1 and MRT3 changed their financial arrangements over time, while LRT2 continuously utilized a single financial arrangement. LRT1 and MRT3 similarly utilized PPPs, but the scheme used and its timing differed; the former applied an O&M concession scheme in the latest phase (P-III), while the latter applied a BLT scheme from the beginning (P-I). It should also be noted that both concessional loans and grant study/technical assistance were utilized when the ODA finance was applied in the projects.
Governance mode
The governance modes for each of the phases of the case projects, one of the factors leading to the outcome (implementation of sustainability concepts), are summarized in Table 11. The reasons for the ratings on strength of policy/regulation are summarized in Table 12. Details of the governance mode applied during each phase of the case projects are summarized with their supporting references in the Appendix.
Table 11. Governance mode
LRT1 | LRT2 | MRT3 | ||||||
|---|---|---|---|---|---|---|---|---|
P-I | P-II | P-III | P-I | P-II | P-I | P-II | P-III | |
Mode of stakeholders’ interactions | ||||||||
Public party vs private party | M/C | M/C | H | H | ||||
Public party vs MDB/BDB | M | C | C | C | C | C | ||
Private party vs MDB/BDB | C | |||||||
Strength of policy/regulation | ||||||||
Policy/regulation on economic sustainability | N/A | − | − | − | − | − | − | − |
Policy/regulation on environmental sustainability | N/A | + + | + + | + + | + + | + | + | + + |
Policy/regulation on social sustainability | + | + + | + + | + + | + + | + | + | + + |
Policy/regulation on operational sustainability | N/A | N/A | + + | N/A | + | N/A | N/A | N/A |
For the mode of stakeholder interactions, H: Hierarchy (vertical) mode; M: Market (horizontal) mode; and C: Collaborative governance (in-between) mode. For strength of policy/regulation, + + : Very positive effects; + : Positive effects; −: Negative effects; and N/A; not applicable (no policy/regulation)
Source: Authors
Table 12. Summary of reasons for the rating
Cases | Rating | Reasons for determining the ratings |
|---|---|---|
Economic sustainability | ||
LRT1 (P-II and P-III), LRT2 (P-I and P-II), and MRT3 (P-I, P-II, and P-III) | – | - There was a policy/regulation introduced by the government, which produced negative impacts, namely the fare control policy, which set fares at a low level and had a negative effect on financial condition of the railway systems - There was no policy/regulation introduced by MDB/BDB |
Environmental sustainability | ||
LRT1 (P-II and P-III), LRT2 (P-I and P-II), and MRT3 (P-III) | + + | - There were two types of policies/regulations that had a positive effect on environmental sustainability by the government and MDB/BDB - The policy/regulation by the government: Republic Act No. 9003 and No. 9275 - The policy/regulation by MDB/BDB: MDB/BDB’s guidelines for environmental and social considerations |
MRT3 (P-I and P-II) | + | - There was a policy/regulation on environmental sustainability enacted by the government (i.e., Republic Act No. 9003 and No. 9275) - There was no policy/regulation introduced by MDB/BDB |
Social sustainability | ||
LRT1 (P-I) and MRT3 (P-I and P-II) | + | - There was a policy/regulation on social sustainability enacted by the government (i.e., a regulation for people with disabilities and vulnerable persons on train cars) - There was no policy/regulation introduced by MDB/BDB |
LRT1 (P-II and P-III), LRT2 (P-I and P-II), and MRT3 (P-III) | + + | - There were two types of policies/regulations by the government and MDB/BDB that had a positive effect on social sustainability - The policy/regulation by the government: regulation for people with disabilities and those on train cars for vulnerable groups - The policy/regulation by MDB/BDB: MDB/BDB’s guidelines for environmental and social considerations |
Operational sustainability | ||
LRT1 (P-III) | + + | - There were two types of policies/regulations by the government and MDB/BDB that had a positive effect on operational sustainability - The railway applied a key performance indicator (KPI) monitoring system with penalties introduced by IFC, in addition to the original KPI by the railway |
LRT2 (P-II) | + | - The government enacted a policy/regulation on operational sustainability. The railway introduced a KPI monitoring system. However, it was laxer than LRT1 (P-III) - There was no policy/regulation introduced by MDB/BDB |
Source: Authors
As can be seen in Table 11, there were some differences throughout the phases of LRT1 with respect to the mode of stakeholder. LRT1 (P-I) had a market mode between the public party and MDB/BDB. In this phase the World Bank conducted studies of the railway systems and the Philippine government chose the design of the railway system taking the advice from the World Bank into consideration; however, the discussions during the studies and the decision on the design were not made collaboratively. In contrast, LRT1 (P-II and P-III) saw a collaborative mode employed by the public party and MDB/BDB. During LRT1 (P-II), JICA conducted studies together with the DOTC/LRTA and provided finance for rehabilitation projects. For LRT1 (P-III), IFC took a facilitative leadership role in support of collaboration among the stakeholders to realize the PPP scheme. This set up created a collaborative governance mode between the public institutions (DOTC/LRTA), the private actors (LRMC), and MDB/BDB (IFC/JICA)). Once the PPP scheme was applied, the private actor implemented the railway operation in line with the O&M concession contract, which is regarded as an intermediate governance mode between collaborative governance and market governance. For LRT2, there was a collaborative governance mode between the public institution and MDB/BDB in both P-I and P-II (i.e., DOTC /DOTr/LRTA collaborated closely with JICA to conduct studies to decide on the appropriate project design and finance).
MRT3 employed a mode that was in between market and collaborative governance during P-I. The public institution and the private entity collaboratively decided on the project design, especially for the PPP BLT scheme, while both parties caried out their respective business duties once the operation commenced. MRT3 (P-II) had a hierarchy governance mode under the top-down leadership of the public institution (i.e., DOTC aimed to reduce government expenditure by replacing the original maintenance company with a cheaper one). MRT3 (P-III) maintained the hierarchy governance mode between the public and private actors, but also employed a collaborative governance mode between the public actor and MDB/BDB. DOTr rescued the deteriorating railway system by working collaboratively with ADB, JICA, and DFTA and using their financial and technical assistance.
When it comes to the strength of policies/regulations, it is noticeable that in all phases of the three cases projects, with the exception of LRT1 (P-I), the fare control policy had a negative effect on economic sustainability. The Philippine government set fares at a low level so that everyone would be able to use the railways; however, this coercive policy negatively affected the financial condition of the railway systems. Looking at the environmental aspects, environmental policies/regulations were present in all phases of the case projects, with the exception of LRT1 (P-I). There are two types of policies/regulations on environmental sustainability: the first are those enacted by the government for all phases of the case projects except LRT1 (P-I), specifically Republic Act No. 9003 (Ecological solid Waste Management Act of 2000) and Republic Act No. 9275 (Philippine Clean Water Act 2004). The second type of policy are those that were introduced by MDB/BDB, namely IFC performance standards for LRT1 (P-III) and JICA’s guidelines for environmental and social considerations for LRT1 (P-II and P-III), LRT2 (P-I and P-II), and MRT3 (P-III). Social sustainability policies and regulations can also be divided into the same two types. Policies enacted by the government include those relating to people with disabilities (BP344) and those regulating train cars for vulnerable groups; these policies applied to all phases of the case projects. The policies/regulations introduced by MDB/BDB include IFC performance standards for LRT1 (P-III) and JICA’s guidelines for environmental and social considerations for LRT1 (P-II and P-III), LRT2 (P-I and P-II), and MRT3 (P-III). Operational sustainability was only regulated for LRT1 (P-III) and LRT2 (P-II). Both introduced their own KPI monitoring systems. LRT1 (P-III) strengthened the KPIs monitoring system by introducing a penalty provision, which was developed by the IFC and the World Bank. The use of the KPI monitoring system was strengthened in LRT2 (P-II), but was nonetheless laxer than LRT1 (P-III).
Comparing the three cases, it is notable that the governance modes of LRT1 and MRT3 changed over time, while the same governance mode was continuously used by LRT2. The same is true for financial arrangements. It should also be noted that both LRT1 and MRT3 had diverse stakeholders from the private entities during P-III, but they had different governance modes—the former had a market/collaborative governance mode between the public and private actors and the latter had a hierarchy governance mode. There were also some similarities in the mode of stakeholder interactions and policies/regulations between LRT1 (P-II), LRT2 (P-I), and LRT2 (P-II), while LRT1 employed a different governance mode in P-III that involved the private actors.
Financial and governance enabling factors for realizing sustainable infrastructure development, focusing on PPPs and ODA finance
In this sub-section, we analyze the financial and governance enabling factors for realizing sustainable infrastructure development by comparing the differences and commonalities in the finance arrangements, the governance modes, and their outcomes, among the phases and the case projects. In this research, the finance arrangements that we focus on are PPPs and ODA finance. Therefore, in this sub-section, we analyze and discuss whether the application of PPPs and ODA finance resulted in the successful implementation of sustainable infrastructure in the case projects and what governance modes and other conditions could lead to success under PPPs and ODA finance.
Did the application of PPPs lead to successful implementation of sustainable infrastructure? What are the conditions for the success?
First, the case projects provide interesting insights into the effective use of PPPs for realizing sustainable infrastructure. There are two PPP urban railway projects, which had different sustainability outcomes, namely LRT1 (P-III) and MRT3 (P-I, P-II, and P-III). LRT1 (P-III) successfully implemented sustainability concepts by mobilizing private knowledge and creativity. In contrast, MRT3 (P-II) failed to sustain the quality of its operation, which led to a deterioration in economic, environmental, and social sustainability. Interviewees attributed this contrasting outcome to the differences in financial arrangements and PPP schemes (interview No. 1–3). For instance, LRT1 (P-III) applied a PPP O&M concession scheme when “everything was there” or all the infrastructure was developed, rehabilitated, and upgraded using ODA loans. In contrast, MRT3 applied a PPP BLT scheme where the private actors arranged all finance from the beginning of the project. It is thought that this discourse became well-established in the country as we see from the Duterte administration’s promotion of “hybrid PPPs”, where construction is financed by the public sector while operation and maintenance is financed by the private sector [69]. It is true that “hybrid PPP” schemes (LRT1 (P-III)), where the private actor takes on limited risk, theoretically have a higher probability that the project will be able to proceed without trouble. Yet, the case projects give more insights into the enabling factors beyond financial arrangements. In other words, there are also governance factors enabling and disabling PPPs from implementing sustainable infrastructure.
Comparing the cases of LRT1 (P-III) and MRT3 (P-I and P-II), there are some noticeable differences in terms of governance modes, which could lead to different sustainability outcomes. Both cases were subject to governmental policies/regulations related to environmental and social sustainability issues, which, to a certain extent, contributed to the adoption of environmental and social sustainability concepts in infrastructure projects. However, only LRT1 (P-III) had a strict guideline for environmental and social considerations introduced by the MDB/BDB or the IFC performance standards, while MRT3 (P-I) and (P-II) did not have any. In addition, LRT1 (P-III) had a strict KPI monitoring system with penalties, whereas MRT3 (P-I) and (P-II) did not have such effective systems. Overall, the vertical project management dictated by policies/regulations was utilized for both railways in the adoption of sustainability concepts. That being said, there are clear differences in the strength of the policies/regulations between LRT1 (P-III) and MRT3 (P-I) and (P-II); the former is stronger than the latter, especially in relation to operational matters. It is believed that stronger policies and regulations are one of the factors that lead to more sustainable outcomes.
A number of differences in the modes of stakeholder interactions during LRT1 (P-III), MRT3 (P-I), and MRT3 (P-II) were observed. During LRT1 (P-III), technical and financial assistance was obtained from MDBs/BDBs for the transition to the PPP O&M concession scheme, which resulted in well-balanced risk and finance allocation among the stakeholders. We attribute this success to trust among stakeholders. MDBs/BDBs were involved in LRT1 for a long time to rehabilitate and upgrade the railway system before the PPPs phase (i.e., LRT1 (P-I and P-II)); “small wins” obtained during this collaboration may have reinforced the trust between MDBs/BDBs and the Philippine government who needed to work together, as Ansell & Gash (2008) [33] suggest. MDBs/BDBs assumed a facilitative leadership role, which is regarded as a critical factor in developing trust and engaging each other in a collaborative spirit to encourage the private actors to become involved in the PPPs (e.g., [33, 37, 39, 40]).
Trust between the public and private sectors is also important for improving the quality of their collaboration, as the extant research suggests (e.g., [34–36]). Interviewees suggested that the public and private actors involved in LRT1 (P-III) were able to maintain mutual trust over time (interview No. 1, 2, and 4). Given this trusted relationship, the private actor could be in a position to continuously try out innovative ways to raise the sustainability of the railway system using its own funds, despite a delay in fare adjustments by the government. This is a good example of the theory that trust promotes the creation of new solutions through collaborative interactions among the stakeholders [53–56]. Conversely, the public and private actors involved in MRT3 lost trust in each other as a result of several issues and arbitration cases during MRT3 (P-II) (interview No. 1 and 2), which prevented them from returning from a hierarchy governance mode to a collaborative governance mode in MRT3 (P-III). Comparing MRT3 (P-III) with LRT1 (P-III), it is considered that a lack of trust and collaboration between the public and private actors is one of the reasons why MRT3 (P-III) had less sustainability outcomes than LRT1 (P-III), especially in relation to the social aspect.
In addition, we attribute the successful PPPs during LRT1 (P-III) to the environmental surroundings of the project, which provide new insights for scholars. These include a competitive environment, incentives for private actors, and external pressure on the private actors. First, LRT1 (P-III) had a good rivalry relationship with LRT2, which is operated by the public operator (LRTA); MRT3 had no such rivalry (interview No. 1). There is social pressure on the private operator, LRMC, to perform better than the public operator, LRTA (who used to operate LRT1 and have been operating LRT2), in all areas. It is believed that the existence of an easily comparable railway line generates a competitive environment, which in turn puts pressure on the private actor to perform well. Another aspect of the project environment is the incentive for the private actor to continuously try to achieve high performance. There is a common understanding among the public and private stakeholders that LRT2 and MRT3 will also apply a PPP concession scheme in the future (interview No. 1, 2, 4, and 9); this knowledge is considered to be a good incentive for the currently successful private operator of LRT1 (P-III) (LRMC) to maintain its high-performance, including from a sustainability perspective.
Lastly, external business pressure on private operators with regards to sustainability is also important. For LRT1 (P-III), the Metro Pacific Investments Corporation (MPIC), one of the main shareholders of the private operator LRMC, emphasizes sustainability issues as one of the top priorities in its corporate mission statement (interview No. 4). Moreover, the company discloses its environmental, social, and governance (ESG) performance, which acts as a strong driver for the operator to promote sustainability concepts (interview No. 4). It is believed that the recent boom in ESG investment by the international business community has put external pressure on the LRMC to set ESG issues as its top priority.
On the whole, the comparative analysis suggests that there are a number of important conditions for making PPPs work, including the financial arrangements, governance modes, and project environments. First, it is important to apply PPP schemes after developing the railway system by using public and/or ODA finance. This finding supports the concept of “blended finance”, which has recently been promoted by the international practitioner community as “the strategic use of development finance for the mobilization of additional finance towards sustainable development in developing countries” [70]. Second, a mixture of vertical project management using strong government policies/regulations and MDB/BDB’s policies/regulations, and horizontal process management or collaboration between the stakeholders, especially between the public and private sectors, is critical for realizing sustainable infrastructure through PPPs; this supports the discussions in extant research [5, 11, 12]. Lastly, the analysis implies that particular project environments also contribute to the successful use of PPPs to achieve sustainability outcomes, which provides new insights for scholars.
Did the application of ODA (MDB/BDB) finance lead to successful implementation of sustainable infrastructure? What are the conditions for success?
The three cases show the importance of the involvement of MDBs/BDBs as providers of both finance and technical assistance in order to realize sustainable infrastructure projects. Each of the case study projects utilized ODA concessional loans and technical assistance at some point, and they adopted, recovered, or strengthened sustainability concepts. For instance, LRT1 (P-II and P-III) and MRT3 (P-III) utilized ODA finance for rehabilitation work and/or expansions of the railway systems, and technical assistance and consultation from MDBs/BDBs was obtained at that time; this contributed to the recovery and strengthening of sustainability concepts, especially in relation to environmental and social sustainability. The involvement of MDBs/BDBs had a huge impact and meaning for MRT3 (P-III); due to the prompt and extremely concessional loan from Japan and technical assistance from ADB, Australia, and Japan, the railway system was revived from what had been a deteriorating operation under the PPP scheme. The importance of MDBs/BDBs is also observed in the case of LRT2 (P-I and P-II), where Japan provided ODA loans and technical assistance to the project design. Environmental and social sustainability perspectives were incorporated in the design of the railway system in LRT2 (P-I), and operational sustainability was maintained for decades up to LRT2 (P-II). This is a good example of the role of MDBs/BDBs in promoting sustainability concepts in the projects they finance, which is suggested in the extant research [64].
The involvement of MDBs/BDBs is also important from a governance perspective. First, from a policy/regulation perspective, MDBs/BDBs generally require strict guidelines for environmental and social considerations as a condition for finance. As the extant research emphasizes, the importance of strict guidelines positively affects the environmental and social sustainability of the projects [17, 63, 64]. Indeed, LRT1 (P-II and P-III), LRT2 (P-I and P-II), and MRT3 (P-III), where MDBs/BDBs were involved, rated “very positive (+ +)” on environmental and social policy/regulations, which might lead to “very high (+ +)” or “high ( +)” sustainability outcomes for these aspects. It is noted that LRT1 (P-I) had not yet had such “very positive (+ +)” or “positive ( +)” policy/regulations though MDBs/BDBs were involved at the time. As a result, the environmental and social sustainability of LRT1 (P-I) may have been lower.
Looking at stakeholder interactions, MDBs/BDBs also play an important role as coordinators or facilitators among the stakeholders to create collaborative governance, as discussed earlier. The stakeholders can work together on project details such as design and finance through close communication led by MDBs/BDBs; this in turn promotes the application of sustainability concepts in the projects, which supports the extant research emphasizing the importance of collaborative governance led by facilitative leadership in infrastructure projects [33, 37–41, 65]. Indeed, LRT1 (P-II and P-III) and LRT2 (P-I and P-II), where MDBs/BDBs were involved, had a collaborative governance mode among the stakeholders, which together with relevant policies and regulations, may have led to high sustainability outcomes. In contrast, LRT1 (P-I), which was operated under market governance between the public party and MDBs/BDBs, had less sustainability outcomes due to a lack of collaboration among the parties and relevant policies/regulations. This implies that both vertical project management using strong policies/regulations from the MDBs/BDBs, and horizontal process management or collaboration between MDBs/BDBs and other stakeholders are critical for realizing sustainable infrastructure under ODA finance, as is the case with PPPs [5, 11, 12].
It should be noted that the case study projects also imply the importance of the initial conditions of interaction between the stakeholders, which provides new insights for scholars. A comparison between LRT1 (P-I and P-II) and LRT2 (P-I and P-II) suggests the importance of collaborative governance right from the project planning stage. Collaborative governance was applied in LRT2 right from the planning stage (LRT2 (P-I)), which led to the adoption of sustainable design, especially in the social and operational areas, and resulted in higher sustainability outcomes over phases (P-I) and (P-II). In contrast, LRT1 applied market governance during the planning stage (LRT1 (P-I)) and adopted limited sustainability design. In turn, it was difficult to improve sustainability in the following phase (LRT1 (P-II)) due to the original design of the facilities, despite collaborative governance being applied in LRT1 (P-II).
In general, the cases suggest that the involvement of MDBs/BDBs is important for realizing sustainable infrastructure from a financial and governance perspective, as the extant research suggests [17, 19, 62–64]. However, it should be noted that some factors could make ODA finance work for the successful adoption and implementation of sustainability concepts in infrastructure projects, which is a new insight for scholars. For instance, while LRT2 was financed through ODA loans and was able to realize sustainable infrastructure under the operation of the public entity until LRT2 (P-II), we attribute this success not only to the involvement of MDBs/BDBs but also to the project environment of both rivalry and collaboration between LRT1 and LRT2. The private operator of LRT1 (LRMC) was a good rival for the public operator of LRT2 (LRTA) (interview No. 1), which pushed it to maintain its quality of service during P-II. In addition, there is sometimes a spillover effect from LRT1 to LRT2 in terms of good operation practices beyond the projects (interview No. 1, 2, and 3). For example, the use of KPI monitoring systems and mobile applications for the provision of railway system information. This unique relationship might have been generated by LRTA’s double roles as operator of LRT2 and grantor of LRT1 during LRT2 (P-II). The spillover effect also supports the importance of “blended finance”, which the international practitioner community has recently advocated for [70].
In addition, it is important that MDBs/BDBs have enough capacity to provide timely and appropriate financial and technical assistance. As we observed in the case of MRT3 (P-III), the quick provision of a significant ODA loan and technical assistance just after a request from the Philippine government, supported the quick revitalization of sustainability of the railway system. This was deemed possible due to the Duterte administration’s “Build-Build-Build” policy, which prioritized the use of ODA finance for infrastructure projects and the timely availability of concessional ODA loans and technical assistance. Therefore, it is important for the government of the recipient country to maintain a close relationship with MDBs/BDBs for them to be able to utilize the ODA in a timely manner. Additionally, MDBs/BDBs should have an attractive aid menu that incentivizes the recipient countries to adopt sustainability concepts, such as the quick provision of assistance, extremely concessional loans for projects including sustainable concepts, and practical technical cooperation on implementing sustainable infrastructure, in their infrastructure development.
Conclusion
The current research aimed to investigate the financial and governance enabling factors that brought about sustainable infrastructure development throughout the implementation phases of urban railway projects in Manila. To do so, the research focused on the finance arrangements of PPPs and ODA finance and their relevant governance modes.
The first conclusion of the comparative analysis of the case study projects is that PPPs and ODA finance could contribute to the realization of sustainable infrastructure implementation by filling a gap in financing with funds from the private sector and developed countries. The analysis also suggests that PPPs and ODA finance could play an important role in sustainable infrastructure implementation by utilizing private actors’ know-how and creativity and promoting international standards on sustainability concepts, as advocated in existing research. In addition, from a finance perspective, the research demonstrates the importance of “blended finance” (i.e., finance combining ODA finance with PPPs), which has been recently promoted by the international practitioner community. In particular, the use of PPP O&M concession schemes after all the infrastructure has been developed using ODA finance may be preferable, since the project tends to be able to proceed without trouble under the scheme, where the private actor takes on limited risk.
However, it should be noted that the use of PPPs and ODA finance does not automatically lead to successful sustainable infrastructure implementation without conditions. The case analysis implies that, from a governance perspective, a mixture of vertical project management using strong government and MDB/BDB policies and regulations, and horizontal process management or collaboration between stakeholders is critical for realizing sustainable infrastructure implementation through PPPs and ODA finance. The analysis also suggests that there are other critical factors in the successful use of PPPs and ODA finance for sustainable infrastructure, for example, the types of PPP scheme (e.g., O&M concession and BLT), the timing of the MDBs/BDBs becoming involved, and the project environment, which affects both the trust and collaboration among the stakeholders; the cases suggest the importance of PPP schemes where the financial burdens and risks are well borne by the public parties, the involvement of MDBs/BDBs from the project preparation stage, and incentives for the public and private parties to continuously make an effort to achieve high performance.
The limitations of the research methodology should be noted. First, the information used for the comparative case analysis may be limited and there may be missing information that the research did not cover. However, it is deemed that this limitation was managed to a large extent by using as much available information as possible from various sources, including interviews, documents, research papers, and news articles. In addition, the current research analyzes the outcomes (i.e., implementation of sustainable concepts in infrastructure projects) based on the narrative information, especially for social sustainability. This qualitative rating methodology may lead to slightly different results (ratings) among evaluators. However, the research mitigated this limitation by providing possible rating options (e.g., ± / + and + / + +) for projects and phases difficult to be evaluated by a sole definitive rating (e.g. + and −).
Additionally, the current research focuses on specific finance arrangements (i.e., PPPs and ODA finance) and the relevant governance mode as the enabling factors for sustainable infrastructure implementation. Therefore, future research should cover other finance arrangements and their relevant governance modes. Moreover, other enabling factors for sustainable infrastructure implementation should also be investigated, as the incorporation of sustainable aspects in infrastructure projects must be influenced by various other factors, such as cultural and technical factors. It is also recommended that further research focusing on other cases in different sectors and countries should be carried out. In addition, factors generating a sound project environment for sustainable infrastructure implementation should be investigated. Future research could also include the interrelations between the various sustainability pillars in sustainable infrastructure.
Disclaimers
The views expressed in this text are those of the authors only and do not purport to reflect the opinions, views or the official positions of any organizations.
Author contributions
Conceptualization and methodology: All authors; Data collection and analysis: K.E.; Writing—original draft preparation: K.E.; Writing—review and editing: J.E. and A.G.; Supervision: J.E. and A.G.
Funding
This work was supported by the JICA Ogata Sadako Research Institute for Peace and Development.
Data availability
All data generated or analyzed during this study are included in this published article and appendix.
Declarations
Ethics approval and consent to participate
Ethics approval was exempted according to the Research Ethics Guidelines of JICA Ogata Sadako Research Institute ((DI) No.202203310015 dated March 31, 2022). The guidelines do not require the ethics approval of the research applying the interviews regarding institutional settings and activities (not regarding the participants themselves), which was applied to this research. Verbal informed consent to participate in this study was obtained prior to the interview.
Competing interests
The authors declare no competing interests.
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
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Abstract
In recent years, the concept of sustainable infrastructure has gained popularity and is widely utilized and promoted by the international development community. However, implementation of sustainable infrastructure remains a challenge due to various enabling and disabling factors particularly related to financial arrangements and governance modes. This paper aims to fill the research gap in this area and investigate the factors that enable implementation of sustainable infrastructure, with a focus on the financial and governance aspects. To do so, the paper uses real urban railway projects in Manila, the Philippines as case studies for comparative analysis. The results suggest that from the finance and governance perspectives, public–private partnerships (PPPs) and official development assistance (ODA) finance are effective tools for implementing sustainable infrastructure, with some conditions, namely a mixture of vertical project management and horizontal process management, and the project environments having a positive effect on the trust building and collaboration among the stakeholders.
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Details
1 JICA Ogata Sadako Research Institute for Peace and Development JP, Tokyo, Japan (GRID:grid.454175.6) (ISNI:0000 0001 2178 130X)
2 Erasmus University Rotterdam NL, Rotterdam, Netherlands (GRID:grid.6906.9) (ISNI:0000 0000 9262 1349)