Professional Documents
Culture Documents
This paper is submitted by Bertrand Alexander J. Lesaca (UP-NCPAG) in partial fulfillment for
the requirements of PA 301 (Theories in Public Administration) under the guidance and
instruction of Dr. Danilo Reyes.
Abstract
As a an adjunct to my proposed thesis tentatively titled: Philippine Style 3rd wave good
governance: Application of Tofflers 3rd wave theory to promote transparency and good
governance, this paper will delve into issues facing the practice of contracting-out government
services to understand the theoretical framework behind it as well as to find out if such practices
actually benefit the public at large or simply serve as yet another opportunity for institutionalized
rent and patronage seekers to profit from.
As we witness the ongoing global trend of government contracting-out the delivery of public
services, there is an emergence of private establishments getting more interested and actively
involved with the government. The tight competition for government contracts for the delivery of
public services, specially those involving technology, infrastructure, security, healthcare, potable
water and electricity, should result in economic and social benefits for the general public.
However, such competition for government contracts may also be subject to political or
administrative manipulation such that the expected benefits no longer accrue to the public at
large.
For this study to be meaningful, given the time and logistical limitations of a semester,
qualitative focus will be on the contracting out of porter (baggage) services for both departing
and arriving passengers at the Ninoy Aquino International Airport (NAIA). Did the service
improve? Are the benefits (or inconvenience) as expected? Does it do the passengers any good?
Is proper oversight performed by the NAIA to ensure contract terms and agency goals are met?
These questions will hopefully be answered in this paper.
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Introduction
Objective
Significance
It has always been the goal of management (in the private sector) to increase revenue and
decrease expenses. But in the government sector this tradition often translates to resource
allocation or the acumen to do more with less. Following the Acceptance Theory of Authority
(Barnard 1938), in order for the States authority to be respected and preserved, the needs of its
people must first be met. But with the growing Philippine population1 together with the strong
objections by the powerful Catholic Church against any form of contraception, the State is
further pressured to better manage the limited resources it has, in the absence of a socio politically practicable population control policy.
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the ability to deliver essential public services and government functions is a prerequisite
for the legitimacy of state. The foundation of a resilient state the social contract between
Citizens and their government is imperiled when the basic needs of its people
are not met.
2010 OECD Handbook on contracting out government functions
While airport porter service can hardly be considered an essential service, the ability to travel
serves as an indication of a higher level need (Maslow 1954) of the airline passenger.
International or domestic air travel requires the purchase of an airline ticket and owning at least a
baggage (or a form of luggage) containing ones clothes and other personal items, which are
signs of financial ability. There is therefore an expectation of a higher level of service from them.
And since airports also serve as showcases of a countrys growth and development, it is
imperative that the service provided also reflects this. And through the multiplier effect2, can
result in either public benefit or loss.
An understanding of the theoretical and legal framework behind the outsourcing practice
together with the dynamics that are involved in each situation should provide an idea of the
Why and How government agencies have adopted the practice of contracting-out ( also
called outsourcing) of some, or in some cases all, of its functions. An analysis follows to
evaluate outsourcing contract and determine if the government agency, through its contract
2
The multiplier effect happens when an investment or payment is used to become someone else's salary or income,
and that person in turn spends or invests it and becomes another persons salary or income. This repeats itself
resulting in an amount larger than the initial investment or payment.
(SOURCE: http://www.unc.edu/depts/econ/byrns_web/Economicae/multipliereff.html)
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agent, actually delivers what it initially set out to accomplish and that authority, proper
monitoring and control is exercised by the agency and not its agent.
Owing to our strong filial and family ties, we have strong emotional sentiments when any of our
relatives and friends leaves the country whether it is for a short vacation, overseas work or
migration. In the early 1970s, the Manila International Airport (or MIA as it was called then)
had a fairly large viewing deck where one can wave to loved ones as they walk toward their
designated flight carriers. It was normal practice for each passenger to be accompanied by
busloads of friends and relatives to bid farewell. Because of this Filipino send off tradition,
Porter service was not really a problem for departing passengers what with all the relatives and
friends ready and more than willing to carry the entire luggage, boxes and whatever tampipi4
the traveler had to carry. This happens both when the person leaves and when he/she returns.
Baggage porter service at that time was used more by foreigners, who are usually wary of such
service for fear of losing their belongings. For those old enough to remember, it was really
3
4
SOURCE: http://125.60.203.88/miaa
A native luggage made of sawali or other similar indigenous materials.
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chaotic with all those people, either welcoming or bidding farewell, greatly outnumbering the
arriving/departing passengers.
After a fire gutted the old MIA terminal in 1972, a new terminal (now called the Ninoy Aquino
International Airport or NAIA5) was designed and built with 1st class western standards. The
designers considered the tradition of passengers being accompanied by busloads of well-wishers
as an undesirable nuisance rather than a unique Filipino tradition that should be continued. This
is because the government expects an steady increase in air travel as it actively promotes
Tourism in the country. To decongest the terminal of the throngs of people, more than half of
whom were not even passengers, the new airport introduced an updated security screening
system for which only ticketed passengers are allowed to pass through. While it greatly
alleviated the crowding problem as well as passenger security, no longer can the Filipino
passenger enjoy the luxury of being attended to, and be the center of attention, by the multitude
of well wishing friends and relatives who were now all relegated to looking through a glass panel
till they can no longer see their departing loved one. The advent of Porter Service use had now
arrived.
Terminal 2: Centennial Terminal - All Philippine Airlines flights only (North wing
International, South wing Domestic)
Named after Sen. Benigno S. Aquino Jr., staunch political foe of the Marcos Administration, who was assassinated
shortly upon his arrival after being arrested and led away on the airport tarmac in August, 1983.
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Volume
In 2009, the airport experienced a surge of 24.1 million passengers. Two years after, it serviced
29.7 million passengers, making NAIA one of the top 50 of the world's busiest airports by
passenger traffic. Then in 2012, the NAIA terminals handled a total of 31,558,002 airplane
passengers representing an increase 6.2 percent the previous year. This represents 13,928,034
international passengers and 17,629,968 domestic flights passengers. But with more airlines
using bigger aircraft, there was a decrease in flights to only 214,354 flights, compared to the
previous year of 218,925 flights. Furthermore, it was noted that Terminals 1 and 2 are already
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operating way above their operational capacities of 4.5 million to 7.5 million passengers
annually. The additional terminal 3, plagued by controversial contract problems, is only partly
operational but gets an annual passenger capacity of 13 million6.
Mandate
The Manila International Airport Authority was created by Executive Order 778 (s 1982), as
amended by Executive Order NO. 903, is mandated to7:
Formulate and adopt for application in the airport internationally acceptable standards of
airport accommodation service;
Upgrade and provide safe, efficient and reliable airport facilities for international and domestic
air travel;
Help encourage and promote international and domestic air traffic in the country as a means of
making the Philippines a center of international and domestic air travel;
Perform other functions as maybe provided by the law while maintaining financial viability as
an autonomous government entity.
SOURCE: http://www.manila-airport.net/index.cfm
http://125.60.203.88/miaa/index.php?option=com_content&view=article&id=9:miaa-mandate&catid=27:agencyprofile&Itemid=37
7
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Definition of Terms8
Outsourcing
Outsourcing is the act of contracting out to another provider of goods and services of basic
functions of administration and customer service support that might otherwise be performed inhouse. Although these business processes could be performed by the company itself, outsourcing
such tasks can result in financial advantages to the company.
Globalization
The opening up of trade barriers between countries though the World trade Organizations
General Agreement on Tariff and Trade (WTO-GATT). With the advances in information and
communication technology, trade, interaction and interdependence among countries are further
accelerated.
This is the practice of hiring or contracting a 3rd party (outside of the organization) to perform
certain business processes such as accounting, customer service call center operations, IVR,
accounting/payroll, etc. and formalized by a contract that is enforceable by law.
SOURCE: http://www.merriam-webster.com/dictionary
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Contract
An legally enforceable agreement between 2 parties who have agreed and entered into an
agreement for certain considerations or bargains. While it is standard practice for contracts to be
written, oral contracts are also allowed, provided it can stand certain legal criteria.
Hollow State
Referring to the state whose resources are so limited, it cannot properly function without
contracting-out some or all of its services.
Porter Service
The carrying of luggage by authorized airport personnel. It includes the porters (those who carry
passenger luggages up to the check-in counter and from the customs area to the parking lot) and
the baggage retrievers (those who carry and bring these luggages back and forth from the checkin counters to/from the airplane to the claim areas).
Study Parameters
The study will look into the porter services of the NAIA. This often overlooked and underappreciated service at the airport is one of the first things a passenger will inevitably encounter
upon arrival at the airport terminal. From the time the passenger falls in line (just to enter the
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terminal) till the time you cue up for check-in processing, one cant help notice the seeming
correlation between availing of the porter service and getting to the front of the line faster.
After going through all the security checks, the traveler feels assured no baggage will be lost.
However, the accuracy, effectiveness and ethical practices by the baggage retrievers, those
people who work behind the counters and on the airport tarmac, will largely determine if such
expectations can be realistically met. Although the NAIA or the MIAA has no access to
information regarding lost, pilfered or delayed baggage, information obtained from the Civil
Aeronautics Board show 81 formally filed complaints in 2011, of which 7% (or roughly 6
complaints) involved lost luggage9. I suspect this figure covers only a portion of the 4 terminals
of the NAIA as it seems too small for the whole year. However, the fact remains that proper
luggage security and handling will result in air passenger satisfaction, despite numerous security
hassles resulting from the September 11, 2001 terrorist attacks on the US.
It is unfortunate that there is a lack of available data or other related information on this service.
In this regard, to perform the evaluation and performance of the contracted out service, the
analysis will focus on how this contracted out service helps to meet the agencys mandate. Thus,
this paper will attempt to qualitatively evaluate the service based on the following 3 questions:
b) Does it provide for the safety of international and domestic air passengers?
Source: http://opinion.inquirer.net/42971/passenger-protection#ixzz2P6jIKPtf
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c) Will it provide for the financial viability for the MIAA as an autonomous government entity?
Traditionally, porter in the Philippines was free of charge although porters expect to receive
some gratuity, the amount of which depends on the number and weight of luggage carried. This
practice left the passenger to predatory practices of unscrupulous porters some of which may
not even be employed by the airport administration. With the crowding of the airport by well
wishers and welcomers, the added problem of theft and loss of baggage became a public
concern.
Prior to march 1st of this year, the free porter service was handled by the LBP Services Inc10.,
which employed around 300 porters to service NAIAs four terminals. After this date, the MIAA
Board awarded a new firm, Hire and Keep, Inc11., to provide porter services at the NAIA. A
uniform fee of 1 USD or 50 per luggage will be charged for departing and arriving passengers.
It is expected that the new porter-service provider will absorb most of the LBP contractual
workers12 for baggage retrievers. Porters will have to re-apply to the new company.
10
It is interesting to note that LBP Service Corporation, which was organized and incorporated in October, 1996 by
a group retirees from the Land Bank of the Philippines. The companys Board of Directors and Executive Officers
are composed of human resource professionals, finance specialists, and administrative officers who are past and
present officers of Land Bank.
11
Established in Pasig City, Philippines on July 30, 2003. HIRE & KEEP, INC. has as its goal the provision of
personnel and services at a more cost-efficient and flexible arrangement for local companies of any size.
(SOURCE: http://hireandkeep.com/profile).
12
Aning, J. Philippine Daily Inquirer. 4:29 am | Friday, February 15th, 2013. Only those
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For this arrangement, MIAA will get 10 percent of the revenue collected from the new fees to
augment its financial resources for maintenance and improvements.
Passengers who do not wish to use the service can still have the option to use pushcarts which
will remain free of charge to the passengers. The new porter service will have counters
strategically situated at the entrance of the terminals for departing passengers and after clearing
the customs counters of the arrival area for arriving passengers13.
Analysis
Will it promote international and domestic air travel in the country?
The promotion of air travel in the country requires a concerted effort by both the government and
public sector. While the contracting out of porter services in our airports can hardly make an
impact to this end by itself, travelers may have noticed some improvement in the congestion at
the air terminals. Whether this was affected by the contracted out service is too early to tell.
Through the outsourced service, porter service is expected to be more professional and effective
through the application processes applied by the new company in its hiring and promotion.
The promotion of air travel in the country requires an inter-departmental and executive effort. As
the trend from government to governance moves us toward a hollow state, Fredericksons theory
of conjunction (1999b) offers a good explanation for such inter dependencies.
13
Santos, R. NAIA porters to charge travelers P50 per bag. The Philippine Star. February 15, 2013
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It is expected that the new porter service will provide for a safe and secure environment to the air
riding public that their checked-in baggages will not only be professionally handled but will be
there intact when they get to their destinations. Hopefully, this will give the perception of
efficiency which can swing passenger preference to use our countrys air services, promoting
our tourism and air travel industry.
Will it provide for the safety of international and domestic air passengers?
With the perennial crowding at our airports, especially during peak travel seasons, passenger
safety is of utmost importance. Un-regulated porter service can be a bane for the passenger if
there is no sense of professionalism within its ranks. Unidentified porters coupled with the
connivance of predatory groups operating within and outside the terminals, further aggravate the
situation. It is expected that with the outsourcing of the service, porters will be trained to be more
responsible and accountable to the riding public.
Will it provide for the financial viability for the MIAA as an autonomous
government entity?
Assuming a 13 million passenger traffic14 we expect either USD$13 million or 650 million
annually (that is if all of these passengers use the porter service). At just 10% going to the
MIAA, we see that the revenue the service can potentially generate can significantly provide
14
MIAA estimate
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additional funds to the agency. This additional revenue generated can further be used to meet its
mandate of maintenance and improvements of other airport facilities. For transparency, close
coordination with the commission on audit (or other auditing authorities) may need to be
mandated
Rationale
Philippine bureaucracy practically emerged from our American colonizers. To Max Weber, the
(bureaucratic) model is characterized by prescribed rules and procedures, official documents,
hierarchy of authority, selection based on merit, and separation of private or personal life from
office15. Unique to this model is the rationalization of group action in order to achieve the
highest degree of efficiency16.
And while a plethora of terms abound to define or characterize certain stages of our
governments level of capacity to look after the public welfare and provide the services to its
citizenry, there a couple of theories that shows great promise to Public Administration theory in
the Philippines. These are the concepts of Hollow (or Fragile) and the disarticulated state.
According to the OECD, a fragile state as one that is unable to meet its populations
expectations or manage changes in expectation and capacity through the political process
(Jones et al., 2008). Meanwhile, a disarticulated state relates to the inter-institutional relations of
administration in the context of the decline of authority; the decreasing importance of
15
Weber, M. Bureaucracy. In Classics of Organization Theory, 4th edition; Shafritz, J. M., Ott, J. S., Eds.;
Wadsworth Publishing Company: Belmont, California, 1996; 8085.
16
UNDP. Trends and Challenges in Public Administration Reform in the Asia Pacific; Sub-Regional Resource
Facility for the Pacific, Northeast, and Southeast Asia, UNDP: Bangkok, 2004; 9.
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jurisdictional borders; and a general institutional fragmentation. The most important factor is the
decline of the relationship of political jurisdiction and PA. Such weakening of this bond disarticulates17 the central link between government and its contracted agents resulting in a disarticulated government (Frederickson 2003).
The competition brought about by globalization induces the private sector to be leaner, have
always been more adept at developing and adopting sophisticated management tools that
government sector operations never experienced because of their monopolies over essential
public sector production and big government contracts. This divide is oftentimes the bone of
contention regarding the best management practice. Despite the differences, we find a common
denominator among them. They are: 1) adaptation of a market-based management and resource
allocation; 2) Increasing reliance on private sector establishments for the delivery of public
services and; 3) a sustained effort at downsizing; and 4) decentralizing the governments role as
the major policy actor.
As the population steadily grows, government and its agencies have been steadily becoming
leaner while available resources have remained largely limited. There is continued pressure to
17
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carry out their mandates, to the extent that they may either limit or completely remove some its
services to the public. This nascent condition of a mismatch of responsibilities and resources is
central to the concept of a hollow government18 and is a major factor for government agencies
to contract out in order for the government to continue with its service mandate to the public.
Soft State
Our Constitution expressly states that The Philippines is a democratic and republican State.
Sovereignty resides in the people and all government authority emanates from them (1987
Constitution of the Philippines. Sec.1. Art. II.). In truth, our society has historically been
dominated by the rich and powerful and characterized by poverty, social and cultural insecurity,
lawlessness and injustice. Such a condition will certainly qualify our country as a Soft State
(Myrdal, G. 1944) since we are still dominated by the oligarchy that continue to exploit the
power of the State or government to serve their own personal interests rather than the interests of
the public. Regulation and policy formulation are more in the command and control tradition
which more often than not either result in regulatory capture or are not properly enforced, if they
are even enforced at all. The traditional exploiters of our Soft State are: (1) rent-seeking
oligarchs or rich and powerful politicians and their families; (2) warlords or leaders of private
political armies; (3) politicians who use force, fraud, or electoral fraud; (4) rent-seeking
businessmen and government administrators and employees; (5) gambling, drug and smuggling
lords; (6) tax evaders; (7) rebels who collect revolutionary taxes; (8) terrorists or organized
18
McGlinch, P. Hollow Government: Resource Constraints And Workload Expansion At Fda. April 30, 2001.
Harvard Law School. Also called state failure.
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banditry; and; (9) the poor informal settlers and squatter syndicates who occupy private or
public land and are protected by politicians to increase their electoral support.
Our weak nation and Soft State are clearly related to many political leaders who use
their power and authority more to serve their private and political interests than to serve the
common good and the national interest. On the whole they have failed to lead us towards our
constitutional vision, ideals and goals through good governance and the rule of law19.
19
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The following charts briefly compare the pros and cons of outsourcing with privatization20:
The Privatization or Outsourcing Debate
Reflects a False Choice
The Left
The Right
Government employees
should perform all public
services
Privatize everything
Privatizing makes
government smaller
Speed and
flexibility
Enhanced Quality/
Effectiveness
Specialization/New
Talents and Skills
Networked
government
benefits
Increased Reach
and Choice
Innovation
Inadequate
Protection of Public
Values
Creaming Deprives
Those Most in Need
Choice and
Competition Can
Give Way to Private
Monopolization
Networked
Government
Problems
Poor Contractual
Protection of Public
and Incorrect
Quality Measures
20
Lack of Necessary
Government
Oversight Talent
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In our study of the porter service at the NAIA, we can certainly expect that with porter service
contracted-out; a more professional approach to baggage handling should result. With part of the
fee going to the MIAA, the agency is able to augment its finances which can help meet the
mandate of being able to provide world class service to air travelers.
Still, one begs to ask: why did the agency only get 10%? What are the agencys plans for the
realized savings from the outsourced service? What kind of oversight and control is exercised by
the agency to ensure that proper reporting of collected fees remain above board? How often will
performance be reviewed?
Partnerships can serve as an alternative to contracting out, as defined in a strict legal sense.
These partnerships can contribute to long-term state building and increase the distribution and
delivery of justice and security. This is not a case of conventional contracting out but a
partnership that begins with the state reaching out in an attempt to establish a type of community
policing program, with the active participation of the civil society and NGOs. And since in a
partnership, all the partners are accountable, efforts by all participants are well coordinated,
transparent and work toward the public good.
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A law was recently passed to protect passengers against airline companies unfair policies and
practices. The Bill of Rights for air passengers and carrier obligations was approved on Dec. 3
and signed on Dec. 10 by Transportation Secretary Joseph Abaya and Trade Secretary Gregory
Domingo. It took effect on Dec. 21, 2012, in time for the influx of balikbayans and tourists for
the holidays.
The bill of rights sets, among other things, the guidelines on overbooking, rebooking, ticket
refunds, cancelled and delayed flights, lost luggage, and misleading ads on faresthe top causes
of passenger complaints since air transport was liberalized in the country in 1995. Additionally,
an airline should transport any off-loaded luggage on the next available flight, and deliver it to
the passenger either personally or to the residence, or risk paying P2,000 for every 24 hours of
late delivery. If after seven days of non-delivery, the luggage will be deemed lost and the
passenger will be paid the equivalent of about 17,000 per luggage21.
Conclusion
Fragile and soft states, like ours, are most often incapable of providing the needed oversight and
control over contracted out public services. Since the primary reason to outsource is to minimize
costs while maximizing outputs, the role of government and its agencies have shifted from that
of implementer of public programs and services to that of governance.
21
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As a result, a change in the partnership between the public and private sectors and their
corresponding roles and accountabilities has been observed. For one, the shift in focus from
administration to results and output has changed the agencys priorities to one of a performance
evaluator of the private entity contracted to provide the service. Often, due to the limited
government agency resources, this control and authority over the private establishment may not
be well designed and may result in an onerous public burden, not to mention the real potential for
corruption.
Because our government has historically been insensitive, and even oppressive, to its citizens,
heuristic approaches to accountability and governance is a practice rampant in our country. Some
end up as good practices while others become too political and thus become jurisdictionally
limiting. In our study of the NAIA porter service outsourcing, from being free to becoming paid
service, the MIAA mandate is legally complied with. While it remains to be seen if this program
actually contributes to the upgrading and improvement of our airport facilities through the
additional revenue generated by the new fees, the agencys is able to meet its mandate without
incurring additional resources or requesting additional funding from the national government.
Since the nature of government encompasses a huge field of practices, each subcontract is unique
and mostly esoteric to the given agency, jurisdiction, level of government, civil participation and
foreign assistance. Each should therefore be guided and designed by its own publics needs. And
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Lastly, any measure of a contracted out service should include professionally designed forms of
control, checks and balances that remains exclusively exercised by the government agency. It
should be done both in a timely and random manner. Such measures and, no doubt, other
innovations provided from lessons learned , will be a thin divide that will determine between a
true public-centered good governance practice and a surrender of public responsibilities.
22
Frederickson, H. G. Smith, K. B. The Public Administration theory Primer. 2003. Westview Press. Pgs 207-227.
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Print
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Press. Pgs 207-227.
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Meeting of the American Society for Public Administration, Orlando Florida, April 10-14, 1999.
Handbook: Contracting out Government functions and services in post conflict and fragile states.
OECD. 2010. ISBN 978-92-64-09198-6 (PDF).
McGlinch, P. Hollow Government: Resource Constraints And Workload Expansion At FDA.
April 30, 2001. Harvard Law School.
Scheye, E. State-Provided Service, Contracting Out, And Non-State Networks: Justice and
Security as Public and Private Goods and Services. The International Network On Conflict And
Fragility (INCAF). June, 2009.
Online
Abueva, J. V. A Soft State and a Failing Democracy. January, 2011.
http://joseabueva.wordpress.com/2011/01/09/a-%E2%80%9Csoft-state%E2%80%9D-andfailing-democracy.
Aning, J. NAIA to undergo upgrading in 2013 as number of air travelers increase.
Philippine Daily Inquirer. January 9th, 2013. http;//inquirer.com
Contracting out government functions and services in post-conflict and fragile situations. ISBN
978-92-64-09198-6 (PDF). OECD 2010. www.oecd.org/publishing/corrigenda.
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