A bigger problem than financing
At this point it has become pretty clear that a lot depends on the success of the Duterte administration’s much-vaunted Build Build Build mantra. Just recently, the Asian Development Bank said that the Philippines is currently amid a “golden age of economic growth” following a five-decade expansion, which in the short term relies on the success of the infrastructure program.
Build Build Build, ADB said, will not only boost gross domestic product —by up to 6.9 percent next year—but more importantly bring about the type of inclusive growth that has eluded so many generations by making a dent on poverty incidence.
But more than the political decision to finally focus on infrastructure, experts say that the decisive factor in the success of the Build Build Build agenda can in fact be summarized in one word: execution.
Economic thinkers weighed in during a recent roundtable discussion organized by independent think-tank Stratbase Albert del Rosario Institute in which economist Alvin Ang’s paper “Financing Inclusive Infrastructure” was presented.
To be sure, there is no question that a broad and coordinated focus on infrastructure as a pillar of development is long overdue, said Dindo Manhit, President of Stratbase ADRi.
“The impetus for a massive infrastructure build-up is the country’s poor state of infrastructure, as evidenced by our poor performance in several global rankings,” he said. “The Philippines is one of the lowest in terms of logistics performance, and the most problematic factor for doing business in the country is inadequate infrastructure supply.”
But deciding on investing on infrastructure is one thing. Executing the Build Build Build agenda on the ground is another.
For instance, Ang cautioned that while infrastructure projects can theoretically already secure the approval of the National Economic Development Authority board and even pass through the bidding process, the actually execution can be delayed or deferred for several years.
“The MRT 7 is a prime example of this, as the contract was awarded and signed in 2008 and yet construction only took off eight years later in 2016,” he said.
The LRT extension to Bacoor Cavite is another example, having broken ground in May 2017. Right-of-way issues, however, have delayed the start the project to the middle of this year.
How to effectively address this has to be a coordinated effort, he said. For starters, since this is the first time that an administration has consciously put together an infrastructure plan, it needs to take advantage of the President’s political capital in helping implement projects sooner.
Funding wise, since part of the logic behind the implementation of the TRAIN Law is to help sustain the massive infrastructure build-up, its effectivity—in addition to its other components—needs to be ensured.
Government must also respond to the other perennial problems of infrastructure beyond the bidding stage, from the securing of right of way, procurement, budget bottlenecks, and other issues of a “poor knowledge management” nature.
In many ways, the seeming difficulty in getting big-ticket projects off the ground mirror the broader difficulty of doing business in the country, and the only way to deal with that is to get our act together. We need to improve governance at different levels, whether business or infrastructure-related.
Is financing an issue? Only to a certain degree, Ang said. While debates are currently raging on the type of financing strategy that the government must follow—the Aquino administration’s Public-Private Partnership versus the traditional Official Development Assistance—he said execution issues will hound the program regardless.
“This is not an issue of whether PPP or ODA is better. It is ultimately an issue of whether the Philippines can address the myriad of execution and process issues.”
Thus, it’s really the quality and pace of response that ultimate matters. If issues are addressed in an organized and standard manner, it ensures the certainty of funding availability and better rates for borrowing, for instance.
He explained: “The first half of 2018 is critical if it will reflect a much improved infrastructure spending and faster implementation of programs as people are expectant of movement and not just press releases. This same source of political capital might be eroded sooner when people’s expectations are not met.”
Even so, the situation should be viewed as a glass half-full, said Aekapol Chongvilaivan, ADB Country Economist for the Philippines. He cites that the country has taken a $100-million loan for technical infrastructure preparation and innovation, the first time for the Philippines.
Another important dimension is continuity. Since many big-ticket government projects will unlikely be done when the Duterte administration leaves office in 2022, there should be a guarantee that infrastructure plans and monitoring are continued. Otherwise, the momentum that the agenda had gathered would not be sustained, limiting their potentially paradigm-shifting benefits.
A big chunk of political capital has been spent on President Duterte’s Golden Age of Infrastructure and expectations are high. Pressure is now on government to start delivering real results.
The voters are waiting.