The administration of President Rodrigo Duterte has announced an infrastructure program that seeks to complete P8 trillion worth of physical facilities between now and June 30, 2022, the end of Duterte’s term. Build Build Build and other such programs depend for their success on five elements. Those are good projects preparation, adequate financing, adequacy of physical supplies, a good program monitoring system and the economy’s absorptive capacity.
Over the decades since the end of World War II this country has built up a credible project identification and preparation establishment. Supported by loans from the international financial institutions and ODA (official development assistance) from the Philippines’ economic partners, the government was the prime mover of infrastructure development. This approach put heavy pressure on the budget and the nation’s foreign exchange reserves. PPP (public-private partnership, in which private entities financed the installation of public facilities in exchange for the right to operate them over a long, e.g. 30-year, period) was conceptualized and rolled out in the 1980s. The projects prepared by the capable engineers and architects of the infrastructure agencies of the government—mainly the Department of Public Works and Highways (DPWH) and the Department of Transportation (DTr)—are reviewed by equally capable staff of the National Economic and Development Authority (Neda).
Like all infrastructure development programs, Build Build Build needs to be adequately financed. Most of the financing required by Build Build Build will be domestically sourced. The Aquino administration has spoken of an 80-20 (80 percent domestic and 20 percent externally sourced) formula for the financing of Build Build Build. The Secretary of Finance stated the case perfectly when, addressing the tax-initiating House of Representatives, he declared “Without approval of the Comprehensive Tax Reform Package (CTRP), there can be no infrastructure program.” Clearly, without CTRP there will be no Golden Age of Infrastructure.
An infrastructure development program as massive as Build Build Build will require lots of physical supplies—cement, steel, glass, copper tubing etc. An P8-trillion infrastructure program will definitely pose a serious challenge to the supply of these items. Because domestic production capability is bound to be inadequate—thanks to the progressive decline of this country’s manufacturing sector—massive importation will have to be resorted to. The implications of such an import regime for the international reserve and the stability of the peso are foreseeable. This country has been there before.
Absorptive capacity is a further crucial consideration for a decision to embark on a massive infrastructure development program. One cannot embark on such a program without full consideration of its likely impact on the stability and balance of the nation’s macroeconomic fundamentals. The most important of these are macroeconomic fundamentals are a stable internal monetary policy (represented by a low inflation rate) and a stable external monetary policy (represented by a strong currency and a high level of foreign-exchange reserves). These fundamentals must not become the collateral damage resulting from an ambitious infrastructure development program.
Finally, a program like Build Build Build needs a good monitoring system. With good monitoring, there will be no cost overruns, corruption will be minimized and the program will be executed smoothly and on schedule. Without it, Build Build Build will go the way of most of the infrastructure development programs by past administrations.
The presence of these five elements will ensure that Build Build Build turns out to be Build Fast, Build Strong and Build To Last. E-mail: [email protected]