REAL estate and infrastructure play a key role in promoting development for an economy. Both provide for the connectivity required to achieve rapid urbanization and sustainable growth.
This is true for developing countries such as the Philippines. Real estate and infrastructure are the main drivers of the economy with significant multiplier effects that catalyze growth in consumption, employment, investments and tourism.
These are well-played in the country through the growth plans of private developers, and initiatives of the government through public works projects and public-private-partnerships (PPPs).
Mixed-use concept needs infra boost
Private developers in the Philippines have paved the way for more inclusive growth by establishing presence in key growth areas in Metro Manila, Cebu and other provinces. The focus on developing “estates” that allow for a “mixed-use” concept enables a balanced use of land for residential, retail, office or tourism purposes.
to Thailand, Indonesia, Malaysia, and even Vietnam and Cambodia.
Infrastructure plays a big role in shepherding the efforts of these developers.
These include rail projects, toll roads, highways, airports and transport facilities intended to improve access and facilitate trade and investments in key growth centers.
Unfortunately, the Philippines is playing a catch-up game, infrastructure-wise. Catch-up not to Japan or China, but catch-up to Thailand, Indonesia, Malaysia, and even Vietnam and Cambodia.
Wake up call
Nowhere is a wake up call more needed than in the Philippines’ railway infrastructure, which is considered the most popular and sustainable mode of transport in the Association of Southeast Asian (ASEAN) region.
At the recent 38th ASEAN Railways CEOs Conference (ARCEO), held in Yogyakarta, Indonesia, the Philippines, it was painfully clear that while our ASEAN counterparts have overtaken the Philippines in their modern trains and expansive railway systems, the Philippines remained far behind, it’s major cities and roads choking in traffic amidst the runaway growth of its automobile population.
An observer at the conference described the Philippines’ railway scenario as “totally left behind” when technical/management teams from seven countries, namely Indonesia, Malaysia, Thailand, Vietnam, Cambodia, Laos and Myanmar used the annual event to present current rail status, on-going projects and immediate plans of their respective governments— and private sector partners—to set up a growing ASEAN rail community.
The Philippines, which last participated in the annual conference 15 years ago, had nothing to show it was ready for ASEAN integration, much less competition, with its fast-evolving counterparts in the ASEAN railway industry.
The high-powered discussions during the 4-day conference were spirited, creative, and proudly competitive as delegates claimed bragging rights centered on fast-tracking the building of missing links, setting up modern systems of signalling and train tracking, and opening up hundreds of kilometers of markets and railway operations, in particular for freight, in their respective countries.
The Malaysian Industry-Government Group for High Technology’s (MIGHT), for example, showcased plans to set up a Rail Centre of Excellence (RCOE) that will provide training programmes in signalling and communications for main line and metro railways.
Malaysia’s focus on developing its local rail talent and expertise is intended to shore up the mammoth 350 km Kuala Lumpur-Singapore high speed line it will be building, expected to cut travel time to 90 minutes.
Philippines had headstart in rail
The Philippines, acknowledged to have had a headstart in setting up railways as early as the turn of the century, and a commuter rail system (MRT and LRT) since the early 1980s, had nothing to present. True, the local team could lay claim to the LRT commuter extension line to be built from Baclaran to Cavite, but the completion of the project is still years away, depending on tortuous Right-Of-Way (ROW) and myriad political issues
Conference papers and presentations rolled on energetically about how ASEAN is targeting 80% of transport infrastructure investment in the region to be in rail in the next ten years, standardizing the performance and competitiveness of its transport systems, shifting from a “modal shift from road to cost effective modes of transport”, and setting up viable business plans, to ensure a virtuous circle in the rail system.
This virtuous circle was not limited to rolling stock and infrastructure. The Philippines’ ASEAN neighbors have ostensibly tweaked and finetuned the template of sharing financial risks and profits between the future owners of their respective tracks and the operators, thus ensuring the world-class maintenance of the rail infrastructure in their countries.
Glimmer of light
Last week, President Rodrigo Duterte’s infrastructure team announced a list of projects after the President’s trip to Tokyo, which dovetailed with news on the government’s rapprochement moves with China. Among them: a Metro Manila Bus Rapid Transport System, with the first phase connecting Edsa through a tunnel beneath McKinley Road; and the construction of the Clark International Airport Terminal, designed by the French, which has been sleeping for six years without any action.
To be sure, a Philippine delegation in Yogjakarta could have presented such big ticket items, namely, the North-South Commuter Railway Project (600km Manila-Sorsogon line, estimated cost: P200 billion).
Or the priority projects supposedly being eyed by the DOTr under Secretary Arthur Tugade: a 85km Manila-Clark Railway; the 60km Clark-Subic Freight Train; the Mindanao Express (first phase-200km, total project-2,000km); and a cargo rail proposal to restore rail connectivity between the port of Manila to an inland container terminal facility in Laguna. The latter proposal seeks to creatively lay a freight railway service to deliver goods, taking advantage of the existing PNR rail tracks from Tutuban to Calamba..
All the above projects, provide an attractive alternative mode to transport containerized cargoes. These infrastructure projects can effectively alleviate traffic in the major Manila arteries, and make us competitive in the ASEAN region again as import/export of goods will be more seamless.
The latter project, in particular, is considered by industry experts as “low-hanging fruit”, as it will rehabilitate and expand the existing dilapidated tracks of the PNR (thus no new, expensive infrastructure), and can be a catalyst for development not just for Manila, but for the near provinces.
But unless they get off the drawing bard, these projects will remain just that: plans.
Audacious goals
Still, kudos are in order for the Duterte administration for setting audacious goals. It is clearly an administration which recognizes the fact that the Philippines has been left far behind, and will have to make up for years of “neglect.”
Budget Secretary Ben Diokno recently announced that the administration plans to spend up to P900 billion on infrastructure in 2017, and raise infrastructure spending to as much as seven percent of GDP within Duterte’s term.
Diokno said they would build more railroads, roads and bridges in what is hoped to be a “golden age” of infrastructure.
Conflict of interest in high places
At the beginning of the Duterte administration, a forum was organized by the local construction industry on government procurement procedures and PPP’s. New, more transparent rules on government procurement, as well as proposed amendments to improve the PPP law, were presented.
The general reaction from the businessmen in the construction industry was predictable. “That’s nice”, they said. “But nice rules are easily manipulated by bureaucrats and regulators to favor their co-conspirators in bagging government contracts.”
Indeed, if the Duterte administration wants the private sector to be their partner in infrastructure development, an attitude change is necessary. It was pointed out there is so much turf protection among bureaucrats which delay the approval process. There is an obvious bias of NEDA and the old timers in the implementing agencies for ODA and direct budgetary financed projects.
Meanwhile, House speaker Pantaleon Alvarez again decried this week alleged conflicts of interest situations in key government offices, singling out Secretary Tugade, in particular, to “start firing” three of his undersecretaries at the DOTr for “delaying a number of infrastructure projects and programs in favor of certain conglomerates and multinational companies.”
Private sector support, crucial
Clearly, government needs the private sector to invest in infrastructure. But while the private construction industry is excited with the plans of the Duterte administration, their skepticism needs to be addressed.
They want to see how the bureaucrats and regulators implement the presidential intent.