Philippines Plan To‘see More Action’ On Infrastructure This Year

- Jan 19, 2018-

The Philippines is stepping on the gas on the rollout of its public infrastructure program that will allow the economy to avoid the so-called middle-income trap and sustain its high growth trajectory.

During the First Global Forum on Infrastructure Strategies in Pasay City on Thursday, Budget Secretary Benjamin E. Diokno said that President Rodrigo R. Duterte met with him, Finance Secretary Carlos G. Dominguez III and Public Works and Highways Sec. Mark A. Villar on Wednesday night and they agreed that “most” of the big-ticket infrastructure projects will be on a turnkey arrangement.

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“We will not spend a single peso. We will pay them after it is done…,” Mr. Diokno explained.

“That makes a lot of difference. It means it will speed up implementation. How are they going to finance? They have to borrow money from us.”

Rolando G. Tungpalan, undersecretary of the National Economic and Development Authority, said 24 out of the 75 flagship infrastructure projects have been approved by the government’s economic policy-setting body as of this month.

“Twenty-eighteen is the rollout year for the flagship projects and all hands are on deck to make these happen. You will see more action on the ground,” Mr. Tungpalan said.

These projects include the Metro Manila Subway’s Phase 1, Bonifacio Global City-Ortigas Center Link Road, Binondo-Intramuros Bridge, Panguil Bay Bridge, New Bohol Airport, Mindanao Rail’s Phase 1, Metro Rail Transit-Light Rail Transit Common Station, Philippine National Railways (PNR) North 2 and PNR South Long-Haul.

“Our hefty allocation for infrastructure is proof that we mean what we say, that we are serious in achieving the promises of the president to bring development to the whole country,” Mr. Diokno said.

The government aims to spend P8.13 trillion on infrastructure until 2022 — when spending will account for 7.3% of gross domestic product — in a bid to boost economic growth to 7-8% starting this year from 2017’s 6.5-7.5% target.

Addressing infrastructure bottlenecks should allow the Philippines to steer clear of the middle-income trap, in which growth stagnates due to lack of structural support for sustained expansion of economic activity, said Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Gunigundo. “Elements that brought about growth — favorable demographics, very good labor market dynamics — these items disappear at some point. What is good is the Philippines is still a long way from that point,” Mr. Gunigundo said.

A global strategist noted that the Philippines’ infrastructure spending target is hovering around the 8.0% of gross domestic product level needed to kick off a period of “long-term, steady and predictable” growth cycle. “This government is for real on infrastructure spending,” said Parag Khanna, leading global strategist and managing partner at advisory firm Hybrid Reality, Pte. Ltd.

Mr. Khanna said the infrastructure program should help the Philippines create 10-15 “very strong, robust, functional” urban clusters nationwide that, in turn, will discourage mass migration and spread economic opportunities beyond development hubs like Metro Manila.

“Don’t just build the same way as it has been built in the past… ‘Build, Build, Build’ is great but we shouldn’t hear ‘Build, Build, Build’ 20 years from now in the same places,” Mr. Khanna said.

The world needs to invest $3.3 trillion annually through 2030 to build a network of transportation, energy and communications infrastructure, he said.

China’s “One Belt, One Road” initiative is leading the linkage of megacities across geographical jurisdictions and this is increasingly important for Southeast Asia as it deepens the integration of its economy and complementary supply chains.

“The potential of Southeast Asia is absolutely limitless, but it is only when you bring supply chains together that can this region compete,” Mr. Khanna said.

The private sector is excited about the opportunities that will be created by improved infrastructure.

“We agree that it will bring multiple-level of activity into the economy and create a lot of opportunities not just for financial institutions like ourselves, but actually a great level of economic activity for all walks of life,” ING Bank Country Manager Hans B. Sicat said.

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