The country’s economy will benefit from investments made in flagship infrastructure projects, especially those under the “BBB” program. These projects will also serve as major drivers of economic recovery. Decentralization and public-private partnerships will also contribute to infrastructure development in the Philippines. But if these projects are not undertaken with the required investment and planning, the country will eventually fall behind. For now, however, the country’s government is preparing a list of projects that need investment.
Investments required for infrastructure development in the Philippines
To realize the development of key sectors in the Philippines, the government plans to nearly double public investment in the next four years. The Philippine Development Plan outlines the need for strategic infrastructure development. The national spatial strategy lays emphasis on developing key sectors, such as energy, transportation, water, and health. Investments will help connect supply chains and move services across borders. It also aims to develop renewable energy. The Philippine government plans to invest nearly $600 billion over the next four years.
The Philippines is lagging behind its peer nations in public infrastructure investment. The share of public investment in social infrastructure is much lower than the average of emerging market economies (EMEs), at 26.7 percent. Public investment in public infrastructure prioritizes airports, sea transport, and water supply. It also prioritizes flood management, public order, and environmental protection. This gap in infrastructure development could be solved by increasing the efficiency of public investment management.
Projects under the “BBB” program
The BBB programme consists of several big ticket infrastructure projects spanning various regions of the country. The North-South Commuter Railway is a 163-km suburban rail network that will connect urban areas of Pampanga and Tarlac provinces in the north with Calamba in Laguna province in the south. The Malolos-Clark railway project will be financed by the Asian Development Bank, while Japan International Cooperation Agency will co-finance the construction.
While the Duterte administration has made much of the BBB program’s success, many critics have questioned its legitimacy. The program has been criticized for promoting state-centric infrastructure development in favor of Chinese aid, and Western governments and long-term donors in the region have warned against such “white elephant” projects. But the risks associated with BBB projects can vary depending on the level of government or agency.
Impact of decentralization on infrastructure development in the Philippines
Decentralization has many advantages, but it does come with some drawbacks. Although many local governments now have the fiscal capacity to undertake major infrastructure projects, there are still very few that can actually implement them. In the Philippines, the property tax system is outdated, and few local governments have the fiscal capacity to implement major infrastructure projects. This means that the national government is left with the burden of providing infrastructure funds. This is a major issue, and the implementation of the proposed tax reform will help address this issue.
One of the challenges facing local government units is the lack of skills and expertise to manage their infrastructure. While the national government can offer technical assistance and expertise, local governments still face governance challenges. In addition to that, the water sector is highly regulated, which requires highly trained human resources. The Philippines has a high incidence of water-pricing disputes. Effectively dividing the burden of water development between the national government and local government units will be key in ensuring that decentralized infrastructure development is a success in the country.
Impact of public-private partnerships on infrastructure development in the Philippines
Infrastructure is a critical component of a country’s economic development. The Philippines trails behind other South-east Asian nations in public investment, channeling only 2.5% of GDP into projects. Yet, the World Economic Forum cites inadequate infrastructure as the main barrier to doing business in the Philippines. While the country’s GDP is growing at a healthy pace, public investment has not kept pace. This has led to huge gaps in infrastructure, limiting foreign investment and faster economic growth.
PPPs in the Philippines are a bipartisan affair. Government and private sector officials agree on the terms of projects, but the public is left receiving what was agreed on. The government is also forced to defend its projects against opposition. However, there are some good outcomes. A dedicated PPP Center in the Ministry of Finance was established in 2009 to help the government attract more private investments. With this, the Philippines is well-positioned to take advantage of the benefits of PPPs.