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Infrastructure boost in the Philippines

Publication Date : 11-09-2012

 

The Benigno Aquino administration’s flagship Public-Private Partnership (PPP) programme took a big leap forward last week with the approval of 407 billion pesos (US$9.7 billion) worth of infrastructure projects that will address flooding in Metro Manila, improve access to the provinces and deal with the transportation problem in the metropolis.

Topping the list of projects approved by the National Economic and Development Authority (Neda) Board chaired by President Aquino is the 35-billion peso flood management master plan for Metro Manila and surrounding areas. The plan is to be carried out from 2012 to 2035. It has an initial allocation of 5 billion pesos for the improvement of various floodways and drainage systems and river capacities in Metro Manila and nearby provinces until 2013.

Two airport projects were also approved—the 4.8-billion peso Bicol international airport in Daraga, Albay to be built from 2013 to 2015, and the 7.4-billion peso Panglao airport in Bohol, which is expected to be ready by 2017.

Addressing the plight of Metro Manila’s commuters, the Neda Board gave the go-ahead to the 9.7-billion peso LRT Line 2 extension project that will connect the existing LRT line that ends in Santolan, Pasig, to another line that goes through Cainta to Masinag in Antipolo, and the 8.6-billion peso MRT 3 capacity extension project involving the purchase of 52 more cars to increase the capacity of the train system.

The Neda Board approval last week brought many of the infrastructure projects more than halfway through the entire bureaucratic process involving big-ticket undertakings. The Neda Board approval is considered the most crucial and it will now be followed by the preparation of a request for proposals (RFP), invitation and prequalification, preparation and submission of bids, evaluation of bids, and the awarding and initiation of project implementation.

The government is optimistic that it can offer investors more projects through the PPP in the remaining four months of this year, among them, the $1.4-billion LRT Line 1 Cavite extension and operations-and-management contract; the $377.5-million second phase of the Naia Expressway; and the $467-million Cavite-Laguna expressway which was actually presented last week for approval but was deferred pending clarification of some points raised by President Aquino.

Funding for some of these projects is readily available. Last July, the Asian Development Bank (ADB) approved an equity investment in a $625-million private equity fund focused exclusively on Philippine infrastructure projects—the biggest and first of its kind in the country and well-timed for various PPP opportunities. The ADB’s investment in the Philippine Investment Alliance for Infrastructure fund is in conjunction with commitments from the state-owned pension fund Government Service Insurance System, Dutch asset manager APG and the Macquarie Group.

Infrastructure plays a key role in a nation’s economic development. The lack of it is, in fact, one of the factors hampering the Philippines’ climb in the Global Competitiveness rankings of the World Economic Forum.

Ramon del Rosario Jr., chair of the Makati Business Club, echoed the sentiment prevailing in the private sector that a lot of work still had to be done in several areas like infrastructure to help ensure that the Philippines would reach the upper-third rankings by 2016.

Del Rosario pointed out that despite increases in government spending on public works this year, infrastructure investment in the Philippines remained one of the lowest in the region. Infrastructure spending in the country is estimated to be equivalent to less than 3 per cent of its gross domestic product, or below the 5-per cent average for Southeast Asia. “The country’s infrastructure is still in a dire state, particularly with respect to sea and air transport, with little or no progress achieved to date,” Del Rosario lamented. It is a fact that businessmen consider infrastructure a vital area in deciding whether or not to invest in a country.

Every new administration after the end of the Marcos dictatorship in 1986 was full of promises. Yet after the presidencies of Corazon Aquino, Fidel Ramos, Joseph Estrada and Gloria Arroyo, the Philippines simply maintained its sideways course.

Today, President Aquino’s economic officials—and not a few business executives—proclaim that the country is truly on the verge of a takeoff.

We can only hope that the recently approved projects do not get bogged down in the bureaucratic red tape as did many other infrastructure undertakings in the past.

US$1 = 41.6 pesos

 

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