The next administration needs to ramp up infrastructure spending to 7 percent to 10 percent of GDP—from the current goal of 5 percent of GDP—to really make an impact on the country’s growth and competitiveness, Public Works Secretary Rogelio L. Singson said.
This would mean an annual spending target of about P1 trillion for infrastructure upgrade, considering the country’s estimated $285-billion GDP.
This, Singson said, is possible if the capacity constraints are addressed and the rail projects are pursued.
“We told the [construction industry] three years ago that we will grow in infrastructure investments by 30 percent annually, and no one was listening. Now if the next administration seizes this opportunity [of growing infrastructure investments], we should not only be at 5 percent of GDP. We should start ramping up to 7 [percent] to 10 percent of GDP, especially if the government goes to rail projects,” Singson said at the sidelines of the Innovation Infrastructure Congress, organized by the European Chamber of Commerce of the Philippines.
Under the Aquino administration, the Department of Public Works and Highways (DPWH) has been concentrating on cleaning up the house—streamlining procedures; improving the absorptive capacity of the agencies and local government units; and plugging fund leakages—and sees the target of infrastructure spending reaching 5 percent of GDP by 2016 as an uphill climb.
But Singson said that, with the massive logistics network in Mindanao worth P80 billion now just being started and with the bulk of the DPWH’s P202-billion budget for roads and highways directed to that region, the next administration could accelerate spending to 7 percent to 10 percent of GDP during its tenure.
For roads and highways, the DPWH has allocated P97 billion for Mindanao for 2016, with Region 10 taking the lion’s share of P30 billion, and Regions 9 and 11 taking P19 billion each. This does not include the P10 billion given directly to the Autonomous Region in Muslim Mindanao (ARMM).
The National Capital Region (NCR) only got P20 billion. This is a marked shift from the previous years’ trend of allocating the bulk of the budget to the NCR, Singson added.
The private sector, however, needs to overcome the capacity constraints it faces, especially in Mindanao—the most under-invested area in the country in terms of infrastructure—to help meet the target.
Singson said the construction sector—the cement industry, in particular—does not have enough capacity to meet the burgeoning infrastructure development in the region, citing that some manufacturers are now relying heavily on imported cement.
There is also the problem of lack of qualified contractors in the area.
Another problem—but out of the private sector’s hands—is the usual tussle with the local government units in the supply of aggregates, the main component of concrete.
A factor that could also prop up the next administration’s infrastructure spending, Singson said, is the pursuit of the rail projects.
“‘I’ve always maintained that we need more railways. That’s why I advocated a subway to the National Economic and Development Authority [Neda]. That’s now part of the transportation road map for the NCR. We’re now implementing a high-standard highways. The Department of Transportation and Communications, together with Jica [Japan International Cooperation Agency], has come up with a transport road map, which integrates road network with rail system,” Singson said.
One of the government’s largest public-private partnership (PPP) projects, the Laguna Lakeshore Expressway Dike (LLED), is still a “go,” Singson said, as the government is now working on addressing the issues aired by the Team Trident consortium, composed of the country’s largest conglomerates and a pre-qualified bidder.
“That’s still a go, as far as I’m concerned. One bidder has aired their concerns, and we’re trying to address that. January 7 is the current deadline for bidding,” Singson said.
He detailed the issues aired by Team Trident—which is composed of the Sy group, Ayala, Aboitiz and Megaworld—relating to termination provisions and environmental resharing. “One of the issues they raised was the termination provision, whether by default of the grantor or the private sector. Second is the environmental resharing, ano ba extent ng risk nila, if may toxic waste, those kinds of issues,” Singson said.
The P123-billion LLED project is not covered by the election ban on government spending that will take effect on March 16, as PPP projects involve private funds, not government money. This situation gives the agency some leeway in adjusting the timeline, although it is still sticking to the January 7 deadline. The DPWH chief said a notice of award can be given within 30 days after the January 7 bidding.