The head of a Spanish-based multinational construction and civil-engineering company in Manila believes the infrastructure boom in the Philippines is still to come, predicting that in the following decades, Metro Manila would have a network of viaducts and highways, and a new airport and railway system that will connect the metropolis to other cities in Luzon.
“The infrastructure boom has yet to come. I foresee the future—Manila Metro will have important networks. I foresee many urban viaducts and highways to solve the vehicular traffic jam,” said Francisco Moreno Velo, Obrascón Huarte Lain (OHL) Area director for Asia & Pacific.
“I foresee a new airport; I foresee railways that will connect Manila with other centers in Luzon; I foresee also ports. The port of Manila is probably old infrastructure and will need to be taken away out of the city [to an] outside location like what happened in other major cities. You need better infrastructure, like Spain or France, for example.”
Velo agreed to be interviewed after consulting with the headquarters in Spain.
“We just came at the right moment. The Philippines has a backlog in infrastructure spending for the last 30 years. It needs to catch up, like what happened in Spain in the 1960s and 1970s. Spain had a huge backlog in infrastructure and for the last 30 years, we’ve been building a lot of infrastructure and I think the same thing will happen in the Philippines in the next 30 years. It hasn’t come yet to the game.”
During the interview, the BusinessMirror commented that these are expensive projects, and asked how they will be financed, particularly since the Philippines doesn’t have that much economic muscle.
He agreed on that the massive infra upgrade would entail huge investment, but seemed astonished at the query. His answer showed his mastery of the Philippines macroeconomic condition: “Oh, the Philippines is now in a very robust financial situation in the private and public sector. The debt-to-GDP ratio in the Philippines is 45 percent; that’s less than half of what it is in Spain or the US and the UK.”
“The current-account deficit is positive; the government is only collecting 19 percent of the GDP in taxes here, when in Europe it is colleting 40 percent of the taxes. The deficit is 0.9 percent of GDP, the last official number,” he said.
Velo said money is not the problem, but the political will and “finding ways to channel the resources into infrastructure development, and I think the government is well aware of that. It can afford to make it happen”.
Velo’s predictions seem to dovetail with the Philippines’s 64 big-ticket projects that range from major road networks, railway systems and bus rapid-transit systems to airport and seaport modernization.
These are either for implementation or in the pipeline as part of the Duterte administration’s envisioned “golden age of infrastructure”.
Budget Secretary Benjamin E. Diokno said the incremental revenues that would be raised from the first package of the Department of Finance-proposed Comprehensive Tax Reform Program amounting to some P163 billion in 2018 are consistent with the planned increase in the budget deficit—from 2.7 percent of GDP in 2016 to 3 percent of GDP beginning 2017.
Broken down, the 64 projects involve 20 road construction and improvements; two involving bridge construction and reinforcements; two flood-control projects; two dams; one road-transport information-technology infrastructure project; 23 involving rail systems; seven airport-development projects; two transport terminals; and three bus rapid-transit systems.
Besides its current projects, the Department of Public Works and Highways is also set to either oversee or implement 10 infra projects in Metro Manila and Mindanao.
Velo said OHL has been “present in the market actively since 2013.”
“I first came in July 2014, and [I’ve been] living here since the Holy Week of 2015. So that makes it already two years,” said the tall expatriate, who seems to exude that Spanish combination of patrician charm and innate intelligence.
OHL is an international reference in concession, engineering and construction projects, with more than 100 years of history and an outstanding presence in 30 countries across five continents.
Presently, the Spanish firm is a strategic developer of public-private partnership (PPP) projects. It is the 28th-largest infrastructure contractor and the fifth in Latin America; and an international reference in the construction of highways, hospitals and railways.
“So far, we have been awarded recently with the hydropower run-off river in Mindanao. It’s not a dam that stores the water, it just increases the level of the water and create electricity,” he explained. The project is in Mindanao, near Valencia City, costing $35 million.
“We came here to join the PPP Programs of the previous administration, and now we continue targeting this market of PPP projects, [and] also the unsolicited proposals that are privately founded in the Philippines. But also, we’re looking at the hydropower needs. So these are two main market niches were targeting here,” he revealed.
The BusinessMirror asked Velo whether he is aware of the warning of the Philippine Volcanology and Seismology’s (Phivolcs) that Metro Manila is prone to disaster and that it expects the West Valley Fault (WVF) to generate a catastrophic earthquake called the Big One.
Phivolcs Director Renato Solidum had said that in the face of these catastrophes, Metro Manila should prepare to relocate major infrastructures, like ports and airports, to either Clark and the Port of Batangas “to distribute the risks”.
“Yes,” he replied with firm convictions. “One of the criticalities, of the Philippines [is that] it has many particularities when we look at it in terms of infrastructure. First [is] the insular situation of the Philippines, a country that is in the middle of the ocean. But it’s not only like Great Britain, an island or two islands in the middle of the ocean, the Philippines is scattered in the middle of the sea.”
He said because of this situation, the country needed infrastructures that could withstand natural calamities to be able to communicate with Asia and with the rest of the world and to interconnect the Philippines within itself with its more than 7,000 islands.
“So, on top of that, the Philippines has severe natural events, such as volcanic eruptions, earthquakes and typhoon, we have taken that into account. When we build those infrastructure, it has to be resilient to counteract extreme events and you need those infrastructure to be able to attend emergencies everywhere in the country that has islands scattered in the sea.”
Velo said OHL is also looking at railway projects. “There might be some changes in those projects, but I think those are also important projects for Manila. I think those projects are very much needed for the Philippines.”
“If the government takes it out in the market, we will certainly look at it because that is one of our expertise, railroads. We have built very important railways, of course, in Spain. In Turkey we built the Ankara-Istanbul high-speed train, those are 400 kilometers connecting Ankara with Istanbul, a very challenging and successful project,” Velo boasted.
He said they are at the finishing stages of another project—the high-speed train from Mecca to Medina—“another 400 km in Saudi Arabia.”
“We have a lots of experience in Metro and railways and we have technology in different areas; project management, power supply, catenaries and the installation of the rails. We have even a factory for slippers in Czech Republic. We have the whole technology of railways, so all the railway projects here in the Philippines will be our target.”
Asked if OHL is aiming to bid for any airports, Velo said they have experience in airports, as well, and have participated in the Terminal 4 of the new Madrid airport and Barcelona, in Spain.
“Those are big projects; Madrid Terminal 4 could process 50 million passengers per year, and we were one of the construction company that build that.”
Asked whether OHL is not worried by the Duterte administration’s seeming inability to effectively govern the country in a predictable manner and whether they have a long-range plan to stay, he said: “We are builders; we look at the infrastructure and we welcome the announcement of the new government [that] they will prioritize these infrastructures.”
Velo said that after having about two or three international trips a year, visiting Australia, New Zealand and Vietnam as part of his responsibilities, “I come home to the Philippines and I want to rest.”
He is happily married and has a daughter studying here.
Image credits: Jimbo Albano