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Impediments to the Duterte’s infrastructure plan

I recently attended the Euromoney Investment forum where Budget and Management Secretary Benjamin Diokno and BSP Governor Amando Tetangco addressed an audience of 800.

The mood was optimistic owing to the country’s strong economic  fundamentals and President Duterte’s expansionist  economic policies.  The great dampener,  however,  was the specter of the economy  imploding on the back of infrastructure bottlenecks.

Sec. Diokno assured the audience that infrastructure is at the forefront of President Duterte’s agenda.  Whereas in 2015,  infrastructure spending amounted to only  R436 billion, or 3.3 percent of GDP,  Diokno assured a ramp-up  to R860 billion, or 5.4 percent of GDP, by 2017.

Assuming everything goes according to plan, infrastructure spending should top R7 trillion by 2022, an amount sufficient to put our  infrastructure at par with that of Malaysia. In the last quarter alone, NEDA has already approved R471 billion worth of projects.

Infrastructure spending will help drive GDP growth to an average of 6.5 percent from 2017 to 2022, affirms Diokno and Tetangco.  Subsequently,   it is assumed that the economy will have the capital formation necessary accelerate to eight percent.  Growing at this pace will eliminate poverty and establish the nation among the top 20 largest global economies by 2030.

Mike Toledo, representing the Metro Pacific Group, was the voice of the business sector as he expressed optimism on President Duterte’s 10 point economic plan. He assured Metro Pacific’s continued participation in the Duterte growth story by investing heavily in telecommunications, energy, water, infrastructure, media, healthcare and if given clearance,  even mining.

The scale of infrastructure spending is what the Duterte administration has coined as the “golden age of Philippine infrastructure”. However, we must all manage our expectations as the plan is predicated on two dicey assumptions.

The first assumption is that the Department of Public Works and Highways (DPWH) and Department of Transportation (DOTr) have the absorptive capacities to undertake large scale infrastructure projects, simultaneously. The second assumption is that the executive branch will be granted emergency powers by congress for it to bypass time-consuming  procurement protocols.

On the first assumption, it is apparent that neither the DPWH nor the DOTr has the capacity nor the leadership to undertake   an infrastructure plan of this scale,  at least not at the moment.  Eighty days in office and both agencies have not been able to address  even the low hanging fruit –  the elimination of colorum buses, for instance.  Clearly, these departments need to come up to speed. Until they operate on all cylinders,  the roll-out of infrastructure will be intermittent and inefficient.

On the second assumption, House Minority Leader Danilo Suarez and Speaker Pantaleon Alvarez have already gone on record to say they have serious concerns about granting emergency powers  to the executive branch, citing conflicts of interest on the part of the  Department secretaries.

As we all know,  DPWH Secretary Mark Villar is the scion of the Vista Land group  while  DOTr Sec.  Art Tugade and Usec. Noel Kintanar were former employees of Ayala Land.  It seems highly unlikely that   Villar,  Tugade and Kintanar  can  persuade   Congress to think otherwise.

These are the impediments to the realization of President  Duterte’s infrastructure plan.  That said,  make no mistake,  bridging the infrastructure gap is an indispensable component to sustain economic  growth.

At face value, the plan is both  sound and timely. It is, however, betrayed by organizational weaknesses in the DPWH and the DoTr.  Now more than ever, we need President Duterte’s political will and strong arm to iron-out the shortcomings in these departments. For our survival, our golden age of infrastructure must happen.

 

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Andrew is an economist, political analyst, and businessman. He is a 20-year veteran in the hospitality and tourism industry. For comments and reactions, e-mail andrew_rs6@yahoo.com. More of his business updates are available via his Facebook page (Andrew J. Masigan). Follow Andrew on Twitter @aj_masigan.