Key Facts from Business World’s Economic Forum on Fueling Economic Growth

Here is a summary of the analysis on Philippine economy during the BusinessWorld Economic Forum titled "Charting Progress to 2020”

Golden Age of Infrastructure: Where will the money come from?

The government is set to substantially fund what its touts as the golden age of infrastructure from the national budget. The public infrastructure program is estimated to be worth Php 8 Trillion. Manny Pangilinan in his keynote speech shared that eighty percent (80%) of the Build Build Build program would come from Tax Reform for Acceleration and Inclusion (Train) filed with the Congress or collectively known as Comprehensive Tax Reform Program (CTRP).  The remaining twenty (20%) percent would be from other local sources. Secretary Diokno of the Department of Budget and Management (DBM), in a later session, elaborated on the administration’s funding options. He says, eighty percent (80%) of the funds will come from domestic sources while twenty percent (20%) will come from foreign sources. Consequently, the funding breakdown would be sixty-four percent (64%) TRAIN/national budget, sixteen percent (16%) other local sources and twenty percent (20%) foreign sources.

The government, according to Secretary Diokno, would use three modes of funding: from the general appropriations act/national budget, official development assistance (ODA) and a hybrid public private partnership (PPP). The latter being the preferred mode of financing/investment and the model of which is the SCTEX. One of the reasons it is preferred is the short duration of processing time. He also shared that the government is open to the idea of taking out loans as the country is below the sixty percent (60%) debt to equity threshold.

What makes Dutertenomics different?

Aside from having a strongman or a leader with political will, this administration is eyeing to complete projects using a hybrid PPP. The SCTEX is a hybrid model as the funding of construction is from foreign and local ODAs and the government while its operations and maintenance is awarded to a corporation.

On the other side of the coin, Mr. Calixto Chikiamco, President and co-founder of the Foundation for Economic Freedom opined that the government should place an emphasis on PPP more. The government, he says has had bad experiences with ODAs and it does not consider the security risks. He cited that the initial budget for the construction of the SCTEX doubled, the contractor of the Northrail was unqualified and the NBN ZTE deal was infused with corruption. However, at a later session, Secretary Diokno disagreed with Mr.Chikiamco’s views.  He says we cannot discount the advantages of a hybrid PPP due to one or a few bad experiences in the past.

Government Plans: DPWH & DOTr

The DPWH divided its infrastructure into 4 categories: traffic decongestion program, integrated and seamless transport system, convergence of rural roads program, and livable and sustainable and resilient communities. For the decongestion program, eighteen (18) of these will be situated in Luzon, two (2) in the Visayas, specifically in Cebu and Bacolod and two (2) for Mindanao both of which are in Davao. As for an integrated system, a number of bridges will be built in the Visayas to link its islands and a project in Mindanao. A total of seven (7) projects are planned. It includes the Mindanao Logistics Infrastructure Network, a long term development plan of logistics networks in Northern Mindanao, Davao, SOCSARGEN and CARAGA. For rural road development, it is a joint effort program Department of Tourism (DOT), Department of Transportation (DOTr), Department of Trade and Industry (DTI) and Department of Agriculture (DA) which have various goals. For the DOT, it is to enhance tourism access while for the DOTr, it is to construct and upgrade roads to seaports and airports. For the DTI, it is to link manufacturing industries and trade corridors and for the DA, it is to build more farm to market roads. Lastly, for communities, the plan includes a water resources management program in Metro Manila and nearby cities and a flood risk management project in Cagayan and Pampanga and a tide embankment in Leyte.

As for transportation projects, aside from ongoing airport projects the government is planning to build or rehabilitate a number of sea ports and railways. The plans also include the construction of Metro Manila Bus Rapid Transit System. 

Some Private Sector Worries and Needs

 It is apparent from the presentations of some guests from the private sector that the government can do more than build infrastructure for its development plan. Doris Magsaysay-Ho, President and CEO of A. Magsaysay Inc. opines that the government can still capitalize on an opportunity to create a more competitive shipping industry through the concept of economies of scale.  She elaborates that this can be achieved by implementing a cluster development plan around industries and hub ports. She says a cluster strategy the likes of Thailand or Malaysia would effectively lower costs.

For the energy sector, Mr. Francia, President and CEO of Energy Holdings Inc. worries that there will be under supply of energy in the early years of the 2020’s as Malampaya resources are being depleted. The substitute coal and gas power plants are still awaiting ERC approvals and action. He shares that these substitute power plants must be built in the next year so that supply would not be disrupted.

Mr. Ferdinand Maranon, a delegate from Davao, suggested more than farm-to-market roads, like other infrastructure projects for rice, corn and sugar should be looked into. He even suggested a public mill for corn and rice should be constructed, per specific area.

However, as Mr. Chikiamco noted that using different metrics, the growth under this administration is not quite inclusive yet.  Nonetheless, he points out the “Philippine growth will continue but Dutertenomics could be improved with pro-inclusive policies especially in agriculture, mining and forestry.”  He points out that agricultural policies should be veer away from populism while mining policies should be more pro-mining and forestry policies should be toward sustainable management.