Editorial: Build or Bust
The current administration’s economic team spent the most time boasting about four years of infrastructural accomplishments at its recent pre-SONA forum. On the other hand, little was spoken about the government’s intentions for economic recovery from the pandemic’s severe economic catastrophe. The pre-SONA forum’s erroneous emphasis on infrastructure echoes the country’s misplaced urgency on infrastructure as some kind of magic bullet for development.
The Philippines’ creditors, particularly the World Bank and the Asian Development Bank (ADB), have been nagging the government to implement better infrastructure in an attempt to optimize the country’s creditworthiness and investment grade, as well as to attract much-needed international investment in the import-export economy. That is clearly the first and most important reason for making Build Build Build appear grand, and why previous administrations had primarily focused on delivering infrastructure in a liberalized and privatized economy. The Build, Build, Build (BBB), heralded as the central economic program of the Duterte administration, aims to usher in the “Golden age of infrastructure”. In 2017, when it was launched, BBB was envisioned to spend at least P8.4-trillion worth of new infrastructure projects nationwide like roads, bridges, and airports. But with the onset of the pandemic, has it turned out to be a dud?
To begin with, large-scale infrastructure spending proved to be far more challenging than anticipated. Front-line agencies such as the Department of Public Works and Highways (DPWH) and the Department of Transportation (DOTr) failed to address chronic issues such as a lack of absorptive capacity, resulting in underspending and delayed spending. In addition, the infrastructure spending from 2017 to 2019 reached P932 billion yet the finished Infrastructure Flagship Projects(IFPs) didn’t even go past 10. Even if these 29 IFPs are completed by the end of 2021 or 2022, the overall cost of all completed projects will only be Php365.24 billion, or 7.8% of the total project cost of Php4.7 trillion. There is still a lot to be done, with 51 projects extending beyond 2023 and another 28 in the works.
In addition, the Duterte presidency declared less preference on Private-Public Partnership (PPP) as its source of funding and instead more on the state. However, it turns out that the funds from the existing IFPs are from Official Development Assistance (ODA) loans especially from Japan and China.To speed up projects, the BBB Program eventually still had to rely on private funding and unsolicited offers at that. The administration initially announced that foreign loans and grants will finance 15% of total costs and public-private partnerships will finance 18% but this was not followed as the current data shows that foreign loans and grants will finance 91% of total costs and public-private partnerships will finance 4.5%. It is clear that the budget is mishandled and also raises the question of where some of the money goes.
On the bright side, the BBB Program may pose as a pathway to opportunity growth in VisMin as out of 104 projects, 23 are located in Mindanao and 16 in Visayas. It also provides about 17,600 job opportunities to Filipino workers. To add, many claim that it may be ambitious but it is simply a jump starter to more investments, growth, and a sustainable future. However, so far, there are no indications that BBB spending in 2017–2019 helped boost the growth of industry and agriculture. GDP growth was due largely to the robust expansion of services such as real estate, entertainment, tourism, and so on, thanks mainly to the remittances of 10 million-plus OFWs, who have succeeded in transforming the economy into a “consumption-driven” one. In addition, a “sustainable future” might have to be left out as a promise because according to a study by Cuenca (2020), the list of IFPs is responsive mostly only to ICT, mobility, and power, leaving out social infrastructures such as school, health facilities, and technology adoption and innovation.
Last and most importantly, with the onset of the pandemic, there is a need for the expensive BBB Program to take the backseat, and for healthcare to be a priority. According to a study and article by the McKinsey Global Institute (2020), healthcare sector prioritization might just be the prescription to fast post-pandemic prosperity. First, fewer people are likely to die prematurely, so the working-age population will increase. Second, it’s a key to a more resilient and sustainable healthcare system as investing in it early on may dramatically improve the quality of life of millions of people; interventions such as increased healthcare workers wages and expanding access to primary care — could reduce the global disease burden by 40 percent over 20 years. However, with the latest signed budget allocation for the year 2021, the healthcare sector may seem to be the one taking the backseat as the Department of Health (DOH) has only been allocated P210.2 Billion while DPWH comes with a whopping P667.3 Billion (Department of Budget and Management, 2020). It is critical that spending policies and priorities be temporarily shifted to the health sector as it is more beneficial for the country, especially the MSME sector to bounce back from the Pandemic and sustain the country’s growth.
In all probability, in the future post-pandemic country, as the economy yields lower returns on investment, the debt owed today will be more expensive than initially computed. This will mean a heavier debt burden, more anti-poor and regressive taxes, and higher user fees for so-called public services. Perhaps it’s time to wake up from the dream continuously sold — that is the Build Build Build Program. By then, we can only hope for the “grand infrastructure age” to not deliver a legacy of untold poverty and a deeper economic crisis.