OPINION: The 'Build Build Build' score so far

Jose Galang — Your Business

Posted at Apr 16 2018 03:31 PM

It’s easy to be mesmerized by the presentations made at the Philippine Economic Briefing last week, on Friday the 13th. Ambitious and extravagant as the featured infrastructure program may appear, Filipinos can only hope that these projects actually become reality in the next few years.

The images projected on the screen, at least based on what the Investor Relations Office carried on its website later (this blogger was not at the event at Clark Freeport Zone), were pretty—very much like the glossy pamphlets and booklets produced during the Marcos dictatorship when it was wooing bank loans and investments to its grandiose infrastructure and industrial projects back then.

As everybody now knows, much of the funding for those Marcos projects eventually flowed into bank accounts of the dictatorship’s top officials. Kickbacks were pocketed shamelessly, according to subsequent audits of those projects, and the dream projects never materialized. The Philippine economy, by the time the Marcos dictatorship was booted out by the Filipino people, was one of the poorest and heavily indebted in Asia.

With the pictures of gleaming structures of airports, highways, sports centers, new cities, etc. that the Duterte economic managers are now bandying about, fingers are crossed that the old mistakes are avoided this time around. There is too much at stake for the extravagant infrastructure program to fail.

Approved projects so far

This infrastructure program, under the so-called Build Build Build (BBB) strategy, has earlier been estimated to entail costs of over P8 trillion over the next five years. During the Clark event, the National Economic and Development Authority (NEDA) released a list of 55 “infrastructure flagship projects” with combined estimated costs of P1.5 trillion. 

As of last week, 18 projects with combined costs of P462.7 billion have been approved by the NEDA Board and the Investment Coordination Committee, an inter-agency body that evaluates economic impacts of major national projects and recommends to the president for approval and implementation schedule. Of the total approved projects, 8 are for Mega Manila accounting for project costs of nearly P295 billion.

About 70 percent of the taxes that will be collected under the recently launched TRAIN scheme—which imposes new excise taxes on practically every merchandise and service patronized by Filipino consumers—will be spent on the BBB projects. Debt and other government fund-raising measures, including proceeds from the recent sale of P12-billion worth of ‘panda’ bond debt papers, will also be tapped.

There are some items at the Clark presentation that can’t help trigger some degree of doubt, even suspicion, about the big initiative that on the whole was really impressive.

For instance, the Bangko Sentral ng Pilipinas claimed in one of its slides that Philippine GDP growth in 2017 was 6.9 percent. But the real growth rate, as per numerous government declarations over the past weeks, was 6.7 percent GDP growth, which was slower than the preceding year and which led to weaker growth in per capita GDP and family spending. There was really no need to claim a higher, and false, growth number, even if the error was unintentional.

For its part, the Department of Public Works and Highways (DPWH) focused on what it called “the boldest, most ambitious infrastructure program in history” as it detailed revealed planned increases in spending from P858 billion in 2017 to P1.84 trillion in 2022.

‘Traffic decongestion’ projects

One previously little known item was the amount being spent by DPWH on “traffic decongestion” which in 2017 totaled P113.1 billion. It is quite intriguing to know how P113 billion can be spent and still see practically no improvement in traffic conditions in many cities across the nation.

This amount is targeted to increase to nearly P150 billion this year, on such projects as highway upgrades, widening, construction of bypasses, flyovers, interchanges and underpasses. The DPWH report did not say when the people will experience “traffic decongestion”.

The DPWH program presented in Clark included projects with construction already well under way. One example: 20.6-kilometer road sections between the Bataan Export Zone and the Subic Bay Freeport Zone that are about 94.5 percent complete, for which the DPWH is still budgeting P716.3 million to finish the remaining 4.5 percent of the project by 2022.

Even the presentation on the plans for a “New Clark City” presented by Finance Secretary Carlos Dominguez focused mainly on goals for the planned development, which he labelled as “the growth driver for Luzon”, but lacked details on how to achieve these.

Central to this ambitious plan for Clark is the 40-hectare National Government Administrative Center that will house “various back-up government centers that will ensure continuous business operations and services in the country at the onset of a natural disaster.”

Dominguez said these back-up government centers will “bring in hundreds of enterprises around a sprawling industrial and real estate development”. An upgrade of the Clark International Airport is now under way and a railway project connecting Clark to Malolos in Bulacan province, is expected to formally secure financing from the Japanese government late this year.

“Clark will be the showcase for this economic strategy,” he said. “We expect this area to be the growth driver for Central and Northern Luzon.” The towns and cities around Clark, Dominguez forgot to mention, have always formed a hub for commerce and finance in Central Luzon and beyond, hosting regional officers of all banks and top business groups based in Manila. That wider area has been driving growth in the region for decades now.

While the Clark airport is being modernized, the government continues to entertain proponents for two new international airports near Manila, on top of expanding the present Ninoy Aquino International Airport. This is bound to result in reduced efficiencies, along with actual financial losses, at some point. In other Asian capitals, there is only one international airport each servicing much bigger traffic.

In the meantime, structures to be built in Clark in the next few months will be for the 30th Southeast Asian Games that the Philippines will host late next year, along with a planned “disaster recovery center”.

For now, the BBB picture looks like a mishmash of proposals aimed more at projecting an economy that is supposed to be surging ahead. People are being squeezed in the rush, with unemployment remaining above 5 percent and inflation accelerating at around 4.5 percent, the fastest in Asia.

The economic managers’ package would have been complete if the Department of Agriculture was also allowed to make a presentation at the briefing. The agency’s plans are now crucial given the sudden evaporation of the country’s rice reserve stocks, as well as disappearing fish stocks in local seas.

Rather than just letting a cacophony of excavators and cement mixers and hammers prevail, there is a need for a conductor who will be able to bring out a symphony of economic expansion that will bring real benefits to the largest number of Filipinos. People cannot eat concrete and steel.

Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.