‘Build, Build, Build’ pro­gram has faulty un­der­ly­ing as­sump­tions

Manila Bulletin - - Views • Features - By EDGARDO J. ANGARA FOR­MER SEN­A­TOR Email: angara.ed@gmail.com| Face­book & Twit­ter: @edan­gara

THE Duterte ad­min­is­tra­tion is ush­er­ing in a “Golden Age of In­fra­struc­ture” with its “Build, Build, Build” pro­gram. The avowed goal is to fast-track in­fra­struc­ture spend­ing of P8.4 tril­lion. This will raise the ra­tio of in­fra­struc­ture spend­ing to GDP from 5.4 per­cent in 2017 to 7.4 per­cent in 2022. This is nearly on par with in­ter­na­tional stan­dards.

The pro­posed 2018 bud­get al­lo­cates P1.097 tril­lion, nearly 30 per­cent over the 2017 al­lot­ment. This huge amount for 2018 will fund var­i­ous road and high­way net­works, rail­ways, air­ports, and sea­ports.

The “Build, Build, Build” pro­gram is clearly a wel­come in­ter­ven­tion to cor­rect decades of ne­glect. It def­i­nitely, if ac­com­plished, will make the Philip­pines more com­pet­i­tive. Sev­eral is­sues and chal­lenges, how­ever, loom ahead.

First, the ob­vi­ous is­sue of lack of ca­pac­ity of our con­struc­tion in­dus­try. Such un­der­ca­pac­ity is shown by the per­sis­tent in­fra­struc­ture un­der­spend­ing of P355 bil­lion a year from 2011 and 2016 be­tween 2011 and 2016. Of course, un­der­spend­ing may not be solely due to in­ca­pac­ity of con­trac­tors. It may also be due to red tape, right-of-way ques­tions, or weather.

The huge doubts as­sail­ing the lack of ca­pac­ity is be­cause the in­fra­struc­ture projects un­der the “Build, Build, Build” pro­gram in­volve large num­ber of man­power, both skilled, tech­ni­cal, and com­mon la­bor. But even now, just lis­ten­ing to real es­tate de­vel­op­ers and con­struc­tion firms, they are hard-put look­ing for skilled work­ers, elec­tri­cians, welders, and plumber — and even more dif­fi­cult to re­cruit fore­men, mid-level man­agers, and su­per­vi­sors.

Ex­plain­ing largely the cur­rent lack of man­power, the coun­try’s la­bor force par­tic­i­pa­tion rate (LFPR) has been fall­ing to such de­gree that in the past five years, only 415,000 peo­ple have en­tered the la­bor force ev­ery year. True, there are over 15 mil­lion and un­der­em­ployed Filipinos of work­ing age. But they do not pos­sess the nec­es­sary skills or train­ing for these mas­sive public works projects.

The sec­ond ma­jor is­sue is the sourc­ing of funds for the “Build, Build, Build” pro­gram. It ap­pears that the ma­jor fund­ing source is through taxes. For in­stance, the TRAIN (Tax Re­form for Ac­cel­er­a­tion and In­clu­sion) ex­pects to raise the bulk of the rev­enues to sup­port the in­fra­struc­ture fund­ing.

It seems to me that sourc­ing the bulk of funds to fi­nance this gar­gan­tuan in­fra­struc­ture pro­gram from taxes does not make sense at all. It should be sourced prin­ci­pally from Of­fi­cial De­vel­op­ment As­sis­tance (ODA), from the pri­vate sec­tor through PPP, and bor­row­ings, es­pe­cially for in­come-en­hanc­ing public works. Re­ly­ing mainly on taxes is not only bad eco­nomics but also psy­chol­ogy.

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