Can they deliver soon enough?
Let me say at the outset that the administration’s economic team is composed of highly competent people with their hearts in the right place. But they may have promised more than they can quickly deliver.
From TRAIN to Build Build Build, it is starting to look like they may have overestimated the power of Mr. Duterte’s charm to get members of Congress and the usually lackadaisical bureaucracy to cooperate. The economic team also made some unforced errors like junking PPP in favor of budget financing and ODA.
Indeed, even a ready to bid project like the bundled modernization of five domestic airports was given up for no good reason. When I last asked for the status, I was told they are preparing feasibility studies for each airport with at least a year’s delay. Sayang. The private sector bidders have already done their feasibility study at their expense, only to be told the project is no more.
They will likely exert all the political pressure they can muster to get the Senate to junk the TRAIN bill that came out of the ways and means committee of Sen. Sonny Angara. Still, a friend of mine who had closely followed the tax reform measure, even advocated strongly for it, isn’t sure it is possible to deliver what they first thought was possible.
In a comment to one of my Facebook posts, he remarked: “even if we get a good TRAIN, the additional revenue will not be enough to cover infra at least for the short term. The good TRAIN can fetch P130 billion. But consider the following expenses: free college education, P40 billion; Marawi rehab, P50 billion; social protection including the cash transfer, P36 billion; PUV modernization, P9.7 billion.
“Wala pa diyan ang universal health care, costing P65 billion annually for the medium term. That’s why the sin tax is necessary. Then we have to contend with the salary hikes for military and police and other populist measures like free irrigation. PPP is, thus, an option in areas where private sector is willing to invest.”
I guess the economic managers, notably Ben Diokno, were too sanguine about the ability of the bureaucracy to absorb all that money to carry out an ambitious infra program. Ben did not give much thought to the observation of his predecessor, Butch Abad, about the problem of technical deficit which slowed down rollout of projects in the past.
The Duterte economic team inherited pretty much the same bureaucrats and this is where their problems of execution are now starting to happen. In a PPP, the onus for the preparation of a feasibility study, including the cost, is on the private sector proponent. In the scheme the Duterte team selected, the onus is on that same bureaucracy with a technical deficit.
So we have been reading headlines and news stories of trillions of dollars in ODA from China and Japan to fund those projects in their list. The thing is, before the money starts flowing that would allow construction work to start, our government must present feasibility studies.
The only project with such a study now is the Tutuban to Malolos railway line because it was a leftover project from P-Noy’s time. PNoy asked JICA to take over from the Chinese. But even here, JICA had to revise the FS to comply with the insistence of DOTr Sec. Art Tugade to use standard gauge rails rather than narrow gauge.
The JICA guys, however, insisted on demolishing the two kilometers of posts installed by the Chinese despite Tugade’s insistence to build on it. The Japanese engineers do not want to take responsibility for faulty Chinese construction or possible substandard cement or steel used. But that project should be a “go.”
Completing the line from Malolos to Clark is another thing altogether. It needs its own FS and even now, someone at NHA should work to move residents out of the PNR right of way. I don’t think that’s being done.
I think the ADB noticed the problems of the economic team, notably DOTr and DPWH, in preparing the studies that would enable JICA to start releasing funds and get the construction of the projects going.
The facility will supply comprehensive assistance, from feasibility studies at the initial stage of project development, up to the bidding process.
“I am pleased to announce that ADB is preparing a TA (technical assistance) loan of $100 million, the Infrastructure Preparation and Innovation Facility, or IPIF. This TA loan will provide expertise and knowledge to key line agencies such as the Department of Public Works and Highways and the Department of Transportation,” ADB president Takehiko Nakao said in a speech.
“It will help the development and preparation of projects, covering project feasibility studies, design, and procurement. This facility will fasttrack priority projects and move them forward for delivery under this administration,” he added.
Because the ADB works in close consultation with Japan, its principal shareholder, it politely expressed its official impatience on the slow movement of the infra projects. So ADB gathered a team of experts in a two-day Philippine Transport Forum 2017 to discuss how they can help to get going a project pipeline of about P8 trillion through 2022.
ADB president Nakao expressed Japan’s impatience in no uncertain terms. “We need to act, we need to show results instead of just talking beautifully,” Nakao said, urging all stakeholders to move beyond plans. My words exactly!
To help things along, ADB is giving our government a $100-million technical assistance loan to help DOTr and DPWH to produce appropriate project studies. He said the ADB would provide advisory services for a variety of projects, including the North-South Railway project in Luzon and the Clark Green City project in Pampanga.
What about China? An article in Asia Times written in Davao by a local correspondent wondered if China is withholding funds from Duterte. A lot of promises have been made, but nothing is moving on the ground.
“It remains unclear why Beijing has tarried in making actual outlays while other One Belt, One Road initiatives are steaming ahead in other Asian countries,” the Asia Times article wondered. “Some analysts suggest Beijing may be withholding the funds until the bilateral relationship is more firmly consolidated, including in regard to unresolved territorial disputes in the South China Sea.”
The same article pointed out that five big ticket projects for Davao City were presented to China’s Vice Premier Wang Yang in his recent Davao visit.
“The projects include the Davao City expressway project spanning 23.3 kilometers at a cost of P24.5 billion ($477 million), the Davao City coastal road project worth P15 billion ($292 million), the Davao coastline and port development project for P39 billion ($759 million), the P445.3 billion ($8.7 billion) Mindanao Railway Project, and the development, operations and maintenance of the Davao City airport for P40.57 billion ($790 million).
“They are also pushing for China to prioritize the long sought-after Mindanao Railway Project which will connect Davao City with other key areas in the southern Philippines spanning a circumferential length of 830 kilometers and another 702 kilometers of spur lines for other areas.
The first phase, involving the Tagum-Davao-Digos segment costing P37.29 billion ($726 million), has already been approved by NEDA’s board and is targeted to start construction in 2018 and finish in 2022.”
The Davaoenos also hope China will give priority funding to the Davao City coastal road project, whose acquisition of the right-of-way component has already started. “The development of sustainable and improved infrastructure facilities and services shall support Davao region’s growing economy, expanding population and rapid urbanization,” the local NEDA official told Asia Times.
They are banking on Duterte’s declaration that the Philippines and China were now “besties,” or the best of friends. “But for the presidential hometown of Davao City that closer relationship has yet to build a single Chinese-funded pillar, road or railway.”
Davao City’s International Airport was part of the bundle that private bidders were prepared to work on until Tugade changed government’s strategy. Will the Duterte economic team have enough humility to say they have miscalculated and that maybe, PPP is the way to go?