Bureaucratic ineptness undermines BBB

Passing the baton to the private sector to take the lead in bringing the Philippine government’s ambitious golden age of infrastructure to the finish line in the last remaining effective two years of the current administration’s life is a downright sneaky move.

Faced with a growing list of projects that would have to be removed from the original magic 75 circle of flagship infrastructure projects announced in 2016, the first year of President Duterte’s term, we’re now seeing a major shift in policy direction. This is not just a foul dribble move from the public sector’s hands to the private sector’s with the recent announcement that the government will now also bring to the fold infrastructure projects proposed by private firms under the public-private partnership (PPP) model.

This is also a form of number fudging and window dressing which, after the original terms of reference are conveniently set aside or modified, makes the final grade on a report card difficult to measure.

What is more unacceptable in this most recent twist to the P8.4-trillion Build Build Build (BBB) infrastructure heave-ho is the blatant disregard for what really matters, which is reforming the bureaucracy’s inefficiencies that impede infrastructure growth.

Hence, even if the government were able to rely on the original intent of sourcing official development assistance (ODA) and generating its own counterpart funds for projects, meeting start-up and on-time completion targets would remain a major challenge.

For that matter, even if PPP had not been abandoned from the start, as long as bidding and contracting practices continued to be burdened by corruption, politics, mismanagement, and neglect, while construction issues persist, project completion would continue to be an issue.

‘Root issue’

In reaction to criticisms about BBB, including that made by Senate Minority Leader Franklin Drilon who harshly referred to the program as a “dismal failure” with “exactly nine” projects only of the promised 75 started during the last three years, the government responded by increasing the list of flagship projects to 100 and effectively doubling its value to P4.2 trillion.

As can be gleaned in a recently published commentary by Fitch Solutions Macro Research, the problem lies not in the list. In particular, the research paper said that, “Despite having one of the most comprehensive PPP frameworks in the region, slow reforms to tackle root issues such as bureaucratic inefficiencies will continue to be a source of risk for investors.”

When the Commission on Audits flagged the serious issue of delays in many infrastructure projects of the Department of Public Works and Highways (DPWH) earlier this year, Secretary Mark Villar enumerated new initiatives that would curb perennial problems.

The announced interventions, unfortunately, have not translated into any forceful reforms, such that even projects initiated by the private sector through the PPP scheme continue to be plagued by delays, and consequently, cost overruns.

Shrinking development aid

The earliest stated reason of the current administration for its aversion to the PPP scheme was that ODA was cheaper. This is apparently true for some financing sources like the Asian Development Bank, Japan, and some members of the Organization for Economic Cooperation and Development.

But these development aid sources have of late been shrinking, and whether this is something temporary resulting from the prolonged global economic difficulties and the emergence of protectionism among developed nations, there is now not enough foreign money that the Philippine can tap for BBB.

Even the long-courted Chinese funding is not materializing, what with China’s growing problems arising from its stretched-out trade war with the US and recent payment defaults by countries included in its Belt and Road Initiative. Besides, Chinese loans carry a far-higher interest rate.

Guarded interest

Ironically, the private sector in the Philippines may not be as enthusiastic as it was before in participating in partnerships with the national government, especially with the constant admonishments by Duterte’s people about PPP concession agreements being lopsided against public interest.

Despite announcing that public-private partnerships will play a bigger role in BBB, the government had diligently added a parting warning that it will not tolerate provisions that have automatic rate increases, commitments of non-interference, and non-complete clauses.

Such grievances of “lopsided” provisions are a serious food for though for prospective private sector partners, more so with the growing list of companies that are finding their fingers burned.

For example, Ayala’s Manila Water and Metro Pacific’s Maynilad are being slapped with various penalties for apparently reneging on their contracts with their government contractor, the Manila Water and Sewerage System (MWSS).

There is also the case with the latest Supreme Court’s order for MWSS and its two concessionaires to pay P1.8 billion in fines for non-compliance with the Clean Water Law.

More recently, the Toll Regulatory Board attempted to compel San Miguel Corp., which operates the South Luzon Expressway, to suspend or at least refund toll charges after users complained of the stand-still traffic caused by the operator’s ongoing road expansion project.

In the above instances, the private sector companies involved decry the injustice, primarily because the government side has been remiss in complying with its side of the contracts, which is to allow them to implement the agreed rate increases during the past years, now calculated at billions of pesos lost.

In the end, the promised golden age in infrastructure is getting a fair share of gaffe from bureaucratic ineptness and bungling. No spectacular success can be expected from BBB going to the finish line unless some radical moves are adopted.

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