The current administration expects to complete 19 of its flagship infrastructure projects by June 30, and another twelve by December. There are also 35 ongoing projects, 10 of which will be completed by 2023, and another nine will start civil works in that year. Of these, twenty are currently undergoing NEDA-ICC evaluation, and five are in the process of project preparation. Read on to know how the current administration plans to fund these infrastructure projects and what is the state of affairs in the infrastructure sector.
Public-private partnership (PPP) model
One way to make the public-private partnership (PPP) model for infrastructure in the Philippines work is to look at what works best for local businesses. For example, there are some PPP projects that do not require local participation but are considered utilities. The Philippines has one of the best PPP programs in Asia. This is due in large part to the fact that the Philippines has one of the lowest FDI levels in ASEAN.
The Philippines has a relatively mature market for the PPP model compared to other developing economies. The country’s Build-Operate-Transfer Law of 2012 created a robust PPP enabling framework. Moreover, the government established the PPP Center. It is estimated that over the past six years, the Philippines has successfully executed 116 PPPs. In addition to closed PPPs, the country has 37 more in the pipeline.
Impacts of climate change on infrastructure in the Philippines
Climate change will affect the Philippines’ economy and physical assets most. It is estimated that these damages will cost six to seven percent of the country’s GDP. The Philippines already suffers from several climate-related disasters. Major weather disturbances are threatening property and infrastructure, and jeopardizing the lives of communities in high-risk areas. Because of this, the Aquino administration has committed to funding climate change mitigation projects.
Rising sea levels pose a major threat to the Philippines’ infrastructure. As a country with 45% of its urban population living in informal settlements, many of the cities have poor infrastructure that could be destroyed by a giant storm. Even minor disasters can cost millions of dollars in damage. Last year’s Tropical Storm Ketsana alone cost the country $33 million to repair. A major flood could destroy buildings and destroy entire communities.
Challenges of implementing PPPs in the Philippines
While the Philippines has performed well on infrastructure projects over the last few years, a large amount of capital is needed to ensure that these projects remain sustainable. While various reforms have been introduced to address the shortage of infrastructure, more reforms are needed to strengthen the fiscal space, improve the regulatory environment, and facilitate public-private partnerships. In addition, policy coordination and reforms are needed to address bottlenecks in infrastructure, such as inadequate financing.
One way to improve the effectiveness of public-private dialogues is by institutionalizing the processes of conducting them. There should be a secretariat and regular cadence for these dialogues. Establishing regular monthly dialogues will be more effective than the current approach. The government should also establish clear lines of responsibility and give specialized organizations executive authority to perform PPP functions. The Philippines’ experience with T3 shows that regular dialogues between government agencies and private companies are more efficient than the current approach.
Impacts of under-investment in infrastructure in the Philippines
Under-investment in infrastructure has led to the development of many unsustainable systems, including water supply, sewage systems, and transportation systems. This has adverse effects on the economy, including the quality of life of the poor. A recent ASCE report highlights this issue. It also shows that a regulatory mandate on private-sector actors will reduce investment in infrastructure by about 20 percent. Such regulatory mandates will negatively impact employment in other sectors of the economy.
The impact of government reforms and economic growth is analyzed using a lagged model that incorporates both qualitative and quantitative data. It also uses an auto-regressive distributed lagged model to explore possible time intervals for the impact of various variables. It uses a narrative to illustrate the historical development and theoretical foundations of the model. Its findings provide valuable evidence on the impact of under-investment in infrastructure on economic growth in the Philippines.
