Building a new Philippines: How to tackle Duterte’s $27.18 billion problem?

President Rodrigo Duterte’s government is kickstarting long overdue investment in infrastructure but must update dusty bureaucratic processes or he risks making the same old mistakes.

By Oliver Ward

Manila loses $54.35 million USD a day, around $27.18 billion a year, or 11% of total GDP thanks to congestion says a recent Japan International Cooperation Agency (JICA) study. Any resident or visitor knows that Duterte’s country suffers from years of underinvestment, leaving gaps in the road network connecting ports and airports. The day to day reality of this is long travel times, congestion on major roads, pollution, poor access to public services and utilities and a lack of productivity and efficiency.

But things will change, say the new leadership. Department of Finance Secretary for the Philippines, Carlos Dominguez III told the Tokyo business community at the end of last month that now is a “fine time” to invest in the Philippines. The announcement coincides with President Duterte’s visit to Japan after the announcement of his ten-point economic programme aimed at stabilising the country’s economy and achieving higher growth.

Under the plan, Duterte promises money for infrastructure and human capital, funded by reform of the taxation system. On his wishlist are big-ticket projects like a new international airport terminal building, improved roads and bridges, new mass urban public transport and alternative green solutions to combat pollution. For Dominguez, these investments will lead to a regionalised economy with a multitude of opportunities for foreign investors.

His view on the problem is good; traffic congestion currently plagues the capital and swathes of the countryside remain inaccessible. But the reality is that before infrastructure growth is achieved, sweeping bureaucratic reforms are needed. Duterte is working with the same bureaucracy as the previous government. Why would he succeed where the previous administration failed?

What makes this time different?

One of the big issues in the past efforts was procurement law. In 2010, obtaining construction materials required no less than twenty accompanying signatures and twenty different documents. This has since been streamlined and now only five signatures and pieces of paper are needed.

Former Budget Secretary, Butch Abad, complained about a “technical deficit.” The projects were there in proposal form, he said, but the government was technically unable to carry out the projects due to slow decision-making and extensive studies being conducted before any action is taken.

To overcome this the current Budget Secretary, Ben Diokno, is proposing to roll out these projects on a Public-Private Partnership (PPP) basis. He argues it would alleviate the strain on the public purse and also remove the need for ministers to deliberate extensively and get “shovels in the ground” much quicker.

Passenger problems

While, in theory, this sounds like an improvement, the example of the proposed airport expansion shows the PPP process is vulnerable to the same bureaucratic pitfalls as previous, government-funded projects. Extensive studies have been carried out about what to do as it has been clear for some time that the current capabilities of Ninoy Aquino are not sufficient. It reached its passenger capacity some years ago, and congestion and serious delays are a mounting problem for passengers.

Therefore, the decision has been made to construct a new one. But when you look closer, there are issues. First, there is no agreement on location; discussion is currently between sites at Sangley Point, Bulacan or Clark. Second, even once this hurdle is cleared it will take five or ten years to construct the airport but no developer has even been selected. While the transportation department is set to bid the project out to several conglomerates with foreign backers that have already shown an interest these parties are waiting for the terms of the project and a schedule of the bidding. Essentially, although decisions need to be made now as airport congestion is already a serious problem, there is still a hold-up as bidding regulations are agreed, drawn up and finalised.

The airport is just one of the 13 PPP projects that Duterte’s government has announced, and it plans to roll out 17 more by the end of 2017. While increased investment in infrastructure is long overdue, skeptics will continue to reserve judgement until the bureaucratic ghosts of the former administration can be put to rest and stop mitigating the progress of future projects.