With 2 years left in Duterte’s term, where are we on Build, Build, Build?

AT A GLANCE

• Only 56% of the flagship infrastructure projects in the government’s revised list are expected to be completed by 2022, President Rodrigo Duterte’s last year in office.
• The government counts on Build, Build, Build to fuel the Philippines’ economic recovery from the coronavirus pandemic, but it will rely on loans to fund many of the projects.
• The transportation and public works departments, which are implementing most of the projects, have been underspending. This led to the slow execution of the program.

MANILA, Philippines – Are we anywhere near the touted “golden age of infrastructure” now that 4 years of the Duterte administration have gone by?

President Rodrigo Duterte and his economic managers launched the ambitious P8.4-trillion infrastructure program in 2017 to reduce poverty, stimulate economic growth, and reduce congestion in Metro Manila. The messaging was clear: Build, Build, Build will be Duterte’s legacy.

Since then, the government has repeatedly boasted of the program’s achievements – but not without blunders. (READ: CONTEXT: Number of airports, seaports, bridges, roads in ‘Duterte legacy’ graphic)

What has the government achieved in terms of infrastructure in the past 4 years? Amid the coronavirus pandemic, can Build, Build, Build really fuel much-needed economic growth in the country?

Revised list: Only half of projects expected to be completed by 2022

It’s hard to track the actual progress of Build, Build, Build because the government revised its initial list of flagship infrastructure projects about two-and-a-half years after the program was launched.

The Duterte government initially lined up 75 big-ticket projects under Build, Build, Build. Halfway into Duterte’s administration, however, only two out of 75 projects were completed. Senate Minority Leader Franklin Drilon even called the program “a dismal failure” in 2019.

Late last year, the government revised its list of flagship infrastructure projects because some of the projects in the pipeline had various engineering and cost problems. (READ: [ANALYSIS] The pipe dream that is Build, Build, Build)

“Usually human nature, we tend to, in general, tend to be ambitious at the start, then [have] a long list of undertakings to be carried out,” said former National Economic and Development Authority (NEDA) chief Ernesto Pernia in a Rappler Talk interview in October 2019. Pernia resigned last April amid the pandemic due to “differences” in philosophy with other Cabinet officials.

The new Build, Build, Build pipeline consists of 100 infrastructure projects, but has a lower cost of P4.3 trillion. It also contains several existing projects initiated by previous administrations, such as the Tarlac-Pangasinan-La Union Expressway (TPLEX) extension, Light Rail Transit Line 1 Cavite extension (2014), Metro Rail Transit Line 7 (2004), and North Luzon Expressway-South Luzon Expressway Connector Road (2015).

With the revised list, the administration now aims to complete a little over half (56) of the projects by the time Duterte steps down in 2022. The rest of the projects (44) are targeted to be finished up until 2028 – if all goes according to plan.

This means that the fate of at least 44 projects are not guaranteed and would depend on Duterte’s successor. (READ: Duterte’s golden age of infrastructure will have to be completed by next president)

Carlo Asuncion, chief economist at Union Bank of the Philippines, said continuing a project from a previous administration is possible as long as the government has the inclination to go through the necessary bureaucratic processes. He cited the development of the TPLEX extension as an example, with the expressway first opening in 2013.

“It is something, I believe, that continues to be an implementation (largely institutional in nature) challenge, i.e., rolling out big-ticket infrastructure projects that have to go through a lot of legal and structural obstacles before actual cement is actually first poured,” Asuncion said in an email interview on July 3.

As of February 2020, 34 out of the 100 projects were being implemented, 43 were scheduled to start construction in 6 to 8 months or from August to October, 14 were at “advanced stages of government approval,” and 9 were still being studied.

NEDA’s latest update as of writing was in February 2020. (READ: LIST: Duterte’s revised lineup of Build, Build, Build projects)

Like the initial pipeline, majority of the projects in the revised list are under the Department of Transportation (DOTr) and the Department of Public Works and Highways (DPWH). Twenty-nine projects from the initial pipeline were shelved. (READ: LIST: Duterte’s new and shelved infrastructure projects)

Amid pandemic, Build, Build, Build still largely reliant on foreign aid

Duterte’s economic team has made it clear that the Build, Build, Build program is one of the pillars of the administration’s socioeconomic strategy to recover from the adverse effects of the coronavirus crisis.

In April, Finance Secretary Carlos Dominguez III said Build, Build, Build projects will continue despite the pandemic and will not be downgraded because they will “primarily fuel our bounce-back plan.”

He also said in June that Build, Build, Build will break the “vicious circle of weak supply and demand” by creating jobs that will give people cash, which in turn would allow companies and manufacturers to provide more jobs.

The government had said they were reviewing the new list again in May to assess which projects to prioritize – depending on their prospective impact on the economy. But as of writing, the list had not been updated since February – which was a month before parts of the country went into lockdown.

Still, the government has secured foreign loans amid the pandemic to fund some of the projects in the revised list.

“Such financial support from the country’s development partners like AFD (Agence Française de Développement) for our priority programs is crucial at this time when the Philippine government is embarking on its resources-intensive, 4-pillar strategy to suppress the coronavirus outbreak,” Dominguez was quoted as saying after signing two agreements with AFD for infrastructure and financial inclusion projects.

The 100 NEDA-approved projects will cost a total of P4.3 trillion to build. Almost half (49%) of the projects in the revised pipeline will still come from official development assistance (ODA), which are in the form of foreign loans and grants, like in the initial list of 75 flagship projects.

There would also be more projects (29%) to be funded by public-private partnerships in the new list, including the unsolicited ones. The remaining 22% of the projects will be funded by the national budget.

Asuncion said loans are important to stimulate the Philippine economy at this point, considering that the country’s consumption, investments, and balance of trade are all limited by the pandemic. He said Build, Build, Build could be a feasible stimulus for the economy as long as it is done with caution.

“If we get our act together, this (Build, Build, Build) government spending pump-priming the economy is really very possible, but I am also mindful of the government’s stance that the COVID-19 crisis may be a marathon rather than a sprint that it would merit a careful and slow but sure approach,” Asuncion said.

Other economic analysts, however, criticized the Duterte administration’s infrastructure push in the middle of the coronavirus crisis and questioned why much attention is being given to Build, Build, Build instead of prioritizing health-related response. (READ: [ANALYSIS] Test, Trace, Treat (not Build, Build, Build))

Policy research group IBON Foundation analyzed the government’s foreign borrowing during this period and how much of it is really dedicated to responding to the pandemic.

The group said the government secured foreign financing 25 times from March 13 to June 30 worth $9.05 billion (P449.43 billion). Only 10 of these were for COVID-19 response.

“COVID-19 is unplanned, while the Duterte administration’s focus is unchanged,” wrote Rosario Guzman, executive editor and head of IBON Foundation’s research department, in a column on June 13.

Out of the $9.05 billion, a total of $1.7 billion (P84.42 billion) was for infrastructure projects, including 3 from the 100 flagship projects under Build, Build, Build. These are the Angat Water Transmission Improvement Project, Cebu-Mactan Bridge and Coastal Road Construction Project, and the Davao City Bypass Construction Project.

“The government is still fixated on burnishing the economy’s image to attract foreign investors, and will only address the emergency by as much as it can borrow. This reinforces the country’s vicious spiral of debt and shallow economic growth,” Guzman said.

Latest statistics from the central bank showed that the Philippines’ outstanding debt jumped to P8.6 trillion in April 2020. It grew by 11.2% from January to April this year, a surge in debt levels not seen in the country since the 2008 global financial crisis.

Slow project implementation due to underspending

No matter how much money becomes available, the Build, Build, Build program still wouldn’t usher the so-called golden age of infrastructure if the budget is not properly disbursed by implementing agencies.

While spending on infrastructure and capital outlays at the national level has been steadily increasing during the Duterte administration, underspending remains an issue for the DOTr and the DPWH, the two agencies implementing most of the Build, Build, Build projects.

Audit reports from the Commission on Audit (COA) showed that both the DOTr and the DPWH recorded low disbursement rates in 2017 and 2018, the latest available figures.

In 2018, the DOTr only had a disbursement rate of 23.77%, while the DPWH recorded 39.68%. This means both agencies spent far less cash for their obligations, indicating slow implementation and delivery of projects.

In 2017, the disbursement rates of the DOTr and the DPWH reached only 26.5% and 34.14%, respectively.

COA attributed the low disbursement rates, or the agencies’ percentage of disbursements over total obligations, to the many delays or non-implementation of infrastructure projects.

As such, public works failed to drive much of construction growth in the country despite higher spending, according to economist and Rappler columnist JC Punongbayan and his colleagues Zy-za Suzara, Rupert Mangilit, Luis Abad, and Lani Villanueva.

In an analysis piece they wrote in May, the 5 authors pointed out that public works accounted for only about a quarter of total growth in the construction sector in 2017 – and even shrank by 14 percentage points in the 1st half of 2019. (READ: [ANALYSIS] Why we can’t Build, Build, Build our way out of this pandemic)

“All in all, government has failed to considerably jack up public infrastructure spending, contrary to officials’ pronouncements,” the authors said.

With only two years left in the Duterte administration and not even half of the big-ticket infrastructure projects done, the possibility of Build, Build, Build becoming Duterte’s economic legacy is looking less promising. – Rappler.com

Source: https://www.rappler.com/newsbreak/in-depth/265526-where-are-we-on-build-build-build-program