The Philippines’ Economic and Infrastructure Investments Growth

The Philippine economy has done very well in the past few years, ranking among the best performers in Asia in recent years, says the IMF article, “The Philippines: A Good Time to Expand the Infrastructure Push.”

The country’s economy has grown an average of 6.3% annually over the last decades due to structural economic reforms and sound macroeconomics policies.

But factors like high poverty levels, wealth inequities, the archipelagic nature of its geography, and insufficient and outdated infrastructure remain significant economic growth barriers.

To address the problem, the Philippines has increased spending on its infrastructure from an average of 3% of GDP in the previous decade, increasing to more than 5% in 2018, to reach over 6% in 2022. 

Launched in 2017 under President Duterte’s leadership, the Build, Build, Build program is the centerpiece economic program of its administration.

The program aims to spend between Php 8 to 9 trillion ($180 billion) to address the country’s massive infrastructure gap, focusing on roads, bridges, air and seaports, and other large-scale infrastructure projects in recent years.

The IMF article mentions that “When completed, these projects are expected to bring important benefits to the Philippine economy and the lives of ordinary citizens. Better transportation and internet services, for example, would help farmers bring their produce, such as bananas and mangos, to markets and raise the income of the rural population. More generally, improvements in the quality of infrastructure services will help cut the cost of doing business, attract more investment, and enhance productivity around the country.”

IMF notes that infrastructure investments in education and healthcare will benefit the students, the sick, and the elderly. Upgrades in public information technology infrastructure will improve efficiency and transparency in public transactions that could curb corruption in the country.

According to the article, investment in resilient infrastructures, efficient irrigation systems, and better water management can help reduce the impacts of climate change and boost agriculture production that could lift people from poverty.

But achieving all these will require that spending on infrastructure is managed well.

An IMF Public Investment Management Assessment finds that the Philippines has a 23% efficiency gap compared to its peers.

The article notes that closing the gap will entail improving appraisals, greater involvement with the public, more private-sector participation, strengthening procurement through greater competition and transparency, and allowing foreign participation in domestic, among others, will help manage cost and ease domestic constraints and reduce corruption.

Other solutions that can boost the infrastructure improvements in the country include the following: lowering obstacles to foreign investment, implementing the ease-of-doing-business law to reduce red tape and increase transparency and accountability of regulatory agencies, and lastly, tax reform that will increase revenue collection.

Update on the Build Build Build program.

With only a few weeks left before President Duterte steps down, the GMA news reports the status of the administration’s landmark projects.

According to GMA, of the 119 infrastructure flagship projects, only 12 were completed representing 1.4% of the total project’s costs.

“Three largest projects completed in cost include the MRT-3 Rehabilitation Project at P21.966 billion, the New Clark City Phase 1 at P18 billion, and the Clark International Airport Expansion project at P14.972 billion”, the article says.

Public Works Undersecretary Emil Sadain expressed that despite the small percentage of completed projects, the BBB has successfully brought in infrastructure spending growth in the Philippines, reaching 5.9% of its GDP. Sadain notes that it is now up to the next administration to continue the BBB program.

“The Golden Age of Infrastructure does not stop with this administration. It goes beyond the succeeding administrations — if we want to ensure there will be a closure in the infrastructure gap comparatively with neighboring countries,” the article quoted Sadain.

Better infrastructure and connectivity are crucial in attaining inclusive growth in the Philippines. Improving the infrastructure across all sectors – energy, water and sanitation, transport, ICT, and social (health and education) will ensure fast economic growth, enhance the standard of living, open opportunities, and alleviate poverty.

A study “Philippine Infrastructure and Connectivity: Challenges and Reforms” says that achieving this will require various reforms such as improving fiscal space, reforming budgetary processes, improving public-private partnerships (PPPs) and the regulatory environment, and better policy coordination to address problems of connectivity and infrastructure.

According to the study, the Philippines must also “continuously improve the governance framework, ensure stability and predictability of policies and regulations. Better coordination among a diverse set of governmental infrastructure bodies and between government and the private sector is needed to address infrastructure bottlenecks.”

The ongoing infrastructure investment in the Philippines marks an exciting phase of the country’s development. It provides multiple opportunities for the continuous improvement of investment analysis, physical construction, and long-term infrastructure management.