Infrastructure, innovation, information for inclusive national growth
First, I would like to state that all three I’s (Infrastructure, Innovation, Information) are considered co-enablers to achieve the country’s transformation by means of sustainable growth that is inclusive.
These are part of the eight key factors for competitiveness which were targeted for improvement in 2007 when the National Competitiveness Council (NCC) was formed.
Shown on the NCC organogram are the champions of each Policy Improvement Project (PIP).
Considerable improvements have been made in some of these factors over the years but we remain behind our neighbors in the Association of Southeast Asian Nations in the three I’s.
This is probably the cause of our non-inclusive growth.
The Medium Term Philippine Development Plan or PDP (2011-2016) is very clear on the need for infrastructure development to support the performance of the country’s economic sectors; inadequate infrastructure in both quantity and quality is the result of low investment resources by both the public and the private sectors.
The PDP talked about the usual areas of concern: Transport and logistics, flood control, communication, energy, water and food.
The last three terms have become more prominent because of climate change.
In the coming decades, population growth and urbanization will continue to heighten demand for energy and this will result in greater environmental stress. Bridging this growing gap will demand appropriate infrastructure designed creatively and coordinated efforts of informed stakeholders to moderate demand and to accelerate supply.
In infrastructure, we are ranked 6th out of 8 Asean countries (excluding Laos and Burma). With a country rating of 2.8 and the Asean region rating of 4.2, we have a lot of catching up to do to beat Cambodia and challenge Brunei.
In terms of global innovation index, the Philippines is likewise poorly placed as 7th out of 8 Asean countries—or 90th out of 144 countries in the world.
This is reflected by the low number of patent applications where we are at the bottom of the league.
At this point, I would like to propose that instead of tackling the wide range of horrendous problems caused by poor infrastructure, such as the truck ban in Manila and perennial flooding, let us take one step back and look at the bigger picture.
The private sector has the pragmatism to realize that many demands for infrastructure require huge financing, which is always in short supply.
This imbalance between requirements and capabilities mandates us to follow the Pareto 80/20 Rule in the decision-tree planning process and use limited resources to tackle the country’s most immediate needs.
Infrastructure projects account for a big portion of country’s Gross Domestic Product at the expense of other services, such as social safety nets. These must therefore be well selected and well spent.
The doctrine structure follows strategy is often used by management gurus such as Peter Drucker, and Michael Porter when they talk about appropriate structure in corporate organizations.
These experts know that the success of any company depends on the choice of organization structure that best meets the needs of the business strategy.
Define your strategy first, they say, before we talk about appropriate organization structure. The same approach should be observed in infrastructure development in pursuit of inclusive growth.
The country’s infrastructure priorities are well-defined in the Philippine Development Plan.
Strategic approach
China’s impressive development in the past 30 years is attributed to a series of five-year plans which defined each period’s desired economic outcome and the rank-ordering of infrastructure projects to achieve them.
The Philippines, through Neda’s PDP, can make the five-year strategies as the common template to coordinate links for sustainable progress.
It is expected that some local leaders will still pursue their own “vanity projects” to build up their image but this is where the private sector, through the NCC, can help the Cabinet Economic Cluster to stay the course of national strategic growth.
The Asian Development Bank in its report “Taking the Right Road” identified the government’s infrastructure policy as coming in two stages.
I – Improvement of the “climate” to generate broad-based satisfaction from business and public sector. These involve “horizontal interventions.” The first stage is where there is heightened interest in our country but fixed investments remain low.
II -Provision of efficiency for targeted products, including agri/industries and service sectors to realize their potentials. “Vertical interventions”—otherwise known as the “tailwinds”—are provided.
PIDS’ “Report on Enhancing Competitiveness and Empowering Business” highlighted the message.
We have successfully moved up Stage I of our strategy, with investors (both domestic and foreign) looking at the country’s prospect with greater respect, as the global ratings are up at “investment grade” with respectable growth and with greater ease of doing business.
We are now entering the second stage where the country will be generating more jobs and livelihood, as our world-class services and products succeed in a realm of bigger and freer markets. The private sector is expected to share the responsibility as full-partners of government in governance and investments.
Once policymakers recognize the need for targeted interventions, they would have started the transformation towards a narrow income-gap and improved social climate in the country.
The provision of sector specific infrastructure will strengthen 15 sectors to realize their world potential, filling the “employment gap” of 15 million.
This strategic approach is actually spelled out in the Constitution under Article XII, which says “the State shall promote industrialization and full employment based on sound agricultural development, etc. through industries that make full and efficient use of human and natural resources which are competitive in both domestic and foreign markets.”
Productivity of facilities
Meantime, what can we do with the sorry state of our existing infrastructure?
Without throwing tons of money behind it, much can be achieved by being more creative in improving productivity, with the application of technology and science approach.
Let me cite three examples:
- Take the case of roads and bridges. It is known that at a speed of 60 kilometers an hour, one lane has a throughput potential of 50 vehicles a minute. Or a three-lane highway will have a capacity of 150 vehicles a minute.
Of course, this ideal situation is seldom achieved because public vehicles use the outer lane as their loading/discharge stations; certain private vehicles hog two lanes as they become impatient, vehicles stall on the road, etc.
The productivity of the three-lane highway is thus limited to only 50 percent.
- Take the case of ports (airports and seaports). There is no doubt that a shortage of capacity looms, so the NCC had a working group of experts study this problem.
The situation has deteriorated from five years ago, when construction was completed on the Batangas Port and the Subic Port but so far, capacity utilization in Batangas has been a measly 2 percent while Subic port is at 5.6 percent.
We borrowed $240 million for the construction of these ports and another P4 billion for ancillary projects (such as the Star and SCTEx highways) for easy access to the ports. These shortfalls were allegedly due to self-inflicted difficulties that need to be resolved soonest. Leading practitioners on logistics, supply chain management and shippers sat down with the NCC to determine how full capacity can be reached as soon as possible.
The NCC team on infrastructure (championed by Engr. Ito Carlos, Dr. Toto Estuar, Prof. Henry Basilio) submitted three initiatives that will increase capacities without mega-spending.
The first is the introduction of the Ro-Ro concept linking regions with minimal capital expenditure and bureaucracy. This is now adopted by the Asean Masterplan for Connectivity upon our proposal.
The second is the proposed Seamless Logistics Infrastructure Multimodal Network, which maximizes productivity of the Subic-Clark-Batangas Corridor with Manila as core. Since these regions account for half of the country’s output, the proposed network will significantly improve the country’s economy. During the course of the experts’ studies, they discovered that every office had its own Masterplan, so they integrated all these plans into one.
Their third proposal was for Naia 3, which was likewise poorly utilized. The PIP champions proposed technology inputs for e-procurement, for project execution and measurement to 100 percent utilization. In the terminal proper, the processes in the flow of passengers and baggage were to be simplified with the use of Operation Research principles. If these upgrades in productivity are reached, these may reduce the need to invest $10 billion in a new mega airport. The upgrades will certainly reduce the ordeal on passengers and this will help tourism promotion considerably.
- Take the case of flood control. Almost all our efforts are concerned with the design and construction of the hardware, such as gates, pumps, channels, etc. to achieve fast flow of water to catchment basins and eventually to the sea.
No one seems to take into account the human factor, such as the complete indifference of public officials to people’s plight.
For instance, the main cause of the submersion of the once prosperous towns of Malabon, Navotas and Obando was man-made; the filling up of Dagat-Dagatan, a natural catch basin for the waters coming from the elevated neighboring towns, by former First Lady Imelda Romualdez Marcos.
The big area was to be converted into a housing project for the poor, her “vanity project” which she presented to the United Nations. Despite warnings from some professional engineers, such as Engineer Angel Lazaro and myself, about the disastrous consequences of such a project, the governor of MMC had her way.
Dagat-Dagatan today is mostly occupied by warehouses and commercial establishments—no housing for the poor. Perhaps the science and technology leaders at that time should have made their objections more strongly.
In Holland, a country below sea level has elevated flood control management to an art. They have the best equipment for handling different flood situations, but they also have in place an organization of independent water control boards. These are local government bodies responsible for maintaining the channels, pumps, pipelines, etc., free from rubbish. The “dyke meisters” are highly respected persons in the communities, who are chosen from those who benefit the most from the dikes protection. Maybe we should invite a “dyke meister” to help make our program work?
Human dimension
Much has been said about the challenges facing us due to increasing urbanization of towns and cities, made more difficult by increasing population.
But why is this crisis not considered critical in other equally dense urban populations such as Japan, China, Singapore, Hong Kong?
Some anthropologists say that in those countries, people show that they can live well in crowded communities by sharing facilities with others. They drive their cars following strictly the traffic rules; they live in small domiciles with facilities shared with neighbors. They are conscious that noise they create or the rubbish they generate may cause discomfort to others, hence they follow regulations faithfully.
The British Trade Group in its Financial Times article stated that it is creativity that really matters, doing more for less, doing more with less. It improves productivity, driving advocacy, inspiring people to create things, create ideas, and create both continuously. Filipinos are very creative people and can improve productivity of infrastructure under the right conditions.
In July, at the Philippine Quality Award Forum with DTI, the winning organizations both private and public, shared some of their best practices which yielded performance excellence.
They have common strengths —dynamic and creative people which gave them the upper hand in any service or marketing efforts locally, regionally and globally. With the application of total quality principles and with leadership that brings out the best in people, productivity rises without waiting for high capital budgets for infrastructure.
We felt that we were in the company of some of the country’s most innovative people, based on expertise, on information sharing and group dynamics.
Some of the past winners are National Grid Corp., Unilab, Mariwasa (Siam) Ceramics, Thompson Reuters and DOST Region X1.
(The author is chair of the MAP national competitiveness committee and chair of CIBI Information Inc. This article was lifted from the author’s keynote speech at the recent Annual Scientific Meeting National Academy of Science & Technology. He previously served as Secretary of DTI. Feedback at <[email protected]> and <[email protected] >. For previous articles, please visit <map.org.ph>)
