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ADB Economists back PPP scheme for infra development

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ADB Economists back PPP scheme for infra development

/ 05:09 AM July 18, 2017

Tapping the expertise of the private sector would augur well to the Duterte administration’s plan to ramp up infrastructure development, according to a working paper published by the Manila-based multilateral lender Asian Development Bank.

The paper “Scaling Up Infrastructure Investment in the Philippines: Role of Public-Private Partnership and Issues” authored by economists Stephen Schuster, Joven Balbosa, Christine Tang, Takuji Komatsuzaki and Shanaka J. Peiris noted that the Philippine public sector had underinvested in infrastructure for decades such that its public capital stock at 35 percent of gross domestic product (GDP) was less than half of the average of member states in the Association of Southeast Asian Nations and one of the lowest compared with its peers in the region.

As such, the sorry state of infrastructure in the country has been deterring investors. “Poor infrastructure has also been consistently identified as one of the top three ‘most problematic factors’ in doing business in the Philippines with high attendant economic costs arising from ‘insufficient capacity relative to demand, poor connectivity, and low quality’,” the paper noted.

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The economists highlighted the need to ramp up infrastructure investment to enhance competitiveness, raise productivity and sustain the government’s targeted 7-8 percent economic growth rate over the medium term.

Acknowledging the Duterte administration’s ambitious infrastructure plans, which the government had said would be mainly financed by the national budget, the paper nonetheless pointed out that “public investment infrastructure has remained relatively low in the Philippines recently despite the improved public finances due to weak links between planning and budgeting and slow budget execution.”

Most of the funding for the infrastructure program is expected to come from government (P4.4 trillion) with the private sector expected to fund close to P2 trillion or 27 percent of the program. “Progress on improving medium-term investment planning and budgeting and weak budget execution has been limited and could be further strengthened, the report said.

The economists said the size of the infrastructure need required the expansion of both budget spending and public-private partnerships (PPP). —BEN O. DE VERA

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TAGS: Asian development bank, Business
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