Government spending for infrastructure surged in the year to August, with officials reiterating the commitment to help the Philippines catch up with its neighbors in terms of quality of roads, bridges, irrigation systems and national highways.
The Department of Budget and Management reported Tuesday that disbursement for capital outlays and infrastructure hit P169.6 billion in January to August, up by 38.5 percent from that in the same period last year.
“Consistent improvements in our infrastructure and capital outlay disbursements are proof of the Aquino administration’s commitment to further expand the economy through strategic infrastructure investments,” Budget Secretary Florencio Abad said in a statement.
The amount spent so far in the year for infrastructure and capital outlays was used not only for road repairs and rehabilitation, but also for irrigation projects administered by the National Irrigation Administration (NIA).
But despite the increased spending, public infrastructure spending was estimated to be equivalent to just 2.5 percent of the country’s gross domestic product.
This is way below the average of 5 percent for Southeast Asia.
The low infrastructure spending-to-GDP ratio in the Philippines is partly blamed for the country’s difficulty in competing against its neighbors for foreign direct investments.
The estimated $2 billion in FDIs that went to the Philippines last year, for instance, was 10 times smaller than the over $20 billion in investments cornered by Indonesia.
The World Bank and the Asian Development Bank, two of the biggest foreign lenders to the Philippines, said the country needed to increase spending for public infrastructure to at least 5 percent of GDP to better compete for FDIs.
The Aquino administration has accepted the challenge and aims to hit the 5-percent ratio by the time its term ends in 2016.
“We are looking at speeding up our spending momentum for infrastructure and other key expenditures, in line with our goal of pushing infrastructure spending to 5 percent of GDP by 2016,” Abad said.
On a similar note, economist Felipe Medalla said the government was bent on hitting the 5-percent target regardless of whether tax collection rises as targeted.
Medalla, who represents the Bangko Sentral ng Pilipinas in the interagency Development Budget Coordination Committee (DBCC), said in a forum on Tuesday that deficit spending for infrastructure should not harm the economy because it positively impacts on investments.
Higher investments, in turn, should help increase overall income of the economy.
“Infrastructure spending should double relative to the size of the economy within the term of the Aquino administration. This is a plan agreed upon by the DBCC regardless of what happens to tax collection by the BIR [Bureau of Internal Revenue],” Medalla said.