Challenges to new infra projects | Inquirer Business
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Challenges to new infra projects

The Duterte administration’s “Build, Build, Build” infrastructure program had drawn varying comments from the principal presidential candidates in the May 9 elections.

For labor leader Leody de Guzman, the program has some beneficial effects but it had resulted in trillions of pesos in national debt and, as a result, the government had been unable to set aside sufficient resources to address serious economic and social problems.

Sen. Panfilo Lacson is amenable to completing some projects but only through public-private partnership (PPP) arrangements.


Former Sen. Ferdinand Marcos Jr. not only wants to continue the program, he wants to expand and improve it.


Manila Mayor Isko Moreno had the same view as Marcos and vowed, if elected, to do it faster and increase its coverage.

Sen. Manny Pacquiao promised to continue the program with Mindanao as its focus to help reduce poverty in that region.

Vice President Leni Robredo is okay with completing the infrastructure plans on condition that PPP arrangements be used for that purpose rather than overseas development assistance (ODA) loans.

In light of the candidates’ statements (except for De Guzman’s), there is reasonable certainty that many of the infrastructure projects of the Duterte administration that had already been started or are covered by signed contracts would be completed by the incoming president.

That task would, in a way, be made easier to accomplish with the recently enacted law that allows 100-percent foreign ownership in businesses that relate to the operation of telecommunications, expressways, airports and shipping.

The liberalization of ownership in expressways and airports may be considered a favorable factor since bulk of the unfinished projects are infrastructural in character.


But considering the P12.3-trillion national debt, funding the infrastructure projects through taxes or internal revenues would be a major challenge to the government. Other equally important public services, e.g., education and social welfare, are entitled to financial support too.

Under these conditions, the incoming administration may have to rely primarily on PPPs to meet the funding requirements of those projects.

Availing of ODA loans or other forms of foreign borrowing to raise the needed funds would only put the country into a deeper financial hole and make the economic recovery a Herculean task.

But there is a limit to the financial capacity of local businesses to engage in PPPs for multibillion-peso public works projects.

They can only draw so much from their own resources or borrow from local banks for that purpose. Their only recourse may be to look for foreign investors they can partner with for those projects.

Although the welcome mat has been placed for foreign investors, there is no assurance they would find any such partnership invitation worthy of serious consideration.

At the top of their head would be the question of whether any contracts they enter into with the government in partnership with a local company would be honored in their letter and spirit by the government.

And that the government would not for some populist or political reasons change the rules of the game at midstream or, worse, abruptly terminate the contracts.

These incidents had happened several times in the past and so foreign investors cannot be faulted if they have not put the Philippines at the top of their list for investment purposes.

Note that in the competition for foreign investors, our neighboring countries have gained a lot of headway because, among others, their bureaucracy are more efficient and they have given them sweeteners, e.g., tax and corporate privileges, that encourage them to stay longer and invest more.

Given these conditions, the incoming administration has to look for an effective way to remove the obstacles that presently deter the entry of more foreign investments if it wants them to be one of the engines of economic growth in the country. INQ

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TAGS: Business, Infrastructure

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