Infrastructure follows strategy

The doctrine “infrastructure follows strategy” is often used by management gurus such as Peter Drucker, Lester Thurow and Michael Porter when they talk about the appropriate structure in corporate organizations.

These experts know that the performance of any organization depends on the choice of the organization structure that best meets the needs of the business strategy. Should the structure be functional? matrix-type? decentralized? tightly-controlled? Should it be tall and narrow? flat and broad?

Define your strategy first, they will say, and let us know your resources/weaknesses before we talk organization structure. The same principle should be used when one talks about infrastructure development in pursuit of a country’s development.

There is no question that infrastructure is essential for economic growth and social wellbeing. Roads and bridges are needed to get products to the ports, people to move around, tourists to access the sights, etc. Power plants and transmission lines are needed to energize the factories and service centers, and to light up the communities. Water dams are needed for our domestic and agriculture needs, and for renewable power generation. Gateways to the world in terms of airports, seaports and even Ro-Ro harbors are important not only for trade but also for our people who are more mobile than others, and for visitors who need to be attracted to the Philippines.

Fully functional

Unfortunately, despite the capacity shortage in our present ports, two of our new gateways (Batangas port and Naia 3) which were built to address this bottleneck, are still not fully functional due to hurdles placed by minor functionaries.

Infrastructure priority is not about the fastest trains, grand skyways, or the tallest towers. It is not about vanity landmarks like the United Kingdom’s Crystal Palace (which flopped) or the Palm Tree Islands reclaimed from the sea in wealthy Dubai.

It is about what you see when you look down on the ground from the skyscrapers; the loneliness of the poor living on the sidewalks and shanty colonies around. Infrastructure development (which includes maintenance upkeep) accounts for a big portion of a country’s gross domestic product, at the expense of other services, such as social safety nets.

It is, therefore, important to plan for serious infrastructure development only after we define our economic growth strategy, which will reduce poverty, to ensure that every peso counts. Since we are extremely limited on financial and other resources, it is necessary to rank the major infrastructure projects that will deliver early gains in the country’s objectives.

Five-year plans

China’s impressive development in the past 30 years is not only attributed to its political system but to its series of five-year plans, which defined the desired economic outcomes and the rank ordering of infrastructure projects needed to achieve them.

The Philippine MTPDP being prepared by NEDA is also designed with this objective in mind but in the past, it was followed mainly in the breach. Under the leadership of President Aquino, there will be closer coordination and leadership that will make the five-year plan strategy as the common template or coordination link for sustainable progress.

It is a fact that there are infrastructure projects driven by local leaders with the intention of building up their image while ignoring the real needs of the economy. These vanity projects were reported in the past by the National Competitiveness Council but have fallen on deaf ears.

This practice was prevalent in other countries such as China, where a survey showed that more than half of respondents said image projects in their cities were quite common. In the city of Xi’an, for example, they spent $76 million on a musical fountain, known as the largest in Asia, despite their water shortage problem. Chinese authorities have since installed stricter controls to eliminate projects not aligned with their 5YPlans. Consequently, the share of poverty alleviation items in their national and state budgets is expected to increase. They are also more strict in dealing with officials involved in corruption and other irregularities in infrastructure projects.

The avowed objective of our President is to create a better future for our people by providing more job and livelihood opportunities so that the “employment gap” of 15 million will be breached ASAP.

How will this be achieved? Porter says it is about time that economic strategy is used to bring out our clear priorities based on our strengths to ensure the achievement of targets.

Focus must be on areas where the Philippines can be a world player with substantial returns, as manifested in the sunrise sectors (Arangkada list). Identifying the supporting policies and infrastructures is an essential component of the strategy to generate an estimated three million jobs a year out of these sectors, bridging the gap in five years!

Strategy addresses what to do and what not to do in dealing with crisis—not by piecemeal approach. It makes clear the role of the public sector in partnering with the private sector, resulting in broader “ownership” of the national strategic goals, sharing risks as well as benefits.

The crafting of the economic strategy will entail identifying the priority sectors where we can be a world player with substantial returns. This 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 (e.g. BPO, knowledge, creative & labor intensive sectors) and natural resources (e.g. agro, forestry/marine and mining) and which are competitive in both domestic and foreign markets.”

The Constitution certainly seems to have recognized where our strengths lie and the need to build on these to make the vision of full employment a reality.

Infrastructure indeed follows national economic strategy.

(The author is former secretary of the Department of Trade and Industry.)