By Justine Irish D. Tabile, Senior Reporter
THE PHILIPPINE government should maximize public-private partnerships (PPP) to assist narrow the country’s infrastructure gap while easing fiscal pressure from rising debt levels, the Asian Development Bank (ADB) said.
Despite the federal government’s infrastructure catch-up programs, gaps remain as rapid urbanization and economic growth proceed to drive demand, ADB Country Director for the Philippines Andrew Jeffries told BusinessWorld on Wednesday.
“There may be an infrastructure gap within the Philippines… The population of Metro Manila has grown a lot over a number of many years, so investment in urban transport must catch up,” he said.
Mr. Jeffries said each the present administration’s “Construct Higher More” program and the previous administration’s “Construct Construct Construct” initiative were aimed toward addressing years of underinvestment.
“Because the Philippines grows, population-wise, gross domestic product (GDP)-wise, transport must continue to grow as well,” he said.
“And with what’s happening now with diesel fuel prices and all, alternatives for public transport turn into a part of that longer-term solution,” he added.
Nevertheless, Mr. Jeffries said infrastructure catch-up efforts are facing challenges from fiscal pressures and budget constraints.
“The federal government is keeping a really close eye on public debt levels, so easy methods to bring the private sector into a few of these investments as opposed to only government budget and borrowing, I do know, may be very essential to this government,” he said.
The country’s debt-to-GDP ratio reached 65.2% in the primary quarter, the best level since 2005. This comes because the National Government’s outstanding debt climbed by 1.8% to P18.49 trillion as of end-March from P18.16 trillion at the tip of February.
Mr. Jeffries said that bringing in private investment ensures that “public debt levels may be maintained or reduced over time versus that being the one funding source.”
“There may be a variety of private infrastructure already on this country. And the bottom line is easy methods to be sure it’s done well in order that the federal government and the persons are getting one of the best value for money,” he added.
In accordance with the PPP Center, the PPP pipeline as of May 19 consists of 250 projects valued at P3.13 trillion. The railway sector accounted for P1.97 trillion of the project pipeline, followed by land transport (P277.26 billion) and property development (P221.46 billion).
TRANSPORT PROJECTS
Meanwhile, Mr. Jeffries said transport projects will proceed to account for a major share of ADB’s financing portfolio in the Philippines within the near term.
The multilateral lender’s portfolio of projects under construction and implementation within the Philippines is valued at $12.5 billion.
“Our transport portfolio exceeds $7 billion, in order that’s obviously a pleasant large percentage of our overall portfolio within the Philippines,” he said.
“That is de facto due to some extremely large projects we’re funding… From a dollar viewpoint, transport is clearly our largest in our portfolio here within the Philippines,” he added.
These projects include the North-South Commuter Railway, Bataan-Cavite Interlink Bridge, Laguna Lakeshore Road Network Project, and Davao Public Transport Modernization Project.
Asked if ADB is considering additional transport projects, Mr. Jeffries said that “because they (the projects) are so large and it takes considerable time, we’re funding those in time-sliced tranches.”
“So, now we have a strong pipeline going forward, just seeing those projects through to completion… We’re focusing rather a lot on implementing what we have already got,” he added.
Mr. Jeffries said the federal government is exploring ways to draw more private investment into the transport sector amid fiscal pressures stemming from the Middle East crisis.
“With the fiscal issues with this Middle East crisis and so forth, the federal government can also be looking actually at easy methods to bring more private sector investment into this sector,” he said.
“So, we don’t have latest big projects specifically in our pipeline at the moment,” he added.
Mr. Jeffries said transport projects are prone to remain a significant a part of ADB’s Philippine portfolio over the following few years as the federal government prioritizes completing existing projects.
“I believe that proportion will stay kind of the identical for the following few years, especially now that the federal government may be very anxious concerning the trade-offs and the fiscal and the general public debt levels,” he said.
“They need to concentrate on implementation and reaching completion of what’s already ongoing because until they’re done and in operation, they should not benefiting the people,” he added.
FINANCING GAP
The infrastructure and investment gap shouldn’t be unique to the Philippines. In its Asian Transport 2035 Outlook, the Asian Transport Observatory (ATO) said annual investment demand for transport infrastructure in Asia and the Pacific is anticipated to greater than triple over the following decade.
“Annual investment needs across all transport modes will climb from roughly $800 billion per yr during 2000-2025 to roughly $2.6 trillion per yr between 2025 and 2035,” the ATO said.
“That’s corresponding to 2.3% of LMIC (lower- and middle-income countries’) GDP per yr,” it added, referring to those in Asia and the Pacific.
Nevertheless, the ATO said the projection stays conservative because it only reflects current trends and existing project pipelines.
“Actual needs, accounting for the total cost of the energy transition, the climate adaptation backlog, and the SDG (Sustainable Development Goals) access deficit, are prone to be considerably higher,” it added.
Despite this, the ATO said the region still faces a big financing gap.
“Development banks can do things business investors cannot — mix concessional and market-rate lending, absorb early project risk, and fasten technical assistance to pipelines that might otherwise stall on the feasibility stage,” it said.
“But there may be a limit to what external finance can do. The long-run answer to Asia’s transport financing gap is stronger revenue systems and public finance reform. We should not just facing an infrastructure gap, but additionally an investment and governance gap,” it added.