Comment on “Philippine Infrastructure and Connectivity: Challenges and Reforms”

Abstract

Llanto (2016) starts by highlighting the broad challenges for the Philippines by contextualizing the growth and success of the service industry, that is, the business process outsourcing (BPOs) industry as well as e-commerce. These new types of infrastructure and connectivities have certainly led the recent growth trajectory of the Philippines. It is important to note that such growth was achieved despite limited growth in foreign direct investment (FDI) due, in part, to constraints in the development of labor intensive manufacturing in the domestic market. Moreover, other infrastructure provision, such as transportation (roads, railways, ports), power, and water, have not progressed well enough in attracting FDI despite the various incentives that have been introduced. For example, the power sector experienced an initial development with public–private partnership (PPP) investments, but later on stagnated due to fiscal constraints imposed by the government through privatization as well as policy changes to inhibit such infrastructure provision. In addition, the development of the power sector has been constrained by other factors such as stagnating investment in the bottleneck infrastructures such as transmission lines or gas pipelines, a lack of economics of scale, and an incomplete market design and regulatory regime. Llanto also suggests the importance of overcoming regional disparities through regional convergence strategies such as the Road- Roll-On Roll-Off Transport System (RRTS). As described, infrastructure provision and improvements in logistics have a positive correlation with and impact on both macro- and micro economic dimensions. Given the fact that high poverty incidence in rural and conflict affected areas as well as regional disparities continues to persist in the Philippines, appropriate infrastructure provision to enhance intra-country connectivity should also be linked with policy considerations for renewed industrial policies to enhance mobility and employment opportunities by taking into account the comparative advantages of industrial clusters across the country. Moreover, how to deal with infrastructure provision in urban areas from the viewpoint of the development of cities as industrial or population clusters and centers of growth is also critical. Because urbanization is one of the major developmental challenges, the provision of quality and adequate infrastructure to provide intra- as well as inter-city connectivity in enhancing the productivity of the urban city areas should not be overlooked. On infrastructure financing, Llanto provides an important viewpoint by suggesting the more effective usage of Official Development Assistance (ODA). As the Philippine government increases its preference for utilizing local funds in infrastructure spending while pursuing more PPP projects to be contracted out to the private sector, appropriate risk allocation and transparency of procedures in implementing infrastructure projects are becoming more important. In this context, the Philippines' government appreciates ODA resources if such assistance provides value for money through acquisition of quality sustaining appropriate technologies and services and transfer of expertise. ODA could play a vital role as a resource for providing effective technical and financial solutions in the areas of urban planning and land use plans, modal integration in the transportation sector, PPPs, building resilient infrastructure etc. The necessity of providing disaster resilient infrastructure cannot be over-stressed in the context of the Philippines. Llanto rightly points to the global and local attention towards the provision of policies as well as physical and institutional infrastructure conducive to disaster resiliency as emphasized in the principle of Build Back Better. What is crucial is not only how the government/localities rebound quickly with subsequent assistance ex-post of disasters, but also how to prepare and implement adequate policies, planning, and financing instruments which enable the government to provide appropriate budgetary provision, public spending, and capacity development conducive to disaster resiliency ex-ante to disasters. Being one of the most hazard prone countries in the world, the strong initiative by the Philippine government to pursue a disaster risk reduction, management, and financing strategy provides a clear policy direction reflecting this viewpoint. Last, continuity and coherence of government policies and reforms also cannot be stressed more. Sustaining policy coherence over the long-term provides positive signals to the improvement of investment climate and strong incentives to attracting FDI. In terms of long-term infrastructure planning and implementation, the “Road Map for Transport Infrastructure Development for Metro Manila and Its Surrounding Areas” which was approved by the National Economic Development Authority (NEDA) Board in 2014, for example, has provided the Philippine Government with a single robust framework wherein various project proposals in the transportation sector to be implemented by various government agencies in Metro Manila are identified and monitored (see NEDA 2014). This framework should serve as a strong basis to create expectations for the continuity of project planning and design, as well as enhancing coordination among oversight as well as implementing agencies over the long term, thereby enhancing the country's connectivity and competitiveness to improve the investment climate as a whole.