NEWARK, California – It’s the first working day of the new year and hopefully it will also mark the day when the Duterte administration’s promises to produce a golden age of infrastructure is out of the starting gate. The economic managers of the Duterte administration have been using the last six months familiarizing themselves with the work to be done. They should now be raring to make things happen.

Economic Planning Secretary Ernie Pernia has been streamlining the operations of NEDA, the agency that is coordinating all the investment decisions of government. NEDA has been notorious for slowing down projects, notably the big ticket PPP projects. Sec. Pernia has assured us that change has arrived at NEDA.

In economic briefings last year, Sec. Pernia and Budget Sec. Ben Diokno announced their plans for massive investments in infra development. Infra spending will power the Duterte administration’s goal of sustaining the country’s robust economic growth. Infra spending will be ramped up to 5.4 percent of GDP beginning this year. They expect to spend P8 trillion over the next six years on infrastructure.

But will they be able to raise enough taxes to finance many of these projects?  President Duterte must crack the whip and get his supposed allies in Congress to pass the tax reform package submitted last year by Finance Secretary Sonny Dominguez.

The tax reform proposal will test the political will of the Duterte administration. Unless our tax system is reformed to collect taxes more efficiently and minimize corruption, the promised golden age of infrastructure will just be a dream.

There are many other competitors for government funds. They are, for example, implementing many populist measures like the free college tuition in SUCs, free irrigation and the free rice for CCT beneficiaries.

Already, an analyst of UBS, an international investment bank, has declared the earliest we can see any positive impact of the infrastructure strategy is 2018. They are anticipating delays in execution this year. The poor absorptive capacity of the bureaucracy to implement projects, as well as the fate of the tax reform bill in Congress, are reasons for caution.

Nevertheless, the Duterte administration has, thus far, approved 17 infra projects since taking over. Among these are critical infra projects the previous administration failed to roll out: Metro Manila flood management project; EDSA Bus Rapid Transit; Plaridel Bypass Road Project; New Cebu International Container Port; and the South Line of the North-South Railway Project.

Pernia had pointed out the NEDA board has streamlined review procedures for minor changes in scope, design, cost and implementation of projects.

A major change in policy is the Duterte administration’s more positive attitude towards unsolicited projects. The past administration was totally hostile to unsolicited proposals, which explains why the MPIC connector road project languished until the end of its term. The new policy makes it possible for government to accept the proposal of San Miguel to build a new airport in Bulacan, which unlike similar proposals, entails absolutely no financial risk for the National Treasury, not even a sovereign guarantee the other airport proposal requires.

Another new policy is the elimination of bid premiums for the right to build PPP projects on top of actual project cost. San Miguel, for instance, paid P11 billion for the right to construct the NAIA Expressway. While it raised money for government, it also raises the toll fees needed to recover costs. That punishes the public users twice: for having to pay toll to use a project government should have built using taxes and secondly, having to pay more to cover the cost of the premium.

Hybrid PPPs will also be utilized to take advantage of government’s ability to get low cost financing from ODA and multilateral agencies to build civil works components of projects. The private sector can bid for operations and management. Private entities can run airports better, for instance as seen in Mactan, because they are not saddled by bureaucratic red tape.

I am closely monitoring how DOTr will finally get its long awaited projects going. The train projects are particularly important and problematic. Decisions will have to be made before the first quarter ends.

How will Sec. Art Tugade reconcile the conflicts in the North Rail proposals of China and Japan? We need a fast train from Clark to NAIA, not from Tutuban to Malolos as JICA has proposed. Japan wants to demolish the civil works done by the previous Chinese contractor and that sounds like a waste of money unless it can be shown there are serious defects.

Will the South Line to Bicol be done independent of PNR’s Metro Manila commuter line? The original idea was for a cross subsidy between the two operations to make fares bearable. DOTr must roll out the modernization of the commuter line because it is badly needed.

Bidding out the O and M of the domestic airports had been delayed by a change in concept. Sec. Tugade wants the package unbundled. Whichever way it goes, a decision must be made right away. Improvements are being delayed in the light of the change in approach.

The EDSA BRT project, which will likely require a review and cancellation of current bus franchises, must also get off the ground in the first quarter. This is a major component of a long term solution to EDSA’s horrible traffic problem. Will this need emergency powers to get going? Probably. Current bus franchise holders will definitely get a court order to stop this project.

Outside of transport, there should be more urgency in developing an alternative water supply source for Metro Manila because we are now 97 percent dependent on Angat-Umiray. I heard they are looking at a new list of potential sources, but a shovel ready project is already there in the Kaliwa-Kanan river system in Quezon and Rizal provinces. This should be prioritized by DPWH Sec. Mark Villar.

They have a full agenda to make their infra promises come true. Their political will will be tested. I hope they succeed.

We must cheer them on and help them. But we must also call them out if we start to feel we are just being shoved press releases of good things that they are not capable of delivering.

Starting today, it must be all systems go!

Source: https://www.philstar.com/business/2017/01/02/1658738/all-systems-go