Improving port ability in the Philippines
October 28, 2011 at 17:10
The Philippine government has announced plans to step up spending on transport infrastructure, with upgrades to existing ports and the development of new maritime cargo handling facilities to be given priority.
On Sept. 25 the transportation secretary, Manuel A. Roxas II, stated that the government intended to make use of official development assistance (ODA) to help fund major infrastructure projects, particularly those related to his own agenda. Utilizing ODA would give the government access to cheaper funding with repayments scheduled over a longer period of time, he said.
“The predisposition of the Department of Transportation and Communications (DoTC) is to do all heavy infrastructure via ODA,” Mr. Roxas told local media. “Funding would be cheaper since it would be ODA funding as compared to the private sector, which would be subject to bank rates of about 6%-7%.”
While Mr. Roxas’ latest announcement highlighted plans to roll out new rail and airport projects, he has in past statements flagged the importance of increased investments in the country’s ports.
During a visit to China with President Benigno S. C. Aquino III at the start of September, Mr. Roxas said the government intended to invest heavily in upgrading port facilities across the country, in part to assist in developing trade and tourism with Beijing.
Indeed, Mr. Roxas said up to $6 billion would be dedicated to port and aviation infrastructure over the next six years, in line with the President’s desire to see better connections among the country’s islands and to ease movement of people, products and services.
Along these lines, in a meeting with the Makati Business Club in early-October, Mr. Roxas laid out DoTC’s P426-billion, five-year plan aimed at revitalizing the country’s fledgling transport infrastructure.
The program will be welcomed by many, including economists who have been concerned that the slow rollout of new projects is one of the causes for sluggish growth of gross domestic product (GDP) in the first half.
A recent report by Amsterdam-based ING Bank claimed that government underspending is limiting GDP expansion, with the slow pace of state funds being pumped into the economy having undermined overall economic growth by some 1.8% in the first half of the year.
In early-September, global lender HSBC also cut its full-year GDP projections for the Philippines. Citing a fall in government spending, the bank cut its growth forecast for 2011 to 4.3% from 5.2%, down from the 2010 figure of 7.3%.
While the government had plans to launch $16.8 billion worth of infrastructure projects this year and the next, many of them transport sector-related, lengthy delays in calling new tenders and reviewing development programs that were begun under the previous administration have put the brakes on the process. These hold-ups are affecting the government’s spending program and cooling GDP growth.
The country’s underdeveloped port network continues to be a major obstacle to growth, a problem that will persist unless further investments are made.
In its most recent report on global economic competitiveness, released in early-September, the World Economic Forum (WEF) ranked the Philippines 123rd globally in terms of the quality and efficiency of port infrastructure. This was below the ratings for both road and air infrastructure and fell well short of the overall international ranking of 75th out of the 142 nations assessed.
While investments may be somewhat slow in coming, plans to improve the nation’s maritime infrastructure should take priority when funding begins to flow more freely.
In a move that could see the Philippines’ maritime freight capacity given a significant boost, Cebu Port Authority (CPA) has dusted off a scheme — put on the backburner almost a decade ago — to develop a new offshore port facility in northern Cebu.
The $471-million project, off the coast between the towns of Consolacion and Liloan, will involve construction of a large-scale container handling facility, in part to divert some excess demand from the increasingly stretched Cebu International Port.
CPA General Manager Dennis R. Villamor has said officials of DoTC and the Japan International Cooperation Agency met in late-August to discuss the project, and a proposal for the port’s construction is expected to be presented to the National Economic and Development Authority soon.
Original plans to develop the port, floated in 2002, had been shelved due to a lack of demand, but capacity limitations at Cebu International Port have renewed interest in the proposal.
“It was only recently, in 2010, that we thought we would revisit the proposal because of the problem on traffic management, capacity and volume accommodation,” Mr. Villamor said in early-September.
Various plans to improve port facilities, combined with projects to increase road and rail networks, will take time to get off the ground, and the Philippines’ WEF infrastructure rating could for some time remain in the lower half of the international table.
However, if the government can fast-track spending on transport infrastructure, existing bottlenecks will start to be addressed and the country should eventually be better placed to maximize its logistics potential.
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By: Paulius Kuncinas
Source: Business World, October 20, 2011
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