Core
Business World, 11 December 2012

 

First, the good news: infrastructure spending in the first 10 months of 2012 was higher than the ₱100.4 billion recorded in the same period last year. Now, the bad news: actual spending this year is only slightly above half of the full-year target of ₱298 billion. Given past neglect, and the government’s desire to grow at 6% to 8% sustainably during the next seven to 10 years, the administration should spend about ₱500 billion in public infrastructure annually.

The Department of Budget and Management reported to the Development Budget Coordination Committee (DBCC), that public infrastructure spending was ₱165.7 billion for the 10-month period. But that’s only 55.6% of the full-year target of ₱297.98 billion.

The end-October level, however, was still 65% higher than the rock-bottom ₱100.4 billion recorded in the same period a year ago. Overall, that’s unspectacular performance.

Moving forward but not catching up Philippine authorities should not rest of the laurels of the 7.1% GDP growth in the third quarter. It’s too early for a celebration. There’s still an enormous task of catching up to do. Much needs to be done.

The Philippines remains to be the poorest among the original ASEAN-5 countries.

In 2010, Singapore’s GDP per capita was $43,117, Malaysia $8,433, Thailand $4,992, and Indonesia was $3,015. By contrast, the Philippines’ per capita GDP was a pitiful $2,007.

Compared with our ASEAN-5 neighbors, the Philippines continues to lag in global competitiveness. In 2011-2012, out of 142 nations, Singapore ranks 2nd (with score of 5.6, with 1 as the lowest and 7.0 as the highest), Malaysia ranks 21st (5.1), Thailand ranks 38th (4.5) and Indonesia ranks 46th (4.4). The Philippines ranks, by contrast, 75th (with a score of 4.1).

Why invest in public infrastructure?

According to the World Economic Forum 2011 report: “Extensive and efficient infrastructure is critical for ensuring the effective functioning of the economy, as it is an important factor determining the location of economic activity and the kinds of activities or sectors that can develop in a particular instance.”

Rank in global competitiveness

2010-11                           2011-12
(of 139 economies)      (of 142 economies)

Overall ranking
Singapore                  3                                     2
Malaysia                  26                                     21
Thailand                   38                                     39
Indonesia                 44                                     46
Philippines              85                                      75
Infrastructure
Singapore                  5                                      3
Malaysia                  30                                      26
Thailand                   35                                      42
Indonesia                 82                                      76
Philippines             104                                    105

Source: World Economic Forum, Global competitiveness report, 2001, 2012

“Well-developed infrastructure reduces the effect of distance between regions, integrating the national market and connecting it at low cost to markets in other countries and regions. In addition, the quality and extensiveness of infrastructure networks significantly impact economic growth and reduce income inequalities and poverty in a variety of ways. A well-developed transport and communications infrastructure network is a prerequisite for the access of less-developed communities to core economic activities and services.”

True, the state of Philippine infrastructure has inched up marginally compared to its peak in 2010. But its improvement is not fast enough to make up for past neglect and to meet the needs of the business community. The country continues to rank a poor 113th (with a score of 3.4) for the overall state of its infrastructure. The country ranks very low for the quality of its seaport (123rd), airport infrastructure (115th) and roads (100th).

Our ASEAN-5 neighbors rank much better. Singapore ranks 3rd, Malaysia 26th, Thailand 42nd, and Indonesia 76th.

On the state of public infrastructure, our ASEAN-5 neighbors, except Thailand, continue to improve (see Table) while the Philippines continue to lag behind. In order to make up for past neglect, and to catch up the frontrunners, the Philippines has to invest much more in public infrastructure. The current level of infrastructure spending is simply inadequate. In addition, the Aquino administration has to fix the kinks in the public-private partnership (PPP) initiatives in order the get them started.

Sadly, it is our ASEAN-5 neigbors who are investing more in public infrastructure. Moreover, their governments appears to be better than ours in getting things done.