Core
Business World, 26 May 2015

Studies show that countries that have invested in public infrastructure have a competitive edge over others who have not. But when governments underinvest in infrastructure, making it deficient and unreliable, then infrastructure becomes a major constraint to long-term growth.

new President. He is expected to build on what his predecessors have done before. But the harsh reality is that the incumbent President has done very little to close the infrastructure gap. As a result, the Philippines continues to lag behind its ASEAN-5 neighbors.

Necessarily, the first order of business for the next President will be to close the huge infrastructure gap. That is the consensus among rating agencies such as Standard & Poor’s and international financial organizations like the International Monetary Fund, the World Bank, and the Asian Development Fund.

Not surprisingly, the present Philippine economy is a bit more vibrant than the economy before it because, first, of policy reforms done in the past, and, second, because of the current low-interest-rate policy environment owing to the global recession of 2008 and 2009. For example, the economy can grow faster now because of the deregulation of the telecommunication industry, and so with the oil industry.

At the same time, the economy slowed down in some years in the past because of unusually damaging natural and man-made calamities. The Cory Aquino administration was faced with the earthquakes in northern Philippines and the Mt. Pinatubo eruptions. The Asian financial crises reduced economic growth at the tail end of the Ramos administration, which spilled over to the first of the truncated Estrada administration.

The economy screeched to a halt during Arroyo’s penultimate year due to the global recession. The economy under Aquino III suffered as a result of the Zamboanga siege, the Bohol-Cebu earthquake, and the killer typhoon Yolanda.

The state of Philippine public infrastructure is awful. The urban transit system (MRT and LRT) had, and continues to have, frequent breakdowns and accidents.

Traffic along the crumbling EDSA and C-5 highway is getting more and more congested every day. The same is true for major cities nationwide.

The Philippines’ airports and seaports continue to be one of the worst on Planet Earth. Power supply cannot keep up with the demand of a growing economy, making electricity supply unreliable and extremely expensive.

Actual government spending for public infrastructure is grossly deficient. For a country trying to catch up with its ASEAN-5 neighbors, the government should be spending the equivalent of 5% to 7% of gross domestic product (GDP) for well-selected public infrastructure. It has spent only between 2% and 3% of GDP.

A comparative look at the state of public infrastructure relative to our ASEAN-5 neighbors (Indonesia, Malaysia, Singapore and Thailand) shows that, while the Philippines has made some progress in some areas, it remains to be the laggard in all aspects of public infrastructure.

In terms of overall quality of infrastructure, the Philippines ranked 95th out of 144 countries included in the World Economic Forum study. It has improved 18 steps since 2010 but so did Indonesia, which ranked 72nd to the Philippines’ 95th. In a dynamic world, where the Philippines’ competitors are also moving forward, it simply has to gain ground much faster. Keeping in step with others is tantamount to no progress.

Because of its political crisis in recent years, Thailand has taken a major step back. But Thailand has a much better overall quality of public infrastructure than the Philippines.

In terms of overall quality of roads, the Philippines ranked 87th out of 144 nations. Indonesia, the second worst country among ASEAN-5 peers, ranked 72nd.

In terms of the quality of port infrastructure, the Philippines ranked 101st out of 144 nations. Indonesia, the second worst country among ASEAN-5 peers, ranked 77th, or a difference of 24 ranks. This is a major weakness for an archipelagic country like the Philippines with about 7,100 islands. It is sad that where efficiency in the movement of people and goods is desirable, the Philippines ranked as the poorest among its peers.

In terms of the quality of air transport infrastructure, the Philippines ranked 108th, a marginal improvement on its 112th ranking five years ago. Indonesia, the second worst in air transport infrastructure among ASEAN-5 peers, ranked 64th, or a difference of 44 ranks. As expected, Singapore ranked the best in the entire world.

In terms of the quality of electricity supply, the Philippines ranked the worst among ASEAN-5 peers. Of 144 countries in the study, it ranked 87th compared to Indonesia’s 84th.

Given such huge infrastructure lags, the next President has to hit the ground running, so to speak. He should not spend two years reviewing past and ongoing projects of the outgoing Aquino administration. There are enough projects off the government shelf from which to choose from that would last two generations.

The incoming President should choose and prioritize projects of all types — large and small, urban and rural. Many of these projects have recently been updated and they are ready for competitive bids.

Even before his proclamation, the next President should be ready with a list of priority projects that might be doable in the next six years. He’s been elected for a fixed term, and he should focus on what he can do during his six-year term.

He should implement all projects simultaneously, not sequentially. He should bid out these projects to all qualified private-sector companies, regardless of political persuasion. There should be at least one mega project per region and one major project per province.

He should make sure that there is no cronyism, no nepotism and no favoritism in the choice of infrastructure projects. Legitimate, qualified private firms, regardless of political color, should be given an equal chance of winning government contracts.

A good plan requires good people. The next President should choose the best and the brightest men in their area of specialization, guided mainly by competence, integrity, and decisiveness. The wrong thing to do is to limit the choice of the president’s men to his narrow circle of friends.

The next President should be visionary rather than vindictive, spending more time pursuing policies that may promote the common good rather than running after his political enemies.

The next President should be forward-looking and accountable. He should be willing to take full responsibility for his actions or neglects rather than endlessly blaming others for his failures and inactions.

Once elected, the next President should rise above politics, and should act as the leader of all Filipinos rather than that of a privileged few.

In brief, the next President should be the opposite of the present incumbent.