IN the proposed national budget for 2021, the focus is on the revival and expansion of the Covid-derailed “Build, Build, Build” (BBB) program of the government. The DBM is allocating a total of P1.107 trillion for the revival of infrastructure development christened as the “Rebound” program. This amount is estimated to be equal to 5.4 percent of the gross domestic product (GDP).
BBB is, of course, at the center of the Duterte administration’s economic growth program for 2017-2022. According to the economic managers, BBB ushers in the “golden age of infrastructure development” in the country. Past administrations, from Corazon Aquino to Benigno Aquino, neglected infra development, which is one reason for the low level of the country’s productivity, for example, the failure to build and maintain irrigation projects is one explanation for the abysmal performance of the agricultural sector. Annual infra spending from the 1980s to 2000s averaged less than two percent of the GDP. The reason for under-spending on infra development is not difficult to find: the debt-ridden government had limited funds for infras, from the 1980s to early 2010s, no thanks to the debt agreements with the IMF-World Bank group.
Projects lined up under the BBB are numerous and even tantalizing: railways in Luzon and Mindanao (from 77 kms, to grow to 1,900 kms), subways in Metro Manila, road and water projects all over the country, airports and sea ports in major cities, Clark Green City covering 10,000 hectares, and so on. To speed up the implementation of the BBB program, the government has been mobilizing Official Development Assistance (ODA) resources and public funds from the General Appropriations Act (GAA) in support of pet BBB projects.
What is the role of the private sector in the BBB? It plays a central role in all BBB projects—as builder-contractor and as subsequent operator-maintainer of the finished projects, DOF explained. The BBB also covers the Public-Private Partnership (PPP) program, which encourages private sector builders to use their own financial resources in developing infra projects such as the proposed Aerotropolis airport project of San Miguel’s Ramon Ang.
Now, can BBB be relied upon as the country’s salva vida in Covid from 2020 to 2022? The coronavirus cannot be licked until the end of 2022 or even later because a reliable, accessible and affordable Covid vaccine cannot be available sooner than this date.
In this connection, Congress, which is now deliberating on the proposed National Budget for 2021, should consider the following in assessing what should be the role of BBB as a life saver and growth sustainer.
First, BBB and the country’s soaring debt. The government was not shy in revealing how much the BBB would cost the country. The estimated budget cost announced in 2017-2018 was $160 billion or P8 trillion for the entire period of 2017-2022, or an average of more than P1 trillion a year. Given the ambitious BBB and other expenses of the government, borrowing from local and foreign lenders is unavoidable. Thus, the P6.6 trillion national debt in 2017 went up to P7.7 trillion by the end of 2019.
Some organizations such as the Freedom from Debt Coalition warned the Senate Committee on Economic Affairs that the country is building “a debt bomb”. This warning was ignored by the economic managers. They argued that the country’s debt-to-GDP ratio is one of the lowest in Asia and in the world. In fact, before the Covid-19 pandemic, the ratio had been going down. In 2010, the ratio was 52.4 percent; in 2019, the percentage went down to 39.6, probably the lowest in decades.
However, the arrival of Covid changed all the debt trajectories. As reported by the DOF, the government borrowed a gargantuan amount of P1.9 trillion in the first seven months of 2020. For the entire year, the DOF expects the total borrowings to reach P3 trillion. In 2021, new borrowings would more or less be the same, P3 trillion, and in 2022, P2.3 trillion. In short, the total national debt would double by the end of the Duterte administration.
The surge in borrowings immediately altered the trend in the annual debt-to-GDP ratios. The DOF gave new estimates for the ratios: 53.9 percent for 2020, 58.1 percent for 2021 and 59.9 percent in 2022.
The problem is that we have an economy that was slowing down in 2018-2019 and now flattened by the Covid pandemic. Yes, government stimulus spending during crisis periods is crucial. But where will the government get the wherewithal if the economy remains weak despite the BBB? So far, there are no indications that BBB spending in 2017-2019 helped boost the growth of industry and agriculture. GDP growth was due largely to the robust expansion of services such as education, real state, entertainment, tourism and so on, thanks mainly to the remittances of 10 million plus OFWs, who have succeeded in transforming the economy into a “consumption-driven” one. But now the remittances are on the decline. Industrial output is also going down due to weakened demand.
Clearly, it is critical for the government planners to re-think how to do stimulus spending in a high-impact-least-cost manner. This means strategic adjustments in the BBB program. For example, why not postpone the expensive subway projects that are likely to use more machines than people?
Such adjustments in BBB and government spending are also needed in the light of the other pressing requirements of the country under the pandemic. As this column keeps reiterating, the foremost task facing the nation is to save all the citizens of this country, especially the vulnerables. The vulnerables happen to be the overwhelming majority, composed of the displaced and jobless, including the “newly-impoverished” MSME entrepreneurs who have to shut down their businesses. Thus, it is surprising that the proposed 2021 budget does not give enough attention to the social amelioration of the masses, the restoration of jobs and livelihoods of the ordinary workers (as outlined in Congresswoman Stella Quimbo’s ARISE), and the health needs of the entire population. Without a healthy society, infra development becomes meaningless.
This brings us then to the need to tweak the BBB in support of community rebuilding for the communities of the poor nationwide—be they in the urban, peri-urban, rural, upland and coastal areas. Covid has amply revealed that these communities have not been enjoying the so-called fruits of high GDP growth in the last two decades. Covid infection has been surging in these areas precisely because of poor housing facilities and lack of access to basic services such as primary health care. Why not transform BBB into a building program for the poor for a better Philippines?