JAKARTA, Indonesia—While taking a back seat in the Duterte administration’s infrastructure-development program, the Filipino brand of public-private partnership (PPP) has been adopted by Jakarta as the new cornerstone of Indonesia’s plan to bridge its own infrastructure gap.
Minister of National Development Planning of Indonesia Bambang Permadi Soemantri Brodjonegoro said his country has identified the need for private-sector intervention—at least in terms of financing infrastructure development—to help win the battle against infrastructure underspending.
“We first learnt about the program from the Philippines, which is already ahead in terms of implementing PPPs. We would like to do the same, simply because we still have a 77-percent gap for infrastructure financing for the five-year period ending 2019,” he said during a news conference at the Indonesian Infrastructure Week.
The Indonesian government has recognized a $450-billion infrastructure-funding requirement for five years starting 2015. Brodjonegoro said the country has only spent more than 20 percent of the said capital requirement through 2017.
“We need private-sector involvement, not only foreign participation, but also domestic participation,” he said.
Indonesia has implemented a new scheme for funding infrastructure, the Pembiayaan Investasi Non Anggaran (Non-State Budget Investment Financing), or simplified as Pina, a program that aims to accelerate infrastructure spending while reducing pressure on state budget for financing such developments.
The program is similar to the Philippines’s PPP Program.
‘Not perfect, but instrumental’
Former PPP Center Executive Director Cosette V. Canilao said the Philippines was able to establish a “good framework” for private-sector infrastructure funding—including policies, procedures, institutional roles and governance—through the help of development partners.
“While it is not perfect, it was instrumental in delivering critical infrastructure projects. The Philippines now has a baseline and data points to compare PPP via other modes of procurement, and hopefully further improve it, especially the implementation component,” she told the BusinessMirror.
The impact of the program to the local and national economy can be clearly seen in the four completed and operational projects, with a total project cost of P31.77 billion, as follows: the Muntinlupa-Cavite Expressway Project, the PPP for School Infrastructure Project Phase I, the Automatic Fare Collection System Project, and the Ninoy Aquino International Airport Expressway Phase II Project.
Aside from the completed projects, the 11 other ongoing awarded projects, which include the Metro Manila Skyway Stage 3, Mactan-Cebu International Airport New Passenger Terminal Project, PPP for School Infrastructure Phase II and Metro Rail Transit (MRT) Line 7, are expected to provide significant contributions to the economy.
The previous administration gift-wrapped a PPP pipeline of 53 deals worth roughly P1.5 trillion. These projects were considered intergenerational, spanning to as much as three decades worth of contracts that the private sector can implement.
PHL must also recognize need for PPPs
Andre C. Palacios, also a former executive director of the center, said the Philippine government must also recognize the need for the PPP program’s continuity, as Indonesia has identified it as a viable means to save the country from its infrastructure crisis.
“The Philippine PPP program is recognized as a global model for developing countries facing an infrastructure crisis. Asia-Pacific countries wish to learn from our PPP success. We need to build on this and enhance, not abandon our PPP program,” he told the BusinessMirror.
The Duterte administration took an apparent shift in bias toward developmental financing from private sector-led funding on infrastructure development, which was the cornerstone infrastructure-development program of the Aquino administration.
Aside from pronouncements from different economic managers, government data will prove that it has, indeed, changed its preference on project financing toward official development assistance (ODA) and state coffers.
From a staggering 14 projects under procurement in the first half of 2016, data from the PPP Center now showed that there are only three PPP deals that are up for bidding as of end-September.
This does not mean that the projects were awarded to their respective winners, but most of them were simply snatched from the pipeline, and was added to the Duterte administrations “Build, Build, Build” (BBB) program.
Touted as the government’s “most ambitious infrastructure plan,” the BBB program lists 70 priority infrastructure projects that are seen to solve the infrastructure crisis that the Philippines faces today.
The new infrastructure thrust was born out of Duterte’s policy on increased infrastructure spending, an avenue wherein the previous administration failed miserably, with underspending plaguing government agencies tasked to develop crucial infrastructure, such as roads, rails and ports.
The majority of the projects under the newly minted program—roughly 39 of 70 deals—were contracts either signed, implemented and started during the administration of former President Benigno S. Aquino III, according to estimates made by the BusinessMirror.
Likewise, a thorough analysis of the project pipeline under the BBB program would show that in terms of financing options, the majority of the projects will be funded by the General Appropriations Act. This is followed by ODA grants and loans, while private-sector funding comes in last.
Should the current administration decide to also put prime importance to the private-sector funding, Palacios believes that it could be a new international framework for infrastructure development that other countries can also learn from.
“With our BBB program, we can again become a global model—this time, on how to successfully blend all sources of funds,” he said.
The Philippines is in the midst of ushering the country into the so-called golden age of infrastructure, with Duterte issuing a policy on increased infrastructure spending throughout his term. His mandate is to increase the budget for infrastructure development to as much as 7 percent of the country’s GDP from a mere 2.9 percent.
Over the next six years, the government will spend roughly P8.4 trillion to build, modernize and rehabilitate new and old infrastructure, as the country plays catch-up with its neighbors in terms of adequacy of transportation facilities, energy and water supply and other socioeconomic needs.
Infrastructure has always been the Achilles’ heel of the Philippines. Just recently, the World Economic Forum reported that the country ranked 97th out of 137 nations in terms of underinvestment in infrastructure, making interest in the Philippine economy low, despite ranking 22nd in terms of macroeconomic environment.