WITH China willing to foot the bill for key Philippine projects and Manila looking to ramp up spending for these, the Department of Budget and Management (DBM) said last Wednesday there is much room for economic cooperation between the two neighbors as the country pursues its massive infrastructure program or “Build, Build, Build.”
At the China-Philippines Infrastructure Investment Conference in Manila, Budget Secretary Benjamin E. Diokno said: “Given the scope of our plans, full effort and cooperation from all stakeholders is needed. This starts with us, the government, followed by the private sector and our development partners.”
Diokno said the Duterte administration is pushing to boost infrastructure spending to 5 to 7 percent of gross domestic product in the medium term, since the country was not able to invest in its infrastructure for the last 50 years, as infrastructure spending back then was at a low of 2.6 percent of GDP.
“This explains why there is much room for economic cooperation between the Philippines and China. So far, we are satisfied with the pace of economic cooperation between the Philippines and China,” he added.
In nominal terms the planned infrastructure spending is equivalent to P5.5 trillion, which will be spent from 2019 to 2022, according to Diokno.
“From 2017 to 2022, the Duterte administration will spend P8 trillion or approximately $150 billion for infrastructure development,” he said. “The BBB will give the Philippine economy a much-needed boost as we aim for economic growth of 7 to 8 percent coupled with aggressive poverty reduction program.”
The government, he noted, has already signed 29 agreements with China including a memorandum of understanding on the Belt and Road Initiative to strengthen infrastructure cooperation.
He added that the Philippine government has already identified 36 projects for possible Chinese government funding, with two being grants.
“The indicative total investment requirements for the projects, except for three projects whose costs have yet to be determined, is pegged at P835.8 billion or 110.5 billion renminbi [RMB],” he added.
The National Economic and Development Authority Board-Investment Coordination Committee already approved 12 projects with a requirement of P300.8 billion or 39.8 billion RMB.
Diokno said the government expects to groundbreak the 12 approved projects by 2019 up to the first quarter of 2020.
He called as “totally unfounded” pundits’ fears the Philippines is falling into a debt trap due to China’s official development assistance (ODA).
The government said it plans to implement projects through ODA only when the rate of return is much higher than the cost of borrowing, adding that the cutoff rate at the moment is at 10 percent.
“We would like to assure everyone that the Philippines is exercising due diligence in processing the approval of these projects,” Diokno said. “All projects whether funded through bilateral sources like China, Japan South Korea, and others, or multilateral sources like the World Bank or Asian Development Bank—all these projects go through a very rigorous process.”
Public-Private Partnership Center of the Philippines Executive Director Ferdinand A. Pecson also pointed out that China can help the projects to be implemented in the Philippines in terms of making them “smarter” and efficient through the application of artificial intelligence (AI).
Pecson said there are number of projects that can be further pursued in the top sectors like energy, specifically renewable-energy projects, water, sanitation and health care with the inclusion of technology seen to be a big boost.
“Already there are opportunities for foreign participation,” Pecson said. “Something that I would really like to see more of on technology is the use of AI to make our infrastructure smarter, and this is where China can play a significant role.”