Building Big: Boon or Bane?

When the Duterte administration announced last year that it would embark on a “Golden Age of Infrastructure,” not a few eyebrows were raised. After all, this meant bankrolling some P8.4 trillion in public infrastructure projects from hereon until the President steps down in 2020. Finance officials said that this massive spending would represent 7 percent of GDP, unprecedented under any previous Philippine presidency.

By early this year, the Department of Public Works and Highways (DPWH) reported that Mindanao would get P139.6 billion or 36.5 percent—the lion’s share—in its P382.4 billion national budget for this year.

Which was just as well, considering how the island has consistently, oftentimes vainly, lobbied for its rightful share of the national budget. Time and again, Mindanao lawmakers have reminded their counterparts that the island has been plunking in an annual average of 18 percent to the national economy. This alone, they assert, is more than enough reason to give Mindanao her due.

And so the infra train is up and running. In the DPWH pipeline are at least ten major highways, three airports, two ports, and seven railways.

In Davao City alone, spadework has begun for an 8.2-kilometer coastal road from Matina Aplaya to Sta. Ana Pier, the first segment of which will cost nearly P2 billion. A two-way bypass road, costing P46 billion, will also be built from Toril to Panabo City.

As if on cue, the private sector has responded. Last year, Davao construction activities began gathering steam, with some 5,600 residential units reportedly in the drawing boards of real estate developers. The Dusit Thani hotel chain, Ayala Land, DMCI Homes, Vista Land, Filinvest Land, Megaworld Corp, and Robinsons Land, among others, have all cranked up their cranes and Caterpillars. Local property leaders Aldevinco and Damosa Land, as well as old family businesses have moved solely, or in partnership with Manila- and Cebu-based firms, to take advantage of the new government’s resolve to level the playing field.

So bullish was the local scenario that two things happened: One, the Davao City Assessor’s Office recommended an increase the city’s real property tax to up to 1,000 percent; and two, online real estate platform Lamundi announced its intention to do business in the city. The firm, which operates in 34 countries, bypassed Manila as an investment location.

With all these developments, what can be cause for worry? Is the country up to the dream? Shouldn’t its citizens take a step back and take stock of the road ahead?

For one, ANC News reported in January that the Philippines only had 150,000 civil engineers and 8,000 licensed contractors; if it was to embark on its “Build, build, build” program, it would need more than it its current share of technical personnel. For another, aggregates and other raw materials need to be sourced more aggressively; the requirements for one highway alone may be staggering for a city or municipality.

According to a policy paper, “The Philippines: Infrastructure Opportunities and Challenges,”  published by the Hong Kong Trade Development Council (HKTDC), “… the Philippines suffers from insufficient capacity to build and operate viable and sustainable projects. Both the government and industry need better infrastructure services. On the government side, technical assistance in feasibility studies, public expenditure management, organisational management, public services management and financial modelling should be better engaged. The efficiency and reliability of built infrastructure, whether constructed or managed by the government or by private companies, remains poor.”

The paper adds: “On the industry side, professional services such as project development, transaction advice and technical feasibility studies are not readily available locally. The skills, organisation and mobilisation of Filipino construction workers are not up to the standards of their ASEAN counterparts in countries such as Malaysia and Thailand. There is a considerable service gap, which means that the Philippines may require greater involvement of foreign companies with the skill sets needed for the country’s bold infrastructure plan.”

Still, optimism reigns. In response to the accelerating construction activities, private companies are retooling and rebuilding capacities.  

Brewer Ramon Ang of San Miguel Corp. established Eagle Cement, which became the sole supplier for the Metro Manila Skyway Stage 3 highway project and MRT-7 rail project. Aboitiz Equity Ventures put up Republic Cement, which is spending $300 million to add more plants. DMCI Holdings is said to be pouring in $300 million in a new cement factory conveniently near a coal mine. SteelAsia Manufacturing also unveiled plans of investing $1 billion to meet new market demands.

Additionally, as the HKTDC paper concluded: “In recognition of difficulties that project owners face when dealing with government agencies and departments, the Duterte government is taking steps towards reform. As well as cracking down on corruption and reforming the bureaucracy, President Duterte has taken a strong interest in pushing project delivery, smoothing the path for infrastructure project owners … There are good opportunities for foreign businesses to fill the funding and services supply gaps.” 

The country may not be fully-primed for the proverbial call of the times. But it appears that it is moving in that direction.