Aquino's Infrastructure Spending Problems

The resignation on Sept. 6 of Philamer C. Torio, executive director of the Philippine government’s Public-Private Partnership Center is a disheartening indication that the Aquino administration’s ambitious plan for infrastructure development is off the rails and far behind.

Torio, a presidential spokesman told reporters, “is pursuing higher studies overseas” despite the fact that he was only appointed to head the office less than a year ago, in November 2010. Cosette V. Canilao, the deputy executive director, has been appointed the temporary head of the agency while a new director is sought, according to the PPP Center’s website.

Benjamin Diokno, who served as undersecretary for budget operations under President Benigno S. Aquino III’s mother, Corazon Aquino, as well as secretary of Budget and Management under President Joseph Estrada, recently went public over what he called seriously deficient infrastructure underspending on the part of the current administration. Diokno pointed out that capital spending is critical in the first six months of the year because of the extreme weather in the Philippines from June through November, with typhoons often delaying construction.

Foreign investors are also said to be increasingly concerned about the government’s efforts to curb corruption, which seem centered on former President Gloria Macapagal Arroyo rather than the deep institutional problems that extend far beyond Arroyo’s own reign. The Philippines is tied with eight other nations ranked 134th in the world by Transparency International’s corruption perceptions index, among the worst in Asia. Indonesia, by comparison, ranks 110th.

President Aquino, at the outset of his administration 14 months ago intended the PPP Center as a flagship agency in charge of reviewing and endorsing all public-private infrastructure projects for bidding. The agency was designed to attract private investors amid administration hopes that the scheme would play a major role in helping to achieve the country’s 2011 gross domestic product growth target of 7-8 percent. However, HSBC earlier this week downgraded GDP growth to 4.3 percent, admittedly due in large part to the global economic downturn.

In his most recent State of the Nation address, Aquino didn’t mention the PPP Center, possibly because of the 10 projects that officials originally earmarked for development under the PPP center have been delayed for a variety of reasons in a country where infrastructure development is woefully inadequate on every level – highways, bridges, ports, schools and airports, particularly the Ninoy Aquino International Airport in Manila, which was named for Aquino’s murdered father. Numerous studies say the navigation equipment at the airport is dangerously out of date.

The government has spent only P698 billion of P1.711 trillion allocated for public works projects in the first half of the year. Much of that went to government employee salaries and revenue allotments for local government unions while capital outlays for infrastructure, maintenance and other operating expenditures have been delayed.

These delays have included holdups in bidding, continuing contract reviews, suspicion over bidders, changes in leadership such as the departure of Torio, who reportedly had been feuding with Canilao, which have all contributed to the problems. Another was the change in the leadership of the Department of Transportation and Communications, in which Aquino brought in his friend and former vice presidential running mate, Mar Roxas, to take over.

Roxas’ first act was to put a hold on bidding for a P14 billion (US$330.03 million) contract to manage the Manila Light Rail Transit 1 and Metro Rail Transit 3 operations. Both light rail systems are choked with passengers to the point where using them is a major ordeal. Delays and breakdowns are rampant. Meanwhile, the agency has ordered a review of the contracts. The MRT, which was designed to carry 350,000 passengers daily, now is transporting 470,000.

Spending on public infrastructure projects under the Department of Public Works has reportedly been held up because Aquino adopted a zero-based budgeting approach that called for rigorous review of government programs and projects. That has resulted in a time-consuming process that has slowed implementation of government projects.

Among other projects that have been delayed are the P20.2 billion North Luzon Expressway-South Luzon Expressway connector, a 13.4-kilometer, four-lane elevated thoroughfare from Caloocan to Makati; P10 billion for school construction; P1 billion for a vaccine self-sufficiency program; and the rehabilitation of Palawan’s Puerto Princesa airport.

Of the two contracts that have been formally offered by the government, only the bid process for a Southern Luzon Expressway tollway project is moving forward, with 18 construction companies having obtained the bid specifications for the project, slated to cost P1.956-billion.

Canilao told local media that projects set to be offered next year include a P947.7 million international expressway phase II project, the lengthening of the newly opened Cavite-Laguna Expressway; three other expressways, an extension of the Metro Manila C-6 expressway, an airport development project in Bohol, the now-delated LRT-1-MTR-3 project, and several others.