World Bank-Singapore Infrastructure Finance Summit
InterContinental Singapore
April 5, 2018
Thank you to the World Bank and the Government of Singapore for organizing this infrastructure finance summit. As the region races to build the vital infrastructure needed to sustain its growth and maintain its competitiveness, this meeting allows a rare opportunity for all the stakeholders to exchange notes and compare experiences.
In the Philippines, the infrastructure program is at the core of our strategy for rapid and inclusive growth. With the highest multiplier effects, investments in infrastructure enable us to stimulate economic expansion. Since the Philippines is an archipelago, investments in infrastructure enable us to build an efficient logistics backbone that addresses the problem of stranded island communities and inaccessible farming areas.
Over the next five years, we expect to invest about 170 Billion US dollars in providing better infrastructure projects for our economy and our people. Our foremost consideration is improving transport facilities that will make movement of goods and people more efficient. We are building several railway lines, a subway system for the Manila area, and new roads that will serve as growth corridors for key areas of the country.
The Philippines underinvested in infrastructure in the wake of the debt crisis of the mid-eighties. In the nineties, we spent only 2.2 percent of GDP in the infrastructure program. This is less than half what our neighboring economies were investing, creating an infrastructure gap with the rest of the region. As late as two years ago, our investments in infrastructure amounted to only 2.9 percent of GDP, leading to problems of congestion and inefficiency in our ports, airports and roads.
In 2017, with priorities rebalanced under President Rodrigo Duterte’s administration, infrastructure investments rose to 5.4 percent of GDP. This year, one quarter of the national budget, equivalent to 6.3 percent of GDP will be allocated for the infrastructure program. By 2022, we expect to increase investments in infrastructure to 7.3 percent of GDP.
The Build, Build, Build program maps out our key infrastructure investments for optimal impact on our economic growth. The 75 strategic infrastructure projects included in this program are designed to increase the productive capacity of the economy, create jobs, increase incomes and make the economy more attractive to investment flows. This program, we believe, opens the path to sustained and inclusive economic growth.
Of the 75-high impact and big-ticket projects we have identified, 23 projects have completed the approvals process and are now shovel-ready. We expect the rest of the projects to pass the approvals process this year.
The Comprehensive Tax Reform Program is a necessary component of the economic strategy we pursue. It aims to raise our tax effort over the regional average. It will enable the government to fund the ambitious infrastructure program without compromising the fiscal discipline that had improved our credit rating to investment grade.
The recent enactment into law of the Tax Reform for Acceleration and Inclusion (TRAIN) law, the first package of our Comprehensive Tax Reform Program, will enhance the financial feasibility of the Build, Build, Build Program by providing a steady revenue flow for the government. About 70 percent of incremental revenues raised from TRAIN will be directed to the infrastructure program. The remaining 30 percent will be used for social services and investments in our human capital.
In tandem, the infrastructure program and the package of tax reforms will enable us to grow our economy by 7 percent or more into the medium term. We aspire to bring down poverty incidence from about 21 percent to only 14 percent by 2022.
Our ambitious infrastructure program benefits from expanded official development assistance (ODA) flows from our friends in the region such as China and Japan. The program also benefits from a revived interest in infrastructure investments among multilateral institutions such as the Asian Development Bank (ADB), World Bank (WB) and Asian Infrastructure Investment Bank (AIIB). These institutions have evolved a keen sense of the importance of infrastructure-based intervention to assist in economic emergence. We have combined loans and grants to arrive at economically astute and technically superior designs for the projects we intend to undertake.
Against the backdrop of over two decades of underinvestment in infrastructure, we embarked on the Build, Build, Build program with a great sense of urgency. With expanded ODA inflows and with the possibility of floating bonds at investment-grade rates, we decided to shift to hybrid public-private partnership (PPP) models that will enable us to execute the projects quickly, reduce completion risks and deliver the economic benefits as soon as possible.
The traditional PPP models were simply too tedious, too complex and prone to unnecessary delays. I put it this way, PPP is actually a wrong term, because the public-private partnership, they forget the last “P” which is the People. When these projects are delayed, it is the people that suffer. By our experience, the traditional PPP model required all of 30 months from gestation to start of the project. In the hybrid PPP model, government undertakes the projects using budget allocations, ODA and funds raised from our borrowing. The completed projects are then passed on to private partners for management or even acquisition or investment.
To further hasten the process, we have streamlined processes for loan processing and project approvals. For instance, the Department of Finance (DOF) and the National Economic Development Authority (NEDA) are finalizing guidelines for the implementation of a 3-in-1 process. In this process, the NEDA Board Approval, the Forward Obligational Authority and the Special Presidential Authority are issued all at once.
In order to hasten project implementation, government advances right-of-way acquisition and land resettlement prior to loan signing. We have improved institutional arrangements such as designating the Department of Budget and Management (DBM) as the procurement agent. We have advanced budget allocation for government’s counterpart commitments and established project monitoring offices to closely observe the completion of projects.
We continue to improve the institutional processes regarding project approval and execution. It is our desire the see the strategic projects completed at the shortest possible time in order to immediately realize their economic value and lessen unnecessary financing costs.
I am sure we will learn more from the discussion in this important forum. We look forward to that.
Thank you and good day.
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