By Justine Irish D. Tabile, Senior Journalist
THE Philippine government must expand private-private partnerships (PPP) to help reduce the country's infrastructure gap while reducing financial pressure from rising debt levels, the Asian Development Bank (ADB) said.
Despite the government's plans to catch up with infrastructure, gaps are still growing rapidly in cities and economic growth continues to increase demand, said ADB Country Director for the Philippines Andrew Jeffries. BusinessWorld on Wednesday.
“There is an infrastructure gap in the Philippines… Metro Manila's population has grown exponentially in the past few decades, so investment in urban transportation must continue,” he said.
Mr. Jeffries said both the current administration's “Build Better” plan and the previous administration's “Build Better Build” plan are aimed at addressing years of underinvestment.
“As the Philippines grows, in terms of population, gross domestic product (GDP), transportation also needs to continue to grow,” he said.
“And with what's going on now with diesel fuel prices and everything, other forms of public transportation are becoming part of that long-term solution,” he added.
However, Mr. Jeffries said infrastructure maintenance efforts are facing challenges caused by financial pressures and budget constraints.
“The government is closely monitoring the levels of public debt, so how to bring the private sector in some of these investments instead of just the government budget and borrowing, I know, is very important for this government,” he said.
The country's debt-to-GDP ratio reached 65.2% in the first quarter, the highest level since 2005. This comes as the National Government debt increased by 1.8% to P18.49 trillion at the end of March from P18.16 trillion at the end of February.
Mr. Jeffries said that bringing in private investment ensures that “public debt levels can be maintained or reduced over time and vice versa.” that is the only source of funds. “
“There are many private infrastructures in this country. The important thing is how to make sure that it is done properly so that the government and the people get the best money,” he added.
According to the PPP Center, the PPP pipeline as of May 19 consists of 250 projects worth P3.13 trillion. The railway sector accounts for P1.97 trillion of pipeline project, followed by ground transportation (P277.26 billion) and propdevelopment of the country (P221.46 billion).
TRANSPORTATION PROJECTS
Meanwhile, Mr. Jeffries said transportation projects will continue to account for an important share of ADB's financing portfolio in in the Philippines in a short period of time.
The international lender's portfolio of projects under construction and commissioning in the Philippines is estimated at $12.5 billion.
“Our transportation portfolio is over $7 billion, so that's a very good percentage of our portfolio in the Philippines,” he said.
“That's really because of the very large projects that we're financing… From a dollar perspective, transportation is obviously big in our portfolio here in the Philippines,” he added.
These projects include the North-South Commuter Railway, the Bataan-Cavite Interlink Bridge, the Laguna Lakeshore Road Network Project, and the Davao Public Transport Modernization Project.
Asked if ADB is considering other transport plans, Mr. Jeffries said that “because (the projects) are so big and take so long, we finance it. those who are at the appointed time.”
“So, we have a strong pipeline going forward, we're just seeing those projects being completed… We are focus more on use which we already have,” he added.
Mr. Jeffries said the government is looking at ways to attract more private investors into the transport sector amid financial pressure.from the Middle East crisis.
“Due to the financial problems and this crisis in the Middle East and others, the government is also looking at how to bring investment from private companies in this sector,” he said.
“Therefore, we do not have any major new projects in our pipeline at this time,” he added.
Mr. Jeffries said transportation projects will likely remain a major part of ADB's Philippine portfolio in the next few years as the government prioritizes completing existing projects.
“I think that number will remain the same for the next few years, especially now that the government is more concerned about trade and financial levels and public debt,” he said.
“They want to focus on working and reaching the ends of what is going on because until it ends and works, they do not benefit the people,” he added.
FINANCIAL GAP
The infrastructure and investment gap is not unique to the Philippines. In Asian Transport 2035 Outlook, Asian Transport The Observatory (ATO) said every year the need for investment in transport infrastructure in Asia and the Pacific is expected to more than triple over the next decade.
“Annual investment needs across all modes of transport will increase from approximately $800 billion per year between 2000-2025 to approximately $2.6 trillion per year between 2025 and 2035,” the ATO said.
“That is equivalent to 2.3% of the GDP of LMIC (low and middle income countries) per year,” it added, referring to those in Asia and the Pacific.
However, the ATO said the projections remain conservative as they only reflect current trends and existing project pipelines.
“The real needs, accounting for the full cost of energy transition, the climate backlog, and the lack of achievement of the SDG (Sustainable Development Goals), are likely to be much higher,” it added.
Despite this, the ATO said the region still faces a huge financial gap.
“Development banks can do things that commercial investors can't – combine leveraged and market-rate lending, capture project risks early, and attach technical assistance to otherwise viable pipelines. they are still in the feasibility stage,” he said.
“But there is a limit to what foreign capital can do. The long-term answer to the transport financing gap in Asia is strong revenue programs and public finance reforms. We are not facing an infrastructure gap, but also an investment and governance gap,” he added.
