MANILA, Philippines - Governments in Southeast Asia, which includes the Philippines, should be more proactive in providing infrastructure projects to solve wide income disparity and prevent social unrest, industry experts said in a panel discussion during the World Economic Forum on East Asia held in Makati last week.
They said the time is now for governments to roll out more infrastructure projects to take advantage of the “golden age of financing†while offering Public-Private Partnerships (PPP) scheme for urban projects that would give businesses adequate returns.
“The ability of the region to take on the challenge of inclusive growth depends on infrastructure programs,†said Stephen P. Groff, vice-president for operations of Manila-based Asian Development Bank (ADB).
“We have a moral and social imperative here. The more (people) live in these circumstances, the more social unrest can occur,†Groff said during the Accelerating ASEAN Strategic Infrastructure forum.
The Southeast Asian region, which is pursuing an economic integration next year, requires around $60 billion annually until 2020 for its infrastructure needs, data from the ADB showed.
“The government should be doing more infrastructure projects than the private sector,†said Enrique K. Razon Jr., chairman of International Container Terminal Services Inc. (ICTSI) and casino owner Bloomberry Resorts Corp.
“There is a misconception that every infrastructure project could be done by PPP,†Razon said, adding that while PPP in urban sectors can generate adequate returns, projects like airport runway and railways systems would charge the public high rates to be profitable.
For Don Lam, CEO and co-founder of Vietnam’s VinaCapital Group, said governments should just focus on a few key projects, making sure these are bankable.
“PPP is all about risk sharing. If it seems difficult it is because the discussion of risk sharing is a complicated one,†said Michael Whalen, vice-president for Structured Finance of US-based Overseas Private Investment Corp.
So far, the Aquino administration has awarded six PPP projects worth P45.1 billion, including the P17.5-billion Mactan-Cebu International Airport project and the P1.72-billion Automated Fare Collection System. Thirteen more projects worth P367.9 billion are in the pipeline, nine projects of which worth P187 billion are seen to be awarded before 2016.
“With the investment grading rating, the cost of funding is very cheap at the moment,†Razon said.
“We exist in the golden age of financing and the golden age of innovation,†Whalen said.
Groff said billions of funds in the US and Europe are stored in low-yielding treasuries given the undeveloped capital markets in Southeast Asia.
PPP, the flagship program of the Aquino administration that involves railroad, tollroad and airport ventures was launched in 2010 to address the country’s infrastructure backlog. It has since attracted the attention of top conglomerates like San Miguel Corp., Ayala Corp., SM Investments Corp., Metro Pacific Investments Corp. and JG Summit Holdings Inc.
However, issues like updated feasibility studies and complaints from the private sector have caused delays in the bidding of PPP projects.