Transport infrastructure

Existing infrastructure gaps are handicapping the Philippines’ productivity and competitiveness. Traffic congestion in Metro Manila and Metro Cebu is severely reducing the productivity of millions of workers every day, while international gateways for passengers and cargo, such as NAIA and the Manila port, struggle to keep up with increasing demand. Therefore, if economic growth is to be sustained, there is an urgent need for the development of major infrastructure projects that meet high international standards. For that to happen, there is a requirement for capital investment, innovation and knowledge/ technology transfer of the latest international trends.

As a global leader in high standard, technologically advanced, innovative infrastructure development, the EU infrastructure sector has the potential and is willing to contribute to the development of vital infrastructure projects across the Philippines. However, there are major barriers that hinder the participation of EU infrastructure companies in infrastructure development initiatives in the country.

If these are addressed, it will open the way for EU companies to contribute to infrastructure in the Philippines that facilitates economic growth through better connectivity for international tourist arrivals, less costly transportation of imports and exports and more productivity due to reduced commuting times for professionals both in Manila and other urban areas. How? We believe that the following recommendations can make that happen:

I. Removal of foreign ownership restrictions

Revisit the Public Service Act of 1936 to revise and limit the scope of the definition of public utilities.

Reform the Government Procurement Reform Act, to remove provisions subjecting the procurement of goods and services to the Flag Law of 1936 and provide for increased transparency and efficiency in the procurement process.

II. Improvement of the PPP program

Amend the BOT Law to strengthen the PPP program with emphasis on the Senate version of the 16th Congress and ensure timely implementation.

Update the IRR of the BOT Law and PPP Governing Board policy circulars.

Establish the use of the Swiss challenge for unsolicited proposals.

III. PCAB licensing for fully foreign owned contractors

Amend the IRR of PCAB to allow regular licenses to be issued to fully foreign owned contractors.

IV. Comprehensive, pro-growth infrastructure development

Develop adequate transportation infrastructure across the country that will enhance and sustain economic growth.

Market  Data

The transport system of the Philippines consists of road, water, air, and rail transport. Water transport plays an important role due to the archipelagic nature of the country, but road transport is by far the dominant subsector accounting for 98 percent of passenger traffic and 58 percent of cargo traffic. Spread across the Philippines is approximately 215,000 kilometers of roads, 1,300 public and private ports, and 215 public and private airports.

Of the 215 airports in the Philippines, 84 are government-owned and controlled and the rest are privately owned and operated. Of the government-controlled airports, 10 are designated as international airports, 15 are principal class 1 airports, 19 are principal class 2 airports, and 40 are community airports. The busiest airport in the Philippines is the NAIA in Manila, with Mactan Cebu International Airport being the second-busiest airport in the country.

With regard to water transport, of the approximately 1,300 ports, around 1,000 are government-owned and the rest are privately owned and managed. Of the government-owned ports, about 140 fall under the jurisdiction of the Philippine Ports Authority (PPA) and the Cebu Ports Authority; the remainder are the responsibility of other government agencies or LGUs.

The railway system consists of Light Rail Transit (LRT) lines in Metro Manila and heavy rail lines in Luzon. The three LRT lines commenced operations in 1984, 1999, and 2003.

Public expenditure on infrastructure reached PHP345.3 billion at end of 2015.

Disbursement improved 25.1 percent from the PHP276 billion booked in 2014.  As of May 2016, the Philippine Government had awarded twelve PPP projects, worth a total of PHP197 billion, with about 15 more projects currently in the process of procurement.

As of end 2016, the Duterte Administration has committed to spend major amounts on infrastructure development. The 2017 budget has been structured accordingly. What remains to be seen is whether the government agencies and the LGUs have the absorptive capacity to get the projects going. It would be useful if the government would regularly consult with the private  sector on the speedy implementation of infrastructure development.