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Economy

Duterte shelves Chinese projects but still pushes 'Build, Build, Build'

In infrastructure policy revamp, Manila cuts reliance on loans and embraces PPP

Philippine President Rodrigo Duterte disembarks from a plane upon his arrival at the Villamor Air Base in Pasay City on Nov. 4. (Photo courtesy of the Philippine Presidential Communications Operations Office) 

MANILA -- President Rodrigo Duterte's government has shelved infrastructure projects it deems unfeasible, including at least two big Chinese-funded deals, in a major policy revamp as it scrambles to complete projects before Duterte's term ends in 2022.

Duterte has come under pressure to deliver on his government's promise of ushering in the "golden age of infrastructure," which it has partly done through cheap loans from Japan and from China, the country's maritime rival which the president has courted for investments.

In a policy shift, the government is also embracing infrastructure projects proposed by private companies under a public-private partnership model.

With less than three years in office, the administration is revising its list of "flagship" priority projects, according to Vince Dizon, recently named presidential adviser for flagship programs and projects.

The new list has 100 projects -- up from 75 -- including airports, railways, dams and roads, which make up half of the 8-9 trillion peso ($158-178 billion) planned spending under Duterte's "Build, Build, Build" program. It also expects at least 54 projects to be completed by 2022, up from 21 in the old line-up.

The new list includes projects that are smaller but can easily be completed by 2022, helping Duterte, who is known for his bloody campaign against drugs, burnish his presidency's infrastructure record.

"The president is a very impatient man," said Dizon. "He wants to speed things up and do things faster."

This also means that projects that were "deemed unfeasible" will be shelved, such as inter-island bridges, funded by the government and Asian Development Bank, and two Chinese-funded projects: a 46 billion peso, 11 km bus-rapid-transit linking the Bonifacio Global City business district and the Manila airport, as well as the second and third phases of a multibillion dollar railway project in Mindanao, which has yet to begin construction.

The shelved projects could be pursued sometime in the future, Dizon said.

Infrastructure spending has improved under Duterte's term, but critics have questioned the progress of the ambitious projects unveiled a few years ago, including a 175 billion peso China-funded railway linking Manila and southern Luzon, and 357 billion peso Japan-funded subway in the capital.

"It is sad to say that the Build, Build, Build program of the administration is a dismal failure," Senator Franklin Drillon, from the opposition block, was quoted as saying by the local media this week. "We only have two and a half years left in this administration. I don't think any substantial progress insofar as that program is concerned will be achieved."

Duterte's spokesperson Salvador Panelo said such comments were "baseless."

Meanwhile, the government's new list now includes over 20 public-private partnership projects, some of them already in the works or approved during the previous administration of President Benigno Aquino.

The former government used a PPP model that auctioned off projects for private companies to build and operate, such as the 17.5 billion peso Mactan-Cebu airport project, which was won by a tie-up between India's GMR group and Megawide, a local construction company.

It also includes the recently approved $15 billion New Manila International Airport project proposed by conglomerate San Miguel, the beer-maker turned infrastructure developer.

The Duterte administration initially put the PPP program on the back burner due to frequent delays as bidders asked for more time to prepare their tenders. A number of Aquino-era PPP projects are now being bankrolled through loans, such the 12.2 billion peso Kaliwa Dam project, which will be funded by China.

"This government is not anti-PPP," Dizon said.

He said the government is opposed to a PPP model that gives winning bidders the right to automatic fare hikes, noncompete clauses and sovereign guarantees. "We cannot compromise the public interest," Dizon said.

Companies that won the rights to privatized assets have sued the government after failing to get rate increases, as in the case of Manila's water concessions, he said.

"The directive to allow PPP is another welcome development, as it brings to the table projects that have gone through the feasibility studies carried out by the interested parties," Nicholas Mapa, an economist at ING Bank in Manila, said.

At least one economist, meanwhile, is skeptical.

Ruben Carlo Asuncion, economist at the Union Bank of the Philippines, said, "The revamped infrastructure program would still be under the same project implementation and policy environment challenges and bottlenecks as the previous one, so I doubt if it would make a huge difference at this point."

But Dizon said the list also provides an infrastructure pipeline for future administrations.

"It's not just a Duterte administration program," Dizon said. "It's meant to be a Republic of the Philippines program."

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