The government plans to spend PHP307.6 billion on infrastructure in 2013, representing 3.2 percent of GDP. The largest share of infrastructure investments goes to the power sector, with PHP94.7 billion or 30.8 percent of the total. The next highest recipients of infrastructure spending are water and transportation. But which sector is getting the most attention? And is it the right one? Let’s examine this question further. And if the government is serious about addressing the country’s infrastructure needs, then what’s holding it back?
The Philippines has a high concentration of cell phone users compared to the U.S., making the cellular industry more developed there than in the United States. Over five million Filipinos rely on their cell phones as their digital wallets, using their cellular networks for all financial transactions. Despite the high number of cell phone users, the Philippines consistently underinvests in its physical infrastructure. In fact, it spends under 3% of its GDP on infrastructure.
Although government infrastructure spending is still small, the government has committed to reducing the deficit to less than three percent of the country’s GDP. It also pledged to increase revenue mobilization to cover the infrastructure spending. However, this is difficult given the lack of revenue mobilization in the country. And because public investment is small, it is difficult to reallocate a large portion of government expenditure to finance infrastructure spending. In a way, it can only be seen as a good thing, and a major concern for the government, but it still needs to happen.
The Philippines is facing a serious lack of infrastructure. Many parts of the country suffer from frequent power failures. In recent months, power failures have even affected Manila. Insufficient power supply is one of the main problems that plague the country’s economy. Poor infrastructure has a particularly negative effect on the lives of women and children. This is especially true in areas without running water or electricity. So despite these problems, the country can make a huge leap forward.
A large part of the problem lies in government procurement. Many projects end up substandard, as contractors are chosen based on the lowest bids. Moreover, contractors often scrimp on resources and employ subcontractors. These practices make the overall cost of the project lower. They also use unused funds for other purposes. Because of these challenges, the government’s policies do little to address this problem. But these shortcomings can be addressed.
The public investment in public infrastructure in the Philippines has consistently lagged behind other countries in the region. The country invested only 2.5% of its GDP during the period 2000-2014, which is low compared to regional peers. The poor quality and low investment efficiency of the country have been noted in studies by Montes, Dohner, and Intal. Several countries in ASEAN share less than 5% of their GDP in public infrastructure. So the Philippines has a lot of work ahead of it.
