Duterte taps local businesses to fulfil infrastructure promise

Philippines President Rodrigo Duterte. Photo: Bloomberg

When Philippine President Rodrigo Duterte took office in 2016, he promised $165 billion in spending to “build, build, build” roads and railways in the Southeast Asian nation.

The program consisted of 75 key projects — including a railway stretching the length of Luzon, the country’s main island — along with thousands of smaller ones like schools, to be funded mostly from development loans and the government’s budget.

Halfway through the president’s six-year term, only two of those key projects have been completed. Most have run into bureaucratic delays, or faced problems like acquiring land and financing to get off the ground.

Now Duterte is revamping the plan and giving businesses a bigger share of the projects, after earlier shying away from privately led projects due to financing risks and delays. That’s a boon for companies like Megawide Construction Corp., which is already planning bids for rail and other infrastructure projects.

“It’s a good opportunity for us,” said Edgar Saavedra, chief executive officer of Megawide. “This is like a rebirth for the Philippines.”

Duterte’s new plan consists of 100 priority projects, nearly half of which will be funded from investments by companies like San Miguel Corp., which wants to build a 736-billion peso ($14.5 billion) airport north of Manila, and Udenna Corp., which proposed a monorail in Cebu.

The revamp could result in a more streamlined approval process, given “sufficient attention to fast-track implementation,” according to Cosette Canilao, chief operating officer at Aboitiz Equity Ventures Inc.’s infrastructure unit. Canilao was head of the country’s Public-Private Partnership Center, which reviewed company-led infrastructure projects under Duterte’s predecessor, Benigno Aquino.

The infrastructure gap is large across emerging Asia, with the Asian Development Bank estimating the region needs $26 trillion worth of investment through 2030 to address bottlenecks and keep growth going. Political uncertainty has delayed infrastructure projects in Thailand, while in Indonesia, the government has offered tax benefits to get around funding constraints.

Port Plans

Philippine billionaire Enrique Razon, chairman of port operator International Container Terminal Services Inc, said he’s looking at proposing more infrastructure projects to the government. Razon is a major shareholder in a venture that seeks to develop a new water source for the Philippine capital.

The government aims to start construction on all 100 projects on the new list before Duterte steps down in 2022, with one-third of the projects expected to break ground next year, said Vince Dizon, a presidential adviser on the infrastructure program, who was appointed to the post in September.

Private-sector participation alone doesn’t guarantee projects will get completed. Reforms are needed to speed up approvals, address corruption and prevent policy reversals, said James Su, an infrastructure analyst at Fitch Solutions Inc. in Singapore.

The scope of Duterte’s “Build, Build, Build” program is so large that “it was always going to be a challenge to implement the initiative in full,” he said.

Turning to companies also poses risk a of competing firms suing each other over contracts. And even when projects do get off the ground, the Philippines faces a shortage of construction workers.

“These are issues all countries face when they raise infrastructure,” Thomas Helbling, the head of the International Monetary Fund’s mission to the Philippines, said at a recent conference in Manila.

Speaking to foreign investors this month at the Clark Freeport special economic zone, Antonio Lambino, an assistant secretary in the Finance Ministry, said the country’s infrastructure drive goes beyond the list of high-profile projects. Public infrastructure spending made up a record 5% of the country’s gross domestic product last year, and should rise to 7% by 2022, he said.

“We go around to take a look at these projects on the ground, and we do see that ‘Build, Build, Build’ is making a difference in people’s lives,” Lambino said.

Bloomberg

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.