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Infrastructure Problems Hobble Relief Efforts in the Philippines
By Murray Hiebert & Phuong Nguyen
During the first week after Typhoon Haiyan ravaged the central Philippines, relief operations were greatly hampered by the destruction of roads, bridges, and airports. The surviving roads were covered by wreckage and debris from the storm and, in recent days, they have become clogged with people trying to escape areas such as the city of Tacloban, which was ground zero for the largest storm to hit the Philippines in at least two decades.
Weak and overextended infrastructure has long been one of the biggest problems holding back the Philippine economy. After the government of President Benigno Aquino took office in 2010, officials estimated that the country would need to boost infrastructure spending from $7 billion to $11 billion a year if it wants to keep pace with its economically more successful neighbors.
Many have pointed to Manila’s lack of cash as a reason for the country’s flagging infrastructure. The government typically spends 3 percent of gross domestic product (GDP) on public infrastructure. But in recent years, as a result of faster economic growth, infrastructure spending has increased. For instance, spending on infrastructure in the first quarter of this year was nearly 45 percent higher than the same period in 2012. International financial institutions, including the World Bank and the Asian Development Bank, continue to advise the government to boost this figure to 5-8 percent of GDP by 2016.
Since coming into office in 2010, President Aquino has advocated the use of public-private partnerships (PPP) as a means to finance large projects and upgrade the country’s crippled infrastructure. However, the Department of Transport and Communication (DOTC) has not responded enthusiastically to initiatives in which private funding would be used.
A year after Aquino launched his flagship PPP scheme, former DOTC minister Manuel Roxas, who is now minister of interior, called for the re-examination of 10 large projects earmarked for bidding under the PPP program. Roxas said he would rather use funding borrowed through official development assistance channels or from foreign governments, calling it more cost-effective than using private sector funds. Government websites show that to date, contracts have only been awarded to 4 out of 47 proposed PPP projects.
Corruption has also long hampered infrastructure development in the Philippines and played a key role in the country slipping from the ranks of one of the most successful in the region at the end of World War II. For years the central government allocated funding—known as pork barrel funds—to elected officials for political purposes. Although these funds were said to be meant for public investment projects in local constituencies, they were more often used for private gains. The perennial misuse of pork barrel funds has led to underinvestment in roads, bridges, and airports in many parts of the country. The Philippine Supreme Court recently declared the pork barrel funding unconstitutional, to which the Aquino administration has not yet issued a response.
President Aquino was elected on a platform pledging to tackle corruption. His government has arrested and charged his predecessor Gloria Arroyo with plunder in a series of schemes, including allegedly misusing state lottery funds. Aquino’s anti-corruption efforts resulted in the Philippines being listed in this year’s Global Corruption Barometer report as one of only 11 countries out of 107 surveyed where citizens perceived an improvement resulting from government policy.
Yet some high-profile cases remain. A recent corruption case at DOTC involved Czech company Inekon, which attempted to bid to supply 14 rail cars to the Metro Rail Transit in Manila in 2012. DOTC officials allegedly asked Inekon executives to pay bribes of $30 million, a sum later reduced to $2.5 million, to win the contract. When Inekon refused to pay, the company was reportedly blacklisted. The company has since submitted an affidavit to the National Bureau of Investigation, the Philippines’ equivalent of the Federal Bureau of Investigation, detailing what it described as an extortion effort by the DOTC.
Still, reports of corruption in infrastructure projects have dropped markedly in recent years. Nonetheless, the legacy of the past has resulted in under-investment in infrastructure, which has held back the economy generally and is now hobbling relief efforts in the wake of Typhoon Haiyan.
Mr. Murray Hiebert is a senior fellow and deputy director of the Sumitro Chair for Southeast Asia Studies at CSIS. Follow him on twitter @MurrayHiebert1. Ms. Phuong Nguyen is a Research Associate with the Sumitro Chair.
Courtesy: This post originally appeared on the Center for Strategic and International Studies, Washington D.C. cogitASIA blog
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