10/10/2019 [ANALYSIS] The pipe dream that is Build, Build, Build

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THOUGHT LEADERS

[ANALYSIS] The pipe dream that is Build, Build, Build

What’s the status of the Build, Build, Build projects? Why have they proceeded so slowly? How are we going to pay for them?

JC Punongbayan
Published 5:00 PM, July 24, 2019
Updated 5:00 PM, July 24, 2019

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10/10/2019 [ANALYSIS] The pipe dream that is Build, Build, Build

They promised us a “golden age of infrastructure.” But all we got so far is a pipe dream.

Build, Build, Build is being touted as the Duterte administration’s agship economic project. With an original expected cost of
P8.4 trillion spread over 6 years, Build, Build, Build is meant to usher in a “golden age of infrastructure,” bringing in new
railways, roads, bridges, airports, etc.

But more than two years since its launch, only two of the 75 projects have been completed as of April 2019.

Sure, 9 other projects are “ongoing,” and many more are in the pipeline. But President Rodrigo Duterte is stepping down from o ce in less than 3
years, and relative to the targets set by the economic managers for themselves, this is hardly the golden age they promised to deliver.

What’s the status of the Build, Build, Build projects? Why have they proceeded so slowly? How are we going to pay for them?

1) Only two projects have been completed as of April 2019

The latest comprehensive status report on Build, Build, Build is available from the website of the National Economic and Development Authority
(NEDA).

As of April, at least 37 – or about half – of the projects have been approved by the NEDA Board. Another 29 are awaiting approval, and 9 need no
approval at all.

Only two projects have been completed so far (Table 1). They are relatively minor and obscure, and both cost only a little over P1.2 billion. That’s
just 1% of 1% of the original P8.4 trillion expected cost of Build, Build, Build.

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10/10/2019 [ANALYSIS] The pipe dream that is Build, Build, Build

Status of Build, Build, Build projects

Project count as of April 30, 2019. GAA = General Appropriations Act; ODA = o cial development
assistance (foreign loans/grants); PPP = public-private partnership.

ODA
Status GAA Grant Loan (unspeci ed) PPP Private T
Completed 1 0 1 0 0 0
Detailed
1 0 1 3 0 0
engineering design

For review 0 0 1 3 0 1
Ongoing 2 2 1 0 4 0
Procurement 3 0 6 0 0 0

Budgeting/ nancing 3 0 14 2 2 0

Feasibility study 0 0 0 22 2 0
Total 10 2 24 30 8 1

Source: National Economic and Development Authority • Get the data

Table 1

The 9 ongoing projects represent only 12% of all identi ed projects. None of the big-ticket projects – like the Metro Manila Subway, 3 new PNR
lines, and the Subic-Clark Railway – have yet broken ground. They are in various stages of detailed engineering design, budgeting/ nancing, or
procurement.

Spending is so much weaker than expected. The economic managers had promised to spend P847 billion in 2017 and P1.2 trillion in 2018. But
actual infrastructure disbursements fell short of these amounts by 18% and 26%, respectively (Figure 1).

Although infrastructure spending last year amounted to 5.1% of the nation’s income “for the rst time in our history,” the economic managers
had promised to spend a higher percentage (5.4%) back in 2017.

Unmet spending targets of Build, Build, Build

In billion PhP.
Projected infra spending (for BBB alone) Actual infra disbursements (not just BBB)

0 500 1,000 1,500

2017

2018

2019

2020

2021

2022

Source: 2017 Build, Build Build launch; 2019 pre-SONA forum • Get the data

Figure 1

If you listen to the pre-SONA forum presented by Public Works and Highways Secretary Mark Villar, you might get the impression that Build,
Build, Build has met many of its goals. He said proudly, “We are already halfway in revolutionizing our infrastructure.”

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10/10/2019 [ANALYSIS] The pipe dream that is Build, Build, Build

But this sense of accomplishment is illusory.

Many of the projects that Villar mentioned – like the new terminal at the Mactan Cebu International Airport and the Parañaque Integrated
Terminal Exchange – are in fact carryovers from the previous administration. Nonetheless, they have all been conveniently folded into Duterte’s
Build, Build, Build.

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2) Three-fourths of the projects will be funded by foreign loans and grants

The nancing of Build, Build, Build has also changed considerably since 2017.

Back then the economic managers said only 15% of total costs will be nanced by foreign loans and grants (otherwise known as o cial
development assistance or ODA). In contrast, they added, 18% will be nanced through public-private partnerships or PPPs.

But latest data show that 75% of the projects (or 91% of total costs) are now nanced by ODA (Table 1). Only 11% of the projects (or 4.5% of
total costs) are nanced by PPPs.

The economic managers shunned PPPs precisely because they thought ODA would be faster.

But even Socioeconomic Planning Secretary Ernesto Pernia now admits that this is not necessarily true: “We thought that things would move
fast, but they are not moving as fast as we expected.”

Moreover, about 42% of the new loans will be nanced by China, wholly or partially. The two grant-funded projects (the Binondo-Intramuros
Bridge and the Estrella-Pantaleon Bridge) are also Chinese-funded.

Note that China didn’t offer us infrastructure loans until Duterte came along. Conceivably, China’s abiding interest in Build, Build, Build aligns with
their own infrastructure push called the Belt and Road Initiative.

But Chinese loans tend to include onerous provisions, as pointed out by Supreme Court Senior Associate Justice Antonio Carpio.

Halfway through Duterte’s term, China also has yet to commit to nance some of Duterte’s favorite projects, like the Mindanao Railway Project.
Why the hesitation?

3) Congress derailed Build, Build, Build

Meanwhile, the late passage of the 2019 budget has derailed other Build, Build, Build projects.

Lawmakers hijacked the budget cycle last year, and Duterte’s Cabinet had to contend with a reenacted budget for the rst third of 2019.

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10/10/2019 [ANALYSIS] The pipe dream that is Build, Build, Build

Consequently, economic growth foundered to a mere 5.6% in the rst quarter of this year, the lowest in 4 years. Public construction shrank for
the rst time since 2015.

This budget delay is utterly ba ing. Doesn’t Duterte already control Congress via the supermajority?

At any rate, budget delays of this sort are unacceptable at a time when the government is gunning for an infrastructure golden age.

4) Budget de cit is already widening

Finally, although Build, Build, Build has yet to proceed at full throttle, the nation’s coffers are already straining.

Former budget secretary Benjamin Diokno (now the Bangko Sentral governor) assured us before that the government’s budget de cit (or
revenue shortfall) will not exceed 3% of the nation’s income “all throughout” Duterte’s term.

But in recent years, the government’s budget de cit has been rising steadily (Figure 2). In July 2019, the economic team has also raised the
de cit ceiling to 3.2%, presumably realizing that Diokno’s original 3% target is now untenable.

Rising budget de cit

5-quarter moving average of national government budget de cit as a percent of nominal GDP. In July
2019 the de cit ceiling has been raised from 3% to 3.2%.

3.2
3

1
2015 Q2
2010 Q1
2010 Q2
2010 Q3
2010 Q4
2011 Q1
2011 Q2
2011 Q3
2011 Q4
2012 Q1
2012 Q2
2012 Q3
2012 Q4
2013 Q1
2013 Q2
2013 Q3
2013 Q4
2014 Q1
2014 Q2
2014 Q3
2014 Q4
2015 Q1

2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
2019 Q1

Source: Author's calculations of data from the Bureau of the Treasury • Get the data

Figure 2

With many more infrastructure projects in the pipeline – and new big-ticket social programs like universal healthcare, free tuition, and higher
government salaries – expect a ballooning de cit in Duterte’s last 3 years.

Finance Secretary Carlos Dominguez III recently assured us that the 2017 TRAIN law “provided a solid footing for our infrastructure spending
program.”

But revenues from TRAIN are quite small. In 2018 they totaled only P68.4 billion, just 8% above target and a puny 8% of total infrastructure
disbursements in that year.

A wider budget de cit is no cause for concern per se. But we don’t want it to soar because each episode of de cit adds to the country’s debt
stocks.

Not as easy at it looks

We need to ramp up infrastructure spending to sustain economic growth in the coming decades.

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10/10/2019 [ANALYSIS] The pipe dream that is Build, Build, Build

But through a combination of unrealistic targets and unacceptable budget delays, Duterte’s Build, Build, Build program has clearly not yet
delivered.

Is this why Duterte mentioned Build, Build, Build in his latest State of the Nation Address (SONA) only in passing?

Transportation Secretary Arthur Tugade once joked that when it comes to infrastructure previous administrations were only capable “talk, talk,
talk.”

But as I’m sure Duterte’s Cabinet is now realizing, ushering in a golden age of infrastructure is not as easy as it looks.

Luckily for them, plenty more projects from the previous administrations will need ribbon-cutting ceremonies. – Rappler.com

The author is a PhD candidate at the UP School of Economics. His views are independent of the views of his a liations. Follow JC on Twitter
(@jcpunongbayan) and Usapang Econ (usapangecon.com).

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