Case Study on Poor

Infrastructure
(Applied Economics)

Submitted to:

Sir Aaron San Jose

Submitted by:

BONOAN, Alonzo D.

MIGUEL, Sean Andre R.

NEPOMUCENO, Kyle Dustin S.

TAMAYO, Aindrea Ma. Regina Gabrielle B.

Date of Submission:

December 3, 2021
 Table of Contents

Introduction of the Problem p.3

Current Scenario of the Problem p.4

Alternatives p.6

Recommendations p.10

Sources p.11
I. Introduction

The Philippines' infrastructure is suffocating the economic potential the nation possesses. Traffic

congestion is high, provision of electricity struggles to keep up with demand, the low accessibility

of clean water is alarming, the airport systems and transportation are inefficient. The main issue

of the infrastructure in the Philippines is the transportation and road networks. Metro Manila’s

traffic congestion is ranked fourth globally (Balinbin, 2020), and the country ranks ninth globally

in traffic (Grecia, 2021). The issues in the efficiency of the transportation of citizens heavily

cripples the potential growth in the nation’s economy.

The infrastructure in the Philippines was under neglect from government action, importantly, the

lack of infrastructure. The Philippines’ lack of infrastructure caused many of key infrastructure to

be sub-par compared to regional neighbors. With the announcement of the “Build, Build, Build”

project, the government aims to further improve the infrastructure to provide a better life for the

Filipino citizen. However, this does not negate the current issues the infrastructure currently

possesses, further studying of the infrastructure allows for a greater opportunity to provide

alternatives. Aiming to understand the infrastructure of the Philippines, the main issues hindering

the infrastructure are as follows:

1. Corruption within the government

2. Lack of focus and budgeting towards current infrastructure

The conducted research in this paper aims to provide an overview of the current infrastructure

situation. The research can be used to conclude the situation of the infrastructure. Studying the

current issues of infrastructure, mainly the issues towards the transportation and road networks

within the country provide the wasted economic potential the issues induce.
II. Current Scenario of the Problem

Infrastructure investments in the Philippines are allocated unevenly among industries.

Transportation is one of the most affected industries due to the slow infrastructure development.

In the World Economic Forum's Global Competitiveness Index for 2017-2018, the Philippines

placed 22nd out of 137 countries due to its poor infrastructure score of 3.4 out of 7. The Philippines'

total infrastructure development falls behind those of its Southeast Asian peers due to its limited

roads, railroads, ports, and electricity. To add more information, according to a recent Numbeo

analysis, the Philippines has the worst traffic issue among Southeast Asian nations and is ranked

ninth worst in the world.

This would explain why employees, students, and commuters take so long to get to their

destinations due to heavy traffic created by limited routes. The Philippines' delayed infrastructural

development interrupts the industrial chain. Poor infrastructure prevents progress in our economy

by delaying production. To connect supply chains and effectively transfer goods and services

across borders, the economy needs reliable infrastructures. Infrastructure connects households in

metropolitan areas to better-paying jobs, healthcare, and education opportunities. In addition,

many locations, particularly coastal ones, are in desperate need of infrastructure that can resist or

reduce the effects of more severe weather and disasters. Majority of people rely on transportation

infrastructure and public utilities, which are equally critical to our enterprises' economic viability.

Poor Infrastructure is a huge hindrance to community development and economic prosperity of the

country.

Unfortunately, accomplishing infrastructure development requires the presence of a decent and

honest administration. Certain infrastructure projects in the Philippines have been delayed or

falsified as a result of government corruption since some officials have been stealing funds that

were supposedly distributed for the project. According to the Corruption Perceptions Index of

Transparency International, the Philippines got a score of 34 on a scale of 1 to 100 being the

cleanest nation. This would validate that the Philippines is indeed a country full of corrupt
government individuals. One of the negative consequences of political corruption is the lack of

quality service and justice; if our country is corrupt, there will be limited public services that would

support the livelihood in the Philippines. This also accounts for why the Philippines is classified

as a third-world country due to its high rate of poverty, high rate of corruption, and poor rate of

infrastructure. So, in order to steadily improve the standard of living in the Philippines, the public

administration should consist of clean and honest authorities that would emphasize the country’s

economic growth by adopting additional infrastructures that would help aid in the productivity of

its people.
III. Alternatives

The Duterte administration aims to usher in the “Golden Age of Infrastructure” in the Philippines.

The lack of infrastructure has long been one of the many reasons for the Philippines’ slow growing

economy. Now with the upcoming 2022 national elections in May, it is extremely obvious that this

failure of an administration has greatly and horribly failed at ushering an age that would bring in

huge economic growth and reduce poverty. The “Build! Build! Build! Program” is the current

administration’s attempt to initiate the so-called “Golden Age of Infrastructure”. The program

which started in 2016 (still ongoing), aims to “accelerate public infrastructure expenditure from

an average of 2.9 percent of gross domestic product (GDP) during the Aquino regime to about 7.3

percent at the end of the Duterte administration (Subic - Clark Alliance for Development, n.d.)”.

This project is responsible for the creation of the Mactan airport and the ongoing Subic- Clark

railway project. Our country must be more active in having more infrastructure due to its many

benefits that could greatly help our economy recover from something like a pandemic. According

to the Asian Development Bank, “Infrastructure is vital to economic development, as it is key to

achieving higher and stable economic growth. Although most economies in Asia have already

developed their basic infrastructure, the focus of development is usually on the quantity rather than

the quality. According to the World Economic Forum (2014), “well-developed infrastructure not

only reduces the distance between regions but also integrates national markets and connects them

at low costs to other economies”. Infrastructure also lessens poverty rates which helps our

economy progress. According to the Borgen Project website, “poor infrastructure is also a large

factor of poverty. Impoverished people generally live in isolated communities in rural areas. This

means that these people do not have easy access to electricity, water, roads and reliable

transportation. For example, more than 85 percent of the population in the Central African

Republic lacks electricity and connectivity. As a result, isolation is limiting the ability to education

or work opportunities (Park, 2019)”. Our country’s government and private companies (mainly

the government) must be able to use these sets of alternatives that can help our country have better

infrastructure and will result in great economic growth and a lower poverty rate to make the

Philippines have a brighter future:

 1. Slowly Eradicating Corruption within the Philippine government

2. Budgeting and Analyzing for Economically Beneficial Infrastructure Projects

Slowly Eradicating Corruption within the Philippine Government

In 2020, Transparency International released its annual corruption perceptions index. They

grade the corruption in a country’s government. 180 countries were part of the rankings, and the

Philippines is one of them. Sadly, the rank of the Philippines was 115 of 180 and our country

scored a poor and measly 34/100. This ultimately proves that corruption is constantly bringing

down our country’s economic growth and increases the poverty rate through the money being

corrupted that can be used for investing in things that would boost our economic growth like the

building of infrastructures. Slowly eradicating corruption can help our country’s economy to get

better and to lessen the poverty rate in our country. According to Investopedia.com, corrupt

countries have an economy that does not function properly due to the three (3) economic laws(law

of self-interest, law of competition, and law of supply and demand) not being able to move freely,

resources are not allocated equally and efficiently, and the quality of education and healthcare goes

down to a lower state because of a corrupt government and economy which makes the standard of

living of a country’s citizens much lower due to the consequences caused by corruption. Our

government must find ways to slowly remove corruption from our country to see massive

economic growth, be able to save money for investments for building of infrastructure and a

tremendous decrease in the poverty rate. To lower corruption in a country, the government must

be more transparent about their candidates and must offer more civic education to the citizens who

can vote. Our government can apply the use of “report cards” which have the qualifications of the

candidates which can bring corruption down. This was proven to be effective when it was done in

Delhi, India where; “using the Indian Right to Information Act and candidates’ affidavits, they

created report cards for ten assembly jurisdictions during the run-up to the 2008 election in Delhi.

They then randomly provided slum dwellers with pamphlets and free newspapers containing
information on candidate qualifications and legislator performance. The information increased

voter turnout by 3.5 percentage points and reduced the incidence of vote buying by 19 percentage

points. The information campaign seems to increase the quality of government: the vote share of

the best performing incumbent increased by 7 percentage points in the treatment group relative to

the controls (Olken and Pande, 2012)”. Civic education must also be used so people can be more

certain on who they will vote for, which can make the country less corrupt when citizens know

who is supposed to be voted. According to Fajar and Muriman (2018), “eradication of corruption

can be done through education, because education has a very strategic position in an effort to build

an anti-corruption stance, especially to the younger generation. The formal education sector can

play a role in meeting the need for corruption prevention as a preventive strategy. In this case the

students serve as a target as well as empowered as an environmental press to avoid permissiveness

to corruption and together rise up against corruption [15-17]”.

Budgeting and Analyzing for Economically Beneficial Infrastructure Projects

For decisions concerning a huge investment in terms of our infrastructures, the Philippine

government must research and assume the risks of a large project and incorporate them in the

budgeting of building infrastructures that can boost our economic growth. Our government must

create an effective and efficient plan that would lessen the risks of an infrastructure project being

a financial disaster. According to Hekter and Mischke (2013), our government and private sectors

(mainly the government) must invest in the projects that will help our economy get better. “Projects

need to be clearly linked to broader economic and social development, rather than being vanity

exercises. Governments need to evaluate costs and benefits rigorously and prioritize accordingly

(Hekter and Mischke, 2013)”. Evidence of this action succeeding is from South Korea’s public

and private infrastructure investment management when they were able to save 35% of their

infrastructure budget by rejecting 46% of the project it reviews (Hekter and Mischke, 2013). The

government must also ensure that they’re spending is very well-managed and constantly

monitored. According to the IMF Staff Country Reports (IMF), the Philippines has a 23% gap in

efficiency compared with best practices in translating public investment into infrastructure.

According to the IMF, “Closing this gap will require improving project appraisals, by identifying
risk reduction measures early on and greater involvement of the public—for example, by

publishing appraisal analyses for public comment. Moreover, more private-sector participation

could help in executing the infrastructure investment push if financial risks to the government are

well managed. Moreover, developing domestic capital markets could broaden the funding of the

push (IMF, 2020)”. Foreign investments can also be utilized to help on the spending on the

infrastructure project and stimulate private investments (IMF, 2020). The use of the ease-of-doing

business law, RA 11032, “the law also seeks to increase efficiency by reducing processing time,

eliminating red tape, and curbing corrupt bureaucratic practices”, this can be used to cut red tape

(“excessive bureaucracy or adherence to rules and formalities, especially in public business.”,

Oxford, n.d.) and to increase transparency in transactions for foreign investments. Strengthening

of the public procurement process can also help. “Greater competition and transparency would

help in managing costs and reducing risks of corruption. Imposing stricter sanctions, such as larger

financial penalties and longer exclusion from future tendering, would help deter bid rigging in

procurement. Likewise, allowing greater foreign participation in domestic projects would increase

competition as well as help ease domestic capacity constraints (IMF, 2020)”. Lastly, the tax reform

can help make the push on infrastructure stable while safeguarding its fiscal sustainability (IMF,

2020). According to the IMF (2020), “The government’s recent tax reforms have led to significant

increase in revenue collection (IMF, 2020)”. The tax reforms can possibly lay down a foundation

“for inclusive growth by supporting sustainable investment in infrastructure and human capital” if

there are efforts to maintain the strengthening of the tax system (IMF, 2020).
IV. Recommendations

There are a lot of ways in resolving the Poor Infrastructure in the Philippines but one of the most

effective ways given the alternatives above is, “Slowly Eradicating Corruption within the

Philippine Government.” Given the fact the Philippines’ Administration has the power, strength,

and ability to help the economy grow, they are sometimes the cause of delay or hinders the

development of the country. The government should provide a policy of transparency in

eradicating corruption when it comes to development of infrastructure projects, that will be given

priority to spend its money such as building roads, better transportation system, solve notorious

traffic conditions and long commutes, port congestions and under capacity of international airports

across the country that inhibit and impedes our growth development. With this given solution they

can make use of the country’s money properly and can improve infrastructure, facilities, and

systems that support the function of the country, Philippines. If this shall be given priority, the

Philippines would be able to compete globally and rise from its third world title and have a better

and peaceful place to live in.

V. Sources/Citations

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