Bernardo M. Villegas
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Rebalancing Strategy
published: Mar 31, 2017



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Infrastructures: The Key to Competitiveness

           The boldness of President Rodrigo Duterte should be addressed especially to the building of more efficient infrastructures, in which the Philippines pitifully lags behind its East Asian neighbors.   With the support of a Budget Secretary that is equally bold in macroeconomic terms, we should be able to go beyond the average of 5 percent of GDP spent on infrastructures in the region.  Because of our backlog, the Duterte Administration should even consider raising that percentage to 7 percent of GDP, as was suggested by Senator Grace Poe during the presidential campaign.  There is great need to accelerate an integrated infrastructure program by focusing on interconnectivity of regions, and from source to market, both nationally and globally.  The new Administration should build on what former President Gloria Macapagal Arroyo accomplished through the Philippine Nautical Highway.  We should interconnect even more some of the major islands, replicating what Imelda Marcos did in building a bridge between Samar and Leyte.  Possible candidates are Batangas and Mindoro, Iloilo and Guimaras, Dumaguete and Siquijor, among many others.  These bridges can facilitate even more the domestic travel of close to 40 million Filipinos who are among the first tourists in their own land.

          Among the priority areas for encouraging private investments are power, telecommunications, logistics and ports, and transport.  By opening the economy to competition, a decentralized approach under a regional structure would accelerate implementation by reducing bureaucratic blockages.  This would prepare the country for the eventual shift to a federal form of government.  To complement the more aggressive infrastructure building program, lending from financial institutions would need to adapt to this evolving market where the ability to fund private infrastructure projects would become essential.

          The President should consider issuing an Executive Order to remove the obstacles to the Local Government Code which had the laudable objective of giving more autonomy to the local government officials.  To follow through his request for the Supreme Court to be more prudent in issuing Temporary Restraining Orders (TROs), the President should issue an Executive Order obliging the national government to release the Internal Revenue Allotments (IRAs) that it has been withholding for political reasons.  He should no longer wait for the Supreme Court decision on the suit filed against the National Government long ago by returning Governor Hermilando Mandanas of Batangas.  The early release of IRAs withheld by the national government can kick-start a virtuous cycle:  Better access reconnects isolated communities.  Improved logistics brings down costs and prices of basic commodities.  Greater regional trades enhance incomes.

          The execution of infrastructure projects requires close coordination and planning.  To ensure that transport infrastructures are developed coherently, the various implementing and regulatory agencies should be merged.  A really bold step is to rationalize the operations under one super department combining the Department of Public Works and Highways (DPWH), Department of Transport, the Philippine Ports Authority and the Philippine National Railways.  As already practiced during the outgoing Administration, there should be very close coordination between the Department of Tourism and the DPWH as well as between the Department of Education and DPWH (in the construction of school buildings).  In the past, these departments were suffering from a “silo” mentality.

          To attract long-term capital, still a scarce resource in the Philippines despite the very liquid banking system, constitutional restrictions to foreign investments (except in the ownership of land) shall be relaxed or amended.  By securing energy, modern communications and infrastructures that improve interconnectivity, and accessible water services to the widest number of our people through private enterprise and initiatives, we shall come closer to inclusive growth, especially in the rural areas.  These privately funded infrastructure projects should be generously complemented by massive government expenditures on farm-to-market roads, irrigation systems (especially in coconut regions), post-harvest facilities and other rural infrastructures that should put the finishing touches to the land fragmentation that occurred during the expired Comprehensive Agrarian Reform Program (CARP).  The small farmers, even if they already own their lands, remain to be among the poorest Filipinos because they have been denied by the Government the needed infrastructures to make their land productive.

          We should also work towards greater integration with our ASEAN neighbors through the ASEAN Economic Community (AEC), without decoupling from the rest of the global economy.  We survive by competing successfully with our global peers, not by continued cuddling by government through subsidies or non-tariff protection.  Philippine companies can lead in an expanded ASEAN market as already demonstrated by such world-class Philippine firms as UNILAB, Liwayway Manufacturing, Ayala Corporation, Universal Robina Corporation, Jollibee,  and Century Canning, among others.   It is about time that Philippine business need not cower in fear and run for cover under the protective mantle of government subsidies and high import tariffs.

            As early as possible in the first one hundred days, a task force should be convened to recommend the appropriate mechanisms and constitutional amendments so that a transition to a federal form of government becomes feasible.  My opinion is that we will need to retain the presidential form until our political system is able to nurture true political parties that are differentiated by their respective ideologies and are not based on personalities.  We have just witnessed again the utter lack of party loyalty (the so-called “balimbing” phenomenon) when practically all opposition politicians joined the bandwagon of the party of President Duterte.  A parliamentary form of government will never work without real party loyalty.  For comments, my email address is bernardo.villegas@uap.asia