Bernardo M. Villegas
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Build Bigger Bolder Better Before (Part 1)

             Finally, the business world is assured that the much discussed Maharlika Investment Corporation (MIC) is in the hands of very competent professionals steeped in top management  experiences in finance, investment management, strategic planning and project implementation.  The recent appointments of Rafael Consing as CEO of the MIC and  Vicky Castillo Tan, Andres Jerome Gan, German Lichuaco and Roman Felipe Reyes  as the four independent members of the board of directors have sent a good signal that the Government intends to  have the MIC as a  completely independent long-term investment fund run by professionals with all the required qualifications and experiences that will guarantee both the profitability of the Fund as well as the attainment of the development-oriented goals for which it was constituted by the Philippine Congress and approved by the President.  As a development economist, academician and independent director of a good number of corporations myself, I give the least importance to the academic degrees of the people appointed to the MIC but the highest importance to their work experiences as indicated by the various professional positions they have held over the last twenty to thirty years.  I know of so many top professors in economics and finance with the highest degrees from the best universities in the U.S. and elsewhere but who have spent practically their whole professional life teaching (with little business experience ) who would not have qualified for  a position in the MIC. It is about time that at both the leadership positions of our society and the skilled workers’ level, we get rid of our obsession with academic degrees and focus more on skills and experiences relevant to the position or job at hand.

            It was also refreshing for me to read what the MIC CEO Rafael Consing announced what his investment priorities will be when he takes over the top management of MIC. He was quoted as saying that he aims to steer the fund towards projects in such critical sectors as energy, agriculture and infrastructure (while actively seeking investments from both domestic and international sources). He would like to focus strategically on infrastructure flagship projects (IFPs) with 30 of them falling under Public Private Partnership (PPP).  This focus is exactly what the Philippine economy needs to be able to attain an investment to GDP ratio of more than 30 % (from present levels at the low twenties), to grow the agricultural sector at 2 to 3 % annually by significantly improving productivity through capital-intensive agribusiness ventures, and attaining lower prices of electricity which in turn will increase the attractiveness of the Philippines to foreign investors in manufacturing.  The attainment of these three strategic objectives will enable the Government to hit the higher range of its 6 to 8% GDP growth targeted by the BBM Administration.

            The 6 to 7% growth that the Philippine economy has attained annually since 2011 (with the exception of the pandemic period of 2020 to 2021) has been mainly spurred by consumption and government spending (including through the Build Build Build program initiated by the Duterte Administration which brought  the infrastructure to GDP ratio to an all-time high of 5 to 6%.  Because of the high cost of domestic capital and the high debt-to-GDP ratio of the Government, it is going to be very difficult to continue the Build Build Build Program on the basis of Philippine savings alone (which is already the lowest in the region at 10% of GDP).  We need all the possible ways of actually increasing the flow of FDIs into the Philippines, especially in the capital-intensive projects contemplated by Mr. Rafael Consing and hopefully his entire board. In fact, the Infrastructure Flagship Projects mentioned by him are literally a drop in the bucket of what the NEDA has lined up for the entire duration of the BBM Administration.  The NEDA has identified 3,600 potential infrastructure projects worth $372 billion planned for implementation through 2028. That would mean attracting as much as $62 billion of FDIs annually in infrastructure projects that can already be owned 100 % by foreigners under the amended Public Service Act.  I think it would be reasonable for the BBM Administration to target an ambitious $15 to $20 billion of FDIs annually, considering that Vietnam whose economy is very comparable to that of the Philippines, has managed to attract close to $20 billion yearly in the last three to five years.  The only difference is that most of those investments in Vietnam are labor-intensive manufacturing projects that are leaving China and are finding Vietnam more attractive than the Philippines because of lower electricity costs, lower wages and long-time openness to FDIs.  In our case, we will be targeting, not mainly manufacturing investments but capital-intensive infrastructure, energy and agribusiness projects.

            More recently, NEDA updated the list by approving 194 high-impact priority projects worth P9 trillion, among them the rehabilitation of the decades-old Ninoy Aquino International Airport (NAIA).  Out of the 194 IFPs, 123 are new, which means that only 71 were carried over from the previous Administrations, such as the ongoing Metro Manila Subway project started during the presidency of President Rodrigo Duterte and the North-South Commuter Railway venture started during the government of President Benigno Aquino III.  The NAIA rehabilitation was classified as a new project because it did not push through when it was proposed during the Duterte Administration.  By late December 2023, DOTr received four proposals (down from eight earlier) for the P170.6 billion project.  Bidders are the Manila International Airport Consortium (MIAC), Asian Airport Consortium, GMR Airport Consortium and San Migel Corporation (SMC) SAP and Co. Consortium.  These bidders are affiliated with some of the most prominent conglomerates in the country with vast and long-term experiences in the building of infrastructures.

            In planning to invest in infrastructures, very important consideration should be given to the multiplier effects on two of the most promising service sectors in the Philippine future:  tourism and BPO-IT.  Potentials of the Philippines to attract foreign tourists are almost unlimited.  The Archipelago with its 10,000 miles of seashores has been judged all over the world as the “best beach destination” for foreign tourist all over the world, especially those who come from cold climates in Continental Europe, North America and Northeast Asia.  To add to this prestige is the reputation of the Palawan set of 2,000 islands as the Best Island Resort in the world, besting even the famous Bali in Indonesia (who unfortunately suffer from all the  possible natural disasters such as volcanic eruptions, earthquakes and tsunamis).  Palawan only suffers from typhoons which are quite mild at that.  These natural resources, however, are for naught because of the very poor physical infrastructures prevailing in the country:  congested airports and seaports (just consider what happened to the Norwegian Jewel cruise ship carrying 2,500 tourists who were crammed like sardines in a hall  at Pier 5 in Manila that could accommodate only 1,000).

            In planning for the building of the large infrastructure projects like airports, seaports, railways and subways, toll ways, telecom, water and energy facilities, the slogan should be Build, Bigger, Bolder, Better and Before.  The Changi international airport should be the role model. The policy of the Singapore Government was to overbuild or to build before so that supply is not always trying to catch up with the demand.  They are now at their fifth terminal in Singapore. I am glad that both the national and local governments agree with the Asian Development Bank that, despite the seeming lack of present demand for its use, all are agreed that we have to build that bridge connecting Cavite through Corregidor to Bataan. The critics who maintain that there is still no present demand for such a bridge are failing in foresight.  Build Before  and they will come. Use the most advanced technology available because obsolescence is happening faster than ever especially in this age of Industrial Revolution 4.0.  This means taking a very bold point of view.  Especially as regards international airport, bigger is always better.  Just imagine the day when we can attain the number of foreign tourists that Thailand has even today, 25  million. Whoever will be the foreign investors we can attract to build the international airports in Coron , Puerto Princesa and San Vicente in  Palawan should be told to at least approximate the size and amenities of the International Mactan Airport that was a result of a partnership between GMR, an Indian infrastructure company and local construction firm, Megawide.  Today, it is owned and managed by the Aboitiz group.  To be continued.