Download ESCAP High-level Policy Dialogue

 ESCAP High-level Policy Dialogue
Ministry of Finance of the Republic of Indonesia International Economic Summit 2013
Eleventh Bank Indonesia Annual International Seminar
“Macroeconomic Policies for Sustainable Growth with Equity in East Asia”
15-17 May 2013, Yogyakarta, Indonesia
Jointly organized by
UN ESCAP, Ministry of Finance of the Republic of Indonesia and Bank Indonesia
Session 4 – Domestic Infrastructure Financing
Presentation
Domestic Infrastructure Financing in the Philippines
by
Rosario Manasan
Research Fellow II, Philippine Institute for Development Studies
May 2013
The views expressed in the paper are those of the author(s) and should not necessarily be considered as reflecting the
views or carrying the endorsement of the United Nations. This paper has been issued without formal editing.
Domestic Infrastructure
Financing in the
Philippines
Rosario G. Manasan
Philippine Institute for Development Studies
ESCAP - Bank Indonesia High Level Policy Dialogue
Macroeconomic Policies for Sustainable Growth with Equity
15-17 May 2013
 Trends in infrastructure spending
 Scale of infrastructure financing
requirement
 How to redirect fiscal resources to
infrastructure sector
 Lessons learned from earlier
experience with PPP
Figure 1. National Government Expenditures on All Economic Services Sectors and All Social
Services Sectors and Core Infrastructure Sectors, as a Percentage of GDP, 1975-2013
8.00
Marcos
Aquino I
Ramos
Estrada
Aquino II
Arroyo
7.00
6.00
Percent of GDP
5.00
4.00
3.00
2.00
1.00
All Economic Services Sectors
Core Infrastructure Sectors
2013 NEP
2011
2012 Prelim
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
0.00
All Social Services Sectors
Declining trend in national government infrstructure spending from
1998 onwards
Table 1. Public Sector Infrastructure Spending, 2008-2013
2007
2008
1.92
1.90
Naional Government
2009
2.29
2010
1.84
2011
1.56
2012
1.81
2013
2.04
Government Owned/ Controlled Corp.
0.30
0.23
0.22
0.10
0.24
0.11
0.26
Local Government Units
0.53
0.55
0.63
0.59
0.59
0.52
0.52
Total
2.76
2.67
3.13
2.54
2.39
2.44
2.82
Slight improvement in total public sector infrastructure
spending in 2013
 Trends in infrastructure spending
 Scale of infrastructure financing
requirement
 How to redirect fiscal resources to
infrastructure sector
 Lessons learned from earlier
experience with PPP


overall state of country’s infrastructure compares
unfavorably with that in other countries in the
region
less than 25% of total road network in the
Philippines is paved




15% of paved roads are in poor condition and 32% are in
bad condition
paved road length per unit area, per capita and per vehicle
is the lowest in Southeast Asia
although total road length per unit area is one of the
highest in the region, total road length per capita and per
vehicle are among the lowest in Southeast Asia (ADB 2007)
per capita power consumption in the Philippines
is lower than that of its neighbors in the region about one third that in Thailand and one fifth that
in Malaysia
 vehicle operating costs & intercity freight
costs are more than 50% higher than in
Indonesia & Thailand
 Philippines has the highest cost in the ASEAN
for exporting a container, partly because of
inefficiencies in port handling
 power tariffs for businesses in Manila are 20–
80% higher than tariffs in the other nine cities
in Southeast Asia
 the dependability of power supply is also a
cause of concern (ADB 2007)
Philippines’ overall competitiveness &
investment climate rankings pale in
comparison with other countries
 Philippines is ranked behind most of other
countries in the region in terms of
infrastructure adequacy (2007 World Bank
study)
No rigorous estimate available
 Just for roads sub-sector alone, estimate is at
least 2% of GDP yearly
 World Bank (2007) estimates need is 5% of
GDP – close to 4.2% of GDP average in 19721982
 More recently, ADB PhCO estimates country
needs to spend 7% of GDP on infrastructure
yearly
 Trends in infrastructure spending
 Scale of infrastructure financing
requirement
 How to redirect fiscal resources to
infrastructure sector
 Lessons learned from earlier
experience with PPP
Figure 2. National Government Expenditures on Core Infrastructure Sectors and National
Government Revenues, as a Percentage of GDP, 1975-2013
20.00
Marcos
Aquino I
Ramos
Estrada
Aquino II
Arroyo
18.00
16.00
Percent of GDP
14.00
12.00
10.00
8.00
6.00
4.00
2.00
Core Infrastructure Sectors
2011
2013 NEP
2012 Prelim
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
0.00
National government revenues
 Need to increase fiscal space
 infrastructure spending covariant with national government
revenue performance albeit with some lag  need to
Improve tax effort  present administration posted some
gains even before sin tax law was amended
 Recent budget reform & expenditure management
initiatives create fiscal space and yields greater efficiency in
spending
 Multi-year expenditure framework and sectoral medium
term spending plans – greater medium term focus
favorable to infra sectors
 Results-based budgeting – link spending with outputs/
outcomes
 Program evaluation (Zero-Based Budgeting) – improve
allocative efficiency
 Greater transparency/ accountability in spending – review
of public works contracts in 2010/ 2011 resulted in savings
of about 30% in project cost
 Recognition of importance of causal link between
infrastructure spending and sustainable growth
 Special Road Fund – funded from motor
vehicle registration fees




created in 2000; first road fund in region
Delayed release of funds until 2004
Political pressure on allocation of funds
Institutional/ governance framework
improved recently
 Trends in infrastructure spending
 Scale of infrastructure financing
requirement
 How to redirect fiscal resources to
infrastructure sector
 Lessons learned from earlier
experience with PPP
 Build operate transfer law enacted in
1990 (amended 1994)
 first in the region
 Legal framework that governs financing,
construction and operation of infra
facility by private sector
 Through the law, private sector
constructed and rehabilitated 57% of
country’s total power generation
capacity in the mid 1990’s
Table 3. Project cost of awarded
PPP projects, 1999-2012 (million
US dollars)
1999
16,697
2000
6,078
2001
5,864
2002
4,149
2003
1,740
2008
2009
2010
2011
2012
1,413
662
746
746
1,316
 PPP as a source of infrastructure
finance has waned since 1997

Despite amendments to implementing
rules and regulations (IRR) of PPP law in
2006 and 2012
 Financial, institutional and regulatory
reforms for PPP needed to ensure that
private sector receives reasonable rate
of return on their investment
 Stable policies/ reliable judiciary
 User charge regulation,
 Allocation of risk between government




and private sector
Institutional arrangement –
coordinating entity
Access to subsidies and guarantees
Fiscal support fund
Sound fiscal policy
Thank you