The Philippines, known for its difficult traffic conditions and lengthy commutes, falls behind many of its neighbors in the development of infrastructure. Economic growth is frequently seen as being hampered by port congestion. Under capacity in international airports around the nation was a major barrier to growth and tourism before the pandemic. In the area of transportation infrastructure, there are both pressing requirements and business potential.
To address the nation's rising infrastructure problems, the Duterte Administration introduced the ambitious $180 billion "Build, Build, Build" (BBB) program in 2017. 75 projects totaling $48 billion in initial value were recognized as flagship projects by the initiative. Across the country, these included expensive train, airport, road, and bridge projects. Due to the low interest rates and lengthy repayment terms, the government preferred to use tied aid loans for the majority of projects. As leaders in this field, China and Japan soon seized control of the expensive train projects. The Philippines also received concessional loans from the World Bank, the Asian Development Bank, and Korea for their major projects.
Transportation Projects So Far
In the previous five years, the list of flagship projects has undergone two revisions. The government added new projects, including public-private partnership (PPP) initiatives, and withdrew projects that it no longer regarded practicable.
There are now 112 projects on the most recent list of flagship projects, totaling roughly $94 billion. The list includes 76 transportation and mobility projects totaling $85 billion, with road, highway, expressway, and bridge projects accounting for about half of them. Rail, airport, bus rapid transit, subway, and port developments are more examples of this type of project.
Four flagship projects have been reported finished as of May 2021, and 12 continuing projects were scheduled to be finished in 2021. The remaining projects are anticipated to be finished by 2022 or later.
Only 12 of the 76 transport and mobility projects on the list will be fully funded by government funding, with 35 of them being or being fully funded by development aid. Twenty of the 24 PPP projects are unsolicited submissions.
Many of the listed projects have not yet begun construction. Construction projects are far behind schedule as a result of the pandemic. Contract awards are also delayed. In light of the COVID pandemic's consequences, project proponents are still reviewing and revising unsolicited PPP bids, most of which are for airport developments.
Companies have decided to pursue large-scale projects funded by the Japanese government since these projects guarantee completion and payment due to the Philippine government's convoluted procurement procedures. After the principal contractor has been chosen, they are free to collaborate with companies of any nationality. Official development aid projects are procured in accordance with the laws of the donor country. In the past, U.S. companies have worked as subconsultants, contractors, or suppliers on Japanese-funded projects, successfully finishing jobs worth millions of dollars.
The Philippine government has expressed interest in PPP projects, however U.S. companies have expressed worries about having to manage or operate infrastructure projects that they did not develop due to the separation of the Build and Operate sections of such projects. Unsolicited PPP projects have also shown to be difficult because there is an obligatory Swiss Challenge, which means that initial project proponents can spend millions of dollars on producing a project proposal with no assurance that they will be granted the project in the end. American businesses established connections with the intended recipients of such expensive unsolicited airport developments. However, because these companies are simply the predicted "winners," U.S. businesses have been reluctant to sign contracts without complete confirmation. The government is still emphasizing its preference for moving projects to PPP models in light of the pandemic. To explore such projects, the private sector is generally hesitant.
Companies are urged to first pick initiatives they are interested in, investigate their status, and then decide how to get involved and evaluate risks. National elections will take place in 2022, and a new administration will imply new objectives and initiatives. Therefore, it is better to look for projects that are anticipated to proceed despite a potential change in government.
Reform in the Transport Sector and Industry
The Public Utility Vehicle (PUV) Modernization Program is one of the government's top objectives since it takes into account the local context and aims to support the Philippines' Nationally Determined Contributions (NDC). With the projected corporatization or collectivization of operations to support such a system, the shift from individual vehicle franchising to a route-based franchising model (possibly "one-route-one-franchise") creates considerable opportunity for monitoring and oversight.
Service levels on a given route under fragmented operations are the outcome of numerous independent decisions made by operators. One operating company on the route has the capacity to govern service levels on the corridor (i.e., headway/vehicle frequency) in a way that individual operators could not under the "one-route-one-franchise" structure. The potential to add new criteria to the terms of the franchise that go beyond the prior basic requirements is presented by the processes of franchise consolidation and the tendering of new franchises.
It will be crucial to implement all parts of the PUV modernization program while recognizing the unique skills and achievements of the current operators who have operated within a former regulatory environment that was insufficient. As a result, the Government interacts with the sector through a number of workshops and consultations. It also creates a nationwide program for operators' social assistance, which includes trainings and other initiatives to build their capacity.
Transport Projects and Progress
Leading Sub-Sectors Rail: The $3 billion North-South Commuter Railway Project (Philippine National Railway [PNR] North 1), the $12 billion North-South Commuter Railway Extension (PNR] North 2 Project, and the $7 billion Metro Manila Subway Project Phase 1 were among the projects that initially attracted significant U.S. interest in the flagship list. While the Asian Development Bank (ADB) is supporting the civil works for a component of the North-South Commuter Railway project, Japan is subsidizing the rail and subway developments. For JICA-funded projects, U.S. companies cannot be the main contractor listed on the contract, but the project's scale still permits reasonable subcontracting, supply, and consultancy opportunities.
New Manila International Airport in Bulacan, a $15 billion greenfield project with plans for four parallel runways and a projected capacity of up to 200 million people annually, is the country's largest airport project. This PPP project is an unsolicited one.