• Development should aim for quality, not quantity

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    AFTER years of dragging its feet, the Aquino Administration has announced to anyone who will listen that it intends to boost infrastructure spending to the global standard of 5 percent of gross domestic product (GDP) by next year.

    To give some sense of how ambitious the government’s plans are, five percent of GDP based on the country’s 2014 economic performance would be approximately P630 billion.

    In a sign of the sincerity of the government’s intentions the Administration’s planning authorities recently approved a dozen new projects through the public-private partnership (PPP) program, and expects to conduct the bidding and contract awarding for at least four or five of those by the middle of this year.

    Any progress toward making up for the massive disadvantages of the Philippines compared to its regional neighbors in terms of infrastructure is welcome, especially if the alternative is for the country to fall even further behind.

    The manner in which the Aquino Administration is pursuing most of its infrastructure plans, however, is causing growing concern that in pushing for mere quantity of infrastructure development activity the government is forsaking quality, and potentially creating much bigger problems in the long term.

    So far, the PPP Center has managed the awarding of 9 projects (out of a list of 57 “in the pipeline” as of April 10) under the Administration’s flagship development program. Those 9 projects support 11 contractors – each of the two phases of the massive school classroom construction project are divided into two parts – and it is more than a little alarming that only a few companies are involved. Of the 11 contracts, five have been won by Megawide Construction Corp. or a consortium of which it is a part, three have been gathered by the Ayala group, two by Metro Pacific Investments Corp. (MPIC), and one by San Miguel Corporation.

    Among four big upcoming projects recently announced by the government (a regional airports development project, the expansion of Davao’s Sasa Port, a regional prisons construction and management project, and the resurrection and upgrade of Philippine Railways’ South Luzon line to the Bicol region), the companies that have expressed interest or already declared their intentions to bid include Megawide, San Miguel, Ayala, the Philippine subsidiary of Malaysian infrastructure conglomerate MTD, and the DM Consunji (DMCI) group.

    The most obvious problem is the creation, unwittingly or not, of an “infrastructure oligopoly.” Fewer than 10 companies control the lion’s share of infrastructure projects, and while there is no indication that any of the projects contracted so far have been affected by any sort of corruption, the rules governing bidding and awarding of these projects tend to favor the same prospective bidders every time.

    And we have to ask, is a construction firm like Megawide (to use an example) sufficiently competent and experienced in managing such diverse enterprises as hospitals, airport terminals, seaports, and prisons to provide the Filipino public with the best quality, cost-effective services?

    By sticking to rules and procedures that limit participation in large-scale development projects to a few local stalwarts with their fingers in every pie, the government is rejecting opportunities for greater investment, and more importantly, much-needed technology and skills transfer. Because every PPP project conceived so far carries with it an operation term of between 10 and 35 years, the effectiveness – or lack of it – of the project’s management will have an impact for one or two generations. One project done well in that context is better than any number done poorly.

    We feel the necessity of reminding the Aquino government of this, and of urging it to pursue quality, not quantity, in racing to catch up on neglected infrastructure development.

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    4 Comments

    1. The truth is Megawide was and is not in the same league with large conglos like Ayala, MPIC, San Miguel and it has been successful in winning these bids is a testament that the tender rules provide level playing field. SMEs should draw inspiration from Megawide and not be afraid to challenge these big boys in an honest and friendly competition. Moreover, the rules allow taking in foreign technical partners to address the competency issue in managing complex infrastructure projects.

    2. The Aquino administration is inept. No matter what rules are changed or laws bent to do things, everything it tries does not result in a good outcome. So I will agree to limit any plans or just do not so anything. Do nothing is better than having to deal with another mess.

    3. G. M. Kuizon on

      Yes, indeed, quality should be paramount in infrastructure development. But that is obviously not the case with the hypocrites in Malacanang. Aquinopraises his own Tuwid na Daan and extols DPHW Sec. Singson as the most pure official of his administration. Yet read the columns (backed by personal observation and research) of The Manila Times’ Rick B. Ramos. He is a public works watchdog and is president of an NGO whose expertise is assessing infrastructure projects. The so-called clean DPWH praised by Aquino to high heavens is as corruption-ridden as it was under previous presidents.
      Nakakaiyak at nakasuka!

    4. Matthew Parkes on

      This will be the mother of all screw-ups.

      We should also expect to lose at least 30% of that P630 billion and a lot of that will end up n Cojuangco-Aquino hands.