INFRASTRUCTURE spending expanded by double-digit terms in 2016, but fell short of the revised target set by the national government, data released by the Department of Budget and Management (DBM) over the weekend showed.
Infrastructure and other capital expenditures surged by 42.8 percent to P493 billion in 2016 from P345.3 billion a year earlier.
If the absorptive capacity of agencies improves this year, then public spending on infrastructure will continue to pick up, according to analysts the government.
Disbursements went up last year on expenditures by the Department of Public Works and Highways on repair, widening and rehabilitation of national roads, as well as the modernization program of the Armed Forces of the Philippines, the facilities and medical equipment paid for by Department of Health, and the repair, construction and rehabilitation of educational facilities of Department of Education and some state universities and colleges.
ANZ Research economist Eugenia Victorino noted the growth in fiscal spending on infrastructure last year was more due to the low-base effect as a result of soft spending in 2015.
DBM data showed infrastructure spending actually fell short of the revised target of P533.1-billion by 7.5 percent P40.1 billion.
“Infrastructure and other capital outlays … missed the target expenditures by 7.5 percent or P40.1 billion, owing to procurement difficulties such as failure of biddings, non-compliance of bidders with bid requirements or difficulty in complying with product or service specifications,” the DBM said in an assessment report.
Procurement and implementation of some projects under the Department of National Defense are still ongoing such as the construction of P1-billion airbase of the Philippine Air Force in Cagayan De Oro City, while some projects under the Revised AFP Modernization Program are still to be approved by the President.
Underspending in infrastructure outlays also reflected the P1.8 billion of funds that the Philippine National Railways and Philippine Ports Authority were supposed to request for in connection with the memorandum of agreement with the Department of Transportation (DoTR) on various rail and port projects, it said.
“The said agencies are already expediting procurement activities for these programs or projects to ensure obligation this year,” the DBM said.
The DoTR has created an interim Bids and Awards Committee (BAC) to bid out projects and programs funded under prior years’ budget and sign agreements with local or provincial governments and government corporations to transfer funds for site or land acquisition.
Bank of the Philippine Islands Vice President and lead economist Emilio Neri Jr. said the shortfall in infrastructure spending “is part of adjustment process of the leadership transition in the different government agencies.”
The DBM said the disbursements in the first few months this 2017 will grow at a moderate pace, partly due to base effect, considering the high disbursements recorded for the same period in 2016, and since most line agencies are still in the process of obligating their allotments.
“However, spending is expected to rack up in the succeeding months towards the summer season,” it said.
Several reform measures are being implemented to support credible budget execution this year. Cash requirements for the first semester will be released to ensure efficient and timely implementation of government programs and projects. The Implementing Rules and Regulations (IRR) of the Procurement Law has been revised to fast-track the bidding process and streamline the documentary requirements sidestep procurement problems and delays in implementing programs and projects.
Training and capacity building of BAC personnel started last year some of which are currently ongoing for some line agencies, local governments and government-owned and -controlled corporations to support the implementation of the revised IRR.
“The DBM will closely engage the line agencies to jointly monitor the progress of their program or project implementation,” it said.
Victorino said renewed focus on infrastructure spending is growth positive in the long-term. “The current government has raised its budget deficit target to 3 percent of GDP [gross domestic product], along with the increased allocation in infrastructure development,” she said.
The push from the top has led to some improvement in the speed of implementation of infrastructure spending in the last six months, she noted.
“However, there are still significant challenges regarding the absorption capacity of local government units and governmental agencies to spend their budgeted allocations,” she said. Unless these structural challenges are resolved, the likelihood of reaching the 3 percent deficit target may be slim, Victorino noted.
Neri said the gap between actual infrastructure spending and the government target to narrow down the shortfall this year and in 2018 is crucial “as reforms at the DBM and National Economic and Development Authority (NEDA) to speed up processes and improve the absorptive capacity of government agencies gain traction” is on track.
The government targets to spend P847.21 billion or 5.3 percent of GDP on infrastructure this year.