On the Right Track: Philippines’ BBB programme progressing well

Challenges, setbacks, and progress of Philippines Build-Build-Build programme, its link to long-term economic recovery, and improved urban mobility.

Amidst the slowdown and economic recession experienced by the Philippines and the world at large due to the Covid-19 pandemic and the subsequent lockdowns to stem its spread, infrastructure development through the government’s flagship programme, the Build-Build-Build (BBB) programme, is touted as one of the key drivers of the country’s economic recovery.

While the implementation of the programme was hit by the pandemic, the government remained focused on infrastructure development through the BBB programme, not only to pull the economy out of the Covid trap, but also to take advantage of the multiplier effect of infrastructure development on economic growth and output.

About the programme

Taking cognisance of the need to ramp up infrastructure in the country, the Philippines government allocated PhP 860.7 billion towards infrastructure, a 13.8 per cent increase from the previous year’s infrastructure budget allocation of PhP 756.4 billion, from the PhP 3.35 trillion national budget for 2017. Backed by a robust infrastructure budget allocation, the Philippines government announced an aggressive infrastructure programme, the BBB programme.

According to the plan, the total funding requirement is PhP 8.4 trillion to achieve the targeted infrastructure outlay between 2017 and 2022. Further, the National Economic and Development Authority developed a three-year rolling infrastructure programme, under which 4,895 projects, estimated to entail an investment of PhP 3.6 trillion, have been identified. Currently, the BBB programme consists of around 20,000 infrastructure projects nationwide, involving roads, highways, farm-to-market roads, seaports, terminals, lighthouses, airports and evacuation centres, among others. The programme is the centrepiece and one of the top priority programmes of the current administration. The government has allocated a budget of around PhP 8 trillion ($164.7 billion) for a six-year period (2017-22). This budget allocation on infrastructure is the highest in Philippines history to date.

New funding avenues – Switching from PPP to government revenue and ODA loans

When the BBB programme was rolled out, it marked a shift in financing structures from the public-private partnership (PPP) modality to a combination of government revenue and official development assistance (ODA) loans. However, the government is currently considering the revival of PPP as a mode of financing to encourage private sector participation. While only nine projects from the original list of 75 BBB projects had private participation, the recent revision to the plan now involves about 29 PPP projects under the programme. The government has also planned to renegotiate the terms of big-ticket infrastructure projects to be undertaken by the private sector and possibly give them longer contracts to allow a return on investments in view of the Covid-19 pandemic.

Furthermore, since 2016, there has been an increase in unsolicited proposal submissions, one of the newer channels initiated by the government. Besides, joint venture arrangements comprising partnerships between private sector players and municipal governments also increased.

Progress on board – Key projects under the programme

The Philippines is implementing a large number of highway and expressway projects under the BBB programme. Projects spanning at least 430 km are expected to be completed by 2021-22. Further, according to the projects tracked by Southeast Asia Infrastructure Research, projects involving the construction of another 500 km are expected to be completed by 2026.

For example, the 220 km long Quezon-Bicol expressway, extending from Barangay Malicboy in Pagbilao, Quezon, to the existing Maharlika Highway in San Fernando, Camarines Sur, is an important project under the programme. It is being implemented as a PPP at an investment of about PhP 89.3 trillion. Recently in January 2021, construction work on the project was approved by the House Committee on Public Works and Highways. Besides, the Southeast Metro Manila expressway is also being implemented as a PPP at a cost of PhP 45.29 trillion. The 74 km Metro Cebu expressway project is also under way and is expected to be completed by 2022 at a cost of PhP 28.02 trillion. The project is being funded by the Philippines government. Apart from these, the Cavite-Tagaytay-Batangas, Camarines Sur-Davao City and Cebu-Cordova link expressways are some of the other key projects being implemented by the government.

With regard to the railway sector, one of the big-ticket projects being implemented under the BBB programme is the North-South Commuter Railway (NSCR). Expected to cost $158 billion, the project will be implemented in sections. The NSCR is a 163 km long suburban railway network connecting the urban areas in Pampanga and Tarlac provinces in the north and Calamba in Laguna province in the south to Metro Manila. Earlier, in May 2019, the Asian Development Bank (ADB) approved a $2.75 billion financing facility for the Malolos-Clark railway project, covering two sections of the NSCR. The Japan International Cooperation Agency (JICA) is co-financing the project. The loan is ADB’s biggest project in the Philippines and ADB’s single largest infrastructure project financing in its over 50-year history.

Another important project being implemented under the programme is the Metro Manila subway, the country’s first underground mass transit system. The 13-station subway, to be built at an estimated cost of PhP 355.97 billion, is expected to carry around 370,000 passengers annually upon its partial opening in 2025. Construction is being part-financed by JICA, which is set to provide JP Y1 trillion over the next five years. The excavation works on the project are expected to start by end 2020. Phase I of the project, which will include stations in East Valenzuela, Quirino Highway, Tandang Sora Avenue and North Avenue, is expected to be completed by 2023-24. Meanwhile, two of the 25 tunnel boring machines required for the project have been mobilised. The entire 34 km line is expected to be completed by 2025-26.

In addition to the metro, other key projects in the pipeline include the Luzon Spine Expressway Network, a series of new roads stretching 1,000 km from north to south Luzon; the Metro Manila Logistics Network, and a set of new bridges and roads designed to alleviate congestion in the capital.

Recently, in June 2021, the Philippines government added 13 new infrastructure projects worth PhP 523 billion to the flagship programme while also removing two projects worth PhP 38 billion from the list. These 13 projects include development of a road, a bridge, ports and digital infrastructure. After being taken off the list in the previous update, the PhP 175.66 billion Bataan-Cavite Interlink Bridge has been reinstated. Construction of Davao Sasa port (PhP 19.9 billion), Iloilo port (PhP 10 billion), and General Santos Port (PhP 5.2 billion) are some of the other projects categorised as priority projects. The revised list also includes work on the Laguna Lakeshore Road Network Project valued at PhP 177.86 billion, and the initiative for digital transformation centres, which is expected to cost PhP 33.98 billion. The two projects that were removed from the list were the PhP 33.98 billion ICT Capability Development and Management Programme and the PhP 4.27 billion Bohol Northeast Basin Multipurpose Dam Project.

The flagship list, which is a sub-list of priority projects under the BBB programme, now has around 112 projects with a total cost of PhP 4.687 trillion. Out of the total, 29 projects are expected to be finished by 2022, works on 51 are currently under way, and another 28 projects are scheduled to start construction in the near future. Four of the total projects have already been completed.

Covid-19 fallout – Setbacks for the programme

While construction activity in the Philippines slowed significantly during the country’s Covid-19 lockdown, it has now picked up as the country gradually lifts restrictions. The Department of Transportation (DoTr), one of the main implementing agencies of the BBB programme, suffered a budget cut of around PhP 8.8 billion ($181.2 million) from its original budget of around PhP 147 billion ($3.02 billion) in 2020. Another main programme implementing agency, the Department of Public Works and Highways (DPWH) also had its 2020 budget cut to fund doleouts and healthcare expenses worth around PhP 121.9 billion ($2.5 billion), leaving it with a much lowered infrastructure programme spending budget of around PhP 458.9 billion ($9.4 billion), down from PhP 580.9 billion ($11.9 billion). Some challenges in project implementation are expected since the pandemic-induced downturn has also affected the country’s infrastructure lenders such as Japan and China.

However, despite the budget cuts, the government remains focused on infrastructure development under the administration’s BBB infrastructure programme. To put things in perspective, the government has reprioritised the infrastructure programme and retained 92 flagship projects expected to cost around PhP 4.1 trillion ($84.4 billion) in value. Although eight projects were removed from the list of priority infrastructure projects, 13 more were added. These projects are aimed at organising water supply, enhancing the transportation network, healthcare systems, and the digital economy in the country and intensifying internet connectivity.

Recovery on the cards – Relation between BBB and economic recovery

Despite the setbacks, the BBB programme was among the major economic activities to resume in the Philippines. In fact, the government has been able to complete a number of flagship projects despite the pandemic and subsequent lockdowns to prevent its spread.

Key infrastructure projects that were commissioned during the pandemic period include the Angat Water Transmission Improvement Project; the four-lane Sorsogon City coastal road; the Tarlac-Pangasinan-La Union Expressway Rosario exit; Phase 1A of New Clark City; the harbour link; the broadband project with Facebook (Luzon bypass infrastructure); Sangley airport; the Bohol-Panglao international airport; Laguna Lake highway; Tarlac-Pangasinan-La Union expressway (TPLEX) Rosario; TPLEX Pozorrubio; Cagayan de Oro port, the country’s biggest passenger terminal port; a new world-class terminal at the Mactan-Cebu international airport; the Lal-lo international airport; and the Puerto Princesa international airport. Infrastructure development of the domestic airports of Marinduque, Virac, Tuguegarao, Busuanga and San Vicente in Luzon; Maasin, Catarman and Tacloban in the Visayas; and Ipil, Siargao and Camiguin in Mindanao, has also been completed.

Besides, construction work on six railway projects is under way, while additional railway projects are in the pipeline. Once all the railway projects are completed, the number of stations across all railway systems will increase from 59 to 169, the number of trains from 221 to 1,425, and daily ridership from 1.02 million to 3.26 million. The international airports in Davao, Zamboanga, General Santos, Kalibo, Iloilo and Laoag are also undergoing improvements.

In sum

The completion of BBB projects within the target time frame not only holds the key to economic recovery in the pandemic and post-pandemic era, but also, to some degree, to improvements in air, land, sea and inter-island connectivity and mobility in the country. Going forward, in the long run, the completion of these projects will help the Philippines government to achieve the desired economic growth and improve the country’s global competitiveness.