BusinessWorld forum emphasizes gap in infrastructure funding

By April Paulyn B. Roque, Special Features Assistant Editor
The last session of the BusinessWorld Economic Forum held at Shangri-La at the Fort on July 12 focused on capacity and discussed ways by which companies addressed infrastructure challenges and supply bottlenecks in the country. Speakers were Public-Private Partnership Center of the Philippines Executive Director Andre C. Palacios, Globe Telecoms, Inc. President and CEO Ernest L. Cu, Ayala Corporation Energy Holdings, Inc. President and CEO Eric T. Francia, and Aboitiz Equity Ventures, Inc. President and CEO Erramon I. Aboitiz.

Mr. Palacios, who spoke first among the four, began his talk by presenting the grim state of infrastructure in the Philippines as reflected in the latest Global Competitiveness Index, where the country ranked 90th among 140 economies. He delved on the developments and areas of concern regarding infrastructure projects under public-private partnerships (PPP) formed during the past administration, noting that there are currently 53 PPP projects, worth around $34 billion, at different stages in the pipeline. He emphasized the need for sustained political support for these projects since the average duration of a PPP contract stretches to 25 years, and would involve at least five Philippine presidents.

“We should understand that PPP programs require strong and sustained political support — strong support for the program without putting politics in the projects. We have been successful so far over the past six years and we look forward to continuing this good experience of having speedy implementation while maintaining integrity,” he said.

Mr. Palacios then laid out the reforms the PPP center proposed to the new administration, under President Rodrigo R. Duterte, which revolve around implementation and procurement.

The cause of slow Internet service

For his part, Mr. Cu discussed the current challenges and opportunities in developing telecommunications infrastructure.
Appetite for data services has increased significantly — and is expected to spike in the coming years — but the number of cellular sites between 2013 and 2016 has not been able to meet demand, he explained.

“Philippine telcos actually out-index most global telcos in terms of spending. We at Globe spend approximately 28% of our revenue on capital expenditure… so there is significant amount to spend going into this country in terms of telco infrastructure,” he said.

According to him, mobile Internet in the country is very similar to some of its ASEAN neighbors, like Thailand and Vietnam, but the Philippines lags behind in capacity because it moved straight from being an SMS-based economy to a data-based one, skipping the voice phase.

Slow Internet service in the country is the result of low cellular site density, a long history of under-investment in fixed Internet, and difficulties in laying down fiber cables due to geography and red tape. Reforms on these issues will be key in improving telecommunications capacity in the Philippines, he said.

Despite these challenges, he said Globe was able to gain access to a larger spectrum through proper investments, which allowed the company to provide better services.

Collaboration between public, private sectors

Mr. Francia, for his part, focused his speech on the private sector’s role in capacity building. Like Mr. Palacios, he reiterated the importance of collaboration between the public and private sector in improving the Philippines’ current state of infrastructure.

He recalled the problems brought about by the lack of infrastructure — such as airport and port congestion, inadequate road and rail infrastructure, and energy and water security issues — and that this under-investment ultimately limits our gross domestic product (GDP) growth.

“But we believe that this is sortable, especially with the help of the private sector…” he said. “We have to be selective, make priorities, in terms of where the private sector should be participating in. Whenever a project can stand on its own two feet, the government should strongly consider giving the private sector the chance to develop it.”

Bigger, more complex projects should be driven by the private sector as well, even when it is not economically feasible, he added.

Mr. Francia also talked at length about the key imperatives in developing existing infrastructure, such as airports, railways, toll roads, and those responsible for water and energy services. He concluded by urgently emphasizing the need for both private sector and the government to act quickly, given the lead time needed by projects before they break ground. The government also needs to fulfill its commitments in terms of delivery and contracts, Mr. Francia said, adding that local and foreign investors need to participate further in infrastructure projects since these require huge amounts of investment.

Economic optimism to boost energy demand

Last but not least, Mr. Aboitiz gave perspectives on how the energy sector plans to keep up with the increased demand projected in the years ahead.
For one, he noted that the Electric Power Industry Reform Act (EPIRA), which was passed in 2001, is working. It provided a framework, he said, for the restructuring of the power industry to a functioning competitive structure, and he believes it has been a successful policy that has shown tangible results.

The Philippines’ current power demand is at 11,500 megawatts and is expected to increase to 14,000 megawatts in five years, which is forecast to grow to 17,500 megawatts in 10 years with moderate economic expansion.

However, given the optimism surrounding the country, Mr. Aboitiz said that the power industry should prepare for higher demand and aim to build capacity ahead of growth.

He also discussed the need to choose an appropriate energy mix for the country, and the need for “a dependable, reliable, and competitive price based on capacity.”

“I firmly believe that for power prices to go down and leave them there in the long term is to make sure that there is adequate supply and there is healthy competition among industry players,” Mr. Aboitiz said.

Speeding up plant constructions and connectivity to the power grid, he said, will also help build the energy industry’s capacity in the long run.

April Paulyn B. Roque (@aprilpaulyn on Twitter) is an English Literature graduate. When she’s not writing, she’s either reading dystopian novels or watching dog videos online.