Philippines: Meeting Philippines: Meeting Infrastructure Infrastructure ChallengesChallenges

The World BankThe World Bank

Infrastructure in the Infrastructure in the PhilippinesPhilippines

A mixed picture of important A mixed picture of important

achievementsachievements

And remaining weaknessesAnd remaining weaknesses

Overall access to water supply and Overall access to water supply and sanitation, telephones, and electricity sanitation, telephones, and electricity are relatively high compared with other are relatively high compared with other developing Asian countriesdeveloping Asian countries

CountryElectrifi-cation

rates (%)

Quality of electric supply

(Scale 1–7)

Mainlines per 100 peoplec

Mobile sub-scribers per 100 peoplec

Access to improved

sanitation (%)

Access to improved water (%)

2000 2003/04 2003 2003 2002 2002

China 98 4.2 20.9 21.48 44 77Malaysia 96 5.9 18.16 44.2 — —Mongolia 90 — 5.62 12.98 59 62Thailand 82 5.3 10.49 39.42 99 85Philippines 80 3.7 4.12 26.95 73 85Vietnam 75 3.4 5.41 3.37 41 73Sri Lanka 62 3.2 4.9 7.27 91 78Indonesia 53 3.6 3.94 8.74 52 78India 43 3 4.63 2.47 30 86Rank 5 of 9 5 of 8 8 of 9 3 of 9 3 of 8 2 of 8

Power Telecoms Water & sanitation

Total road network length compares Total road network length compares favorably with neighboring countriesfavorably with neighboring countries

1,000 vehicles (4-wheel)

1,000 population

sq. km of land area

Indonesia 310,000 65.8 1.4 0.16

Thailand 209,800 42 3.3 0.41

Vietnam 204,318 302 2.5 0.62

Philippines 202,083 91.3 2.4 0.67

Cambodia 38,257 372 2.7 0.21

Malaysia 72,000 19.4 2.8 0.22

Ranking 3 of 6 5 of 6 1 of 6

Country

Total road length (km)

Road density: length in km per

Sources: Philippine data from JICA-DPWH. 2003. “Roads in the Philippines.” Manila; other countries from the ASEAN Statistical Yearbook 2004 and the ASEAN Transport and Communication Sectoral Report 1999. ASEAN, Jakarta.

Major reform measures in the Major reform measures in the power, water, transport, and power, water, transport, and telecoms sector have already been telecoms sector have already been initiatedinitiated Power: Power:

– Critical tariff adjustments implementedCritical tariff adjustments implemented– Ongoing market restructuring and privatization Ongoing market restructuring and privatization

Water Supply and Sanitation: Water Supply and Sanitation: – Landmark Manila water concessionLandmark Manila water concession– EO279 for water sector financing reform EO279 for water sector financing reform

Road: Road: – Special Road Fund establishedSpecial Road Fund established– DPWH reform proposals DPWH reform proposals

Private Sector Participation in Infrastructure: Private Sector Participation in Infrastructure: – BOT Law (1990, amended 1994)BOT Law (1990, amended 1994)– Public broadly supportive of private sector participationPublic broadly supportive of private sector participation

But overall state of infrastructure in the But overall state of infrastructure in the country has not kept up with rapid country has not kept up with rapid population growth and urbanizationpopulation growth and urbanization

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

19

50

19

55

19

60

19

65

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

020

4060

80

Percen

tT

ho

usa

nd

s

% of population residing in urban areas

% of population residing in Metro Manila

Rural

Urban

Low quality of services has emerged as a Low quality of services has emerged as a key impediment to the economic key impediment to the economic competitivenesscompetitiveness

Infrastructure Ranking in the Global Competitiveness Report

Source: World Economic Forum, “The Global Competitiveness Report, 2003-2004”Legend: 1=poorly developed and inefficient, 7= among the best in the world

Overall Overall InfraInfra

RailroaRailroadd

PortPort AirAir ElectricitElectricityy

TelephonTelephonee

ChinaChina 3.53.5 3.73.7 3.73.7 3.93.9 4.24.2 5.45.4

IndiaIndia 2.92.9 4.74.7 3.23.2 4.84.8 3.03.0 6.06.0

IndonesiaIndonesia 3.73.7 3.23.2 3.73.7 4.14.1 3.63.6 3.93.9

KoreaKorea 5.25.2 5.45.4 5.35.3 5.75.7 6.16.1 6.56.5

MalaysiaMalaysia 6.16.1 4.94.9 6.16.1 6.26.2 5.95.9 6.06.0

PhilippinPhilippineses

2.32.3 1.51.5 2.42.4 3.93.9 3.63.6 4.84.8

ThailandThailand 4.94.9 3.73.7 4.54.5 5.65.6 5.35.3 6.16.1

VietnamVietnam 2.72.7 2.82.8 3.13.1 3.93.9 3.43.4 4.94.9

RankingRanking 8 out of 8 out of 88

8 out of 8 out of 88

8 out of 8 out of 88

6 out of 6 out of 88

5 out of 5 out of 88

7 out of 7 out of 88

Service levels for the poor are much Service levels for the poor are much lower than the averagelower than the average

0

20

40

60

80

100

Poorest Second Middle Fourth Richest

Electricity Telephone Piped drinking water Own flush toilet

Per

cen

t o

f p

op

ula

tio

n

Quintile

Access to basic infrastructure

Need to increase infrastructure spending Need to increase infrastructure spending from less than 3% of GDP to at least 5%, from less than 3% of GDP to at least 5%, and increase the efficiency of and increase the efficiency of infrastructure spending in the meantimeinfrastructure spending in the meantime

0

1

2

3

4

5

6

7

8

9

Philippines Indonesia Albania Russia Cambodia Kazakhstan China

Per

cen

t

Public

Private

No breakdown

Note: No breakdown for China, figures are 1991-2000 average. Philippines and Indonesia (2002 figures) , Albania and Russia (2000) and Cambodia (2001).Sources: World Bank Privte Participation in Infrastructure Database, World Bank Public Expenditure Reports, China Statistical yearbook (various years).

0

2

4

6

8

10

1985 1987 1989 1991 1993 1995 1997 1999 2001

Total

Private

Public

““Boom-Bust” Infrastructure CycleBoom-Bust” Infrastructure Cycle Infrastructure Investments as a share of Infrastructure Investments as a share of GDP, GDP, 1985-20021985-2002

Capital outlays only.

Sources: Department of Budget and Management; Department of Finance; Commission on Audit; Maynilad Water Services, Inc.; Manila Water Corporation, Inc.; Optel Ltd.; and World Bank.

Per

cen

t

The Way Forward – The Way Forward – Four PrioritiesFour Priorities A rigorous and sustained fiscal reform A rigorous and sustained fiscal reform

programprogram Continued specific reforms in key sectors – Continued specific reforms in key sectors –

particularly power, road and waterparticularly power, road and water Improved central oversight of the planning Improved central oversight of the planning

and coordination of investmentsand coordination of investments A few focused investments in the short A few focused investments in the short

term through public- private partnershipterm through public- private partnership

Implementing Specific Implementing Specific Reforms in Key SectorsReforms in Key Sectors

Basic framework in place – thus Basic framework in place – thus huge returns to some specific huge returns to some specific measures measures

Cross cutting reform issue is to Cross cutting reform issue is to achieve cost recoveryachieve cost recovery

Improving Oversight of Improving Oversight of Investment Planning and Investment Planning and CoordinationCoordination Focus of oversight Focus of oversight

responsibilities to responsibilities to shift from detailed shift from detailed project-level project-level approval process approval process to a broader and to a broader and more forward-more forward-looking rolelooking role

Concerns about Concerns about efficiency and efficiency and transparency of transparency of unsolicited bidsunsolicited bids

Infrastructure Infrastructure Investment as a share Investment as a share of GDP, 1985-2002of GDP, 1985-2002

0

1

2

3

4

5

6

7

8

9

19

85

19

87

19

89

19

91

19

93

19

95

19

97

19

99

20

01

Focus on a Few Investments that Focus on a Few Investments that Address Infrastructure Address Infrastructure BottlenecksBottlenecksunder Public Private Partnershipunder Public Private Partnership

MTPDP has highlighted the prioritiesMTPDP has highlighted the priorities– Decongesting Metro ManilaDecongesting Metro Manila– Developing Subic Clark areasDeveloping Subic Clark areas

Undertake these investments in close Undertake these investments in close partnerships with the private sectorpartnerships with the private sector

New projects should be tendered competitively New projects should be tendered competitively and transparently to attract private sectorand transparently to attract private sector– Good project preparation is key to be able to conduct Good project preparation is key to be able to conduct

competitive biddingcompetitive bidding– Proper management of subsidies: cash subsidies and Proper management of subsidies: cash subsidies and

guaranteesguarantees

Summary of MessagesSummary of Messages

Infrastructure is key element of the Philippine Infrastructure is key element of the Philippine Development Agenda Development Agenda

Many elements of good infrastructure policy Many elements of good infrastructure policy framework are already in placeframework are already in place

Some key measures are critical to revive Some key measures are critical to revive infrastructure investmentsinfrastructure investments– Fiscal stabilizationFiscal stabilization– Specific sector reforms, including cost Specific sector reforms, including cost

recovery policyrecovery policy– Improving planning and coordinationImproving planning and coordination– Well-designed competitive tendering to Well-designed competitive tendering to

maximizing the benefits of private sector maximizing the benefits of private sector participationparticipation