[ANALYSIS] Why we can’t Build, Build, Build our way out of this pandemic

It’s time for the economic managers to drop their fetish for Build, Build, Build.

Right smack in the middle of a pandemic, the Duterte government is pushing for Build, Build, Build to “fuel our bounce back” from the economic doldrums.

Finance Secretary Carlos Dominguez III claims infrastructure spending remains the “best driver of economic growth” for it has the “best multiplier effects in terms of employment and shared prosperity.”

This preference for infrastructure has invariably shaped the government’s COVID-19 response. The economic managers are now cordoning off the infrastructure budget, saying it will be “the last item that we will touch.”

Construction works are indeed coming back, bit by bit. The Inter-Agency Task Force has already greenlit the resumption of private and public construction works. Government will also hit the ground running with some13 big-ticket transport projects.

But can Build, Build, Build really help the economy bounce back quickly?

We doubt it. Even before the pandemic, Build, Build, Build proceeded at a glacial pace and was not as growth-inducing as trumpeted by the economic managers.

If key agencies – notably the Department of Public Works and Highways (DPWH) and the Department of Transportation (DOTr) – can’t deliver Build, Build, Build projects in normal times, what more in a pandemic?

We also fear that Build, Build, Build might end up as a patronage tool by local officials and become bloated by non-essential, non-strategic infrastructure projects.

Dismal failure

Back in 2017, President Rodrigo Duterte’s economic managers boldly envisioned a “golden age of infrastructure.” Three years later, officials claim they’ve successfully “jacked up” infrastructure spending.

But data belie such claim. In truth, Build, Build, Build has been a “dismal failure” (to borrow the words of Senator Franklin Drilon).

First, realizing that many of the projects they dreamed up were infeasible, Duterte’s economic managers have had to modify their master list of projects and replace some big projects with smaller, more doable ones. (READ:The moving goalposts of Build, Build, Build)

Second, government failed to stick to its original infrastructure budget targets. In the last two national budgets Congress programmed infrastructure allocations way lower than the targets originally set by the economic managers (Figure 1).

Figure 1.

Third, Build, Build, Build has been marred by chronic underspending. This can be gleaned from the gap between “obligations” and “disbursements.”

Obligations refer to liabilities incurred by the government when an agency enters into contracts for the delivery of projects. Disbursements refer to the cold cash withdrawn from the Bureau of the Treasury to pay for such obligations.

If less money is being disbursed than the amounts that were obligated, that’s called underspending and it signals slow, inefficient project implementation.

Underspending has been particularly bad in Build, Build, Build’s two lead agencies: the DPWH and DOTr.

An analysis done by the Institute for Leadership, Empowerment, and Democracy (iLEAD) shows that these two agencies managed to disburse less than half of their total obligations for the past 3 years on average (Figure 2 shows the data for DPWH).

This appalling spending performance has been called out by the Commission on Audit (COA) in multiple reports. Although both the DPWH and DOTr’s disbursement rates somewhat improved in 2019, they continued to underspend.

Figure 2.

Fourth, government construction projects have not been a key driver of growth.

Figure 3 shows that from 2017 public works accounted for just about a quarter of total growth in the construction sector. In the first half of 2019 public construction even shrank by 14 percentage points owing to budget delays.

In principle infrastructure does have multiplier effects, meaning a peso of infrastructure spending contributes more than a peso to the economy at large. But to our knowledge no proper study has yet looked at the multipliers for Build, Build, Build projects.

Figure 3.

All in all, government has failed to considerably jack up public infrastructure spending, contrary to officials’ pronouncements.

Until government fixes the chronic underspending problems faced by DPWH and DOTr – especially bottlenecks in planning and implementation – we can’t Build, Build, Build our way out of this pandemic.

Pork by any other name

More funds can be had for the COVID-19 response if government sets aside local infrastructure projects: they account for nearly a fifth of 2020 infrastructure outlays.

But lawmakers – led by House Speaker Alan Peter Cayetano – are closely guarding local infrastructure projects, believing – as do the economic managers – such projects could boost growth and development.

We fear Build, Build, Build might fall victim to local politics and the age-old problems associated with pork barrel allocations.

Since the 1920s, district-level public works have taken on many names, including Support to Local Development Projects, Countrywide Development Fund, and Priority Development Assistance Fund (PDAF).

But pork by any other name has been susceptible to abuse, often serving as a mere cash dispenser for legislators. Local infrastructure projects are more often than not a tool for patronage and political survival, pursued at the expense of the communities they ostensibly serve.

In 2013 the Supreme Court, in the wake of public uproar, struck down lump-sum PDAF as unconstitutional.

But let’s not kid ourselves: pork lives on. Legislators could still lobby for funds by moving budgetary amounts around, often by inserting items into the DPWH’s Local Program.

Extent of pork today

In the 2020 budget, Congress passed appropriations for local public works double or triple the proposed levels.

Specifically, budget items for multipurpose halls nearly doubled, items for local roads doubled, and items for flood control projects tripled (Figure 4). This is a surefire indication of congressional insertions.

Figure 4.

On top of this, budgets for local infrastructure projects have tended to go to richer, rather than poorer, regions.

For roads and bridges, the top recipients are Metro Manila, Davao Region, Central Luzon, Calabarzon, and Mimaropa. Save for a couple of districts in Bicol Region and a district in Eastern Visayas, the top recipients of flood control projects are districts from better off regions.

Lobbying for local infrastructure funds is also largely determined by political ties.

This is illustrated well by Figure 5, which lists the top 10 districts which got allocations for flood control projects this year. Note that a bulk went to districts of lawmakers who are known allies of the President; in fact the district at the top is represented by the President’s son himself.

The same pattern can be found in budgets for roads and bridges (Figure 6).

Figure 5.

Figure 6.

If only lawmakers let go of some of their pet local infrastructure projects, they can free up substantial allocations for hospital reimbursements, quarantine and testing facilities, or subsidies for the poor and jobless. (READ:Test, Trace, Treat (not Build, Build, Build))

But it seems lawmakers won’t be parting with their pork any time soon.

On May 12, Duterte’s allies in Congress submitted a P1.5-trillion stimulus package bill called CURES or COVID-19 Unemployment Reduction Economic Stimulus, centering on local infrastructure projects and aiming to cure the economic havoc wreaked by the pandemic.

If we’re not vigilant enough, this bill might end up curing pork rather than the economy itself.

Legacy mode

To help with the COVID-19 response, government better trim the 2020 budgets of both DOTr and DPWH to levels they can realistically spend. Based on the past 3 fiscal years, that amounts to just P350 billion to P400 billion a year.

Government can also realign or reexamine P180 billion of local infrastructure except essential ones like water systems.

We understand that the pandemic has derailed the Duterte government’s legacy projects under Build, Build, Build. But in this time of crisis, government needs to get its act together and divert all its energies and resources to saving people’s lives.

That’s the prudent thing to do, and perhaps the better legacy to leave. – Rappler.com

The authors are former workers in government.

JC Punongbayan

JC Punongbayan is a PhD candidate and teaching fellow at the UP School of Economics. His views are independent of the views of his affiliations.

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