So great are its scope and cost that the centerpiece of the Duterte administration’s economic agenda—the Build Build Build infrastructure program— has given rise to two questions. The first is, does the economy of this country have the absorptive capacity for the completion of a program consisting of 75 flagship infrastructure projects? The second question is, will the implementation of Build Build Build cause damage to the Philippine economy?
The first question is not hard to answer. Even for a more developed economy, 75 flagship projects—railways, highways, airports, seaports, bridges, etc.—is a problematic proposition; for an economy of the Philippine economy’s size, absorptive capacity is a very big question mark. Delays in public bidding and other administrative requirements, right-of-way issues, bureaucratic inertia and incompetence and political interference are already being experienced by Build Build Build. True, the disbursement of finds by DBM (Department of Budget and Management) is better —DPWH (Department of Public Works and Highways) chief Mark Villar has reported that his department has now received more than 60 percent of its 2018 budgetary allocation—but the number of projects that are well underway is nowhere near the two-thirds of the Build Build Build total.
With the halfway point of Mr. Duterte’s term fast approaching, the number of Build Build Build projects likely to be completed by June 30, 2022 is, at this point, far less than 100 percent of target.
The second question is assuredly the more important of the two questions usually asked Mr. Duterte’s infrastructure program.
Is Build Build Build, if implemented as planned, likely to cause damage to the Philippine economy? Perhaps the best way to approach this question is to compare it with the only other massive infrastructure program undertaken by the national government since Independence. I’m referring to the Rice and Roads program undertaken by President Ferdinand Marcos during his first term (1966-1969). Fully cognizant of the fact that up until then no President had won re-election—an inaccuracy, considering that President Ramon Magsaysay did not run for re-election—Ferdinand Marcos decided, on Day One of his Presidency, that he would win the elusive second presidential term on the back of a hitherto-not-undertaken massive infrastructure program. Upon the advice of his Cabinet that two of the nation’s most serious deficiencies were a good road network and support for the agricultural sector, Mr. Marcos gave out orders for the drafting of a Rice and Roads program.
Whether or not the spanking-new highways and the improvements in the agricultural sector—the nation regained rice self-sufficiency, for one—were responsible for it, the fact was that Ferdinand Marcos won a second term in the 1969 election.
But Mr. Marcos’s re-election came at an extremely high cost to the Philippine economy. When the reckoning was done the day after Election Day, it was found (1) that the budget deficit had skyrocketed, causing the budget-deficit-to-GDP ratio to reach an intolerably high level, and, more important, (2) that the nation’s GIR (gross international reserve) to virtually disappear, causing an intensification of inflation and a sharp de facto devaluation of the peso. Looking for scapegoats, the newly re-elected President found them in the Secretary of Finance (Eduardo Z. Romualdez) and the Governor of the CB (Central Bank) of the Philippines (Alfonso Calalang). Both men, gentlemen to the core, resigned.
Abject as the Philippine economy’s situation was at that point, the new Secretary of Finance (Cesar Virata) and CB Governor (Alfonso Licaros) had no choice but to fly to Washington D.C. to seek an IMF (International Monetary Fund) stand-by agreement. The harsh conditionalities that normally accompany a standby agreement—chief of this is a sharp reduction in the budget deficit—made the Marcos administration even more unpopular than it was in the run-up to the 1969 election. Another major conditionality was the transference of the peso from the parity system to the free exchange market system. Overnight, the peso lost close to 60 percent of its legal value, adding further fuel to the inflationary fire.
The foregoing is how the last massive government infrastructure program ended for the Philippine economy—and for its principal opponent. Will the same fate befall Build Build Build? I hope not, but the probability is great.