Build, build, build.
So far it’s just another catchy slogan.
But not if the Duterte administration can help it.
During the BusinessWorld Economic Forum held last May 19, three Cabinet secretaries from the NEDA, Budget, and Public Works presented and extolled several components of Dutertenomics, which included its Build, Build, Build initiative.
Under the Duterte government’s ambitious program, Build, Build, Build intends to remove — or at least unclog — bottlenecks in trade, traffic, and tourism and, most importantly, lift millions out of poverty.
Besides constructing new roads, bridges, and airports, the Duterte administration will also put up 2,000 kilometers of train tracks in Mindanao, according to Budget Secretary Benjamin Diokno.
This was followed up by Public Works Secretary Mark Villar who announced that his department intends to spend a record P450 billion on infrastructure for this year alone.
All these projects, in turn, will be completed on schedule without any hint of corruption, Socioeconomic Planning Secretary Ernesto Pernia assured.
In short, if things go well, Dutertenomics will solve all of the country’s problems.
The only thing Dutertenomics can’t do — if you’ve happened to quaff generous amounts of their Kool Aid — is to cure cancer, bring about world peace, and (cough, cough) solve extra-judicial killings.
While Dutertenomics was one of the forum’s themes this year, the event allowed also participants to gain several business insights from senior corporate officials (without anyone having to resort to, say, military rule).
In any case, here are some takeaways from the BusinessWorld Economic Forum.
1) It pays to share the wealth.
Everyone talks about inclusive growth.
But perhaps no one as as passionate about it than Mr. Go Negosyo himself, Jose Ma. “Joey” Concepcion III.
As a champion of Filipino entrepreneurship, Mr. Concepcion continues to spearhead activities to help small firms — which comprise more than 99% of all businesses in the Philippines — become medium-sized enterprises.
“It’s a long way,” he admitted in his speech at the BusinessWorld Economic Forum’s fifth session entitled “Preparing for the Middle-Class Consumer.”
But it doesn’t mean that he’s starting from scratch.
Besides helping put together a mentorship program tailor-made for small entrepreneurs, Mr. Concepcion is also pushing for what he calls “inclusive financing” or “lending that will not require collateral.”
“For many of these small entrepreneurs, the challenge is not the interest rate,” Mr. Concepcion said. “The challenge is really the asset. They don’t have the asset to use as collateral.”
As far as he’s concerned, inclusive financing has paid off.
And Mr. Concepcion has RFM, of which he is President and Chief Executive Officer, to prove it.
The publicly-listed food and beverage company recently provided owners and operators of sari-sari stores across the country with money and credit to sell its Selecta ice cream brand, a separate BusinessWorld report said. As a result, Selecta’s market share surged to 80% currently and posted 11% growth in revenues, the same report said.
Selecta has also raised the bar for any newcomer in the ice cream industry since sari-sari stores cannot accommodate more than one brand due to its small size, Mr. Concepcion said.
“The consumption of ice cream has increased because of sari-sari stores,” the RFM senior executive said.
This only proves what Mr. Concepcion has believed in all along.
“We have to start sharing what we have with those at the bottom of the pyramid and increase the middle class,” he said. “You don’t lose money because you help the poor become part of that ecosystem. Eventually, they become your customers.”
2) The future lies ahead* (at least for the Philippines’ energy sector).
The best way to predict the future is to invent it.
That quote, attributed to American computer scientist Alan Curtis Kay, worked, to some degree, for the Philippines’ energy sector.
Had the government been remiss in enacting power sector reforms years ago, the country would have been plagued with brownouts right about now.
“Six years ago, everyone in this sector was seeing a potential undersupply situation hitting us in the mid-2010s to 2018,” John Eric T. Francia, President and CEO of AC Energy Holdings Inc. said during his speech at the BusinessWorld Economic Forum.
But because of electricity industry reforms, coupled with the low cost of capital — thanks to a robust economy — the private sector was encouraged to borrow money (and invest some of their own) to build more generation facilities.
As a result, these plants helped add capacity to the grid, averting shortages in the near term. So far, supplies remain adequate — but only until 2021, Mr. Francia said.
By that year, demand for electricity — which powers malls and mobile phones, industries and the internet — may already outstrip supply, depending on several factors.
“You need to build 700 megawatts per year, assuming a five percent growth in demand nationwide,” Mr. Francia explained.
And that decision to build plants needs to be made “within the next twelve months because it takes three to four years to build a plant,” Mr. Francia said.
So what’s holding them back?
Delays being faced by power plants that are currently being built (and thereby can immediately augment supply once they are completed).
Some facilities are awaiting decisions from the Energy Regulatory Commission (ERC) while others have yet to secure permits, environmental and otherwise.
These delays are “giving uncertainty to the industry,” Mr. Francia said. “While we have expansion potential for our own plants, [we don’t want] to run the risk of building into an oversupply situation in the early 2020s.”
3) There is no one-size, fits all funding mode for the government’s infrastructure build up.
That’s what Oliver Y. Tan said.
“Funding is just one of the many critical steps to implement the government’s infrastructure build-up,” said the chief financial officer of the Megawide Construction Corp.
However, the company’s experience showed that its projects were built faster and incurred lower costs when funding was undertaken via Public-Private Partnership (PPP), a program initiated during the previous administration.
Take its project to upgrade and expand the Mactan-Cebu International Airport.
When it was finally able to begin work on the project in November 2014, it wasted no time to beat its June 2018 deadline, despite a one and a half year delay owing to a rival’s complaint and a property turnover that took longer than expected.
Megawide also paid the government an upfront premium of P14.4 billion, Tan said during his speech at the BusinessWorld Economic Forum, adding that the government is protected should the project incur cost overruns.
Compare that to the Official Development Assistance (ODA)-funded New Iloilo Airport Development Project that began in 1998, he said.
That project took nine years and two months to complete with costs ballooning by 42% due to overruns and variation orders, he said in his speech, citing a report by Castalia Strategic Advisors.
Mr. Tan also compared another Megawide PPP classroom project with a similar government-led initiative that was funded by the national budget.
From 2005 to the first half of 2010, the government was able to build a total of 17,305 classrooms using its own funds.
Megawide topped that, comparatively speaking.
Under its PPP for School Infrastructure Project (PSIP), the construction company was able to build “a total of 13,663 classrooms…over three years from 2014 to 2016,” Mr. Tan said.
Even though the company got things done faster and cheaper via PPP, Mr. Tan nor the company isn’t closing doors to various funding options. After all, it continues to support the government’s infrastructure development.
“There are unique inherent risks and liabilities that come with the various funding options of the government and these must be analyzed diligently before choosing a particular funding mode,” he said. — Robert JA Basilio Jr. with Josielyn Luna Manuel and Erika Fortuno-Mioten
*The quote is from Louisville basketball coach Denny Crum.