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New $1 Bn LRT Proposed

The government has received an unsolicited proposal to build a 9-kilometer (km) elevated light railway transit that would connect to . The railway line is projected to cost around $1 billion.

eturning from a state visit to Malaysia, the Trade and Industry Secretary Ramon M. Lopez has confirmed that RFilipino firm, A. Brown, and the Malaysian firm, East West Rail Corp and Alloy MTD Group, have signed a memorandum of understanding (MOU) to undertake jointly a planned project to put up a light rail transit in the . The project has been submitted by the partner companies as an unsolicited proposal to the Department of Transportation (DOTr) and is currently in the project evaluation stage. The project proposal has already gained the endorsement of the Philippine National Railways (PNR). The unsolicited proposal involves the build and operation of a 9-km, 11-station, elevated light rail transit (LRT) line that would traverse Diliman in Quezon City to Quiapo in Manila. The railway line from Diliman to Lerma would connect the University of the Philippines Diliman campus to the University Belt, where the University of Santo Tomas and are located. The private proponent estimates that the whole project proponent [East West Corp. and Alloy MTD Group] is granted will cost around $1 billion. The mass transit transport proposal the status of original proponent.” However, no news have also includes a 30-year operation and maintenance contract been heard about the project since then, though it is a policy with the private proponent before the joint venture would that every proposal submitted to the NEDA-ICC needs to be turn over operations of the railway line to the government. reviewed with 15 days from date of submission and forwarded The project would take at least 36 months to complete. to the Cabinet-level ICC for approval. The NEDA-ICC has According to the Public-Private Partnership (PPP) Center, already convened last August, but no news about the status of the unsolicited proposal has been lodged with the technical the light rail transit has been disclosed. The PNR East West working group (TWG) of the National Economic Development Railway Project Committee, for its part, confirmed: “The PNR Authority’s Investment Coordination Committee (NEDA- has submitted an unsolicited proposal to PPP and NEDA and ICC) as early as July 5. PPP Center Executive Director Andre it is undergoing evaluation stage pursuant to the BoT law.” Palacios has said, “The agency [PNR] already did preliminary The proposed LRT marks the first such pitch from evaluation and determined that this proposal meets the criteria the private sector to be submitted to the NEDA under of the BoT Law and the implementing rules, and therefore the the administration of President Rodrigo Duterte.

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PH Infra Competitiveness Ranking According to global executives, inadequate supply of infrastructure is the 2nd most problematic area of doing The Philippines infrastructure has been consistently business in the country, just slightly below ranked number described as “poor” by international investors and one of the 1 issue: inefficient government bureaucracy. Issues in major barriers for the country to be able to compete effectively Philippine infrastructure even outranked typical business on the global stage. Twelve years since the World Economic concerns such as corruption, tax rates and tax regulations Forum started releasing its Global Competitiveness Report, (see Most Problematic Factors for Doing Business). the country’s infrastructure ranking continues to weigh The Philippines' infrastructure ranking of 95th out of 138 down the Philippines’ global competitiveness. countries is the 2nd lowest ranking amongst the 12 major pillars of competitiveness identified by the WEF(see A Snapshot of the Once again, the Philippines’ dismal ranking in terms of quality Philippines Competitiveness Index, 2016-2017 editon). Only the of infrastructure has contributed to the country’s slide down in criterion, Goods Market Efficiency, with a ranking of 99th out the global competitiveness ranking. Based on the 2016-2017 of 138, was worst performing, and it is likely that this factor too Global Competitiveness Report of the World Economic Forum was affected by the quality of infrastructure in the country. The (WEF), the Philippines ranks 57th overall from 138 countries 12 pillars of competitiveness are criteria that the WEF deems surveyed, 10 places down from its previous year’s ranking of 47. important for a country to possess in order to effectively compete

The first unsolicited proposal lodged with the NEDA-ICC

Philippine ANALYST INFRASTRUCTURE October 2016 INFRASTRUCTURE 85 with other countries in an increasingly globalized economy. The pillar - adequate infrastructure - is defined by the WEF as one of the basic requirements for competitiveness. Without it, a country cannot compete nor improve in its overall competitiveness ranking. Unfortunately for the Philippines, the country has the dubious achievement of being consistently dismal when it comes to its infrastructure ranking. Since WEF started tracking the competitiveness levels of countries in 2004, the Philippines’ infrastructure ranking has never gone higher than 90. Its worst performance was in 2011 when its infrastructure ranking was at 105 out of 142 countries surveyed. In the latest Global Competitiveness Report, the lowest quality of infrastructure score received by the Philippines were in the areas of quality of air transport infrastructure (116th out of 138), quality of port infrastructure (113 / 138) and overall infrastructure (112 /138). Quality of roads and the availability of fixed telephone lines also contributed to the low infrastructure ranking (see Breakdown of Philippines Infrastructure Competitiveness Ranking, 2016-2017). Both the quality of airport infrastructure and port infrastructure were adversely affected by the growing and still unresolved issues of congestion. These transport infrastructure are vital in the ease of people and goods movement. It provides connectivity that is an integral element in business and in a growing economy. Without sufficient supply of ports and airports, businesses have to incur higher costs in doing business in the country. It is estimated that congestion in airports alone has caused airline companies an estimated loss of about P7 billion annually, while port congestion cost has been placed at P2.5 billion per day. All previous years of low infrastructure ranking were mainly caused by the lack of improvement in the country’s airports and ports.

result of wef executive opinion survey on the philippines, 2016-2017

MOST PROBLEMATIC FACTORS FOR DOING BUSINESS

Inefficient government bureaucracy 18.8 Inadequate supply of infrastructure 17.8 Corruption 16.9 Tax rates 10.8 Tax regulations 8.3 Policy instability 7 Restrictive labor regulations 6.8 Inadequately educated workforce 3 Crime and theft 3 Access to financing 3 Insufficient capacity to innovate 2.3 Poor work ethic in national labor force 2 Government instability 0.6 Inflation 0.3 Foreign currency regulations 0.3 Poor public health 0.1

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a snapshot of the philippines competitiveness index, 2016-2017 edition

Source: World Economic Forum, Global Competitiveness Report INFRASTRUCTURE_OCTOBER2016

breakdown of philippines infrastructure competitiveness ranking, 2016-2017 edition

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Source: World Economic Forum, Global Competitiveness Report

Supply of Infrastructure in the Philippines has been consistently dismal.

Philippine ANALYST INFRASTRUCTURE October 2016

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STATUS OF BIG INFRASTRUCTURE PROJECTS IN THE PIPELINE AS OF SEPTEMBER 2016

IMPLEMENTING FUNDING CIVIL WORKS PROJECT TITLE PROJECT COST STATUS / ISSUES AGENCY SOURCE TIMEFRAME

ROADS/BRIDGES

MPIC and DPWH has signed the concession agreement NLEx-SLEx Connector Road DPWH PPP 2018 – 2020 P23.20 billion for the project. AIR AND WATER PORTS New Bohol (Panglao) Airport Operations, Maintenance & DOTr & CAAP PPP TBD P4.57 billion Development Project Pre-Qualified bidders for the projects: Laguindingan Airport Operations, (1) SMHC-IIAC Consortium (San Miguel Holdings Corp.; Maintenance & Development DOTr & CAAP PPP TBD P14.62 billion Incheon International Airport Corp.) Project (2) Philippine Airports Consortium (Metro Pacific Investments Corp.; Aeroports de Paris; ADP Ingenierie) Davao Airport Operations, (3) Maya Consortium (Aboitiz Equity Ventures Inc.; Maintenance & Development DOTr & CAAP PPP TBD P40.57 billion VINCI Airports SAS; ANA-Aeroportos de Portugal) Project (4) GMR Infrastructure and Megawide Consortium (Megawide XConstruction Corp.; GMR Airport Bacolod Airport Operations, Developers Ltd.) Maintenance & Development DOTr & CAAP PPP TBD P20.26 billion (5) Filinvest-Jatco-Sojitz Consortium (Filinvest Project Development Corp.; Japan Airport Terminal Co.; Cyberzone Properties Inc.) Iloilo Airport Operations, Maintenance & Development DOTr & CAAP PPP TBD P30.40 billion Project The following companies have expressed their intention to bid: (1) Megawide Construction Corp. (2) Metro Pacific Investments Corp. NAIA PPP Project DOTr & MIAA PPP TBD P74.56 billion (3) San Miguel Corp. (4) Ayala Corp. (5) Asia’s Emerging Dragon Corp. (6) Aboitiz Equity Ventures, Inc. Pre-qualified bidders for this project: (1) Asian Terminals Inc. – DP World FZE Consortium (2) Bollore Africa Logistics Davao Sasa Port Modernization (3) International Container Terminal Services, Inc. DOTr & PPA PPP TBD P18.99 billion Project (4) Portek International Pte Ltd. – National Marine Corp. Consortium (5) San Miguel Holdings Corp. – APM Terminals Management (Singapore) Pte Ltd. Consortium New Cebu International Port CPA & DOTr ODA TBD P9.2 billion NEDA has approved the project

RAILWAYS

Apart from operations and maintenance, the PPP Operations & Maintenance of LRT DOTr & LRTA PPP TBD No CAPEX Center is eyeing a 3.9-kilometer extension from Recto Line-2 Avenue to Pier 4 in Manila of LRT-2. LRT Line 6 Project DOTr PPP TBD P65.09 billion For submission of pre-qualification documents

Philippine National Railways – DOTr PPP 2016-2020 P213.99 billion NEDA has approved the project. South Project

UTILITIES

New Centennial Water Source – Bid submission for this project is expected to start MWSS & DPWH PPP TBD P18.72 billion Kaliwa Dam Project before the end of the year. Batangas-Manila (BatMan) 1 PNOC PPP TBD P14.72 billion For NEDA Board Approval Natural Gas Pipeline Project OTHER PROJECTS

Regional Prison Facilities through Bid proposal submission is rescheduled for the 4th time DOJ & BuCor PPP TBD P50.20 billion PPP on April 27, 2017

Philippine Travel Center Complex DOT & IA PPP TBD P1.7 billion For NEDA Board Approval Project New Nayong Pilipino at DOT PPP TBD P1.47 billion NEDA has approved the project. Project

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ACRONYMS BuCor Bureau of Corrections CAAP Civil Aviation Authority of the Philippines CPA Cebu Port Authority DOJ Department of Justice DOTr Department of Transportation DOT Department of Tourism DPWH Department of Public Works and Highways IA Administration LRTA Light Rail Transit Authority MIAA Manila International Airport Authority MPIC Metro Pacific Investments Corporation MWSS Metropolitan Waterworks and Sewerage System NEDA National Economic Development Authority NLEx North Luzon Expressway ODA Official Development Assistance PNOC Philippine National Oil Company PPA Philippine Ports Authority PPP Public-Private Partnership SLEx South Luzon Expressway TBD To be determined

Philippine ANALYST INFRASTRUCTURE October 2016