A Policy Brief on Philippine Roads and Rail Infrastructure AUTHOR JOHN D. FORBES is a private business consultant, author, and public speaker. He is Senior Adviser of the Arangkada Philippines Project at the American Chamber of Commerce of the Philippines (AmCham) and chairman of its Legislative Committee. He is also a senior counselor for Vriens and Partners Pte. Ltd. of Singapore. John is the author of Arangkada Philippines 2010: A Business Perspective and two AmCham Roadmaps to More Foreign Investment in the Philippines. The American Enterprise Institute published his monograph Jamaica: Managing Political and Economic Change in a Third World Democracy. He received his education from Georgetown University, Princeton University, and Harvard University and served as an American diplomat for 25 years, beginning in Vietnam and the Philippines. John worked in the Bureau of East Asia and Pacific Affairs, the Bureau of Congressional Affairs, the Policy Planning Staff, the US Congress, and as a Special Assistant to the Undersecretary for Political Affairs. POLICY BRIEF EDITORIAL TEAM: Editor-in-Chief: John D. Forbes Managing Editor: Sarah Kathrina F. Gomez Economic Researcher: Charles John P. Marquez Research Assistant: Lia Angela H. Daus Cover: Christina Maria D. Tuguigui Layout: Mary Grace Dilag-Mojica LIST OF SPONSORS • American Chamber of Commerce of the Philippines, Inc. • Australian-New Zealand Chamber of Commerce of the Philippines • Bankers Association of the Philippines • Canadian Chamber of Commerce of the Philippines • Confederation of Wearable Exporters of the Philippines • European Chamber of Commerce of the Philippines • Foundation for Economic Freedom • Japanese Chamber of Commerce and Industry of the Philippines, Inc. • Korean Chamber of Commerce Philippines, Inc. • Makati Business Club • Management Association of the Philippines • Philippine Association of Multinational Companies Regional Headquarters, Inc. • Philippine Chamber of Commerce and Industry • Philippine Ecozones Association • Philippine Exporters Confederation, Inc. • Semiconductor and Electronics Industries in the Philippines, Inc. • US-ASEAN Business Council Policy Brief No. 8 • September 2018 LUZON VISAYAS MINDANAO TABLE OF CONTENTS I. INTRODUCTION AND SUMMARY 1 II. LAND TRANSPORT: A SUPPLY AND DEMAND CRISIS 2 III. PHILIPPINE INFRASTRUCTURE SPENDING CATCHING UP 5 IV. ROAD TRANSPORTATION 6 EXPRESSWAYS 7 BRIDGES 13 BUS RAPID TRANSIT 16 PUV MODERNIZATION PROGRAM 17 V. RAIL TRANSPORTATION 17 VI. RECOMMENDATIONS 22 VII. CONCLUSION 25 BIBLIOGRAPHY 26 LIST OF TABLES & FIGURES Figure 1 : GDP, Philippines, 2003-2017 2 Figure 12 : Total expressway network, select Figure 2 : Population growth, Philippines, Asian countries, 2017 7 2010-2045 3 Figure 13 : Luzon Spine Expressway Network 8 Figure 3 : Vision of the future Filipino family 3 Table 3 : Current expressway network, Km 8 Figure 4 : Car sales, ASEAN-6, 2010-2017 3 Table 4 : Expressways under construction, Km 10 Figure 5 : Five year car sales, Philippines Table 5 : Expressways planned and proposed, Km 11 2010-2022E 3 Table 6 : Bridges under construction, meters 14 Figure 6 : Motorcycle sales, ASEAN-5, 2010-2017 4 Table 7 : Proposed and planned bridges, meters 15 Figure 7 : Percentage of GDP used for Table 8 : Inter-Island Linkage Project bridges, Km 16 infrastructure, ASEAN-6, 2007-2018 5 Figure 14 : Quality of railroads rankings, ASEAN-6, Figure 8 : Infrastructure spending, 2017-2022 5 2008-2018 18 Table 1 : Road quality and road density, Table 9 : Current light rail and commuter line, Km 18 Philippines, 2017 6 Figure 15 : Current Metro Manila rail system 19 Figure 9 : Quality of roads rankings, ASEAN-6, Figure 16 : Light rail ridership (LRT-1, LRT-2 & 2008-2018 6 MRT-3), 2000-2014 20 Table 2 : Most problematic factors for doing Table 10 : Rail projects under construction, Km 20 business, Philippines, 2013-2017 6 Table 11 : Rail projects under construction soon, Km 21 Figure 10 : DPWH budget, 2003-2018 7 Table 12 : Rail projects planned, Km 21 Figure 11 : DPWH net sincerity ratings, 2006-2016 7 1 A Policy Brief on Philippine Roads and Rail Infrastructure A POLICY BRIEF ON PHILIPPINE ROADS AND RAIL INFRASTRUCTURE I. INTRODUCTION AND SUMMARY Efficient transport overland of people and goods “Build, Build, Build” until the country has a modern characterizes high-income developed economies. transport system. Implementing more efficient transport in the Philippines will help achieve the aspiration of The Philippine government has only started to meet the Aquino and Duterte administrations for a the challenge of modernizing ground transport. “comfortable life for all.” Infra spending, as a percentage of GDP, is now almost 5% and should go higher. The public works High-quality roads and bridges and extensive budget has increased over 1,000% since 2006 to urban and inter-urban rail networks ease traffic over US$ 10 billion a year. New expressways and congestion and enhance economic productivity. rail lines under construction will be operational Better transport infrastructure drives higher in a few years, while more are in advanced stages growth, leading firms to invest more and increasing of planning and approval. Sufficient funding is productivity of both labor and capital. The quality of available, but implementation is slow. health and education also improves when citizens travel with ease. This policy brief discusses plans for the expressway system to grow from 385 to 1,463 km and the rail Conversely, an economy is inefficient when ground system from 77 to 1,200 km by 2022. New skyways, transportation is inadequate, burdening citizens bridges, and rail lines should ease Metro Manila with heavy congestion costs. This describes the traffic congestion, but only if new transportation Philippines in 2018, where “carmageddon” looms projects are built much faster. in urbanized centers. The policy brief includes recommendations made Annual sales of new passenger and commercial at a roundtable on April 26 at AmCham. We are vehicles are growing, moving steadily higher grateful to the participants, especially to senior towards levels seen in more developed ASEAN officials of DOTr, DPWH, and JICA, who made countries. Traffic congestion costs the economy PhP excellent presentations. 3.6 billion daily, and may rise to PhP 6 billion daily by 2030. The next president can expect to face the Transport infrastructure is clearly challenge of almost one million new vehicles a year, most urgent need twice the current level. our . It immediately contributes to economic expansion and Solutions include upgrading the extensive national broadens the revenue base of countries. and local road system, rapidly expanding the small Businesses are able to improve network of freeways and elevated expressways, productivity dramatically and building larger bridges to span rivers and connect households are able to improve islands, building more light rail lines inside incomes with the modernization Mega Manila, expanding commuter rail lines, of transport infrastructure. and rebuilding long-distance rail on Luzon. Such projects comprise much of the “Build, Build, Build” - Carlos Dominguez III, Finance Secretary program of the current administration. Subsequent During the Asian Infrastructure Investment Bank (AIIB) administrations will be obliged to continue to Governer’s Business Roundtable on June 27, 2018 Policy Brief No. 8 • September 2018 2 KEY RECOMMENDATIONS: 1. Issue/implement the comprehensive National 9. Accelerate project implementation. Transport System Master Plan. 10. Continue to improve ROW acquisition. 2. Observe continuity of projects and policies 11. Assure project quality and efficiency. between administrations. 12. Restructure regulatory agencies and provide 3. Maintain high levels of public and private adequate resources. sector investment in needed infrastructure. 4. Achieve intermodality in planning and 13. Open up land transportation to foreign firms. implementation. 14. Be prepared to subsidize rail. 5. Be ambitious in land transportation 15. Remember maintenance. modernization. 16. Conduct a robust PPP and privatization 6. Advance Philippine country rank to top third program. in WEF “quality of road” ranking. 17. Reduce political interference in infrastructure 7. Be ambitious in rail transport modernization, programs. especially in major cities. 18. Enact other reform legislation. 8. Advance Philippine country rank to top half in WEF “quality of rail” ranking. II. LAND TRANSPORT: A SUPPLY AND DEMAND CRISIS No modern economy can ignore developing safe Economic growth has been steady between 6 and and reliable public transport for citizens. Manila 7% since 2012. Government planners target 7 to 8% and other cities in the Philippines, short on road going forward (see Figure 1). capacity for increasing numbers of vehicles, must prioritize developing quality public transport. Figure 1: GDP, Philippines, 2003-2017 Modern economies provide efficient urban bus transport, light rail, monorail, and inter-urban rail networks, and facilitate bicycles. These modes in the Philippines have long been neglected in favor of cars, jeepneys, and old buses. With its still-growing population and strong economic growth, the Philippines is experiencing a surge in demand for land transportation. Expressway and skyway networks need to be expanded by hundreds and eventually thousands of kilometers to accommodate the increasing number of vehicles. Mega Manila will be one of the largest mega cities in the world. Makati, Ortigas, and BGC will need