Report No. 47281-PH Report No. 47281-PH Philippines Transport for Growth An Institutional Assessment of Transport Infrastructure Public Disclosure Authorized February 24, 2009 Poverty Reduction and Economic Management East Asia and Pacific Region Philippines Public Disclosure Authorized Transport for Growth Transport Public Disclosure Authorized Document of the World Bank Public Disclosure Authorized LIST OF ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank BOT Build-Operate-Transfer CAAP Civil Aviation Authority of the Philippines CIDA Canadian International Development Agency CIIP Comprehensive Integrated Infrastructure Program DOTC Department of Transportation and Communications DPWH Department of Public Works and Highways GDP Gross Domestic Product GNP Gross National Product GOCC Government-Owned and Controlled Corporation HDM-4 Highway Development and Management Version 4 ICC Investment Coordinating Committee, National Economic and Development Authority IT Information Technology JICA Japan International Cooperation Agency LRT Light Rail Transit LRTA Light Rail Transit Authority MRT Mass Rail Transit MTEF Medium-Term Expenditure Framework MTPDP Medium-Term Philippine Development Plan MTPIP Medium-Term Public Investment Program MVUC Motor Vehicle User’s Charge under Republic Act 8794 NAIA Ninoy Aquino International Airport PEGR Philippines Australian Partnership for Economic Governance Reform (PDAF) Priority Development Assistance Fund PPIAF Public-Private Infrastructure Advisory Facility PNCC Philippine National Construction Corporation PPP Public-Private Partnership CONTENTS EXECUTIVE SUMMARY ............................................................................................................................1 1. GROWTH AND TRANSPORT INFRASTRUCTURE....................................................................2 ECONOMIC RECOVERY..................................................................................................................................2 SUSTAINING GROWTH...................................................................................................................................4 INFRASTRUCTURE AS A DRIVER FOR CONTINUED GROWTH...........................................................................5 COMMITMENT TO INCREASED INFRASTRUCTURE SPENDING.........................................................................7 2. TRANSPORT INFRASTRUCTURE IN THE PHILIPPINES........................................................9 FINDINGS.......................................................................................................................................................9 Infrastructure Quantity ...........................................................................................................................9 Infrastructure quality............................................................................................................................11 Overall assessment of the transport infrastructure network and services ...........................................14 RECOMMENDATIONS...................................................................................................................................18 FINDINGS ....................................................................................................................................................19 Total infrastructure expenditure...........................................................................................................19 Spending on transport infrastructure ...................................................................................................23 Transport infrastructure maintenance spending ..................................................................................24 Road maintenance spending .................................................................................................................25 Expenditure by organization.................................................................................................................28 Government Owned and Controlled Corporations ..............................................................................34 Government plans for future spending .................................................................................................38 RECOMMENDATION ....................................................................................................................................39 Increasing funding for transport infrastructure investments................................................................39 Additional funding for maintenance .....................................................................................................40 3. INSTITUTIONAL SET-UP FOR TRANSPORT INFRASTRUCTURE PROVISION..............42 FINDINGS ....................................................................................................................................................42 Policy-formulation, Budgeting and planning .......................................................................................43 Regulatory and operational responsibilities.........................................................................................43 Provision of local transport infrastructure...........................................................................................44 Government owned and controlled corporations .................................................................................45 The private sector..................................................................................................................................47 RECOMMENDATIONS ..................................................................................................................................49 4. PLANNING, BUDGETING AND PROJECT SELECTION.........................................................51 FINDINGS ....................................................................................................................................................52 Planning................................................................................................................................................52 Project Preparation ..............................................................................................................................53 Budgeting ..............................................................................................................................................54 RECOMMENDATIONS ..................................................................................................................................56 Overall Planning...................................................................................................................................56 Project selection....................................................................................................................................57 Budgeting ..............................................................................................................................................58 5. IMPROVING LOCAL GOVERNMENT INFRASTRUCTURE PROVISION ..........................60 FINDINGS ....................................................................................................................................................60 Financing – Tax ....................................................................................................................................61 Financing – Internal Revenue Allotment (IRA) ....................................................................................62 Financing – Borrowing.........................................................................................................................62 Urban bias.............................................................................................................................................63 Local planning and budgeting ..............................................................................................................63 Links Between Local and National Planning and Budgeting...............................................................65 RECOMMENDATIONS ..................................................................................................................................66 Financing ..............................................................................................................................................66 Local Planning and Budgeting .............................................................................................................67 Links Between Local and National Planning and Budgeting...............................................................68 6. RESTRUCTURING SELECTED GOVERNMENT OWNED AND CONTROLLED CORPORATIONS........................................................................................................................................69 FINDINGS ....................................................................................................................................................69 Government Subsidies and Agency Debts ............................................................................................69 The Philippine National Railways ........................................................................................................70 The Light Rail Transit Authority...........................................................................................................73