Manila splurges on infrastructure
Infrastructure investments in the Philippines may "rise sharply" in the next seven years, as government spending fuels the biggest growth in Southeast Asia outside Singapore, according to Goldman Sachs.
Andrew Tilton, Goldman Sachs senior economist, said in an 18-page report that the Philippines would need US$110 billion (Bt3.35 trillion) in outlay to meet rising demand. Infrastructure investments, as a per cent of gross domestic product, may rise from the current 2 per cent to between 4 per cent and 5 per cent by 2020.
The Philippines “has the lowest per capita income [compared with Thailand, Malaysia and Indonesia], and ranks the weakest in infrastructure quality,” Tilton said.
The report cites a World Economic Forum (WEF) ranking that shows that the Philippines has the worst quality of infrastructure among the four countries.
The WEF places the Philippines at 3.2 in a range of one to seven – seven being the best score. Malaysia gets 5.1; Thailand, 4.6; and Indonesia, 3.8.
Goldman Sachs expects the per capita GDP of the Asian countries to nearly double between 2010 and 2020, increasing demand for power, roads, airports and water, among others. Throughout the region, infrastructure needs during the period may reach $550 billion, Goldman Sachs reported in a May 30 research paper titled, “Asean’s half a trillion dollar infrastructure opportunity.”
“The low base, and increases in per capita income and urbanisation could drive demand across the board for a projected $110 billion,” Tilton said about the Philippines.
Power projects account for the biggest share of the total amount at $46 billion. Road projects account for $24 billion; railways, $23 billion; seaports, $8 billion; water and sanitation, $6 billion; and airports, $2 billion.
Tilton’s calculation covered the period 2013-2020, which he then compared with the Philippine Development Plan for 2011-2016.
Tilton also said that if the government were to meet the required outlay, infrastructure spending could become the key driver of overall investments in the country.
“Assuming that non-infrastructure investments grow at a constant rate, our projections suggest that infrastructure can contribute as much as 20 per cent of the total investment rate in the Philippines [through] 2020,” he explained.
Considering the country’s funding needs and fiscal balances, financing of infrastructure may not be a big problem since the government is the key source of funds, Tilton said.
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