Early in October this year, the Department of Transportation (DOTr) led a virtual signing ceremony for the contracts that will kickstart the construction of the Malolos-Clark Railway Project. This 54-kilometer railway link is part of the planned North-South Commuter Railway System in Luzon, one of the largest infrastructure projects in the Duterte administration’s Build, Build, Build program. It could also very well be our country’s road to recovery.
The measures that were put in place to stem the spread of the coronavirus disease led to unprece-dented declines in economic activity. According to the World Bank, the global recession we are now in is the deepest since World War 2, and the Asian Development Bank expects economies in developing Asia to contract in 2020 for the first time in nearly 60 years.
For a hole this big, we will need an equally big plan to dig our way out. Deloitte believes that a critical part of that climb to recovery will be high quality infrastructure development, for obvious reasons: spending on infrastructure boosts economic activity and creates jobs, which is the kind of economic stimulus we need coming out of a significant slowdown. It also creates the kind of economic growth that is more sustainable and productive.
But this is also, understandably, a difficult time to increase public sector investment as governments contend with increasing deficits and debt levels. One way the government can manage this challenge is to approach infrastructure development in three phases.
Respond. In the respond phase, the goal is to minimize disruptions due to the pandemic by addressing the urgent infrastructure gaps, which have been notable in the areas of healthcare, telecommunications and logistics across several countries. In the Philippines, the government’s push to fast-track the approval process for the construction of cell towers is a step in the right direction. But the academic community’s ongoing struggle with remote learning is proof that there is more work to be done in filling those gaps.
Recover. By their very nature, infrastructure projects require lengthy lead times, but governments need to spur economic activity now. To get construction activity going in the recovery phase, govern-ments can accelerate “shovel-ready” projects, that is, those that can be quickly started with minimal risk, such as maintenance and upgrades to existing infrastructure. Governments can also accelerate pre-approved projects in the pipeline. This is not to say, though, that the necessary due diligence can be short circuited in the interest of urgency. Governments can plan a pipeline now so that projects are ready when increased spending begins to flow again.
Thrive. Much has been said about how this unprecedented disruption is opening up opportunities to “build back better.” One step governments should seriously consider in that regard is embracing a low carbon future so that they position their nations to thrive as green economies. Indonesia, for example, is looking at doubling the share of renewable sources in its national energy mix by 2025 – from 12 per-cent to 23 percent. It’s a step in the right direction for one of the world’s largest coal producers.
The private sector can be a key ally in this area by driving investment towards green and resilient infrastructure. Sustainable financing for corporations and project owners of sustainable infrastructure has been gaining ground as institutional investors also increasingly focus on the sustainability of their portfolios. Research from BlackRock, a US-based investment management corporation, suggests that a majority of environmental, social and governance (ESG)-tilted investment portfolios have outper-formed non-sustainable peers during this year’s pandemic driven downturn. It is in our collective in-terest to keep this trend going.
For its part, the government should look at crafting long-term policies to enable the move to a low-carbon economy. In rolling out infrastructure projects, resilience and environmental sustainability should be part of the key objectives.
As we approach the end of a difficult year, it is encouraging to see the government pushing forward with a number of infrastructure projects and also exploring more public private partnership opportunities. We have a long way to go still in our recovery journey, especially as the government concedes that state spending on infrastructure remains below already lowered targets. But let’s hope our fiscal managers find the room and the right partners to roll out more projects under the current administration’s ambitious infrastructure program so we can begin building our way towards a resilient, sustainable recovery.
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