Philippines infrastructure spending up 50 percent in a year

Worldwide infrastructure spending is trending upward, but the Philippines are making up for lost time. National spending there grew by almost 50% annually in the first two months of the year as the government continued to speed up project implementation.
The Philippines have a population of just under 100 million living on 7,107 islands in the Pacific Ocean. The capital Manila, combined with nearby Quezon City, forms one of the worlds major urban areas. Transportation infrastructure in the country is relatively underdeveloped. In 2003, only 3.6% of GDP went to road and rail development. Roughly 20% of the country’s roads are paved and many major river systems have limited bridgework connecting regions within single islands.
Public spending for infrastructure rose by 49.2% to P49.8 billion in January to February from the P33.3 billion recorded in the first two months of 2013, government data showed.Expenditures for the broader spending category of capital outlays likewise increased by 39.1% annually to P61.3 billion in the two-month period from P44 billion a year ago.

Corruption’s impact on infrastructure

A new article on South African infrastructure issues highlights an ongoing, and historic, problem with centralized, government-sponsored infrastructure spending: corruption.

infrastructure fundingSouth African politician Helen Zille, in critical comments to the Independent Online, reviewed some of the specific problems her country faces in renovating and extending infrastructural systems. But her comments could be extended to many countries and the often problematic relationship between political organizations, with tax-funded budget authority, and the many vendors and contractors who are seeking contracts. This environment is a breeding ground for backdoor deals, ‘no bid’ contracts, collusion, and outright theft.

Infrastructure spending by government agencies often promotes corruption because contracts go to the most politically well-connected contractors. In closed, authoritarian countries this can be a direct “you scratch my back, I’ll scratch yours” sort of arrangement, while in more open, democratic countries the process is one focused on election campaign funding. In the United States this sort of indirect bribery is referred to as “pay to play.”  By providing funding for projects the politician expects vendors, unions, or contractors to funnel some portion of the money back to supporting that politician or party.

There are recent and age-old examples of this sort of corruption in every part of the globe. It affects infrastructure projects directly by driving up costs, misdirecting revenue into less useful, sometimes completely useless, projects, and poisoning the political process. Reform efforts usually involve public scrutiny of bidding and contracting, open accounting practices, and a variety of information reforms like ‘sunshine laws’ and ‘ethics commissions.’ The effectiveness of these efforts obviously varies and the need for these efforts has never waned.

Susan Rose Ackerman covers these issues in her classic 1999 book Corruption and Government: Causes, Consequences, and Reform. She reviewed decades of research and offers examples where high levels of corruption limit investment and growth in any economy and lead to weak infrastructure systems, including ineffective government. Corruption creates huge economic inefficiencies and inequities that spread through other aspects of public and even private life.

Robert Rotberg picks up these ideas and expands on the issues of corrosive corruption in Corruption, Global Security, and World Order (2009). This is a collection of articles from around the world that examines many different, and depressing, examples of the impact of gaming the public funding system. The varied approaches to combating this problem are the most valuable part of these articles.

In the US this issue continues to eat at the fringes of massive expenditure plans. Last year the American Society of Civil Engineershas identified $2.2 trillion worth of repairs needed on bridges, roads, schools, and water and sewage systems. And that’s just the repair and  maintenance, without additional construction or replacement of aging systems. With that much money on the line serious efforts must be put in place to make the funding process as clean as possible.

Infrastructure begets infrastructure

Zambia flagZambia’s continuing growth as one of the world’s leading copper suppliers is supporting the development of in-country infrastructure. The copper boom itself is the result of rising demand for copper, primarily in larger Asian markets, driven by the needs of modern society for electronics, railroad and building construction.

Zambia held its first international mining and energy conference and officials have been in the news media talking about the new opportunities they have for cutting the county’s inflation rate to the single digits. Zambia’s annual economic growth rate climbed to 6.5 percent this year.  Zambia currently produces about 750,000 tons of copper a year and the output is expected to rise to a million tons in the next five years.

Surging copper prices have led to investments in power systems, road networks and wireless deployments across parts of the country. New investments in energy production and agricultural facilities, from China and other Asian countries, is spurring a boom in the southern Africa country.