JAZA: Fill Asia-Pacific infra gap to sustain growth momentum
MANILA, Philippines – To sustain its strong growth momentum averaging at 6% annually and outpacing the rest of the world, the Asia-Pacific region must continue investing in necessary physical and human capital, a Philippine business leader said.
In his presentation at the symposium on the Asia-Pacific Economic Cooperation (APEC) 2015 Priorities at the APEC-Informal Senior Officials’ Meeting (APEC-ISOM) on Monday, December 8, Ayala Corporation chairman and CEO Jaime Augusto Zobel De Ayala said the Asia-Pacific region is experiencing a significant infrastructure backlog.
Zobel De Ayala cited an Asian Development Bank (ADB) study that the infrastructure backlog in the region is at $8 trillion until the year 2020. In the ASEAN, in particular, the infrastructure investment backlog is estimated to be around $1 trillion.
Transport and networks in urban areas, information technology, and communications, trade, and energy are the infrastructure sub-sectors that are lacking investments, though they have the most potential to spur economic development, Zobel said, citing a latest PricewaterhouseCoopers (PwC) CEO survey.
“It is imperative that the infrastructure requirement gap be addressed. Failure to do so will severely slow down growth,” Zobel De Ayala said.
Acknowledging the Aquino administration’s efforts to ramp up infrastructure spending to meet the requirements of a fast-growing Philippine economy, Zobel De Ayala said further investments are still needed.
Addressing the PH infrastructure backlog
The demands of a growing Philippine economy call for massive infrastructure upgrades to solve problems on urban settlements, waste management, water, electricity, telecommunications, mass transportation, and traffic, airport and seaport congestion, to name a few.
“Unfortunately, our existing infrastructure has been unable to handle the growing capacity requirements, and this entails much greater collaborative efforts among sectors,” Zobel De Ayala said.
Public sector investment is not sufficient to meet all of the country’s infrastructure needs, he added.
The government is getting flak for spending below program despite the need to accelerate disbursements to support reconstruction and rehabilitation in typhoon-affected areas and investment. Public spending on key infrastructure needs is not growing fast enough, economists said on the country’s dismal 3rd quarter gross domestic product growth of 5.3%.
Thus, the private sector could be and should be a significant contributor to help bridge the country's infrastructure investment gap, Zobel De Ayala said.
“Whether through direct private sector investment, or via public-private partnerships (or PPPs), the private sector can help further expand the available investment base,” he said.
Ayala Corporation is a diverse conglomerate with significant interests in retail, real estate, banking, telecommunications, water infrastructure, renewable energy, electronics, information technology, and management and business process outsourcing.
Highlighting Ayala’s efforts in Philippine infrastructure development in the country, Zobel De Ayala said that their experience with water distribution services through Manila Water and telecommunications through Globe Telecom Inc show that both the public and private sectors have key roles in facilitating sustainable infrastructure financing.
“And, more importantly, we have also seen how we can all reap significant benefits when the public and private sector work together,” he said.
Zobel De Ayala also said that strong leadership, political will, and good governance are needed for milestone infrastructure direction-setting.
“This paves the way toward legislating a clear framework that will promote a fair environment in which the government and private sector can feel confident to collaborate,” he said.
The private sector must also take a long-term view and commitment to invest in infrastructure projects, and not to be driven solely by short-term gains, Zobel De Ayala said.
“A solid commitment calls for an active role in bringing in business and technical expertise to further enhance the value of projects and improve capabilities of everyone involved,” he emphasized.
Both the public and private sector should be open to fostering and leveraging strategic partnerships given the size of the needed infrastructure investments in the country, Zobel De Ayala said.
For instance, the tandem of Metro Pacific Investments Corporation (MPIC) and conglomerate Ayala Corporation has signed with government the concession agreement for the P65-billion ($1.46-billion) Light Rail Transit 1 (LRT1) Cavite extension project.
“Partnerships allow the parties to leverage each other’s strengths and capabilities to deliver the most optimal solutions,” he said.
Overall, sustainable infrastructure financing can be achieved on the ability of both public and private sector to maintain openness and to have constant dialogue.
“It is important that we achieve a balance of needs and a mutually beneficial allocation of risk. Working together to bridge private sector expectations and public sector concerns is what will make these collaborations truly impactful and sustainable,” Zobel De Ayala concluded. – Rappler.com
*$1 = P44.61