Government mulls shift in infrastructure funding tack

From BBB, back to PPP

MANILA, Philippines — The government may revert to public-private partnerships (PPPs) to finance big-ticket infrastructure projects due to funding shortfall as a result of the Mandanas ruling.

Finance Undersecretary and chief economist Gil Beltran said yesterday the country  may tap the private sector over the next few years to complete the public infrastructure projects laid out by the government under the Build Build Build program.

“We now have to look at PPPs more intensively to find out where we can use the private sector resources to continue the Build Build Build program, which has been ongoing since the start of the Duterte administration,” Beltran said in a webinar with the United Nations Development Program.

“Also, we want to make sure that the private sector will contribute to resource mobilization. The Mandanas ruling reduces national government resources because we have to increase the share of local government in revenues,” he said.

President Duterte’s economic plan favors acquiring external grants and loans, known as official development assistance (ODA), to bankroll the government’s infrastructure projects and social services.

Based on government records, the Duterte administration secured $7.94 billion worth of ODA from July 2016 to December 2020, exceeding the administrations of former presidents Gloria Macapagal Arroyo ($6.06 billion) and  Benigno Aquino III ($5.64 billion).

To widen the tax base, the government also passed multiple fiscal measures to rearrange the tax brackets and introduce additional excise taxes, an example of which is the Tax Reform for Acceleration and Inclusion (TRAIN) Law signed in 2017.

The TRAIN Law exempted workers with a gross income of below P250,000 yearly from paying personal income taxes, but in exchange slapped excise taxes on fuel, sugar-sweetened drinks and vehicles, among others.

As planned, at least 70 percent of TRAIN’s revenue will finance public infrastructure, and the remaining 30 percent will be allocated for social services.

However, as mandated by the Supreme Court under the Mandanas ruling, the national government must raise the internal revenue share of local government units by next year. According to the Department of Budget and Management, local governments will receive a total of P959.04 billion in 2022.

Broken down, P326.07 billion will be given to municipalities, P220.57 billion each to cities and provinces and P191.8 billion to barangays.

In exchange, local government will take up most of the responsibilities in managing public services, including agriculture, connectivity and health.

The government has programmed P1.01 trillion for its infrastructure program this year, and plans to spend P1.26 trillion in 2022, P1.27 trillion in 2023 and P1.35 trillion in 2024.

Although the amount goes up through the years, its share to the economy falls from 5.8 percent in 2022 to 5.3 percent in 2023 and 5.1 percent in 2024.