President Duterte’s ‘Build, Build, Build Plan’: Who Really Stands to Gain (and Lose) from It?

President Duterte sees the “Build, Build, Build Plan” as a means to usher in a “Golden Age of Infrastructure” for the Philippines.

This six-year infrastructure program under the "Dutertenomics" policy aims to make the country a “prosperous, predominantly middle-class society” by improving and developing  infrastructure programs for transportation (roads, bridges, airports, and seaports), flood management, water resources, energy, communications, sewerage & sanitation, and solid waste management.

How Much Will It Cost?

There are 4,000 infrastructure projects that Duterte's administration plans to do. However, the flagship projects as of June are only 75 -- and they require the most expensive budget to date.

The total spending for these 75 projects will be around P8 to P9 trillion over the medium term. So far, 18 flagship projects worth P462.74 billion have been approved by the National Economic and Development Authority (NEDA).

Where Will They Get the Funds?

According to NEDA, foreign borrowing will account for only 15% of the funds, but upon closer review of the 75 flagships they approved, it shows the government is going to borrow almost half (48%) of its funds from foreign lenders.

As of June this year, Duterte's administration is borrowing money from the following countries / foreign lenders:

• Japan (3 projects) - P226.89 billion
• China (3 projects) - P164.55 billion
• South Korea (2 projects) - P14.06 billion
• World Bank (1 project) - P4.79 billion

Interestingly, most of the big-ticket rail projects are actually backed up by Japanese or Chinese loans, such as the Mega Manila Subway, Phase 1 (Bulacan-Cavite ) that's worth P225-billion.

Who Gains the Biggest Benefit?

Foreign Lenders

It's the foreign lenders who will gain the most from this venture.

Truth is, countries that are lending us money are not really doing this out of kindness and genuine willingness to help. Everything is really shaped by economic and social gains they can get from the Philippines.

Aside from gaining a lot just by the debt's interest, they can earn profit by exclusively providing the needed materials and services we need to build the roads and railways.

They can also benefit by furthering their business interests. For instance, many of Japan's fund allocation is concentrated in Southern and Central Luzon -- areas where export zones with Japanese investments are at their highest.

China, on the other hand, chooses to fund infrastructure projects in Mindanao, since many of its mining and plantation businesses are located within this region.

Public-Private Partnerships (PPP)

On a much lesser note, Public-Private Partnerships (PPPs) will also stand to gain a lot from this huge venture.

Just like foreign lenders, PPPs, who are made up of powerful oligarchs such as San Miguel Corporation, Ayala Corporation, and Manny V. Pangilinan, are pushing themselves to fund many of these infrastructure projects to benefit their self-interests (or numerous businesses).

For instance, SM's unsolicited infrastructure project to fund a P25 billion toll road will connect its Pasay and Makati malls in one stretch.

How Will It Affect Filipinos?

Regardless of its impressive potential, many say that Duterte’s “Build, Build, Build Plan” will heavily burden the poor and average income earners.

Remember that spending on these infrastructure projects will be a huge burden on the national budget deficit.

And a larger deficit means greater borrowing from the government.

The government plans to compensate for this by reforming the tax structure, which will cut the income tax to 25 percent from the current 32 percent. According to fund manager Wilson Sy, this will allow them to "maintain fiscal responsibility while increasing infrastructure spending."

Despite this promise, reforming the taxes can lead to three changes:

• Higher value-added tax (VAT)
• Higher and expanded excise tax on all petroleum products
• Sugar excise tax

In the end, many Filipinos will still feel the burden of the huge debt incurred by the government.

Final Word

President Duterte’s “Build, Build, Build Plan” is an ambitious undertaking, and indeed has a great potential to make the Philippines a stronger, more developed nation. Still, the government’s pursuit to achieve a “Golden Age of Infrastructure” can  also prove to be an exceptional burden to the economy and many Filipinos in the long run.

Yet despite this challenge, one question still remains: is it all worth it?

And our answer is: only time will tell.