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Comprehensive and Integrated Infrastructure Program

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Presentation on theme: "Comprehensive and Integrated Infrastructure Program"— Presentation transcript:

1 Comprehensive and Integrated Infrastructure Program
Philippines Development Forum Cebu City, Philippines March 8, 2007 Good morning! I am pleased to make this presentation on behalf of Socio-Economic Planning Secretary Romulo L. Neri who unfortunately cannot join us today.

2 Promoting Global Competitiveness and Exports to Create Jobs
To strengthen and sustain our global competitiveness and create 10 million jobs, we will focus on five strategic measures: Make food plentiful at reasonable prices to make our labor cost globally competitive. Reduce cost of electricity to make cost of running our machines and our manufacturing processes regionally competitive. Modernize physical infrastructure and logistics system at least cost to ensure efficient movement of goods and people. Mobilize and disseminate knowledge to upgrade our technologies and increase our people’s productivity. Reduce red tape in all government agencies to reduce transaction costs. Secretary Teves and Secretary Andaya have discussed fiscal reforms and prospects for These reforms led to lower interest rates, stock market upsurge and stronger peso, which then created greater fiscal space in terms of having more revenues, among others. To make the impact felt by the real economy and the common people, there is need to spend on education, health, SME support, S &T, agribusiness and upland development, and infrastructure. The President in her 2006 State of the Nation Address mentioned modernizing physical infrastructure and logistics system at least cost to ensure efficient movement of goods and people as one of the strategic measures to strengthen and sustain our global competitiveness and create jobs. This presentation will provide an update on the Comprehensive and Integrated Infrastructure Program (CIIP) , an overview of ten priority projects as well as some necessary microeconomic reforms in the infrastructure sector.

3 CIIP Investment Requirement by Financing Source
Total investments = PhP 1,983.9 billion Private Sector PhP663.2 B 33.4% Other Sources PhP86.7B 4.4% National Government PhP848.5 B 42.8% LGUs PhP44.4 B 2.2% GFIs PhP3.7B 0.2% GOCCs PhP337.3 B 17% The Comprehensive and Integrated Infrastructure Program (CIIP) is a subset of the Medium-Term Public Investment Program (MTPIP). It is a list of priority infrastructure projects formulated by the Committee on Infrastructure (INFRACOM) in consultation with the implementing agencies. In this document, the projects’ outputs and outcomes are identified, as well as the responsible implementing agencies, investment requirements, financing sources/strategies, implementation period, and the status of preparations. The total investment requirement of CIIP from 2006 and beyond 2010 amounts to PhP 1,983.9 billion. In financing this required investment, the government seeks to tap the private sector as its partner in development. About PhP billion (33.4%) of the total estimated investment is expected to come from the private sector. This would focus on projects with acceptable return on investments that are attractive for the private sector to undertake. On the other hand, the government will focus more on projects with high socio-economic impact. As such, around PhP billion (42.8%) will be sourced from the General Appropriations Act (GAA) of the National Government (NG), PhP 341 billion (17.2%) from the Government Owned and Controlled Corporations (GOCCs) and Government Financial Institutions (GFIs), PhP 44.4 billion (2.2%) from the Local Government Units (LGUs), and PhP 86.7 billion (4.4%) from other sources [i.e., Official Development Assistance (ODA) Grants, Universal Charge for Missionary Electrification, and Energy Regulation 1-94].

4 National Government Total Budget Requirement (CIIP vs
National Government Total Budget Requirement (CIIP vs. DBM Proposed Budget ) - 100 200 300 400 500 600 700 800 900 Total CIIP ( ) Budget ( ) (PhP Billion) ` Total P848.5 Req t . 2006 2010 P429.7 . beyond 2010 P418.8 Spill over implementation of some projects beyond 2010 can be accelerated. Total 2006 2010 = P605 Surplus P175.3 Of the total PhP billion requirement from NG/GAA, PhP billion will be disbursed within the period and the balance of PhP billion beyond Considering the proposed Budget Strategy of DBM for the infrastructure sector for the period 2006 to 2010 with an estimated allocation of about PhP billion, the PhP billion NG requirement of CIIP can easily be accommodated. There will be an annual budget surplus for infrastructure, wherein by year-end 2010 the accumulated surplus will reach PhP billion. With surplus funds available, additional projects can actually be accommodated and/or implementation of CIIP projects accelerated on or before 2010. The following slides will present the GoP’s Selected Priority Infrastructure Projects where financing from bilateral and multilateral agencies, and the private sector is being explored. -

5 Criteria for Selection
(List of Selected Priority Infrastructure Projects) Must be in the Comprehensive and Integrated Infrastructure Program (CIIP)/SONA Ready-to-Go Projects c) Reasonable Rate of Return d) No Major Issues e) High Socio-economic impact The criteria for selection are as follows: Must be in the Comprehensive and Integrated Infrastructure Program (CIIP)/SONA (excluding ongoing projects & those proposed with firmed-up/concluded ODA or private financing). Ready-to-Go Projects – Projects endorsed by the Investment Coordination Committee (ICC)-Technical Board (TB)/Cabinet Committee (CC) or approved by the NEDA Board, but indicative financing are not yet concluded). c) Reasonable Rate of Return – Particularly for private sector undertaking or PPP. In peso cash flows – ICC approval ranges from 17% to 21% for IRR on equity In dollar cash flows –ICC approval ranges from 9% to 13% for IRR on equity d) No Major Issues that could hinder the implementation of the project (e.g., legal issues, ROW). e) High Socio-economic impact – critical/high impact projects with EIRR greater than 15% hurdle rate.

6 1. BICOL EMERGENCY POWER RESTORATION PROJECT
(Facilities damaged by typhoon Reming) Description: Component 1: Installation of temporary 230 KV by-pass sections & repair of 887 wooden & steel poles. Component 2: Replacement of 116 toppled steel towers & repair of other damages to substation facilities & equipment. Implementing Agency: TRANSCO Total Project Cost: PhP 1,115 Million Financing Mode: Loan Implementation Period: Immediate Remarks: Approved in principle by ICC-CC on 13 December 2006 due to emergency nature. Location: Bicol Region Financing: The second component of the project is proposed for WB retroactive financing. TransCo has already undertaken the first component of the project using its Internal Cash Generation (ICG). This project will fully restore power in Bicol.

7 (Junction Irawan-Narra-Abo-Abo Section-Bataraza-Rio Tuba Section)
2. PALAWAN SOUTH ROAD (Junction Irawan-Narra-Abo-Abo Section-Bataraza-Rio Tuba Section) Description: Rehabilitation/improvement of the km road, which serves as the main trunkline of the Southern Municipalities of Palawan. Implementing Agency: DPWH Total Project Cost: PhP 3, Million Financing Mode: Loan Implementation Period: Remarks: Endorsed by ICC-TB on 5 December 2006 for ICC-CC approval. EIRR = %; 15% = PhP Billion Location: Financing: Loan- Proposed for JBIC funding ( for yen loan financing)

8 Construction of main bridge, approach viaducts, & approach
Project Location 3. PANGUIL BAY BRIDGE Description: Construction of main bridge, approach viaducts, & approach roads that provide direct transport link between Central Mindanao & Northern Mindanao. Implementing Agency: DPWH Total Project Cost: PhP 2, Million Financing Mode: GOP/PPP Implementation Period: Remarks: Project approved by the ICC on 18 January 2007. Misamis Occidental Tangub Tubod Lanao Del Norte Financing: GOP to provide Php900 million equity This will ensure an effective road network and facilitate the delivery of socio-economic service in Mindanao.

9 4. BINAN-SUCAT 230 KV T/L PROJECT
Description: Installation of an additional 14 kms of 230 kV line at Biñan & Sucat substations to increase the power transfer capacity of the existing Biñan-Sucat line. Implementing Agency: TRANSCO Total Project Cost: PhP Million Financing Mode: Loan or PPP Implementation Period: Remarks: Approved by the ICC – CC on 15 February 2007. FIRR = 28.23%; FNPV = PhP 5.62 B at WACC = 11.67% EIRR = 63.54%; ENPV = PhP B at SDR = 15% Location: Sucat,Paranaque & Binan, Laguna Financing: Loan-Calyon Corporate and Investment Bank Loan Facility (French Commercial Loan) or PPP-There is possibility that the loan can be picked up by the concessionaire, after successful privatization of TransCo. Without the project, in the event that the Binan-Sucat circuit trips, overloading of the remaining lines will occur during maximum dispatch of generators in the South of Luzon.

10 5. LINE 1 NORTH EXTENSION PROJECT
Description: Construction of a 5.4-km elevated line seamlessly from Monumento Station of Line 1 to North Avenue Station of Line 3. Implementing Agency: LRTA Total Project Cost: PhP 6,209 Million Financing Mode: BT Implementation Period: Line 1 North Extension (Monumento-North EDSA) Proposed for Construction: Existing Light Rail Network: MRT 3 (North EDSA-Taft) LRT Line 1 (Monumento-Baclaran) NCR LRT 1 North Extension Financing: Civil works are proposed for Build-Transfer (BT) while operation and maintenance will be part of the entire Line 1 operations which is also for private sector participation.

11 6. NORTHRAIL-SOUTHRAIL LINKAGE PROJECT
(Alabang to Calamba, 27.1 kms) Phase II Description: Rehabilitation of the Existing km into a double track railway & the acquisition of five (5) new 3-car train sets. Implementing Agency: DOTC / PNR Total Project Cost: PhP 4,520.93 Million Financing Mode: Loan Implementation Period: Remarks: Approved by ICC on 13 December 2006. EIRR = 18.39%; 15% = PhP M Financing: Loan-Proposed for Korean financing. This aims to develop a fast, safe, comfortable and reliable commuter train service to the South of Manila. This is part of the solution to the Metro Manila traffic problems. It will also encourage the dispersal of Metro Manila population to Southern Luzon.

12 7. LRT LINE 6 (Line 1 South Extension)
NCR Proposed for Construction: Existing Light Rail Network: LRT Line 1 (Monumento-Baclaran) Line 1 South Extension/Line 6 (Baclaran-Bacoor) 7. LRT LINE 6 (Line 1 South Extension) Description: Extension of the existing LRT Line 1 from Baclaran station to the cities of Parañaque, Las Piñas, & Adjoining municipalities of Bacoor, Imus, & Dasmariñas in the Cavite province. Implementation Agency: LRTA Total Project Cost: PhP 35,474.4 Million Financing Mode: Loan/GOP/BOT Implementation Period: Remarks: Approved by ICC-CC on 13 December 2006 & NG budgetary requirements is being discussed. EIRR: 20% (high VOT assumption), 16% (low VOT assumption) LRT Line 6 Financing: Loan- Civil works component is proposed for ODA funding-WB. Note: VOT refers to value of time

13 8. AGNO RIVER INTEGRATED IRRIGATION PROJECT
Description: Rehabilitation of Agno River Irrigation System (ARIS) & Ambayaoan-Dipalo River Irrigation System (ADRIS) with a total of 34,450 has. service areas in Pangasinan, Region I. Rice production is projected to increase by 120,000 metric tons per year benefiting around 28,000 farm families. Implementing Agency: National Irrigation Administration (NIA) Total Project Cost: PhP 7, Million Financing Mode: Loan Implementation Period: Remarks: Already approved by the NEDA Board. Location: Pangasinan, Region I (service area) Prospective Financing: Loan-JBIC under 26th Yen Loan Package

14 9. NORTH LUZON EXPRESSWAY EXTENSION PROJECT
(NLEEP-I) Description: Construction of an 84.5 km road; 12 interchanges & toll collection facilities; & 2 major bridges crossing Agno & Bued Rivers totaling 2.85km, to support socio-economic activities in Regions I, III, CAR & Metro Manila, & help decongest traffic at McArthur Highway. Implementing Agency: DPWH Total Project Cost: PhP 19,350 Million Financing Mode: GOP/BOT Implementation Period: Remarks: Revised proposal is being prepared with scaled-down cost of ROW requirements & proposed implementation arrangement thereof.

15 Improvement/rehabilitation of the existing
10. QUIRINO HIGHWAY Description: Improvement/rehabilitation of the existing km road, of which km is Proposed for improvement to PCCP & application of Asphalt Concrete (AC) overlay, & the remaining km PCC pavement in good condition for application of AC only. Implementing Agency: DPWH Total Project Cost: PhP 1, Million Financing Mode: Loan Implementation Period: Remarks: ICC-TB endorsed the project on 5 December 2006 for ICC-CC approval. EIRR = %; 15% = PhP Million Region 5 Camarines Norte Camarines Sur Financing: Loan-Proposed for Korean financing.

16 Micro-Economic Reforms
Transportation (Air and water services, including port services) Telecommunications Power We just presented the CIIP and the priority infrastructure projects, which are the hard infrastructure. These are not sufficient, we need to complement these with the soft infrastructure, the policy infrastructure, which is in the realm of microeconomic reforms. The biggest problem areas in microeconomic reforms are in the transportation, telecommunications and power sector services. Putting soft infrastructure in said services mean, for example, liberalizing the airlines and shipping in the nautical highway. However, it has been reported that the agencies regulating said important services sectors are prone to regulatory capture, for example, PPA, MARINA, ERC, NTC, CAB. There is need to reform these agencies if we want to be competitive. It is hard to be competitive with costs of services still very high. The actions of said agencies will have an investment effect, competitive effect and an effect on the total economy. CAB- Investment Effect: Hotels, resorts, and other related businesses Competitiveness Effect: Cost of Air Transport Total Economy: Tourists Arrivals, Employment Generation, 1 million additional tourists means 1 million new jobs PPA- Investment Effect: May discourage investment by competitors Competitiveness Effect: Cost of Cargo Handling, Turnaround Time Total Economy: Logistics Efficiency, Export Cost MARINA-Investment Effect: Investment in Shipping Competitiveness Effect: Cost of Sea Transport Total Economy: Logistics Efficiency, Inter-island Trading NTC Investment Effect: Investment in Telecommunication Facilities, Call Centers, BPOs Competitiveness Effect: Cost of Telecommunications (reduced because of VOIP, but further reduction possible) Total Economy: Business transaction costs and efficiency ERC- Investment Effect: High cost may discourage investments in machinery Competitiveness Effect: Cost of electricity Total Economy: Labor productivity, Wages/workers’ income, Household/consumer welfare

17 Cost of Business POWER: 10-25 % of costs LOGISTICS: 25-30% of costs
TELECOMMUNICATIONS: % of costs Secretary Neri estimates that power can approximately be 10 to 25 % of your costs; logistics, 25 to 30 %, including warehousing, shipping, handling and so forth, and marketing. Telecommunications is about 5 %. On the whole, the costs affected by actions of said agencies ranges from 40 to 60 %. Secretary Neri is encouraging the business sector to help government in undertaking microeconomic reforms as these are the most difficult reforms to do and yet have significant impact on the cost of doing business.

18 ADB on Improving Philippine Competitiveness
Infrastructure Ranks behind Malaysia and Thailand in ICT indices Power cost in RP highest compared with Thailand, China and Singapore Comparative Indices and Rates Country ICT Indices (2005) Commercial Electricity Rates (2005) US cents/KWh WEF-Network Readiness EIU-IBM e-Readiness Philippines Thailand China Singapore 70 34 50 2 51 44 11 13.6 7.2 8.2 10.6 This and the following slide shows the Philippines’ ranking compared to our neighbors in terms of ICT indices, electricity rates, time and cost to export. With micro-economic reforms, the cost of doing business in the country can be reduced and make us more competitive. This is an opportune time to segue into the next presentation. Source: NSCB and WESM, Senate

19 ADB on Improving Philippine Competitiveness
Logistics Relative quick export time and customs clearance but highest cost to export among ASEAN and China Trading Across Borders Country Time for exports (days) Cost to export (US$ per container) Average days for customs clearance (air) Philippines Thailand China Singapore 18 24 6 1,336 848 335 382 4 5 2 Source: World Bank

20 End of Presentation http://www.neda.gov.ph
For more information on the CIIP, please visit the neda website at

21 CIIP Investment Requirement by Sector
Total investments = PhP 1,983.9 billion Transportation PhP 952 B 48% Support to ARCs PhP18.1 B 0.9% Social Infrastructure 177.8 B 9% Communications 33.1 B 1.7% Water Resources 346.9 B 17.5% Power and Electrification 456 B 23% In terms of sectoral allocation covering 2006 and beyond 2010, PhP 952 billion (48%) is allocated for transportation, PhP 456 billion (23%) for power, energy, and electrification, PhP billion (17.5%) for water resources, PhP 33.1 billion (1.7%) for communications/digital infrastructure projects under the Cyber Corridor, PhP billion (9%) for social infrastructure, and PhP 18.1 billion (0.9%) for cross-sectoral projects in support to ARCs. hide

22 NG Investment Allocation of PhP429.7 B for 2006-2010 (by Super Region)
With only the PhP billion budget requirement from the National Government for the period 2006 to 2010, allocation by Super Region reflects the following: North Luzon Agribusiness 15%; Luzon Urban Beltway 43%; Central Philippines 21%; Agribusiness Mindanao 18%; and Cyber Corridor 3%. While government investments in the Luzon Urban Beltway is the largest at 43%, it nonetheless contributes about 50% of the total GDP or an investment to GDP ratio of 0.86, that is, the Luzon Urban Beltway gets PhP 0.86 in infrastructure investments for every PhP 1.00 it contributes to the economy. hide (2006 to 2010)

23 Civil Aeronautics Board (CAB)
Investment Effect: Hotels, resorts, and other related businesses Competitiveness Effect: Cost of Air Transport Total Economy: Tourists Arrivals Employment Generation 1 million additional tourists means 1 million new jobs

24 Philippine Ports Authority (PPA)
Investment Effect: May discourage investment by competitors Competitiveness Effect: Cost of Cargo Handling Turnaround Time Total Economy: Logistics Efficiency Export Cost

25 Maritime Industry Authority (MARINA)
Investment Effect: Investment in Shipping Competitiveness Effect: Cost of Sea Transport Total Economy: Logistics Efficiency Inter-island Trading

26 National Telecommunications Commission (NTC)
Investment Effect: Investment in Telecommunication Facilities Call Centers, BPOs Competitiveness Effect: Cost of Telecommunications (reduced because of VOIP, but further reduction possible) Total Economy: Business transaction costs and efficiency

27 Energy Regulatory Commission (ERC)/EPIRA Legislation
Investment Effect: High cost may discourage investments in machinery Competitiveness Effect: Cost of electricity Total Economy: Labor productivity Wages/workers’ income Household/consumer welfare

28 Agencies Prone to Regulatory Capture
Civil Aeronautics Board (CAB) Philippine Ports Authority (PPA) Maritime Industry Authority (MARINA) National Telecommunications Commission (NTC) Energy Regulatory Commission (ERC) CAB Investment Effect: Hotels, resorts, and other related businesses Competitiveness Effect: Cost of Air Transport Total Economy: Tourists Arrivals, Employment Generation, 1 million additional tourists means 1 million new jobs PPA Investment Effect: May discourage investment by competitors Competitiveness Effect: Cost of Cargo Handling, Turnaround Time Total Economy: Logistics Efficiency, Export Cost MARINA-Investment Effect: Investment in Shipping Competitiveness Effect: Cost of Sea Transport Total Economy: Logistics Efficiency, Inter-island Trading NTC Investment Effect: Investment in Telecommunication Facilities, Call Centers, BPOs Competitiveness Effect: Cost of Telecommunications (reduced because of VOIP, but further reduction possible) Total Economy: Business transaction costs and efficiency ERC- Investment Effect: High cost may discourage investments in machinery Competitiveness Effect: Cost of electricity Total Economy: Labor productivity, Wages/workers’ income, Household/consumer welfare


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