Why PH gov't needs to spend more on roads, airports

Posted at 05/23/14 6:05 PM

ICTSI Chairman Enrique K. Razon talks at the World Economic Forum on East Asia. Photo by Jonathan Cellona for ABS-CBNnews.com

MANILA, Philippines (UPDATE) – While a number of infrastructure projects are currently in the works, ports tycoon Enrique Razon said government should spend more on roads and airports.

At the World Economic Forum on East Asia in Makati on Friday, Razon said this is the "golden age" for financing due to improved investment grade ratings.

"The government is spending more and more, but they can spend more in roads in Metro Manila than they are. Of course, the 800 lb. gorilla in the room is the new airport," Razon, president and chairman of International Container Terminal Services Inc. (ICTSI), said.

"I believe they are allocating more and more of the budget, they can certainly afford it now although sometimes we still have the mentality from the past that we can’t afford this type of infrastructure when in fact we can. Nowadays, it's almost the golden age for financing especially for governments. And our government in particular is investment grade. Cost of funding is very cheap at the moment. We can do it, we just have to be patient. Governments take time," he added.

Razon noted that government should be doing more of the infrastructure projects rather than opening it up for bidding as public-private partnership (PPP) projects.

"When it comes to airports, which is very critical in the Philippines, it would be very difficult for private investors to make a return on building runways. Terminals are fine, but building an extensive runway will be very difficult to make any kind of return on that," he said, adding that the same goes for highways and mass transit systems.

He also said that PPP projects for rail systems are troublesome because for investors to earn, they have to raise fares for the traveling public.

"These are government projects and not for PPP," he said.

Razon suggests that for PPP projects to work, government should build the infrastructure then offer operation and maintenance contracts to the private sector, adding that government has to invest on project capability.

“Government needs to invest in project capability, on execution, review, decision making, financing, these all involve capabilities and human resources,” he said.

Razon also debunked the misconception that every infrastructure project can be done by PPP.

"What can be done by private sector is extremely limited," he said, citing power plants and ports.

ADB vice president Stephen Groff, meanwhile, said all infrastructure projects should have a public element to it whether through financing or regulatory measures.

He also said investors should be vigilant in partnering with governments because of corruption.

“We all too often, in this region and in the world, see vested interest masquerading as national interest and we need to do better in distinguishing between the two things,” he said.

Razon, who invests in other countries as well, said working with governments with vested interests is part of the landscape.