Improvements are being made to the Philippines' vital road network

The road network in the Philippines plays a critical role for both commerce and social movement of citizens. While seaports and airports are instrumental in moving goods in and out of the country, it is the road network upon which Filipinos must rely heavily upon for key tasks, such as moving goods to and from distribution centres, supplying inputs to factories, transporting finished goods to international trade terminals and transporting agricultural goods from farms to markets. As such, road transport remains the dominant transportation subsector, accounting for 98% of passenger traffic and 58% of cargo traffic, according to the Asian Development Bank (ADB). Extending and maintaining these transport arteries is thus a priority for the country to maintain the consistent economic growth it has enjoyed in recent years.

Deep Pockets

The importance of the sector is not lost on the government, with the Department of Public Works and Highways (DPWH) receiving the second-largest allocation of any government agency from the 2015 budget and the highest year-on-year increase – a 37.9% bump from P219.9bn ($4.9bn) in 2014 to P303.2bn ($6.7bn). Of this total, P185.8bn ($4.1bn) was earmarked for the completion of roads and bridges along the national road network. This spending spree is continuing in 2016 with the DPWH budget expanding again by nearly one-third to B397.11bn ($8.8bn), including P364.78bn ($8.1bn) in capital outlays for major building projects in the country. The highest priority for the DPWH continues to be bolstering the country’s highway system, with P204.12bn ($4.5bn) in capital outlays (62.7% of total budgeted expenditures) earmarked for the sector in 2016 alone – a figure which has increased exactly three-fold from the P68.04bn ($1.5bn) allocated for highways in the 2011 budget.

Rough Grade

This steep budgetary increase over the past six years reflects the government’s recognition of a long-standing impediment to the country’s long-term economic development. As sustained economic growth has continued to draw praise from international monetary institutions and credit ratings agencies that commend the country’s sound economic fundamentals, the Philippines almost paradoxically continues to lag behind many of its fellow ASEAN-6 members in terms of global competitiveness. The country scored a respectable 47th among the 140 economies assessed by the World Economic Forum’s (WEF) “Global Competitiveness Report” 2015-16, but fared worse compared to regional rivals, as the Philippines remained in the 5th place in competitive rankings among ASEAN-6 members – only slightly higher than Vietnam, which is relatively new in opening its market to foreign investments.

The transport sector was the worst-ranked category (90th) for the Philippines, and the infrastructure category posted its worst mark from the dozen subsets with a score of 3.4 out of 7, well below the 4.4 gross composite index for the country. Reflecting this score, infrastructure similarly fared poorly in the survey section of the report, with 17% of respondents indicating that inadequate supply of infrastructure was the most problematic factor in doing business in the country, ranking it second only to inefficient government bureaucracy (18.5% of respondents). Within the infrastructure category, the quality of roads scored just below average with a mark of 3.3 out of 7, ranking it 97th out of 140. This rated the country’s road system as the worst among the ASEAN-6, behind Singapore (ranked 7th out of 140), Malaysia (23), Thailand (42), Indonesia (87) and Vietnam (93).

Where Rubber Meets The Road

To improve upon these marks the government has mobilised unprecedented levels of capital expenditure, further bolstered by funding from international donors, to address the roadway network across every region. Mindanao received the largest appropriation in 2016 with P110.99bn ($2.5bn), or 31.6%, of the funding, to bring the neglected region’s infrastructure closer to the levels throughout the rest of the country. Northern Luzon received the second most money with P73.14bn ($1.6bn), or 22.9%; followed by Southern Luzon with P62.53bn ($1.4bn), or 19.6%; Visayas with P59.13bn ($1.3bn), or 18.5%; and finally the National Capital Region with P23.63bn ($524.6m), or 7.4%.

The heavily stressed road system in greater Metro Manila represents a crucial cog in the road network, tying together the country’s political and economic heart along with its largest sea and air hubs all amongst the most densely populated area of the country. As such, many of the high-priced infrastructure projects have centred on the area as the government tries to cope with the surging population by putting up new highways, tollways and expressways. As of 2016 these included large public-private partnership projects – which operate outside the DPWH sphere – including the Tarlac-Pangasinan-La Union Toll Expressway, the Daang Hari-SLEX Link Project, the NLEX-SLEX Link Connector, the Cavite-Laguna Expressway, the Laguna Lakeshore Expressway Dike and the NAIA Expressway.

Road Conditions

Looking beyond the country’s commercial centre, a series of independent yet critically important road systems also play a crucial role in supporting other industries vital to the economy – most notably agriculture, energy and mining operations, which are carried out far from the larger cities. All together the Philippines’ road system is comprised of hundreds of thousands of kilometres of roads, the vast majority of which are classified as local roads and fall under the jurisdiction of a variety of local government units. National roads, which account for around 15-20% of all roadways, fall under the jurisdiction of the DPWH. Of the 32,526.5 km of national roads in the system at the end of 2014, 34% (11,057 km) were assessed as being in “good condition” with another 31% (10,232 km) classified as in “fair condition”. While not optimal, this 65% proportion of roads is a significant improvement from 2011 when only 45% of roads were found to meet these conditions, indicating that concerted efforts over the past five years are beginning to make an impact.

Improvements & Expansions

In addition to the annual budgetary allotments for improvement and expansion, international donor agencies such as the ADB and the World Bank are also sponsoring projects intended to shore up the road systems. One of the most extensive of these projects – coming to a successful close in 2016 – is the Secondary National Roads Development Project, financed by the US-funded Millennium Challenge Corporation-Philippines. The $214.4m initiative was split into four separate packages for the rehabilitation of 222 km of roads connecting the Eastern and Western Samar province in the Eastern Visayas region. The first involves the rehabilitation of the 16.3 km road between the Buray Junction and Barangay Tenani; the second involves the repair of the 63.8 km road between Barangay Tenani and the municipal boundary of San Julian and Sulat; the third involves the rehabilitation of the 64.6 km road from San Julian and Sulat to Balangkayan and Llorente; and the fourth involves the rehabilitation of the 79.5 km road from the town boundaries of Balangkayan and Llorente to Guiuan. As of December 2015, 72% of the reconstruction and rehabilitation activity on the roads had been completed, with 56% of funds distributed for construction contracts.

A second programme running concurrently is the second phase of the National Roads Improvement and Management Programme, funded by the World Bank and implemented by the DPWH. The goal of the $501.68m project is to improve the efficiency and operational capacity of the national road system by rehabilitating 1500 km of non-rural roads while also increasing the planning capabilities of local governments to properly administer and maintain them. As of December 2015, 1200 km of the 1500 km of targeted roadways had been rehabilitated and another 280 km improved, with 680 km of roads under longterm performance based maintenance contracts.

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The Report: The Philippines 2016

Transport & Infrastructure chapter from The Report: The Philippines 2016

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