OPENING SPEECH Mr. Ramoncito S. Fernandez President & CEO, Maynilad Water Services, Inc.; and President, Management Association of the Philippines

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1 SEVENTH ARANGKADA PHILIPPINES ANNIVERSARY FORUM ARANGKADA PHILIPPINES: BETTER INFRASTRUCTURE FOR A STRONG ECONOMY September 12, 2018 Marriott Grand Ballroom, Marriott Hotel Manila OPENING SPEECH Mr. Ramoncito S. Fernandez President & CEO, Maynilad Water Services, Inc.; and President, Management Association of the Philippines Good morning, ladies and gentlemen. Magandang umaga po. I am deeply honored to be opening this year s Arangkada Philippines Forum. For the last seven years, this forum has been widely anticipated. It has innovated the way the government and the business community work together on national interest issues. The recommendations that have come out of this exercise have helped make the business climate more resilient. Today s forum is devoted to infrastructure and its role in building a strong economy. And rightfully so. Because quality infrastructure is key to sustainable growth. Infrastructure is the framework that supports economic growth. Roads, seaports, airports, and railway systems enable trade and mobility. Electricity powers production and safe water is key to public health. When we put money into building and maintaining critical infrastructure assets, we create more jobs, improve overall productivity, promote a healthy and clean environment, and create wealth. A country s competitiveness is measured through its institutions, macro economy, health, primary education, and infrastructure. In the 2017 to 2018, Global Competitiveness Report released by the Geneva-based World Economic Forum, the Philippines ranked 56 th out of the 136 economies.[that is one notch higher than our ranking.] The reports cited inefficient government bureaucracy and inadequate supply of infrastructureas the two most problematic factors for doing business. What is important to note is that in the same benchmarking exercise,as mentioned earlier, we scored only 3.4 out of 7, and ranked 97 th out of 137 economies for infrastructure. These results are consistent with those of the 2018 World Competitive Ranking done by the International Institute of Management Development, in partnership with the Asian Institute of Management. We came in at the 50 th spot among 63 companies. [This brings us down nine notches from 41 last year.] The report mentioned labor productivity and, again, poor infrastructure as the Philippines main hurdles towards competitiveness. In both reports, we see the interconnection between infrastructure, productivity and employment growth, and how these correlated with our country s competitiveness. 1

2 This is the reason why the business community is very happy to see that the current administration acknowledged the important role of infrastructure in national development. Proof of this recognition is the inclusion of an infrastructure-focused policy statement in the 10-Point Socio-economic Agenda of the current administration: Accelerate annual infrastructure spending to account for 5% of GDP, with public-private partnership playing a key role. The Management Association of the Philippines supports this accelerated spending. Raising infrastructure spending to more than 5% of GDP is key to the current administration s Build, Build, Build Program, which is supposed to usher us into the Golden Age of Philippine Infrastructure. We are also glad to see that, after a slow 2017, infrastructure spending has surged by 42% year-on-year as of the second quarter of The government s catch-up plan is critical, considering that for 15 years since 2000, we have only been spending an average of 2% to 3% of GDP on infrastructure. We call on the government to ensure that this trajectory is maintained, so that we can be well on our way towards becoming an upper middle-income country by 2022 and reduce poverty by 14%. Allow me to spend the next part of my sharing to expound on the Management Association of the Philippines position on specific and crucial topics, namely: traffic congestion, airport, and seaport infrastructures. A high-quality transport infrastructure system enhances economic productivity by enabling the efficient movement of people and goods. It is currently estimated that traffic congestion causes the economy to lose approximately PhP 3.5 billion daily. That is how urgent and important the traffic problem is. Given this urgency, what can we do to ease, if not totally address, this problem? Some of the quick fixes that we want to see happen include the following: First, we want to see all Mabuhay Lanes cleared of all forms of traffic obstructions more so now, with the announcement that several bridges and a flyover in Manila will be closed for repairs and restorations. There are currently 17 Mabuhay Lanes designated by the MMDA. [These routes, which are connected to EDSA, are supposed to ease the traffic in the main thoroughfare, as well as provide motorists with an alternative for faster travel.] Illegally parked vehicles and commercial activities along the streets prevent these identified lanes from serving their purpose. Second, we also want to see more qualified traffic enforces deployed, especially in high-traffic areas. We all know that the number of motorists who obey traffic rules is directly proportional to the visibility of enforcers. So, it goes without saying that having more qualified traffic enforces out there will also help ease traffic congestion. 2

3 Third, more CCTV s should be installed in our streets in support of the MMDA s non-contract apprehension policy. It is a laudable program for enforcing traffic rules, while eliminating the possibility of corruption. It deserves more investments definitelyin hardware. We do know that the problem of traffic congestion will not go away with these quick fixes. It must be complemented by the accelerated construction of more elevated roads, as well as limited access metro expressways and bridges. The Management Association of the Philippines fully supports the expansion and upgrading of the mass transport system, including light and heavy rail system, as a sustainable solution to traffic congestion. We have also fully endorsed the MRT and LRT common station, which is currently under design and construction. We believe this will promote intermodal transport and provide a viable alternative to commuters and even motorists. We cannot overemphasize the urgency. The time for a concerted action to address traffic congestion is now. Actually, the time for action was needed yesterday. Annual car purchases have doubled from 200,000 in 2012 to as much as 400,000. Records show that for the first half of 2018 alone, an additional 171,000 cars were bought offthe market. If we do not take this seriously now, the volume of vehicles that we are adding to the pool everyday will definitely only compound the problem. The Management Association of the Philippines recognized the work being done to expand the capacity of our airports across the country. Just last June, we saw the inauguration of the new Mactan-Cebu International Airport Terminal 2, which has an increased capacity to 12.5 million from 4.5 million travelers. Work continues in Mactan Airport, as well as in the Airports of Clark, Bohol, Bicol, Puerto Princesa, Davao,and Cagayan de Oro, to name a few. Not only that. We are also happy to note the efforts to improve the night rating of more airports. [The longer hours, of course, will allow more flights and increased mobility for both cargo and passengers.] 3

4 Our very own NAIA has recently transitioned its air traffic management system from EUROCAT to CNS/ATM. The computerized system will ensure stable and more efficient traffic over Philippine air space. The Management Association of the Philippines supports the airport complementation strategy, which aims to decongest NAIA, give travelers more options for flying and spread development across Luzon. Aside from NAIA, state-owned Clark and Subic airports would be the ideal core components for this strategy, as these are already operational. Together, these three airports have the potential combined capacity of 150 million passengers when fully optimized. We believe this is the fastest and most efficient solution to our airport infrastructure concerns. There is also the matter of seaports, as many of our members business rely on our network of seaports for an efficient supply chain from the movement of raw materials to the eventual distribution of finished goods to local and international markets. Port congestion paralyzes businesses. It affects manufacturing efficiencies, causes missed delivery commitments, and damaged business reputation. We simply cannot afford having to deal with another port congestion crisis. Having said all these, allow me to offer, on behalf of the MAP, some insights on the government s infrastructure development strategy. Part of the reason why we have major and very costly infrastructure issues today is because we have a problem with continuity of projects and policies. We would like to see master plans issued and implemented to the end, instead of resetting with every change of administration. This does not help build investor confidence. Often, changes in policies also mean deviation from contractual obligations. We need to emphasize that businesses just simply want predictability. If we want to see more active participation by the business community, we should start with giving them the assurance that the sanctity of contracts will be upheld. From what we have seen today, I would like to say, after a sluggish start in 2017, we appreciate the increased pace of project implementation this year. However, we need to keep this pace to build up momentum. 4

5 The government needs to be ready and willing to address the challenges of implementing each infrastructure project. It has to do this with more vigor and political will perhaps in the same intensity as it is dealing with the real honest-to-goodness demolition of illegal structures in our own Boracay. One very important challenge that I am sure many of us had deal with is the right-of-way. The government needs to put in more budget to the implementation of the Right-of-Way Law of We need more qualified people to handle simultaneous and nationwide right-of-way acquisitions. Otherwise, this seemingly minor component will continue to impede implementation and delay timelines. Over the next 10 years, US$ 180 billion is programed to be infused into the economy in the form of infrastructure investment as part of the Build, Build, Build Program. This is expected to create jobs, reduce poverty, attract investors, boost the economy, and promote inclusive development. But one of the important questions that have been raised is: What should be the mode of delivery? Comments and opinions have pitted PPP against ODA. We think we should be looking at ODA plus PPP with room for both solicited and unsolicited projects. There is no single mode of delivery that will work for all types of projects. The choice should be based on the nature and scope of the project, the project size and value, the technical capability of the implementing government agency, and the terms and conditions of the ODA and donor country. Finally, we also want to point out the fact that infrastructure projects are often held hostage by layers and layers of bureaucratic processes. Consistent with one MAP s themes for 2018 on ease of doing business, we would like to take this opportunity to recommend government action to reduce political interference into infrastructure projects. Given the magnitude of infrastructure projects, we believe that supervision and approvals should be lodged with the executive branch s regulatory agency. Opening up major national projects to LGU interference will only be counterproductive. We support Arangkada Philippines. We still have a lot to do together. In closing, I am hopeful that today s activity will give us the opportunity to put our heads together to find more answers. 5

6 I am also confident that, when these answers have been pulled together, what will underpin them is our stronger, shared commitment to the development of our beloved country. Again, thank you very much for this opportunity. Magandang umaga po! 6