Building (Literally!) the Means for More Investments in the Philippines


At the start of Duterte’s term, that rah-rah vibe—that resolve to get things done fast—is evident, even in the area of public infrastructure. For starters, there’s that announcement of a cool PhP 8 trillion budget for infrastructure in the next six years. The mandate: Build, build, build.

Duterte's Build, Build, Build program.

Photo taken by user Exec8 October 6, 2007. – [1], Public Domain, Link

Then, there’s the current administration’s 10-point socio-economic agenda, which includes accelerating the annual infrastructure spending to 5 percent of the Gross Domestic Product.

As of this writing, the country has already surpassed this target at 5.4 percent.

And to attract potential foreign investments, the Philippine Economic Zone Authority has its “Revolutioning PEZA” rallying theme, which is a plan to industrialize the country by building industrialized cities in every province. To do that, the plan includes setting up diversion roads, bypasses, and long-span bridges.

Taken at face value, these are great and noble plans. However, the question begs to be asked: Are we ready to take on the task at hand?


Getting Local Contractors to Engage

“It is one thing to say we will spend, another thing to implement. Government must have the capacity to implement,” said Jesse Allado, former chairman of the Philippine Contractors Accreditation Board (PCAB), during the Asia Infrastructure Summit on 19 January 2017 at Marriott Hotel, Pasay City.

Allado thus asked: “Is there enough local contractor capacity to implement the country’s PhP 8 trillion infrastructure plans?”

Contractor capacity in the Philippines


All contractors (including sub-contractors) are mandated by law to secure a PCAB license before they engage in any construction project in the Philippines. Allado noted that the country has 8,424 such licensed contractors—with a total estimated financial capacity of PhP 953 billion—that can participate in tenders for government budget.

Note that this number does not yet account for the unlicensed ones that operate on the fringes as subcontractors.

Overall, Allado believed that the local construction industry—assuming that the unlicensed ones are persuaded to get their licenses—has the potential capacity (with “potential” as the operative word) to meet the demands in public infrastructure projects.


Why Large Industry Players Have Qualms

In reality, though, not all of the largest local contractors are interested to join government projects.

The reasons are manifold. For one, there are enough projects in the private sector that can keep these contractors busy. In other words, some prefer to take on private-sector projects over that of the public sector.

Philippine contractors need to join public projects.


Two, local contractors complain that they have difficulties qualifying in tenders for large foreign-assisted public projects such as those financed by the Asian Development Bank, World Bank, etc. because of requirements such as in average turnover and annual production rates for specific work items.

Three, local contractors turn wary when they expect to face what Allado described as “unfavorable governance practices in the procurement and implementation of projects” of the government.

The solution here, he said, is two-pronged. On the part of the government, its challenge is on how to make the tendering process more transparent, fair and uniform to all bidders.

On the other hand, Allado invoked large Philippine contractors to demonstrate their patriotism by engaging in government projects—yes, despite the current challenges.


Does the Philippines Really Lack Manpower?

Often, when there is a delay in construction projects, the common culprit cited is “lack of resources.” In other words, when faced with a delay, the immediate recommendation of owner representatives is to demand for more resources.

“The shortage of skilled manpower needs to be studied carefully,” said Allado. “Is it really a shortage or just a mismatch?”

Dr Ernesto de Castro, 2016 president of the Philippine Institute of Civil Engineers (PICE), showed the stats on engineers in the country during the Asia Infrastructure Summit 2017. In 2015, there were about 150,000 civil engineers and 300,000 in other fields of engineering. Each year, the country churns our 70,000 engineering graduates.

PCAB data on licensed engineering graduates.


So, if there are many engineers, why then is there a perceived “lack of skilled manpower”?

Drilling down these numbers, we find that only 45 percent of these engineers pass the licensure examination.

Here is where Allado referred to as a mismatch. Foremost here are workers who lack the experience in pre-construction planning as well as construction supervision.

Among blue-collar workers, the identified weakness is their productivity. This can be addressed by training them on best practices as well as adopting better technology or tools (such as the Building Information Model) that can facilitate their work.


Bringing Home World-class Filipino Engineers

The flip side to the story is that Filipino engineers account for 43 percent of the 1.2 million engineers in the ASEAN region.

These engineers are trained in global processes. They are exposed to world-class standards. They have the knowhow in planning or supervising construction projects, among others.

Once the expected construction binge takes place domestically, de Castro believed that “many of those [Filipinos] working overseas and powering the infrastructure of other economies will have a reason to come home.”


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