Here is a good and factual assessment of the build-build-build and infra spending of the Duterte administration, from Dr. Emmanuel "Noel" de Dios of UPSE. Really cool paper, enjoy.
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https://www.bworldonline.com/waste-and-means/
See other mentions of Dr. Noel de Dios:
Some comedies in the recent PH high inflation rate, July 12, 2018
Exports, FDI, Manufacturing, ICOR under Dutertenomics, October 21, 2019
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https://www.bworldonline.com/waste-and-means/
Waste and means
February 9, 2020 | 9:58 pm
Introspective
By Emmanuel S. de Dios
…To be clear, however, there are two benefits from
investment and particularly infrastructure spending: a Keynesian and a Smithian
one. Like other forms of spending, government infrastructure investment raises
current GDP immediately because it employs people and creates income. But it is
not really unique in this function. The economy could just as easily have been
stimulated by raising take-home pay or by reducing taxes on households or firms
(i.e., by stoking household consumption or private business investment, or
both). This spending effect is the reason Keynes sardonically suggested it
would be just as effective a stimulus if government buried bank-notes in unused
mine shafts, filled these with city garbage, and invited private business to
dig them up “on well-tried principles of laissez-faire.” In short, spending to
stimulate the economy does not even have to be productive or prudently chosen.
The real distinction — recalling Hicks — between investment and other spending
stimuli is that the former is undertaken not mainly to create income today but
to raise income for the future.
So, just how good has infrastructure spending been in
Duterte’s first three years? Was it based on the prudent selection of projects
to implement in order to yield maximal social returns in the future? Or was it
motivated primarily by a need to goose the economy in the short term by any
means?
No final answer can be given at this point but facts and
data and casual observation give enough grounds for concern.
First, some facts. Senator Franklin Drilon’s recent
exposé revealed — and the government has not really denied — that only nine out
of 75 of the administration’s originally planned major projects had even
started more than halfway into Duterte’s term. Understandably, though this
should have been anticipated, perennial problems such as right-of-way
acquisition, the technical deficit in government agencies, political lobbying,
and issues in bidding and contracting reared their ugly heads. The government
subsequently “improved” its reported progress simply by drawing up a new list
of “flagship” projects, dropping slow-moving ones and adding “less ambitious”
and “more doable” ones and some already in progress. This effectively changes
both numerator and denominator. Thus, rather than resolve to remove structural
obstacles to major projects, the government simply changed its priorities to
avoid those obstacles. Smart move.
Still, how does this square with the sizeable increase in
public infrastructure spending noted earlier? Well, if it was not flagship
projects that were moving, it can only mean projects of lesser importance and
lower priority were those being implemented. Indeed, in lieu of movement in
“game-changing” flagship projects, the government instead touts its spending on
bread-and-butter items such as roads, bridges, and irrigation systems
constructed or rehabilitated. All this is well and good in creating employment
and prodding the economy today, but — remembering what investment is — how much
more productive of future output are they?
Some statistics. A crude but readily available measure of
the efficiency of investment is the incremental capital-output ratio (ICOR),
which is roughly how much of an investment buck is required for a given bang in
growth. On this measure, it turns out that investment during the first half of
Duterte’s term has been the least efficient in producing growth (see Table).
The ICOR of 4.7 for 2017-2019 is the highest it has been over the past 15
years. This strengthens the suspicion that, at least thus far, exigency and the
need to shore up short-run growth has been the driving force of infrastructure
spending. Keynes not Smith has been the patron saint of Build, Build, Build.
Or then again, take some casual observation. Bonny
Serrano Street in Quezon City, runs alongside Camp Aguinaldo. There has since
been a lane added to it. It is a fine, concrete addition. The only problem is
that no vehicle can use it, since it was simply carved out of the camp grounds
and leads nowhere. One must wonder how much extra social output this
infrastructure has produced since it was completed. A similar infrastructure
project can be seen on the stretch of Katipunan Avenue that runs behind the UP
Diliman Campus. Again, an extra southbound lane has been added and cut out from
UP land. Unfortunately, except for the odd tricycle and jeepney that makes a
right turn on C.P. Garcia, that nice concrete road is largely unused since it
ends in an asymmetrical bottleneck on the rest of Katipunan Avenue. Actually,
without meaning to sound ungrateful coming from UP, the same question may be
asked regarding the whole project of concrete-paving the lightly used internal
campus streets. One must ask how urgent a priority that must have been in terms
of increasing future output. (I can attest its effect on scholastic performance
will not be that great.) Meanwhile, heavily used roads are only periodically,
partially (and badly) patched with asphalt. Such examples can be multiplied
country-wide. While all these projects undoubtedly raised current income, their
impact on future output must be placed in doubt.
In Smith’s words: “In every such project, though the
capital is consumed by productive hands only, yet, as by the injudicious manner
in which they are employed, they do not reproduce the full value of their
consumption, there must always be some diminution in what would otherwise have
been the productive funds of the society.”
But don’t take Adam Smith’s word for it. Listen to the
opinion of a provincial mayor who at some point also saw the problem for
himself when he said, “Sabi ko sa kanila hindi ko kailangan ’yung build, build,
build. Do not give me that kind of shit. I want build, use, build, use, build,
use.”
(E, alam din pala niya.)
Emmanuel de Dios is professor emeritus at the UP School
of Economics.
-------------See other mentions of Dr. Noel de Dios:
Some comedies in the recent PH high inflation rate, July 12, 2018
Exports, FDI, Manufacturing, ICOR under Dutertenomics, October 21, 2019
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