Reviving the railway infrastructure in the Philippines – The Diplomat

Pacific money | Economie | Southeast Asia

The Asian Development Bank and the Japan International Cooperation Agency are currently funding large-scale upgrades to the country’s railways and urban mass transit systems.

A light rail transit line in Manila, Philippines.

credit: Depositphotos

On June 9, the Asian Development Bank (ADB) approved up to $4.3 billion in loans for the southern portion of the giant North-South railway project in the Philippines. The railway is being constructed in three parts and will run for a total length of 147 kilometres. It will start in the north near Clark International Airport and then descend through the urban heart of Manila before continuing to its southern end in Calamba. This comes after the Asian Development Bank approved a $2.75 billion loan in 2019 for the northern sector currently under construction.

The total cost of only the northern and southern sectors will be $14.2 billion, of which the Asian Development Bank has agreed to cover roughly half through loans, with the Japan International Cooperation Agency (JICA) getting another $3.68 billion. Separately, JICA is financing the construction of the middle section that will connect Tutopan to Mollolos. The scale of this project is enormous and, according to the Asian Development Bank, represents “the largest infrastructure financing for the Bank in the Asia-Pacific region to date.”

But this massive, $14 billion rail project is only part of the story. One of the major economic policy programs during Duterte’s administration was to increase spending on infrastructure, and this includes Manila’s urban transportation system, which is set to be significantly modernized. For nearly two decades, mass transit in Manila was covered by three lines that suffered from service and maintenance problems. These lines are undergoing upgrades and expansions, while two new lines, MRT 4 and 7, have either been approved or are under construction.

The most ambitious is the Metro Manila subway, a massive 355 billion pesos ($6.3 billion at current exchange rates) project funded by JICA. Dubbed “Project of the Century” it will represent a major upgrade to Manila’s urban transportation system and is a rather impressive engineering feat. Separately from that, the upscale Makati district city government has entered into an agreement with a private developer to build its own subway system. The Makati project mainly includes Chinese financiers and construction companies.

Taken together, the commitment to invest in public transportation infrastructure in Metro Manila and its surroundings is real and the scale is very significant. It echoes the similarly ambitious public transport projects underway in Bangkok, Hanoi, Ho Chi Minh City and Jakarta and it is clear that there is a lot of construction and investment in the region targeting the transport sector. But some things jump out at me about how this is brought up in Manila.

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First, almost all of these projects are supported by the Asian Development Bank or the Japan International Cooperation Agency. Outside of the Makati Project, a local government initiative, China’s role is relatively small compared to Japan’s. This underscores the fact that while China’s Belt and Road Initiative often grabs the headlines, Japan’s footprint when it comes to infrastructure financing in the region may be less visible but often more significant.

I think it’s also worth noting that the major transportation upgrades for Manila and surrounding areas have been at some point in planning and development for decades. At some point several years ago, the government signed contracts with Chinese counterparts to finance and build parts of the North-South railway, but the deal fell apart and was scrapped.

The fact that these projects have advanced and overcome many of the political, legal, logistical, and financial hurdles that have hampered earlier attempts helps, I believe, explain why Duterte has remained so popular with Filipino voters despite his well-historic shortcomings and controversies. His administration completed some large infrastructure projects while others failed.

Perhaps the new president, Ferdinand Marcos Jr., would like his economic policies to be seen as a continuation of these efforts. But somehow Duterte has done the easy part, by taking advantage of the geostrategic competition between China and Japan during the period of loose monetary policy to obtain financing for large projects. Marcus Jr. may find his turn – completing these huge and complex projects while paying off the obligations incurred to finance them at a time of high inflation and when global monetary conditions are more challenging.

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