Big infra spending fails to lift plight of the poorest

A typical rural road. Photo by Ruby Shaira Panela.

PART CRAGGY mountains and part deep valleys, Apayao in the Philippine north is probably not a place for those seeking an easy life. Yet up until six years ago, the ruggedly beautiful province had a relatively respectable poverty incidence rate of 16.8 percent, which meant more than 80 percent of the families there were consistently meeting their basic needs without much problem.

By 2006, however, majority of Apayao families were struggling, with the province posting a poverty incidence rate of 57.5 percent. As a result, Apayao had also become the newest entry in the Philippines’ list of 10 poorest provinces, and even earned the dubious honor of clinching rank No. 4.

Poverty incidence is the proportion of those considered poor to the total number of families. The term “poor” meanwhile refers to those whose incomes fall below the threshold identified by the government, or those who cannot afford their minimum basic needs in a sustained manner.

There are several possible reasons why many of Apayao’s families suffered a decline in fortune. But those reasons could not have included a lack of new infrastructure projects, which have long been believed to be among the tools that could help alleviate poverty by providing greater access to basic needs and services.

Based on PCIJ’s review of contracts awarded by the Department of Public Works and Highways (DPWH) under the Arroyo government, Apayao was among the top 10 provinces ranked according to their infrastructure spending per capita from 2000 to 2005.

What is curious, though, is that Apayao is not the only province on that list that has ended up with more residents in dire straits. In fact, five of those top 10 provinces experienced a rise in their poverty incidence rates. (see Table 1)

When the PCIJ expanded its review, it saw that despite the surge of civil works funds nationwide in the last seven years, poverty in general not only persisted, it even worsened.

The most recent official poverty statistics cover only up to 2006, when the country posted a poverty incidence of 26.9 percent, up from 24.4 percent in 2003. Yet indications are that when the latest poverty figures are produced by the end of this year, there will be little improvement to be seen, most probably because of sheer inefficiency, misplaced priorities, and persistent corruption.

This is even as the National Statistical Coordination Board (NSCB) points to the fast-growing population and the failure of household incomes to rise as fast as commodity prices as a major reason why more Filipino families are joining the ranks of the poor.

In fact, the PCIJ had conducted its review of the DPWH contracts online database as a follow-up to the January 2009 report of the World Bank’s anti-corruption unit, the Department of Institutional Integrity (INT), which established collusion and corruption in Bank-funded road projects implemented by the public works department.

Contractors and government officials also say that as much as 30 percent to 50 percent of the cost of infrastructure projects continues to be lost to corruption.

At the same time, the latest Commission on Audit (COA) report on the DPWH shows that as of 2007, infrastructure projects undertaken by various DPWH office/districts totaling P1.036 billion were not completed within the specific contract time.

Moreover, notes the COA report, many infrastructure projects had either defects or deficiencies that, if not corrected, may result in the waste of as much as P48.4 million of state funds.

No relief for the poor

The emphasis on road projects by the Arroyo administration may not be that helpful as well in raising incomes of ordinary farmers who are among the country’s poorest.

Former and current government officials attest to President Gloria Macapagal Arroyo’s predilection for road-building as part of her administration’s legacy, although DPWH Secretary Hermogenes Ebdane Jr. also says that the government’s ever-increasing infrastructure projects are aimed partly at easing poverty.

But while Dr. Aleli Bawagan, community development professor at the University of the Philippines, acknowledges that roads are important to make production more efficient, she says that as far as she knows, farm workers do not earn significantly from such investments.

Indeed, while farm workers nationwide each earned an average of P126.3 a day in 2003, they were taking home P121.15 each in 2007, despite a sudden increase in state infrastructure projects after 2003, and even a rise in the production of key crops such as rice, corn, and coconut between 2003 and 2007.

According to its online registry of contracts, the DPWH awarded 27,535 civil-works contracts amounting to over P138.5 billion in total from 2000 to 2008. Of that number, about 99 percent were awarded only beginning 2004. This was the year presidential elections were held with Arroyo clinching right to a six-year term of office.

Bawagan, though, points out: “The roads are there, but it’s not the farmers who benefit. It’s the businessmen — the ones who have the mills, the trucks, the threshers.”

She agrees that farm workers could earn more if they engage in trading, but she says this would require a different set of skills and, of course, entail costs. “There is no problem when you talk of production,” says Bawagan, “but (with) the business side, they (farm workers) need training, capitalization, loan support, and infra support.”

By the latter, she means items specific for agriculture production. “For example,” she says, “rice production could be more efficient if facilities such as irrigation structures, dryer, mills — mobile mills, in particular — are made more accessible to them.”

Bawagan is also not impressed by the jobs generated by infrastructure projects as a way of alleviating poverty. “It’s short-term,” she observes, “and what you want are sustainable things.”

Not cause-effect deal

UP economics professor Ernesto Pernia does caution that while infrastructure and poverty are related, they may not be treated under the cause-and-effect principle all the time. “It will take time for projects to make impact, to bring about benefit to the poor,” he says.

The Arroyo administration's road-building binge has not helped raise incomes of ordinary farmers, who are among the country’s poorest. Photo by Ruby Shaira Panela.

Still, a 2002 study he did with colleague Arsenio Balisacan revealed that investment in roads has to be matched with money sunk in something else — education especially — to be able to exert significant indirect and direct impact on the welfare of the poor.

Using provincial data, Pernia and Balisacan suggested that a one-percent increase in road access coupled with schooling results in a 0.32-percent rise, via growth, in the mean incomes of the poor. Similarly, a one-percent improvement in roads with schooling is directly associated with a 0.11-percent increase in the incomes of the poor.

Unfortunately, the most recent relevant statistics indicate a lag in state investment in education. Provincial data show that both the participation and completion rates have declined (elementary level) in majority of the 10 provinces with the highest total per capita infrastructure spending from 2000 to 2008. This means that the probability of achieving universal primary education is low.

Participation rate is the ratio between the enrolment in the school-age range to the total population of that age range. Completion rate, meanwhile, is the percentage of first year entrants in a level of education who complete or finish the level in accordance with the required number of years of study.

The good news is that the pupil-room ratios in most of the provinces did improve. Based on data gathered through the education department’s Basic Education Information System for the school year 2006-2007, elementary schools in the provinces reviewed met Republic Act No. 7880’s stipulation to have less than 46 pupils in one classroom in one shift.

By mandate, the DPWH is also in charge of constructing school buildings among other public facilities. This is in addition to school building projects led by the Department of Education (DepEd), school principals, and local governments.

Schools not a priority

But official data clearly show, too, that building more schools or classrooms was not the first priority among the top five provinces in terms of total per capita infrastructure spending from 2000 to 2008. Instead, the bulk of the public monies there went to the regravelling, asphalting, and improvement of roads, with the most expensive projects in two of the provinces involving road rehabilitation and repair.

In 2007, Albay spent P28.9 million for the repair/restoration of a damaged road pavement along the Balogo-Nasisi Road in Polangui. Albay had 19 percent or P762.8 million of its total funds spent on improvement of roads between 2000 and 2008.

In 2008, Quirino spent P19.3 million for the improvement/rehabilitation of the Dumabato-Balligui Road in Maddela. The province spent 58 percent or P447.8 million in projects of the same nature.

In Catanduanes, which leaped to first place in 2006 from being 10th in 2005, a good 43 percent or P1 billion went to similar projects. But Apayao, which slipped from third place in 2005 to fourth place the next year in the big infrastructure spenders’ list, beat Catanduanes. Records show that about 60 percent of the P435 million it spent on infrastructure projects between 2000 and 2008 went to roads and bridges. Significantly, too, the figure excludes expenditures for road repair and rehabilitation.

It could be argued that Albay and Quirino simply had to fix the roads damaged by typhoons that had hit these provinces in 2006, hence their huge road repair bills. After all, they — along with seven other provinces included in the 2000-2008 top 10 list — had been declared under the state of national calamity on December 4, 2006 through President Arroyo’s Proclamation No. 1185. (see Table 2)

Excessive contract costs

Catanduanes could claim a similar excuse, having been hit by two typhoons at the tail-end of 2006. That year, however, most of the infrastructure projects done there involved flood-control and not road repair.

Then again, in 2007, the Department of Budget and Management (DBM) released P1.2 billion to the DPWH for the repair of roads, bridges, flood-control structures, and other facilities damaged by typhoons Milenyo, Reming, and Seniang in Region V, which includes Catanduanes, along with Albay, Camarines Norte, Camarines Sur, Masbate, and Sorsogon.

Of the amount, however, it is Albay (which has the fifth highest per capita infrastructure spending among all provinces) that received the lion’s share of P770 million.

Interestingly, COA’s report on the DPWH shows that contract costs of various projects in 2007 exceeded the commission’s estimates by a total of P60.7 million.

In addition, whatever post-typhoon funds were received by Camarines Norte, Eastern Samar, and La Union — which were also covered by Proclamation No. 1185 — failed to help exclude them from being among the 10 provinces that had the lowest per capita infrastructure spending in the last eight years. (See Table 3)

Neglected provinces

The 2006 incidence rates also show that Camarines Norte and Eastern Samar had more impoverished families than seven of the 10 provinces with the highest per capita spending up to 2008. Which begs the question: Why didn’t these two provinces receive more infrastructure funds?

DPWH Secretary Ebdane explains the wide per capita infrastructure spending gap between the top 10 and bottom provinces — more than P10,000 for No. 1 slot occupant Catanduanes, compared with just a little over P6 for Western Samar, the last on the list — by saying that the DPWH does not use a “singular formula” in determining what kind of civil-works project is undertaken where.

“(T)he allocation for infrastructure projects by category is based on planning systems, which follow certain principles, depending on the specific type of infrastructure,” he adds.

Aside from category-specific parameters, the secretary says that the allocation for President Arroyo’s State of the Nation Address (SONA) projects also contributes significantly to the per capita spending in infrastructure of each province, with a marginal amount concentrated in some underdeveloped ones.

“The DPWH is guided mainly by the Medium-Term Philippine Development Plan (MTPDP) as well as the development agenda identified by the President in her SONA and other pronouncements in the implementation and planning of all projects,” says Ebdane. “Complementary to these are the National Economic and Development Authority (NEDA) guidelines as well as the inputs of the Regional Development Councils, local government executives, and the members of Congress.”

No rhyme, reason?

Comments former budget secretary Emilia Boncodin, now a professor at the UP National College of Public Administration and Governance: “There is rhyme or reason as to why infrastructure projects are undertaken. The assumption is that it will solve a problem.”

She says infrastructure planning makes sure that public works funds are spent in necessary projects at the right places — and without sacrificing quality.

“Constructing a road is a very precise activity,” says Boncodin. “A good engineer would know how much it would cost a certain road, given the specifications. And if an engineer has been doing that his entire life, his level of accuracy should be very high — give or take changes in prices.”

Recently, though, the DPWH adopted the Highway Development and Management System 4 (HDM4), a computer-generated prioritization system that is based on economic viability and optimizing benefits to road users.

Boncodin commends this reform, saying that HDM4 would help the DPWH identify which projects ought to be funded.

“If the project is under HDM, then there is scientific basis on why a particular road is being constructed,” she says. “Kapag wala, inutos lang ng whoever (Without that, the project’s done just because someone ordered it done).”