Typhoon highlights weak Philippine infrastructure

Trail of death and destruction in Typhoon Haiyan's wake highlights fragile and patchy infrastructure after decades of neglect and corruption.

MANILA // Under a reforming president, the Philippines emerged as a rising economic star in Asia but the trail of death and destruction left by Typhoon Haiyan has highlighted a key weakness: fragile and patchy infrastructure after decades of neglect and corruption.

Authorities fear that the storm that tore through Leyte province in the country’s east has killed thousands. More than 600,000 people have been displaced.

Haiyan’s devastation underlines the pressing need to spend more money to build hard assets such as more roads, ports and power lines – not only to improve living standards but also to better withstand the storms, earthquakes and other natural disasters that strike the country with numbing regularity.

The Philippines has the lowest percentage of paved roads when compared with neighbours Indonesia, Malaysia, Vietnam, Thailand and Singapore, according to data compiled by foreign business groups in the Philippines in 2010. It also had the worst scores in other key indicators such as fixed phone lines, households with power and electricity lost in transmission.

“It’s hard to prepare for the worst storm in the world,” said Trinh Nguyen, an economist at HSBC. “But at the same time one of the issues now is there isn’t a way to access these places that are severely hit. The roads are not there.”

The Philippines is the country that is most at risk to natural hazards, according to the UK-based risk analysis firm Maplecroft. The country loses US$1.6 billion (Dh5.87bn) on average each year because of such disasters, according to the Asian Development Bank.

Haiyan, possibly one of the most powerful storms on record, is just one of about 20 typhoons that hit the country each year and arrived as it was still recovering from a 7.2 magnitude earthquake in October that killed 220.

Despite the challenges posed by natural disasters, the Philippines president, Benigno Aquino III, has managed to steer the economy into one of Asia’s fastest growing, raising hopes that millions would be pulled out of poverty.

Quarterly growth has risen as high as 7.8 percent this year, outpacing China. Reflecting improved finances, Moody’s, Standard & Poor’s and Fitch have all given the country an investment grade credit rating, allowing the government to borrow money more cheaply for big projects.

Low rates of insurance in the Philippines mean the damaged caused by Haiyan is likely to sap government finances but analysts say it might not slow growth significantly because of the small role the affected region plays in the wider economy.

Mr Aquino, who took office in 2010 pledging to root out corruption and reduce poverty, launched an ambitious effort to improve the country’s inadequate infrastructure. He set a goal of boosting infrastructure spending to 5 per cent of the economy by 2016. That is about double the average of 2.5 per cent over past decades, which substantially lagged other countries in the region, according to a joint report by foreign business chambers.

Mr Aquino’s goal amounts to about $20bn year, said John Forbes, an adviser to the American Chamber of Commerce.

“Targeting that, frankly even funding it, is the easy part. Actually spending it is more of a challenge,” said Mr Forbes.

The president’s plan included partnering with private companies on some projects. Out of 47 public works in that pipeline, only one is partly complete: a plan to build about 9,400 classrooms able to withstand earthquakes, typhoons and floods.

Progress has been slowed by efforts to eliminate corruption.

In 2011, Mr Aquino scrapped or reconsidered $2bn in foreign-funded infrastructure projects that he said had inflated costs or technical problems. The projects were signed under his predecessor, Gloria Macapagal Arroyo, who is embroiled in corruption and election-fixing allegations.

They included a $430 million Belgian project to dredge a lake on the southern edge of Manila that involved moving silt from one section to another. Mr Aquino also ordered the renegotiation of a $276m French port-building project and the re-examination of a Chinese-financed rail line.

Mr Nguyen of the HSBC said infrastructure investment is even more crucial given the Philippines’ rapid growth in population, which rose from 74 million in 1998 to 96 million today.

“When you have a lot of people coming into the labour force, coming into the population, you really need to increase your infrastructure funding. Added to this, there’s a lot of pressure from weather related challenges,” he said.

Analysts and officials say the central Philippines region worst affected by Haiyan, one of the poorest in the country and the only one that suffered shrinking economic output last year, contributes about 2 per cent of the national economy.

Officials looked for silver linings.

“We can also turn this into an opportunity to improve land use planning” in communities exposed to storm surges and other natural hazards, said Emmanuel Esguerra, the deputy director general of the National Economic and Development Authority.

* Associated Press