The Filipino Fight Against Corruption14 July 2008
The second phase of a controversial World Bank-funded road development project is set to begin. But this will be a tough test for the Philippine government's new anti-corruption agenda, writes David Binning.
As a country with crippling infrastructure driven by poor investment, 14 May 2008 was a big day for the Philippines.
After lengthy delays following alleged corruption by companies involved in collusion bidding for the National Roads Improvement Management Program (NRIMP1), the World Bank finally approved its share for phase two of the project known as the NRIMP2.
The move is a major step for the country which has crippling inefficiencies in its transport system. However, its past history means the new funding comes with a raft of anti-corruption measures.
Bidding for the first phase of the management programme, NRIMP1, happened between 2003 and 2006. The World Bank rejected two large road contracts, in three rounds of bidding, leaving neither it nor the Philippine Government financing them.
The rejected contracts were worth about $33m, but bid prices were about $10m higher, sparking suspicion.
While the alleged bidding has been looked into by the World Bank's independent investigation unit, and is being investigated by the Ombudsman, the bank is yet to make public the names of companies found to have engaged in collusion.
World Bank officials in the Philippines, the US and Australia did not respond to questions by the time of publication but more than 340 organisations have been blacklisted.
According to the Washington-based institution, however, the NRIMP1 still made "major progress toward putting in place a modern, transparent and accountable national road management system", despite the situation.
This included the building or upgrading of some 382km of roads in provinces across the Philippines, with a further 975km of existing roads resurfaced and maintained.
"As a result, many Filipinos have benefited from a more efficient and transparent road system, lower transport costs, and reduced travel time," the bank said.
LACK OF INVESTMENT
Nevertheless, the World Bank has still identified the Philippines as having one of the lowest levels of investment in East Asia, with current investment levels sitting around 15%, while comparable economies are attracting 20% or higher.
Figures show intercity freight rates were up to 50% higher than in Thailand or Vietnam, while capital expenditure on roads was at an all-time low of PHP34bn or 0.9% of GDP in 2002 and rose little through a period of fiscal restraint in 2005.
Historically private sector investment in transport has been low due to an uncertain investment climate, poor legal environment and land acquisition problems.
The tragic sinking of a passenger ferry in June 2008, with the loss of some 900 lives, served to focus further attention on the shortcomings of transport infrastructure in the Philippines. Overall the situation has led to crippling inefficiencies in the country's transport infrastructure, with it now among the slowest growing countries in East Asia.
The Philippines faces a number of challenges which are exacerbating the situation, from the fact it is a large archipelago with huge numbers of bridges, to staffing issues which, despite extensive training, still sees skilled staff migrating to the private sector. The substantial operation and maintenance costs of IT are also emerging.
While funds allocated to road maintenance have risen since 2004, due to rising revenues from road users in a Special Road Support Fund (SRSuF), these were only about one third of the estimated needs in 2006 and cost recovery needs to rise further.
With the recent resurgence in the economy, the capital budget and SRSuF for 2007 rose to PHP69bn (1.8% of GDP). This could restore the sector if well prioritised, spent efficiently and sustained. The country's government has made infrastructure a priority, and the 2008 budget has an additional PHP14.3bn for infrastructure.
WHAT NRIMP2 WILL DO
Although the World Bank road project will assist in stimulating trade and tourism within the archipelago, it is also expected to support the Philippines' Strong Republic Nautical Highway Program (SRNH), which according to reports has been losing money.
An initiative involving 70 ports – 40 of which are government-owned – the SRNH intends to give motorists better access to terminals, enabling them to climb aboard ships which can carry vehicles, also known as roll-on, roll-off (RoRo) vessels. The system is also seen to boost local trade.
NRIMP2 is made up of two parts: National Road Improvement and Asset Preservation, and Institutional and Capacity Development.
The first part includes works and services for road upgrading, rehabilitation and widening, bridge replacement, and landslide rehabilitation, adding up to around 450km of roads and about 1,000m of bridges on the arterial National Road Network.
Its estimated cost is around $240m, to which the World Bank is contributing $124m.
Overall the World Bank is contributing $232m to NRIMP2, which will go towards a range of activities from actual construction to administration and processes. Just over $10m will come from Australian aid agency AusAid, which will go directly towards improving administration including processes for accountability, goals laid out as part of the second part.
Signing off on its funding, the World Bank outlined its comprehensive list of stringent anti-corruption measures.
They include the use of an independent procurement evaluator (IPE) to improve the transparency and integrity of procurement processes and further controls to ensure the reliability of contract cost estimates and detect overbidding.
The measures also hope to strengthen internal controls adding an internal audit capacity in the Department of Public Works and Highways. They will also see the adoption of computerised business systems for procurement and financial management while independent oversight will be carried out by "RoadWatch" or "Bantay Lansangan".
"The NRIMP-2 project incorporates a comprehensive range of measures designed to build institutional capacity and governance, to strengthen the fiduciary controls over the use of loan proceeds, and to strengthen social accountability and the demand for good governance from civil society," says the bank.
"Many of these measures have been strengthened due to the incorporation of lessons learned from NRIMP1 and discussions with government on appropriate measures to mitigate the systemic risks identified in the NRIMP INT investigation."
THE KEY TO ANTI-CORRUPTION
Key to this undertaking is the formation of RoadWatch, translated as Bantay Lansangan, a new agency within the Philippine government given a mandate to oversee road projects.
"The Bantay Lansangan road sector partnership hopes to act as a signalling device for the Department of Public Works and Highways (DPWH), monitoring the way it does its job," said Bantay Lansangan executive director Vince Lazatin.
"Bantay Lansangan will check how effectively funds are being spent to address needs, check that value for money is being achieved, and report on the actual results of improvement in road conditions.
"Hopefully, with the support of DPWH, we can work to minimise, if not eliminate corruption and waste at the Department."
The Philippines is no stranger to endemic corruption. However, failure to weed it out from arguably one of the most important infrastructure projects the country has ever seen could have dire consequences for this already fragile economy.