With about three-fourths of loan proceeds reaching billions of pesos still unspent just months before they expire, the Philippines wants to extend for two more years the financing for a delayed major flood control project in Metro Manila, the country's business and commercial hub that's also the second most populous region.
This reflects slow infrastructure development in the country — as pointed out by a couple of think tanks last week, which casts a shadow on the Marcos Jr. administration's ambitious Build Better More (BBM) program aimed at catching up with most of our Southeast Asian neighbors' world-class infrastructure.
According to a World Bank restructuring paper made public last week, loans for the $500-million Metro Manila Flood Management Project have been sought for extension to Nov. 30, 2026 from their original closing date on Nov. 30, 2024.
Back in 2017, the Philippine government borrowed a combined $415.2 million or $207.6 million each from the Washington-based World Bank and the China-led Asian Infrastructure Investment Bank (AIIB) to fund the bulk of this project aimed at protecting 1.7 million Filipinos living close to 56 "potentially critical" drainage systems across 11,110 hectares of flood-prone areas in the National Capital Region (NCR).
The government had shelled out the remaining $84.8 million for the project currently being jointly implemented by the departments of Environment and Natural Resources (DENR) and of Public Works and Highways (DPWH) as well as the Metropolitan Manila Development Authority (MMDA).
However, as of September this year, only 27 percent of these World Bank and AIIB loans have been spent, totaling $110.5 million or over P6.2 billion in the current exchange rate, during the nearly seven years of project implementation.
With $55.5 million disbursed from World Bank co-financing and $55 million from the counterpart AIIB loan, the bigger chunk of $304.7 million or almost P17.3 billion remained unutilized.
Hence, the proposed restructuring also reduced by $22.7 million each the World Bank and the AIIB's financing "given the scaling back of project-financed activities."
These canceled amounts would leave $184.9 million each in credit from the two multilateral lenders.
Still, the government will repay the low-interest loans over a 25-year period, inclusive of a 14-year grace period under the agreed upon terms seven years ago.
The World Bank blamed low loan disbursement on "significant implementation delays since [the project's] outset."
"The project faced design shortcomings, including a lack of specificity on site selection for drainage areas, as well as on the number, and location of pumping stations. The consequent deferral of these decisions to implementation resulted in delays in determining the final list of pumping stations under the project, which in turn, led to significant implementation delays and disparities between planned and actual construction costs," the World Bank said.
"The deferral in the selection of drainage and pumping station sites also delayed decision-making as it further protracted land acquisition and resettlement processes," it added.
Government red tape also remains to be a big problem. "Delays were further compounded by lengthy government procurement procedures, which spanned over seven months... Progress continued to lag the original plan given that the simultaneous procurement of numerous high-value civil works packages strained the capacity of the DPWH staff and prolonged procurement processes," the bank noted.
Also, "frequent leadership changes, issues in procurement and resettlement processes contributed to delays," especially at the height of the most stringent COVID-19 lockdown restrictions in 2020 to 2021, which stopped community engagement, fieldwork, in-person meetings and technical site visits for potential project bidders and contractors, the World Bank lamented.
In particular, "frequent changes within the MMDA leadership (five chairmen in five years) further impacted procurement and disbursements."
"The sum of these challenges set project implementation back by roughly two years," the World Bank said, despite some progress since 2022 when the economy reopened post-pandemic and after the two lenders pushed an action plan to speed it up.
In adjusting the loan terms, project rollout shall also be extended by two additional years, missing the earlier goal to finish this flood control this year so that targeted areas would be free of water within 24 hours after a major rainfall.
If only the World Bank and AIIB-backed project had been finished on time, the flooding wrought by recent strong typhoons to many parts of Metro Manila could have been mitigated, if not totally avoided.
It did not help that the restructuring plan would downscale the project to "retain only those activities crucial to the attainment of [its] development objective" of improving flood management, the World Bank document said.
Last week, the think tanks Capital Economics and Deutsche Bank Research pointed to sluggish infrastructure build-up and corruption as deterrents to the Philippines reaching its full economic growth potential.
Despite slow implementation, the government continues to pursue more official development assistance (ODA) — cheap loans and grants from development lenders such as the World Bank, the AIIB and the Manila-based Asian Development Bank (ADB), as well as bilateral lenders like Japan -- for its priority programs and projects, especially infrastructure.
For instance, a $496-million loan to fund the bulk of the forthcoming $509.2-million Health System Resilience Project of the Department of Health (DOH) is expected to be approved by the World Bank on Dec. 20 of this year.
Based on the World Bank's pipeline, it would lend a total of more than $3.6-billion worth to the Philippines during its 2025 fiscal year covering the period July 1, 2024 to June 30, 2025, across eight projects.
The other upcoming loans from the World Bank included the $750-million Second Digital Transformation Development Policy Loan (DPL); $700-million Pagkilos - Locally-Led Climate Action; $600-million First Energy Transition and Climate Resilience DPL; $455-million Mindanao Transport Connectivity Improvement Project; $287.2-million Digital Infrastructure Project; $250-million Water Supply and Sanitation Project; and $67.3-million Civil Service Modernization Project.
The Ministry of Agriculture, Fisheries and Agrarian Reform (MAFAR) of the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) is also awaiting the approval of a $4-million investment project financing for its Roads to Development project under the Bangsamoro Normalization Trust Fund (BNTF).
Once the World Bank gives its go-ahead for this borrowing spearheaded by the national government's Department of Finance (DOF) this month of October, the BARMM regional leadership will improve rural road access in the six selected Moro Islamic Liberation Front (MILF) camp communities in five Mindanao provinces, with the ultimate goal of connecting farms to markets.