Infrastructure projects should speed up traffic, lower the cost of goods and services by facilitating trade and give comfort to ordinary workers and commuters.
But until their completion, they are a headache to weary motorists, rattle the nerves of the proponents and force the government to pay more than the cost of the construction if the projects are funded by borrowed money.
Just last year, the Philippines paid $13.87 million or over P790 million for the delayed implementation of foreign-assisted projects. The amount rose from $10.7 million in commitment fees paid in 2022.
Such fees or penalties are charges imposed by lenders on the unused portion of the loan. The borrower, or the Philippine government in this case, pays these fees to compensate the lender for holding the funds.
The Organization for Economic Cooperation and Development calls them commitment charges—a penalty for failing to disburse loan pledges under the overseas development assistance (ODA) program, of which the Philippines is a beneficiary.
The penalties may appear small compared with the billions of pesos incurred in building a major infrastructure project. The cost, though, to the intended beneficiary of the project―consumers and commuters alike―translates into continued traffic jams and higher prices of goods and services.
The penalty is a fixed rate based on the unused portion of the loan. Commitment fees for the Philippines, according to the National Economic and Development Autority (NEDA), range from 0.125 percent to 0.85 percent.
The penalty increased 29.6 percent between 2022 and 2023, with the Department of Transportation and the Department of Public Works and Highways accounting for most of the fees.
Funding institutions like the World Bank (WB) and the Asian Development Bank (ADB) monitor the usage of their lent funds. They charge much lower interest rates than those imposed by commercial banks due to the objectives of their funding, mainly promoting sustainable social and economic development and the welfare of a nation.
Commitment charges, or penalties, meanwhile, vary. The World Bank charges the highest fee at 0.85 percent per year on an unused amount from the date charges begin to accrue, excluding the fourth anniversary of that date, and 0.75 percent per year afterward.
The ADB charges 0.75 percent; Australia, 0.125 percent; Canada, 0.375 percent; Germany and Denmark, 0.25 percent; France and the Nordic Development Fund, 0.50 percent; and Spain, 0.15 percent a year.
Many ODA-funded projects in the Philippines are behind schedule because of procurement delays, right-of-way acquisitions and extensions beyond deadlines.
The ADB-funded South Commuter Railway Project registered the highest commitment fees in 2023 at $2.41 million, up from $790,000 in 2022.
The project, according to NEDA, “experienced delays in land acquisition due to deviations in parcellary plans and delays in procurement due to lender concurrence, as well as changes in administration and signatories.”
The Malolos-Clark Railway Project also contributed significantly to the penalties last year, totaling $1 million. The two projects combined accounted for nearly a quarter of the total fees paid in 2023.
Late design changes
Right-of-way issues and late design alternations seem to be the at the core of the delay in many infrastructure projects. Take the case of the Metro Rail Transit (MRT) Line 7 of conglomerate San Miguel Corp. (SMC)
The rail line is funded by private banking institutions, yet it suffers from delays that are not of SMC’s own making. MRT-7 spans 22 kilometers and encompasses 14 stations, starting from North Ave. in Quezon City and ending at San Jose del Monte, Bulacan. It is expected to serve about 800,000 passengers daily.
San Jose Del Monte Mayor Arthur Robes has proposed to realign the route of MRT 7 due to traffic congestion concerns in the area. The proposed route follows Quirino Highway, a key thoroughfare used by a significant number of commuters traveling to and from Metro Manila.
DOTr Secretary Jaime Bautista had said the construction of the 22-kilometer project might face a delay until 2027, effectively deferring its formal operations to 2028 if SMC decided to push through with the proposed alignment.
The interference of the local government unit in a national project like MRT-7 is not helping the cause of San Jose del Monte residents and the thousands of commuters traveling daily from the Fairview area to Quezon City, Makati and other places of work. These commuters will continue to trudge at least two-hour trip from San Jose Del Monte to Quezon City, instead of 35 minutes as promised by MRT-7.
Safe havens
There has been a resurgence in talk among urban dwellers on where best to relocate and avoid floods in Metro Manila. Typhoon Carina and heavy monsoon rains dredged up the trauma of the historic Typhoon Ondoy 15 years ago.
In recent years, the south of Metro Manila has seen an influx of Filipino families escaping urban congestion and taking advantage of relatively affordable real estate. However, some areas in the south have proven to be still unsafe from flooding. Similarly, in north of Metro Manila, there were areas adversely affected, being in low-lying and traditionally flood-prone districts.
Fortunately, there are safe spots of higher elevation in Pampanga province, such as the Alviera master planned estate of Ayala Land Inc. and Leonio Land Holdings Inc.
During the recent downpour, the Alviera Country Club was high and dry, and was open to serve members and guests who were there.
Those bound for air travel were also glad to know that Clark International Airport (CRK) was not flooded and experienced very minimal flight disruptions, compared with the Ninoy Aquino International Airport (NAIA).
As the real estate mantra goes, “location, location, location” is the top consideration in choosing a property, more so these days as many areas not known to be flood-prone become waterlogged after a heavy downpour.
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