The Revival of Rail Infrastructure in the Philippines

pacific money | Economy | Southeast Asia

Currently, ADB and JICA are financing extensive improvements to the country’s rail and urban public transport systems.

The revival of rail infrastructure in the Philippines

A light rail transit line in Manila, Philippines.

Credit: Depositphotos

On June 9, the Asian Development Bank (ADB) approved up to $4.3 billion in loans for the southern leg of the Philippines’ giant north-south commuter rail project. The railway line is being built in three segments and will have a total length of 147 kilometers. It will start in the north near Clark International Airport and then pass through the urban core of Manila before continuing to its southern terminus in Calamba. This follows ADB’s approval of a $2.75 billion loan in 2019 for the northern segment that is currently under construction.

The total cost for the northern and southern segments alone will be $14.2 billion, of which the ADB has agreed to cover about half through loans, and the Japan International Cooperation Agency (JICA) will bear another $3.68 billion. . Separately, JICA is financing the construction of the middle section that will connect Tutuban with Mololos. The scale of this project is enormous and, according to the ADBit represents the bank’s “largest infrastructure financing in the Asia-Pacific region to date.”

But this $14 billion rail megaproject is only part of the story. One of the main economic policy programs during the Duterte administration has been increased spending on infrastructure, and this includes Manila’s urban transit system, which is expected to be greatly improved. For almost two decades, public transport in Manila was covered by three lines that have had problems with service and maintenance. Those lines are receiving upgrades and expansions, while two new lines, MRT 4 and 7, have been approved or are under construction.

Even more ambitious is the Manila Subway, a megaproject of 355,000 million pesos ($6,300 million at the current exchange rate) financed by JICA. Dubbed the “Project of the Century”, it will represent a major improvement to Manila’s urban transit system and is quite an impressive feat of engineering. Aside from that, the city government of the exclusive Makati district has struck a deal with a private developer to build their own metro system. The Makati project mainly involves Chinese financial and construction companies.

Taken together, the commitment to invest in public transportation infrastructure in and around Metro Manila is real and the scale is very large. echoes equally ambitious public transport projects underway in Bangkok, Hanoi, Ho Chi Minh City and Jakarta and it is clear that there is a lot of construction and investment in the region directed at the transport sector. But a few things stand out to me about how this is being implemented in Manila.

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First, almost all of these projects are supported by ADB or JICA. Outside of the Makati project, which is a local government initiative, China’s role is relatively small compared to Japan’s. This underscores the fact that while China’s Belt and Road Initiative often grabs headlines, Japan’s footprint when it comes to financing infrastructure in the region may be less conspicuous, but it is often more significant.

I think it’s also worth mentioning that major transit improvements for and around Manila have been in some stage of planning and development for decades. At one point, several years ago, the government had signed contracts with Chinese counterparts to finance and build parts of the North-South Commuter Railroad, but the deal fell apart and it was cancelled.

I believe that the fact that these projects have advanced and overcome numerous political, legal, logistical, and financial hurdles that hampered previous attempts helps explain why Duterte remained widely popular with the Filipino electorate despite his shortcomings and controversies. His administration delivered on some big infrastructure projects where others failed.

The new president, Ferdinand Marcos Jr., would probably like his economic policies to be seen as a continuation of these efforts. But in a way, Duterte did the easy part, taking advantage of geostrategic competition between China and Japan during a time of loose monetary policy to finance big projects. Marcos Jr. may find his role, carrying out these huge and complex projects while paying off the liabilities incurred to finance them at a time of high inflation and when global monetary conditions are tightening, a little more difficult.

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