BBB: Farce multiplier

January 19, 2022

by Sonny Africa

The Duterte administration is fond of justifying its extravagant Build, Build, Build (BBB) infrastructure program by saying that it has a high multiplier effect. The awe that grandiose infrastructure projects elicit is such that this claim is never questioned.

IBON did ask though and wrote the finance, public works, transportation, and economic planning departments and some other agencies to ask the basis for such repeated claims. None of them were able to provide any study, while the finance department gave the most straightforward reply. Despite the finance secretary being among the most frequently hyperbolic about BBB’s mutilplier effect, they replied: “This Office does not have the information you requested”.

There’s a big problem with how the economic managers and like-minded pundits conceive “multipliers” to justify all sorts of anti-development policies. It all boils down to what outcomes are expected and prioritized.

If the priority is helping poor families amid current collapsed household incomes, large temporary cash transfers are the runaway winner. Giving Php180 billion in cash transfers to 18 million families will immediately increase their purchasing power, consumption and welfare. On the other hand, spending Php180 billion on an infrastructure project will only help the few thousand construction workers hired with much more spent on materials, equipment and machinery, to the glee of companies that market these. The leakage is particularly huge to the extent that these materials, equipment and machinery are imported from abroad.

At a wider policy level, pitting universal social protection against infrastructure is actually a false dichotomy because both have to be attended to as much as resources allow. The real question is what balance to strike between them and, on that point, the disproportionate attention to urban-centric transport infrastructure of the Build, Build, Build (BBB) program is clearly a problem.

Investing in cash transfers to support consumption of poor households, on public primary care and hospitals to improve health outcomes, and on public schools and universities to improve education outcomes will deliver immediate benefits for the people. These should not be mere residual gains that are only as much as stingy economic managers will allow for but core development benefits that the government can give on a wide scale if it chose to.

Indeed, even from a more instrumental view, this improves the stock of human capital and has long-term benefits for a more productive workforce and economy.

Capital outlays should also focus more on infrastructure that increases agricultural and industrial productivity. Too much of BBB is unfortunately defined by what will increase commercial and real estate values, logistics and terminal traffic, and support shallow export enclaves.

There should instead be more public spending on rural irrigation, roads, electricity, and post-harvest facilities to improve production and marketing of agricultural and fisheries products. Urban infrastructure should be identified according to the requirements of a national industrialization program. These are what will really deliver long-term benefits for the economy.

Those who can’t deny the benefits of greater social spending often resort to lamenting that publicly providing all this will break the national budget. (As an aside, it’s curious how there’s no such lamenting about bloated infrastructure spending.)

The national budget will only ever be broken if essential social and development investments are erroneously considered as coming on top of current budgeting mispriorities such as for infrastructure. On the contrary, a budget with the right priorities in mind will fix so much of what is broken in the country’s social infrastructure and the national economy.

On the other hand, mindlessly exaggerating BBB multiplier effects is just making this farce go on forever. ###