Investors in PHL infra facing ‘high operational risks’ —Fitch solutions
By Jon Viktor D. Cabuenas
Investors in Philippine infrastructure projects will continue to face ‘high operational risks’ apart from “bureaucratic inefficiencies,” Fitch Solutions Macro Research said Wednesday.
This is because of the slow pace of reforms in addressing bureaucratic inefficiencies, according to Fitch Solutions’ commentary “Industry Trend Analysis – Philippine Infrastructure To Rely More On Private Capital.”
The role of public-private partnerships (PPP) is expected to expand in conjunction with the country’s growing infrastructure needs the research firm said.
“Despite having one of the most comprehensive PPP frameworks in the region, slow reforms to tackle root issues such as bureaucratic inefficiencies will continue to be a source of risk for investors,” it said.
“These inefficiencies have often resulted in delayed project timelines and cost overruns, but we highlight that this issue is not unique to the Philippines, but a recurring theme in the infrastructure sector of many emerging markets (e.g. India, Indonesia),” it added.
According to Fitch Solutions, the Philippines ranks low in both indicators of construction timelines—bureaucratic environment and construction permit—indicating a heightened risk of delays.
“Apart from project risk, the general operating environment in the country is relatively risky as well,” it said.
According to the research firm’s Operational Risk Index, the Philippines ranks low against its regional peers with a score of 47.3
This compares with Malaysia’s 69.5, Thailand’s 60.4, and Indonesia’s 53.8.
“High operational risk is mainly attributable to high crime and security risk, as the country suffers from high levels of petty, violent and organized crime, and is also vulnerable to terrorist attacks, with the 2017 Marawi Crisis turning the southern Mindanao region into a battleground unsafe for business operations,” Fitch Solutions noted.
“Besides that, a high level of corruption undermines the effectiveness of laws and regulation in place,” it added.
Source: GMA News